I've known this for decades. When Bill Gates started publishing Smart Basic (or whatever) in magazines, I got a copy and saw what crap it was. I could do better.
Why didn't I? That was my very first thought. The reason was, I had to work halftime to pay tuition and buy food. I was mired in working to live. Ol Bill had a family to support him as he bought resources (ads in magazines etc), recruited staff, took meetings etc. Always a hot meal on the table when he got home from a big day.
One result of a Basic Income: more folks can be entrepreneurs, if they're willing to live off that few dollars a month. It could make all the difference.
Healthcare and Basic Income would do a lot to encourage entrepreneurship. I had to also wait till I paid off my student loans. There are a whole lot of shackles if you come from a humble background to starting a company full time.
On the other hand it has never been cheaper to start a side hustle.
> Healthcare and Basic Income would do a lot to encourage entrepreneurship
Would it though? From what I understand EU has way better social safety nets, yet much smaller entrepreneurship rates compared to USA.
Counter-intuitively, limitations drive innovations. When your resources are limited, you are forced to innovate. When you have infinite resources, you tend to waste it. Ever notice that when you have infinite time, you waste it doing nothing, but when your time is extremely constrained, you tend to use it much more effectively? Same thing happens with companies and money. Read: NASA, Texas Instruments developing laser guided bombs, etc.
For example, because TI had such a limited budget for developing laser guided bombs, they couldn't afford a wind tunnel like their defense-contractor competition. So they dropped scale models of bombs into swimming pools and performed mathematical transformations on the measurements. TI's design ended up being far more innovative and outperformed their money-flush competitors[0]
All that said, I think there is some truth to what you say. If healthcare were decoupled from employers, I would be much more likely to leave my current company and start my own since that is one thing holding me back.
2. Innovation and entrepreneurship are not the same thing. Innovation is coming up with something new, entrepreneurship is starting a new business to make money. The former does not always lead to the latter, and the latter does not always require the former (in fact, it rarely does).
3. What the research in this study shows is that limitations of the financial and survival sort do not drive entrepreneurship.
The book "The Trap: selling out to stay afloat in winner-take-all America" discusses the effect of healthcare on entrepreneurship:[1]
> It's a truism that American culture celebrates entrepreneurs. The opinion polls show exactly what you expect: Americans are incredibly entrepreneurship-minded. A 2005 survey showed that 28 percent of Americans have considered setting up their own businesses, compared to only 15 percent of Europeans. Yet the employment statistics reveal that Americans are far less likely to actually do it — 14.7 percent of the European workforce is self-employed, compared with only 7.3 percent of Americans. American entrepreneurs are clearly being held back from pursuing their dreams.
> ...
> What explains the paradox? In Europe working for yourself doesn't affect your health-care coverage...In America, the ambitious many are held back.
> Would it though? From what I understand EU has way better social safety nets, yet much smaller entrepreneurship rates compared to USA.
This is definitely a multiple factor problem, and health care is just one of them. A couple obvious ones - social acceptance/rejection of this as a path, and government/financial friction. If you have only been exposed to the US, it's pretty shocking how hard it is to get a company up and running in many countries. One of the biggies is fairly direct access to capital with the right risk appetite, which itself is complex.
This is all jurisdictional of course, but in parts of North America (I'm including Canadian provinces as well as US states) you can incorporate in less than 30 min online for a few hundred dollars. There are a few other details you'll have to sort out before your first tax filing, but that's about it.
What you actually see in America is that most millionaires come from humble beginnings. That doesn’t mean most people from humble beginnings become millionaires. A->B does not equal B->A. Basic logic.
Go talk to the owners of the five nearest local small businesses, ask them how they started, and see how it goes.
That doesn't mean anything though: vastly more millionaires are from usa than from Dubai, it doesn't say anything about any place, you can replace "millionaires" with any category and likely end up with a true statment, USA just has way more people. Those with humble beginnings are most of us, off course* there are going to be more humble-born <$anything> than privileged-born <$anything>, that's just how populations work.
*: in fact, merely being "humble" is still relatively privileged, a vast sea of humans exists where internet and food and clean water are fleeting dreams
Well, as another commented pointed out, there is a difference between innovating and starting companies. So I would argue that you do see more innovation from poor families than rich families. After all, rich families have no need to innovate, they just throw money at problems until they go away. Poor people are financially constrained and have to think outside the box to solve their problems. But you also see more companies started by rich people. Not necessarily innovative companies, mind you, just companies.
> So I would argue that you do see more innovation from poor families than rich families. After all, rich families have no need to innovate, they just throw money at problems until they go away.
This is not something to argue about, this is something that that we should measure.
In the discussion here, I am assuming innovation refers specifically to innovative products and business ideas, not stuff that remains confined to your close family.
Well yeah, you probably aren't going to get a lot of business innovation from the poor, but because they are resource constrained, you'll see innovation in other forms - such as how they adapt to broken cars, appliances, shortage of food, clothing, etc. The rich have no need to come up with novel ways to mend shoes - they just buy a new pair.
It seemed like you were claiming that people with fewer resources may counter-intuitively do more innovative businesses, so providing people with UBI or similar resources could reduce innovation in entrepreneurship.
The inventiveness you need to thrive as a poor person is very different from that, and I don't think losing that kind of inventiveness would be a real loss in our world.
I'd guess that basic income would encourage entrepreneurship in individuals with a high degree of self-actualization but not individuals with a low degree of self-actualization.
Whether or not basic income itself would increase the degree of self-actualization people have is not an easy question. It is in fact a complicated question deeply integrated with culture. I'd guess peoples opinion on this question mostly reflects their political ideology and/or support for basic income.
China Lake's development of the Sidewinder missile is a similar story - minimal resources, compared to the vast amounts wasted on radar guided missiles that more or less didn't work until much later.
However, I think it's orthogonal. Limitations are good, but having a basic fallback is also good.
There are cultural differences in the EU and the US. I don't think you can control for social safety nets, but not the rest of culture. That said, the existence of social safety nets could well be related to the other differences in culture.
Sweden, for example, has much better safety nets and better income equality than the US, and is rated as being much easier than the US to start a business.
Essentially, Swedes have far greater economic freedom due to greater economic equality. Despite not having UBI.
Basic income in my understanding is far from "infinite resources," and a lot closer to ensuring folks have at least McDonalds levels of nutrition available.
With the caveat that as long as it doesn't require physical space.
With the cost of space in any major city, anything that requires a workshop, working space, or significant storage space is out of the window nowadays for anyone in a major city.
When I was a teenager my side hustle was buying, fixing, and selling used cars. My dad's was the same with small fishing boats.
The story of these billion dollar companies being started in their parent's garage sounds inspirational and all, but I'd imagine less so for the kids whose parents can't afford home with a garage.
Exactly, starting out in a garage sounds like starting out from nothing, but in reality it means that your parents have a house with a garage that they lend out to you for free, where you can do whatever you want (so forget condos undergound garages), and that house is probably not very far from a large city so you have access to clients, employees and resources.
You don't need your parents to be millionaires to get that, but in today's terms this is definitely upper middle class.
Yes, many of the success stories of the 90s started out like you mentioned, the second paragraph was often, "then I borrowed 20k from Uncle Bob to buy a used Sparc station.."
> Healthcare and Basic Income would do a lot to encourage entrepreneurship.
I have a dream that Healthcare will someday be decoupled from employment. So much waste is tolerated simply due to the fact that the majority of the expense is borne by your employer before the number they put on your paycheck.
I can live on a part time salary without issue, but health insurance, which is already $200/wk for my family with my employer chipping in, would jump to more like $600/wk, which is just completely untenable. There is no sane reason why health insurance should be my single largest expense each month.
They could even do this without too many major changes. Just three in fact:
- Increase HSA Contribution Limit
- Allow both Traditional & High Deductible insurance premiums to be paid with the HSA
- Ban employers from directly providing/choosing insurance (ex. US Military)
Essentially everyone goes out onto the open market and buys their insurance using pre-tax HSA contributions (similar to tax benefits to employers now). Employers can continue to "help" be providing dollars to HSA/HSA match, rather than picking your insurance for you.
There are more radical and arguably better solutions, but if you want to see a large improvement with minimal changes/the least controversy this is it. Most insurance companies could likely just convert existing employer provided policies into employee direct ones paid via HSA.
I am talking about a solution to separating employers from your choice of insurance policy, you're talking about an entirely different issue.
I said there are other, arguably better, solutions (e.g. universal coverage) whereas this is an attempt to solve a near-term issue of employer provided health insurance.
If you can get the political support to pass universal reform to health coverage in the US, then absolutely do that instead. In the current political climate this compromise is still a vast improvement.
In 2019 the Trump administration made a change allowing HRA plans to pay for insurance premiums. That went into effect on Jan 2020. That effectively allows a small business to take part/most/all of the employee’s insurance burden from the individual market (healthcare.gov) onto their expense sheet rather than the employee paying for it with post-tax dollars. The problem of course is that in a number of states the individual market plans are still pegged to the price of unobtanium, but it’s a good step forward. The particular vehicle is called an ICHRA.
Yes, at least two big changes were attempted in last administration with 50% success rate. First, loosening restrictions on association health plans which would have allowed diverse groups of small businesses in an area to band together to negotiate lower rates as if a larger organization. This was struck down by the federal court.
The second, and successful, move was to allow health reimbursement accounts (HRA) to pay for insurance premiums on the individual market. These plans, an ICHRA, would allow a small business to essentially give pre-tax dollars to the employee for buying health insurance as long as the reimbursements were applied consistently across the employee base.
The second was great, but the first would have been even better since it would have lowered group rates. Individual insurance premiums and deductibles (when not subsidized by gov) are often so expensive they are hard to justify. Still ICHRA’s are at least another tool for employers and employees to share the burden.
The current "war" is between complete re-invention and essentially the status quo. This is neither of those, therefore it upsets both sides, and gets squished by "perfect is the enemy of good."
Healthcare is decoupled from employment in a number of countries, but barriers to entrepreneurship remain high, sometimes even higher than in the United States.
But we do have lots of housing, it's just located in places people don't want to live. Rents are high in places they do want to be, and that's partly a positional thing -- if you want to live where the top-10% of earners live, you need to bid against them for housing.
Thing is, requirement for on-site employment requires you to live where lots of people live; only the very wealthy can afford to live in places without jobs nearby - as UBI decouples income from where you live, then it would be a pressure to equalize rents, as underemployed people - the demand for whose labor is decreasing and will decrease further - can afford live in the many places which are currently shedding population because of lack of jobs despite being actually very nice to live in.
Maybe. But the counter is that entrepreneurship has strong network effects, it really pays to be around other talented people and hear about the future they're busy inventing. Maybe we'd see the opposite, people leaving a stable job which ties them to some unexciting place, to try to make it in NYC.
> But the counter is that entrepreneurship has strong network effects, it really pays to be around other talented people and hear about the future they're busy inventing.
The actual powerful network effects are essentially a somewhat benign form of cronyism, not mere inspiration from other entrepreneurs. People do more business with less haggling with friends than with strangers.
I think you're talking about networking for money, and that's a thing.
But there are also ideas. Even in fields where there's basically no money, half the world's innovation happening within a circle of a few miles is routine. For instance this happens in music, repeatedly.
When has it happened with music in the last 60 years? If you’re talking about mostly classical music clusters then there are a lot more reasons for that than you’re suggesting
And do you know where the web got invented? At one of the biggest cathedrals ever built to the idea that bringing lots of scientists into close proximity to work on hard problems tends to produce neat stuff.
Sure, on some level he could have done the same work in his garage, in some quiet seaside town full of retired people. But he didn't.
Reducing the friction in long-range interactions obviously has its upsides. But these hairless primates still pick up lots of stuff from being around each other.
From this angle, a UBI is even more powerful, in that it will go a lot further in areas that are less economically productive, and let us use "surplus" housing there.
Ideally we'd just let more people live closer together like they want to, but the elites won't let more people get close to them.
The supply of housing in the places people do want to live is artificially constrained, intentionally driving up prices to achieve the New Segregation.
When you write 'enough housing to go around' you are thinking about housing everyone in need. In a free market economy 'enough housing to go around' means enough real estate assets to safely park capital (for example Chinese one).
The "not enough housing to go around" isn't because of a "free market" (if such a thing even exists), it's because wealthy people have enforced housing austerity and refuse to allow new housing to be built near them. Without wealthy people controlling zoning and restricting what can be built, far more people would be building their own homes, or would at least be allowed to pool together to build. Instead we hand over huge imputed rents to landlords and make anybody who is not super wealthy fight each other for the remains.
I think we should have robust social housing, as in Vienna or Singapore. But one thing that both places do that we do not is allow for far more housing to be built per person in high-demand areas (i.e. pricy areas). Their defining characteristic for affordability isn't so much the social housing, it's that they build for everyone as if housing were a human right, rather than a financial investment vehicle like we treat it here by enforcing scarcity.
To the extent that there is a "free market" it's only on existing housing once it's built. For existing housing, we let the wealthy do whatever they want, and use their market power to buy whatever they want, including hoarding it. However, it's only because of housing austerity in the building of housing that this real estate becomes such a sought after commodity. It is only through scarcity and austerity of building permits that continued financial climbs are guaranteed.
Most of the political spectrum in the US has housing completely wrong, and thinks that everything is going to be OK if they can just keep the "wrong" people out. Instead, we should adopt radical inclusion and welcome all people, and adopt the true belief that everyone deserves housing, every single person. Not just the cool ones, everyone. That is, unless we want to continue the current meatgrinder of capitalism. Eviction may be the blades at the end of the grinder, but the auger is the housing scarcity and exclusion practiced by nearly every single person in the US.
If rich people were the ones who had to build their estates far away, (instead of lower-middle class suburbs being pushed away from the urban areas) we'd have light rail and all sorts of ways for them to easily commute.
I would think almost the opposite. The prices are high where there are high incomes--California, NY, Boston, Washington...
If you don't need to chase a high income, you can move where there's cheaper rent and try to innovate there. Assuming that you don't need any of the spatial resources of the expensive areas. (A big if... but perhaps you can grow your idea then move to the areas with lots of capital.)
Soviet style housing is an answer and also not an answer.
It would provide housing for people on UBI, but because it’s operating on a thin budget, over time it becomes less desirable.
Now, it’s not always the case _if_ you can get the tenants to coöperate and pitch in on basic maintenance and keep anti social behavior at bay ala Singapore, but my feeling is we’re not of the same mindset as Singaporeans.
> Now, it’s not always the case _if_ you can get the tenants to coöperate and pitch in on basic maintenance and keep anti social behavior at bay ala Singapore, but my feeling is we’re not of the same mindset as Singaporeans.
I live in Soviet-style housing in Poland. The antisocial behavior of some tenants (it seems that there's always at least one) is something you learn to live with. Over the years, you start ignoring the occasional puke in the hallway or automatically put on headphones when someone next to you starts blaring loud music again. All in all, given how much people pay for such flats in Poland, my guess is that it would be totally acceptable for most people to deal with the inconveniences, if the flat was free as a part of the UBI.
> Many countries do this by putting legal limits against gentrification.
What does that even mean? I'm not aware of any country that restricts the change in the income mix of housing, or the renovation of dilapidated housing by new residents.
Henry George held that belief on steroids and thought that, unless you taxed away the site value of land, then almost all of the benefits of any good policy or improved economic activity would accrue to landowners.
As a landlord, and landlording in an area with restricted rent, it makes zero difference. It's only good if you stay where you rent, but if you move, it's market rent. You can't adequately control market rent because there are so so many variable on what market rent is for every individual unit, location, type, etc. I'm all for the eliminating zoning restrictions though.
That's the case for rent restrictions. It's actually worse - rent control decreases housing mobility (nobody wants to give up a rent-controlled apartment, even if it no longer meets their needs) and disincentivizes development, so the prevailing market rate for non-rent-controlled apartments goes up.
But eliminating zoning restrictions and building more housing actually does work. Then when you move, you have your pick of many apartments to choose from, and nobody has pricing power to charge more.
I live in a rent-restricted area. There is quite a bit of construction, and the average person moves almost once every two years.
The effects of rent-restriction you quote are theoretical effects. In the real world, it does work, as long as the rent-restrictions are well-thought-out.
> and the average person moves almost once every two years
Are you sure? There's lot of research n rent control and it basically all highlights decreased housing mobility, event he pro rent control authors mention it asa downside.
In my province, the rent office arranges for two measures to counterbalance and increase mobility. Firstly, most rental agreements are made to end on July 1st - legally up to 1974 but now mostly out of tradition. This allows for much less friction, as everyone can change housing without any downtime with access to the full market.
Secondly, landlords are allowed to evict if they do sufficient improvements to the property, which allows a safety valve.
There are so many people that move in the month of July, that over 7% of the entire population - including people who don't rent - moves out on that day. It's pretty much impossible to get a rental truck to move for the entire month of July.
The statistics are that, around July 1st alone, 250 000 out of 900 000 people move. Add in people that don't move in this period, and you get almost half of renters in the entire city moving, despite strict rent control.
You just need to do your rent control carefully. There will be some reduction in mobility, but if you counterbalance them, you can have minimal impacts in mobility and large impact in affordability.
> landlords are allowed to evict if they do sufficient improvements to the property
This is a REALLY unusual provision in rent stabilization laws in the US and as far as I know the EU which normally don't allow evictions like this and severely cap rent increases for improvements.
If you are in Quebec, the RDL is really unique as a form of rent control in that it doesn't set prices or cap increases but rather acts as an arbiter for rent increase disputes. I understand that there are some local criticisms of the system, but I'm not very well versed on the subject.
I think most HN comments about rent control are referring the type that exists in SF where prices are more or less locked in place or otherwise set by the government.
The Régie des logements in Québec absolutely does cap price increases, or even forbid them outright some years.
It also does extra controls that many countries don't do, such as capping price increases even if the tenant change (the tenant needs to request the former rent, though).
Allowing rent increases in the case of renovations is unusual, but not that rare either. That said, it's absolutely not "just a dispute resolution board". It 100% is traditional rent control with capped price increases, on top of the rest.
I looked to me like they don't set hard caps based on their explanation here[1], but again I'm not overly familiar with the RDL. Can you point me to a better explanation of how it works? I'm quite interested. French language sites are fine.
There are indeed no hard caps. There is a formula that is used that takes into account various costs, such as heating and electricity as well as improvements made to the property, and using that formula along with the included utilities, a maximum percentage of price increase is calculated.
It's generally under inflation. A typical price increase cap might be 1.8%.
For cases where the landlord actually asks for a hearing, the average is of around 2.9%.
If no major repairs were necessary, you'll see around 1% or increase, maybe a bit more.
This article is completely orthogonal. Yes, building more pushes price down. Eventually though, you stop being able to increase density economically, and at that point the only way to prevent housing prices from increasing is rent restrictions.
It's important to note that even according to your article, you need to drastically increase supply even for a modest decrease in rent.
No one here is against increasing density. It is however insane to believe that increasing density is enough to fix the problem. Cities at the edge of density still have affordability issues, whereas much less dense cities with appropriate rent restrictions don't.
There is not a single reference to induced demand here. As long as housing stays a profitable investment, and as long as density cannot be increased infinitely without increasing marginal costs, then rent will rise.
The only long term solution is to reduce the profitability of speculation on land prices, so that only productive activities, such as building, are profitable. Rent restrictions are part of this, as rent is a large part of the profitability of land.
And rent restrictions can work. There are many cases where they have been implemented without a significantly negative impact to mobility. So why oppose them?
Not completely orthogonal. Perhaps they should be, but the intersection of the two sets (advocates for rent restrictions and advocates of zoning restrictions) appears to be a large portion of the total, as far as I can tell.
> enough to fix the problem
I think we need to define the problem before we start arguing solutions. In my view "can't afford the rent" is a poverty problem, not a rent prices problem. So, I want anti-poverty solutions, not rent price adjustment solutions. I view "the rent is too high" as a distinct problem from "can't afford the rent." So in my mind, rent price adjustments via price regulation are inappropriate for both problems.
> so that only productive activities ... are profitable
I understand taxing negative externalities, but this sounds anti-democratic. Who decides what's productive? Let's put an appropriate tax on pollution (broadly defined) and let the market figure out what's most productive. That's what it's good at.
> why oppose them?
I don't know of any instances where rent control didn't affect mobility. Are you considering the effect on immigration and wages in other cities? If they didn't affect mobility, then almost by definition they had no effect whatsoever. They'd have to be covering such a tiny portion of the market that they can essentially be ignored, both cost and benefit. Which makes them a waste of bureaucracy.
There is a very simple definition for things that absolutely aren't productive. Things that produce nothing are not productive. Owning land is not productive, and should not be profitable at all. It is settled economics that the profitability of non-productive actions (often called rent-seeking) is bad.
It doesn't matter what your threshold for affordability is. Rent is increasing faster than economic growth, on average. It will continue increasing at this rate until a large part of the population literally cannot afford housing. You're never going to be able to solve the issue of people not being able to afford rent once it stops being economical to increase density, because there will be no incentive for landlords not to push up rent until people can't afford it anymore and start to move out (which is what we don't want to happen).
There are no cases where rent control literally did not affect mobility. There are many cases where there is rent control, and high mobility. The city in which I live has around 40% of renters move each year, which is more than enough mobility, and rent control. You do this by using the additional regulatory framework to make it easier for people to move.
Your first paragraph is literally meaningless. No one here said anything about zoning except you. If you want argue against someone else, then argue against someone else. The arguments I put forth and your response were completely orthogonal.
The rest is simply pure ideology. If you want to convince people or build a coalition with people that disagree with you, put your free-market absolutism aside and focus on solutions and problems.
On the contrary, it's providing the valuable service of holding property that I don't want to hold. I'd rather put my capital to some other use. You seem to dislike arguments of "pure ideology" but the assertion that real estate ownership doesn't deserve return on capital seems like it's singling out just one form of capital. Or do you dislike profits drawn from other kinds of property as well?
You say it's settled economics, but you've misstated. Monopolistic excess returns are "rents." Competitive market returns are to be encouraged.
> until people move out
That's actually exactly what I want to happen. 100% occupancy rate is a signal that something is wrong with the market, just as 100% employment would be.
Simply holding land is not a service to anyone, no. Land is also literally not capital.
A 100% occupancy rate naturally doesn't happen as people move from neighborhood to neighborhood and from city to city. You don't need to squeeze poor people until they have no choice but to sever their safety nets and move out to have a few percent of slack.
I was thinking of something like a cap on rent increase (e.g. max 10% rent increase or something like that), not banning rent increase entirely, if it matters. Maybe with exceptions if the landlord improves (not just maintains) the property.
The problem with most welfare schemes is they have big welfare cliffs. You make one dollar more than a certain amount and you lose thousands in benefits. It's the virtual equivalent of a greater than 100% marginal income tax.
Also, countries with greater welfare programs don't have greater entrepreneurship. The opposite is somewhat true. Probably due to higher taxes and it's very hard to go out of business once you're in business and to fire employees in other countries.
I know that France is the butt of many jokes about work, "no French word for entrepreneurship," but in my experience almost every business I interacted with around socialist Paris was a small, independent business. This was the unintentional consequence of labor laws. <50 employees fall under one set of labor laws, >50 employees you're in a tight spot until you're >1000 employees. Then the additional overhead of benefits for those employees is subsidized by economies of scale.
UBI and single-payer HC may be fastest way to unlocking capital to the lower and middle class. I know far too many smart people who stick with a job they hate simply because the group healthcare is the only thing keeping the individual or family from bankruptcy.
I don't think those reasons are true for the "lack of entrepreneurship". I'd love to know some numbers actually, I know EU doesn't have as many unicorns like Uber, Google, Amazon, etc. But that is a tiny amount of people who started those (and now employ a staggering number of people).
I think there are two reasons why that may be:
- Generally larger regulatory barriers. GDPR is an obvious recent one, but also market complexity with EU countries regulations/laws differing more than US states. I think (without knowing). That coupled with "first to market" advantage of US companies.
- Money isn't as big as a driver for Europeans. "Rags to riches" is a pretty American thing. "Get educated and live well" is closer to our lookout I think.
It definitely makes a huge difference to have savings if you want to be an entrepreneur. But these days, a decent programmer can save up a year or more of runway and build industry connections just by working for a few years and not spending outlandishly. If the startup doesn't work out, a new cushy job is waiting for you.
So yeah, startups are risky and favor the wealthy, but let's not overstate the case. I'm in favor of basic income and I agree it would be a boon to entrepreneurship, but people with the skills to build a tech startup have already won the lottery. We're not the ones in need.
That means some extra years/decades off from your career, to get to the same level of security. So this is not overstating it, it just basically says if there is capital available ambitious ventures will succed at a more frequent rate.
Also, getting a job after a startup failure might be easy in the US or other developed countries, but this will not be the situation in a country like India, where the supply of cheap labor far exceeds the demand and only people from elite university titles will be able to get back to a job better than their last one.
Whereabouts? I guess this might be true in the valley but in the UK for example I'd imagine you'd have to live off nowt for years to be able to do that - i.e. salaries are pretty horrific in some industries.
Realistically a startup needs more than a year or two of runway for one person. It requires several years of runway for several people, plus paying for infrastructure, legal work, marketing etc.
Why are we using Bill Gates as an example here? He is an extreme outlier that is far beyond the goal post of what most entrepreneurs would see success as. It doesn't require the seminal upbringing and kismet growth environment of Bill Gates just to get into entrepreneurship.
....but it helps a huge amount. That's the point of this article.
It's much easier to risk doing a startup when you know that no matter what, you won't have to go hungry or homeless because there's family who will help you. You're a lot less worried about pouring dollars into your 401k at age 22 if you know that you stand to eventually inherit a few million from your parents, so whatever.
I'm not denying it helps and isn't significant. But why do you need to inherit a few million just to feel secure enough to pursue entrepreneurship? Being an entrepreneur doesn't mean you have to go big or go home. There is just as much entrepreneurship with immigrants as there is with the US-born, with the former less likely to have a comfortable safety net.
Opportunity cost and time value of money. In general, if person A puts $5K a year into a 401k between ages 25-35 and then stops, while person B puts in $5K a year between ages 35-65, at age 65 person A will have a larger retirement balance despite having put in only 1/3 as much principal. This generalizes to the rest of your net worth (salary+stock) as well.
If you win the lottery and manage to have significant equity in a startup worth millions, congratulations. If not, you're faced with the prospect of being older and having minimal (or at least far fewer) assets. This is a big problem if you want to raise a family or even if you want to advance your status in life.
The economics of software are simply different. Someone good enough to start a business that brings in $10-20K MRR and barely survive is almost certainly good enough to get hired and paid $200K+ by any number of companies. If you're not going big or going home, it doesn't make sense to do a software startup these days.
Even in other industries, starting and running your own business is a LOT of work. If your goal isn't to (try to) get rich, you can almost always make more money climbing some corporate ladder for a lot fewer hours.
> Opportunity cost and time value of money. In general, if person A puts $5K a year into a 401k between ages 25-35 and then stops, while person B puts in $5K a year between ages 35-65, at age 65 person A will have a larger retirement balance despite having put in only 1/3 as much principal. This generalizes to the rest of your net worth (salary+stock) as well.
I'm with you on the opportunity cost of money but I don't see how it has anything to do with what we are discussing.
> The economics of software are simply different. Someone good enough to start a business that brings in $10-20K MRR and barely survive is almost certainly good enough to get hired and paid $200K+ by any number of companies. If you're not going big or going home, it doesn't make sense to do a software startup these days.
This is not true at all. There are tons of FAANG engineers plotting their exit to start their own business for the reasons of freedom and impact. It's not just about the money. Also, if you can reach $10-20k MRR—that's a lot more scalable than your salary at a company ever would be.
Don't confound entrepreneurship solely as a vehicle for getting rich.
If you come from a family that is anything less than "well off", there is a strong instinct for security. When you know how bad the alternative is, you play it conservative and plan for the future. If your choices are a job at Microsoft where you'll start at a level of compensation that's quite possibly higher than any ever earned by any of your family at any point in their careers and likely climb to senior or principal where you'll make more money in a year than most members of your family will ever have as a net worth or to throw away that essentially guaranteed income for the chance that you could do something else? You take the sure thing.
Aren’t most people called Bill actually named William? I actually know a William III and he’s a not-rich ROTC kid. Bill Gates did have money but i’m not sure the degree to which his name is an indication of that
While there will be a few folks that will prosper from basic income, I can’t say I’m interested in paying people to pursue things that are more like hobbies. For every entrepreneur or community volunteer that makes a difference, I fear 9 others will set their sights on being gaming streamers or will just sit around writing blogposts. If you aren’t adding value somewhere and are able minded and able bodied, I don’t want to invest my money in you.
> For every entrepreneur or community volunteer that makes a difference, I fear 9 others will set their sights on being gaming streamers or will just sit around writing blogposts.
Providing entertainment and insight has no value to society?
I really appreciate Jack Goldstone’s perspective on this.
Instead of perpetual UBI, he’s in favor of a larger single lump sum paid out after a period of time post-civil service. The idea being instead of the slow morphine drip of $1k a month for life, you can get, say, $25k-$50k in a lump sum after serving a year or two in the Peace Corps, AmeriCorps etc.
The advantage being service builds a stronger sense of community and gives you more skin in the game. Additionally, a larger single lump sum is more conducive to helping start a business as well as being cheaper long term. It parallels the GI Bill in a lot of aspects.
I’m not sure that’s a good plan with such a huge dependency on financial wisdom. Look at Alaska - they have the PFD every year (well, mostly) and people just use it to buy TV’s, quads, and all the rest. You could say it frees up other income to pay bills, but I think generally people indulge themselves with lump sums of cash unless they are really struggling and have some good sense. In Alaska there are people who would favor switching the PFD to a monthly stipend rather than a lump sum to discourage this behavior.
I think the rationale is that between UBI and his plan, his has more upside. I don’t think AK is a good analogy because, as you state, it’s a nearly annual re-supply of cash
1) not everybody will use it because they won’t want to do the civil service part
2) those who do won’t have perpetual payments. Once you use it (unlike Alaska) it’s gone. If you squander it, at least there is an upper limit to your benefit as opposed to a plan that acts as an open-ended annuity. I actually think this may help foster better decisions because for many, this is their one chance at such a windfall. Of course there will be some who squander it regardless
3) As opposed to UBI, the rest of society will get some benefit in the form of service.
To elaborate on the financial wisdom aspect, he advocated for putting the money in a trust fund payable at around 25 years old. Similar to the GI Bill, you could also have strings attached as to what it could be used for (the GI Bill, for example, can be used to open a business, go to university, go to a vocational school, but not just a check for “free” money)
Another scarecrow. You are not 'paying someone' at all. It's not your money. The basic income is paid to all, similar to roads and police and fire.
The additional goods and services it buys, come from advances in automation, which are consuming jobs at a geometric rate. Nobody is enslaved to make these things for us (already true for most things).
This attitude is simply the old Protestant Work Ethic writ large - folks that cannot stand to think anybody might not have to slave away at a job.
To draw it clear: is it actually necessary to have an underpaid below-poverty class of workers to make our society function? It cannot exist without them? Was Marx right all along? Is that what is being argued?
In that case, you would except a lot more entrepreneurs from Saudi Arabia. Instead, you have a bunch of freeloaders who outsource their work to foreigners. They started a UBI program a few years ago. Before that, they had a jobs program that essentially functioned as UBI, since it was nearly impossible to fire a Saudi citizen.
Not really, it can be multi factor, with a set of minimum values in several metrics being required before parental wealth becomes the dominant factor.
To be glib, some people leave millions to their cats but I don't see any entrepreneur kittens.....
That is, the baseline genetic, cultural, and environmental potential for entrepreneurship probably needs to be in place before familial wealth becomes so important.
Given that Saudi Arabia has entirely different ethnic groups, with an extremely different culture, and a very different climate and business environment, I am not surprised at all that the principle factor in north American derived populations entrepreneurship isn't that in the Saudi Arabian population.
It doesn't have to primarily be UBI either. Given where we are technologically, it could be PV/wind/demand management/batteries on every roof, a semi-automated garden in every yard, etc... With a little bit of UBI for whatever people aren't able to do at home (eg TP).
I knew Bill Gates's family was well to do when he started with his endeavors, but I recently came to know Bill Gates Sr. was a prominent personality from Howard Schultz's account of him.
The story goes like this -
When Howard was offered Starbucks for US$3.8 million by original founders, he was working to raise funds for that and his current investors went over his back to buy Starbucks. Howard was introduced to Bill Gates Sr.(Lawyer) by a friend, who took Howard to the building where those investors were straight away and threatened them out of it immediately.
"it was Opel who met with Bill Gates, CEO of the then-small software firm Microsoft, to discuss the possibility of using Microsoft PC-DOS OS for IBM's about-to-be-released PC. Opel set up the meeting at the request of Gates' mother, Mary Maxwell Gates. The two had both served on the National United Way's executive committee."
Isn’t this a really bad comparison though? Most entrepreneurs own small (I mean small) businesses providing services and employment to a mostly local area. Bill Gates and his dad are not representative of most small business owners, and seem rather immaterial to a conversation about entrepreneur success.
As a programmer, it's possible to do the same, just one decade later. Jack Ma argues in some talk that people should gain experience before starting a company. This mirrors the numbers that show that older founders have a much higher success rate. After having worked for a decade, there can be enough money to handle some years without income.
Bill Gates was not successful because he started young, but because his mother had the connections to IBM (see some other comment). That cannot be replicated with basic income.
What Jack Ma didn't tell you is that those things don't matter that much, it's more of a lip service to burnish his image, a victory lap. His father is well-connected both in business and politics and provided him access and opportunities plebs counld dream of. Hell he didn't even have any tech experience, he was a english teacher.
And Alipay would have been killed a million times as it infringes the state monopoly on finance, had him not been shielded by the quagmire of local and central politics.
No aspect of a massively successful person's path can be meaningfully analyzed and replicated other than in general principles that are already obvious (be ambitious, proactive, etc.)
On top of the basic income idea I also would be perfectly happy to have the government fund little businesses in a similar manner - not a corporate basic income, but the next great business might be in the head of someone working for minimum wage in shop. Give them a few quid, keep an eye on them, see where it goes.
Thing is, elites are hereditary. They always will be. If we enable entrepreneurship (or education) for that matter for the poor, other social mechanisms will appear that will make both of these irrelevant so that elites are preserved. Which in particular?
Why are we only talking about the small percentage of entrepreneurs that become famous? Most are not and never will be, nor is that a requirement for entrepreneur success. That bar is entirely irrelevant to any conversation about how to encourage entrepreneurship.
I mean who didn't know this? It's quite obvious that if you're in debt or are poor you're not in a position to start a startup. Meanwhile if mommy and daddy are billionaires you can start up a business and fail with no worries.
Look at the extremes and the outcomes of the extremes. If the outcomes are opposite then it's quite likely that a gradient exists in between.
I wouldn't hold my breath if I were you. As much as it is discussed and promoted in certain circles, it has basically no traction in national politics and its hard to see that it ever will since national level politics is currently pre-occupied with trying to figure out if crimes are actually illegal when their own party does them.
Call me crazy, but I think if there's any HS classes or earlier, teaching algorithmic thinking, those kids are have a crazy head start if they choose CS.
I don't mean these classes where they get out and write
class Dog(Animal):
def bark(self):
print("a Dog is barking!")
but if there's young people being taught the difference between quadratic/exponential/polynomial algorithms, that's going to stew in their brains and ferment into gray matter that will ACTUALLY make them better programmers.
I'm not an educator, nor am I educated ABOUT education, but it's just my hunch. I've seen many a young buck come around with a fancy degree or whatever, and not be able to see a skip-list shaped hole for his skip-list shaped peg. That's hard to deal with at a meta scale. I can't develop a way to quickly train people OTJ how to think algorithmically. They either learned to think about the problems that way, or they learned to rely on some stupid Haskell/Python/Elixir/Kotlin/Blub thing, and can't get any meaningful work done quickly.
There’s already a trend in certain high schools where kids start doing competitive programming, hackathons, blog writing, etc. way before university starts. By the time they’re college freshmen they’re ahead of the average new grad already when it comes to interview skills. These kids end up interning for FAANG or unicorns in freshman or sophomore year. There’s thousands of them.
Even outside of CS this will give them a huge head start.
Functional decomposition is one of the most valuable skill one can have. Knowing what an interface is and being able to see a system as a series of layers of abstraction is too.
My prediction is it will be students receiving education i with little to no technology. The paradox being modern technology is so streamlined UX wise you don’t inherently learn anything about modern tech by using them.
I would guess if your parents have a VR headset, a 3D printer, and some sort of home lab that you can tinker around with. And of course, as the OP indicates, without worrying about earning an income.
edit: and probably also superfast internet, and a machine with a GPU, and maybe even some way of setting up a server cluster
Not exactly a technology, but parents who are mathematicians would be my guess. Developing a reasonably deep and intuitive understanding of statistics, probability and linear algebra at a young age would be a huge advantage, especially when coupled with eg R or Python.
I logged in with a throw-away account just to refute the down vote. However, it already looks "neutralised" after my login. Assuming it is true, why would anyone done vote this comment? Makes no sense lah.
Less controversial: High level, this comment seems believable. It seems reasonable and possible. Has this be written about? If yes, please kindly provide some links. I would like to read more about it. This high school was really something special!
His high school was out of the norm, but certainly not the best. At that time, a school in LA had an IBM 360 mainframe. Having an oil rig on school property sure helps.
Sure, and where are the rest of his classmates? Are they all billionaires? early head start is only one if utilized. For everyone that's rich, you can find critical junctions in there lives that really moved them forward to that part. for everyone that's not, we have all had critical moments in our lives where we made the wrong choice.
I am a son of a single mother, who was a teacher at the time. In a country that was just recently liberated from the soviet union. Trust me, I was not rich.
Started my first company at 20, after dropping out from university. (mom wasn't exactly happy)
Sorry, your excuse doesn't apply.
Unless you want to claim that going to a state-funded university is a privilege, in which case I guess everyone in all the countries where universities are free are privileged?!?
The term 'privileged' almost becomes meaningless when comparing between different countries/cultures. Yes, compared to many in the US, you were 'privileged' with respect to education, because you had free university-level education provided. This is something that is outside the reach of many who want it here, and for some who get it, they get it with burdensome financial strings attached. So..., in that respect, you were privileged. People in the US are 'privileged' in other respects compared to your circumstances. But using the word 'privileged' as some sort of singular distinctive quality doesn't make much sense.
This is amazing - just ignore Steve Jobs, Larry Ellison, Andrew Carnegie and several other of the richest people of all time who came from humble beginnings, just because they don’t fit your narrative.
For the past 15 years I have worked with wealthy people for a living, hundreds of them. Two things stand out:
1. Most of them came from humble beginnings, typically as immigrants
2. Most of them stress their kids won’t be as successful because of having it too easy
It’s alarming to me how much ignorance there is about real life outside of tech on hackernews, and how insidious academic leftist propaganda is.
The middle class can win this game with a perspective change. Instead of saddling their kids with school loans and pressuring them to "get a job" right out of school, they should give them 5 years where they "angel" them in their own houses for a stake in the company. Get four young sharp kids a couple of years with no bills to pay and I bet they could create something viable.
This is the difference. Entrepreneurs need funding and encouragement. Parents could play this role instead of VCs and they could bank big when funding comes. You don't need $MM to fund a start-up if you approach it will bootstrap principles.
This works with the assumption that parents have enough disposible income to fully maintain their children well into their 20's. Which isn't always the case.
I've heard a great deal about Bill Gates in my lifetime, but it wasn't until I read Paul Allen's 2011 autobiography that I learned that Bill's mother (a director at a bank) introduced him to IBM chairman John Opel in 1980. They both sat on the board for United Way[0].
It really struck me how these kinds of connections are less of a twist of fate, and more about environment and proximity. Even now it feels remarkable that someone with Gates' intellect and access to rich district school computers (in the '70s) benefited so massively from being born into a connected family.
Not surprising to a British reader. Sutton Trust research [1] finds that positions of influence in the UK, and the professions generally, are dominated by the 7% who were privately educated. Conclusion: networks and connections are everything.
I suspect the main difference between the US and UK this way is the honesty of the process. In the US a ton of money an energy is spent on social signalling and class definition, but also on maintaining a fiction that "class" isn't really a thing.
I do think the US class system is easier to fake, as it relies a bit more on superficial signifiers than institutions and history than the UK. The myth of the "self made man" is also held dear, so you can do ok if you play to that story; you'll still may never really belong but your kids probably will.
Second login with my throwaway account today! Apologies in advance: This stuff is much too personal to post under my real identity.
Exactly this, in my experience. I am from a upper-middle-class family. I live in East Asia now, and wealthy by local standards. Whenever I travel to developing countries in Asia, I am regularly reminded of my upper-middle-class-plus-plus status by the straightness and whiteness of my teeth! Yes, literally, I can count on many, many hands how many times random strangers approach me on the street/bus/train/hotel/airport in developing countries with comments about my straight and/or white teeth. (Please: Do not read humble-brag into that.)
Could we, perhaps, say that accent is a big social divide in UK, whereas teeth are a big social divide in US? I would love to hear from Canadians, Kiwis, Aussies, Saffers, etc...(anyone!) about experiences in their home culture.
I think to put a finer point on it, if you grow up in an environment where your family expects you to succeed and be wealthy, where your peers are expected to also succeed and be wealthy it gives you both the training, the knowledge, and drive to succeed. Never mind the means (dosh) to higher education.
In the U.S. my parent's were working class, broken home. Neither parents had ever invested, knew anything about 401Ks, Roth IRAs, neither owned their own home, knew about mortgages....
So I was beginning at square one and had to teach myself all these things, pay for my own college, etc.
Unless "networks and connections" allow you access to the Next Level (and I have observed this may in fact be true, allowing some to "fail upward") I think the bigger hurdle is not having the environment that gives you an investing and monetary success mindset.
I have taught my children as best I can. We'll see how this experiment plays out with the next generation....
For many years I worked for Zillow -- a great company.
Their co-founder was telling a story of how he got into tech and it went something like... my mom made friends at work with another woman with a son about my age and they set up a play date and that's when I met Bill Gates. Co-founder is a great and talented dude but mom's the real MVP there.
> Even now it feels remarkable that someone with Gates' intellect and access to rich district school computers (in the '70s) benefited so massively from being born into a connected family.
While this seems to be the accepted correlation, by all accounts Bill Gates also brought an extraordinary curiosity and drive to the party.
From what I gather, (adjusted for age) he works just as hard today. Listening to him speak on a topic of current interest to him, gives me a IQ bump (self-perceived and short-lived unfortunately, but that's on me)
I'm no statistician, but I'd be willing wager that the two ratios are about the same:
1. kids with privilege in the 70's: Bill Gates
2. people with the ability to spend billions to further a cause: Bill Gates
All my attempts at entrepreneurship have been via moonlighting, and have failed. There just aren't enough hours in the day. But I can't just quit my day job and take my income down to $0 to pursue a startup.
My experience as well, until the first time I got funded.
After a success under your belt, it's easy to keep going and get more funding. There's no shortage of capital looking for people to fund right now (it goes through spells).
The first time I got funded, it was through a rich elite idiot's social connections (CEO). CEO was a sleazeball, and got all the financial and most of the branding benefit of the venture, despite doing no work. I launched a successful business with CEO as the figurehead, and in the process, I got:
1) Connections and network
2) Visibility and branding
3) Stepping through the process once. Moonlighting can be enough time if you're efficient (which you can't be if you're muddling through figuring stuff out)
It was a stepping stone towards financial stability, and I'm much closer. Socioeconomic mobility is a process. Some people get lucky, of course, but for the most part, there's a pathway from:
1) Unskilled labor; to
2) Professional labor loaded with student loan/mortgage debt; to
3) Financial stability; to
4) Being able to launch high-risk high-reward ventures
That's possible, but it generally takes a few generations:
* It's possible for someone without an education to send kids off to college through public schools, but they'll have a hard time competing with kids who were exposed to advanced tutoring, math, STEM, makerspaces, etc. from an early age (children of professionals)
* It's possible for first-generation professionals to network into power networks and achieve financial stability, but they won't be in a place to quit a job and launch a new venture.
* And it's possible for children of professionals to then (finally) engage in a few high-risk high-reward projects until one pays off....
2) Professional labor loaded with student loan/mortgage debt; to
3) Financial stability; to
4) Being able to launch high-risk high-reward ventures
That's possible, but it generally takes a few generations"
That sequence is coming up a lot lately in discussions of African Americans low wealth accumulation across generations, relative to whites.
In the sense that, first through slavery, then through Jim Crow, then through red-lining, and other forms of egregious discrimination, that multi-generational sequence of wealth accumulation has been artificially interrupted.
It's not clear what should be done to rectify that imbalance. (Reparations? Or is it enough to allow this sequence to play out unobstructed starting with current generation of African Americans, similarly to if they were a new immigrant family.)
Perhaps it might be enough to allow this sequence to play out is if they were a new immigrant family if it was actually playing out. At least where I live, it's not. Socioeconomic mobility is dead.
My family has moved up these rungs, and someone seems to have unscrewed the rungs. They just don't seem to be there anymore. Public schools no longer have:
* Gifted and talented programs
* Or any other support for kids getting ahead of standards (even quality books in the library)
This is all done in the name of social justice. The only families who can get ahead are ones who are already educated enough to teach their kids at home, or rich enough to hire tutors and pay for afterschool programs.
I'm not opposed to reparations per se, if someone were to make a coherent proposal (I haven't seen one, and with each generation, it gets harder to make one, as there aren't clean lines between former slaves, slaveowners, people who benefited from slavery, etc.), but I'm not actually sure they would help. If my grandparents on my dad's side were slaves, and on my mom's side, owned slaves, am I paying reparations? Am I getting paid? How's this even supposed to work?
And how would we manage this so it wouldn't be like winning a lotto, where the money just fades into nothing?
But on the whole, I'm more a fan of fixing obvious problems, such as how public school funding ranges at least 4-5x between rich and poor districts, issues with criminal justice, and so on.
I'm also a fan of targeted subsidies. I wouldn't mind if my taxpayer dollars paid for subsidies for lower-income kids to have the same sort of access to at-home and out-of-schools supports as my child does (STEM resources, programs like RSM/AoPS, etc.). Or if we had entrepreneurship subsidies in lower-income communities. Or more equitable tax structures. And so on.
Yea, I'm doing well enough in my career to have some disposable income now, and was thinking maybe I should outsource to some freelancers next time I get a new software idea, and just play project manager / salesman.
However, the engineer in me would hate to not be building the thing myself.
From one engineer to another who recently internalized this lesson: you're getting in the way of yourself. If you have the resources, use them so that you can move fast.
From my perspective, financial stability is when, if you lose a job in an economic downturn, you don't automatically lose your house. You have enough savings for 1-10 years (yes, that's a big range).
But yeah, it's a fair point. For some people, it's not living hand-to-mouth. For others, it's being able to have a mortgage rather than rent. [insert-my-definition]. For others, it's being able to live without working indefinitely. For others, it's being able to launch businesses from a personal bank account. I was vague.
In my area: The rent / mortgage eats the lion's share of your runway. If you're paying rent / mortgage, your savings don't go very far. If you've paid off your home, it's easy to stash enough away to live like a graduate student for a few years. If you own your home, you can also always scrunch together, and rent out a room.
The generational flip side is:
- Your kids inherit your house and your savings some day. That should be enough to cover much debt, or if you have many kids, at least down payments.
- Your kids can move in with you anytime, if they're laid off, launching a startup, going through a tough time, or just want to save some money. It's a safety net.
There was a guy who owned a recording studio. His observation was that artists who had menial jobs eventually made it. The ones with professional jobs all struck out. Brain energies may be in shorter supply than hours.
I find your comment amusing because, of course you can. And famously, the people that made it big did just that.
But I get it, I'm like you. Also had a college loan to pay off, later kids.... So I stuck to the day-job, read about the high-flyers and work instead on trying to get-rich-slowly.
On a similar note, I've noticed that some of the successful entrepreneur's I know took success in one area and applied it to another, often in the form of re-investing their savings. Watching someone go from salaried to having a million in savings, and then investing _all_ of it into a new business that's not guaranteed to succeed... I question whether I could do that. A million dollars is enough to retire ahead of schedule, would I be willing to risk it all and go back to a salaried employee with no savings? Yet I've noticed many successful people do this, often repeatedly.
> But if the tech scene is really a meritocracy, why are so many of its key players, from Mark Zuckerberg to Steve Jobs, white men?
I disagree with the author that Jobs and Zuckerberg are evidence that meritocracy is a myth. According to Wiki:
> ... Zuckerberg excelled in classes. After two years, he transferred to the private school Phillips Exeter Academy, where he won prizes in mathematics, astronomy, physics, and classical studies.
> By the time he was ten, Jobs was deeply involved in electronics and befriended many of the engineers who lived in the neighborhood. He had difficulty making friends with children his own age, however...
Later in life, they had great ideas, took huge risks (both dropping out of school), and worked hard.
That’s not really relevant. Zuckerberg didn’t outperform his peers at an expensive high school because he was white.
But, “for families with incomes under $75,000, Exeter is free. We pick up the cost of tuition, books and academic supplies, and we provide a stipend ... We meet 100 percent of our admitted students’ demonstrated financial need. [1]”
Sadly, the idea that we live in a meritocracy is so politically incorrect that GSIs (TAs at Berkeley) are taught to interrupt a conversation where they hear a student saying “America is the land of opportunity” or “I believe the most qualified person should get the job. [2]”
I was referring to the fact that Zuckerberg success was possible because of his background (his parents were both professionals, one was psychiatrist, the other a dentist), and not necessarily because of good grades. Plenty of people get good grades.
I suspect a large part of this is due to the fact that those with wealthy parents are more likely to have a) family money to fall back on if things go wrong and b) family investment in the early days
Everyone else has to seriously consider the (high) risks of their startup failing and not being able to afford rent, or whether their idea is worth burning their life savings.
It's also highly cultural; if the people around you that you see as role models are serious about business, connections, management, etc. that's what you pursue. And higher management comes more naturally to people who have spent their childhood in an ethical framework that divides people into manageable units, too.
My working class / middle class parents just didn't have room in their worldview for having employees, nor would they feel comfortable delegating their household aspects to maids and the like. When we had kids my wife and I couldn't imagine having a nanny (despite being able to afford it) while many of those around us didn't blink at it.
I remember working at a startup in the 00s and having to peel out of the office every day at 5:30 to get my daughter from daycare and my (silver spoon raised) boss saying something like "we need to pitch into get you a nanny" and it struck me then how that kind of thing was really tied to "entrepreneurship." I didn't _want_ a nanny, I liked my daughter's daycare, and I very much enjoyed picking her up and getting my hug at the end of her day of play and learning with a group of kids.
Connections, money, yes, but also a managerial/directive ethic, no qualms about telling other people what to do and paying as little as possible for it.
You forgot the family network. Zuckerberg père is a prominent Westchester dentist. Easier to find decent lawyers and accountants when you grow up in that sort of environment. Apparently, Zuckerberg met Sandberg at a party, hosted by a mutual friend.
If you had read the article, you would have seen that it's exactly what they say : “A strong economic base may benefit those interested in setting up a start-up, providing an economic safety net in the event of failure,”
Your parents don't even have to be wealthy. Just having parents who are financially stable, own their house, could literally keep you off the streets and give you food if you fell on truly hard times, makes an enormous difference compared to not having that.
And support for when it doesn't go to plan. An entrepreneur parent will empathize, as odds are they've experienced setbacks themselves.
Most ideas and first attempts fail, I'd imagine people are more likely to try again if they're not catching flak from their parents that they didn't get it right the first time.
Reminds me of a newspaper writeup on a recentlyish murdered billionaire where the murderer is still on the loose, and one of the sons had a writeup about his alibis. One proof of his whereabouts was an iPhone picture of his crypto seed he took while in another country. Bad opsec, ugh.
The child was running a nothing special b&m chain business, but they had a “loan” from the billionaire to acquire and expand the business.
I’m like, okay, at least a loan has to be paid back.
Then half-way through the article, there’s a shareholder agreement involved and I’m like, it doesn’t even need to be paid back!!!!, ugh.
How is Joe Schmoe supposed to compete in a sector where the competition has that kind of financing?
Every now and then an article about research on that topic pops up which attributes success from 'Chance'[1] to 'Personality'[2] and everything in between[3].
I think this falls more in the category of "being rich is actually better than being poor", of which there are an equal number of articles that routinely pop on the frontpage.
All entrepreneurial people in my age (35), that I know, have (at least) better off parents.
Most of their success stems from the fact that they could live with their parents for an extended amount of time and found&crash a bunch of companies before they were 25.
Even the most average person knows how to run a company after they tried and failed often enough.
People joke around how Trump got "a small loan of one million dollars" from his dad.
But it doesn't even have to be that much money, just enough so you don't have to work for 2-3 years.
Certainly within London, you'll have a hard time finding a startup founder who doesn't have a privately-educated upper-middle class accent, i.e. who doesn't have wealthy parents. And while there are startup accelerators focusing on helping groups like female entrepreneurs and black entrepreneurs (which is great don't get me wrong), there aren't any that focus on helping lower or lower-middle class entrepreneurs, i.e. those who don't have wealthy parents.
I've been self employed on an off for the last 4.5 years. I spend 4 years working a job I hated (plus all the time building up to that job) to save the money to take a year off and do my own thing.
The first 2 years went amazingly well, I was very lucky. The last 2 have been pretty rough. A combination of government crackdowns (I'm a brit) on self employed people, brexit and now covid has pretty much done for me. I have enough cash for 3 more months.
I wish I could have started 2+ years earlier with a loan from mum or dad. I wish I could continue now with the same. But they're poor. I suspect I will be too if I don't get a job or a major sale soon.
ha ha ha ha ha. Ok. As a grizzled founder, who is becoming numb to the entitlement that is easy startups, easy funding, easy results.
I know many founders - and they were broke, broke, broke (and went broke to bootstrap). This 'finding about your parents' can make those straight out of college who don't stick with it feel better.
Reality is... entrepreneurship is an incredibly hard game that takes years of grinding away after hours, or eating away at your own savings and your free time.
Founders I know (including myself):
- One worked years on the side to grow it enough just to get seed. With newborn kids, then quit his CompSci job to live off his teachers wife salary for years.
- One was on foodstamps for 6 years, and kids on medicaid to pull his shop through
- One saved for years, and spent most of his money to get through the rough spots and is coming out the other side just now.
- One failed 4 times - each attempt taking a few years, entered bankruptcy to try on a 5th attempt.
- One lived at poverty means for years with a family while bootstrapping.
So.... lets stop the entrepreneurship is easy pr0n. It sucks so hard you'll hate your life. If blowing all your time and money getting there isn't worth the suffering you'll feel - don't try.
I’m sure if you came about entrepreneurship at the highest difficulty setting, it’s hard to shake your own perspective. As a person who has tried twice and failed both times, I totally agree there is no easy path. There are however, lower difficulty paths and those paths lead to better outcomes for entrepreneurs.
If you keep at it, are smart, have good ideas and execute, I think you can probably build an equivalent network over time that leads to success. I always like to think that investors fund people more than ideas.
One thing that confuses me, though - if having a strong safety net to fall back on is important to enable entrepreneurship, why does it seem like Europe is so bad at it?
Europeans may be more risk averse too -- perhaps more YOLOs in America because there's nothing to lose, where as in Europe you can still have a normalish life, but it's not just a strong safety net either though -- many unicorn concepts were done in Europe, but they didn't become big globally.
Maybe the lack of VC to scale - a lot of money sloshing around in SF. Maybe there's less of an culture of thinking "my way is the best" that Americans have more than others[0], maybe the smaller cultural market (there are 350 million Americans, only 30 million Spaniards). Maybe could be Americans are more into Consumer Ethnocentrism and less likely to buy into foreign things than Europeans too (the number of American flags waving around in the states is shocking). I wouldn't expect to see "Designed in Finland" if I bought a nokia phone. The US market has always been far harder for europeans - even Brits - to crack than the other way round.
Your first point is interesting to me. I have a friend that made a crazy call on some stock options that seemed to me like 10 to 1 odds. When I asked him why he said essentially, it's the only way I'll ever have a chance to get rich.
I think a lot of Americans may be driven to entrepreneurship because, short of the lottery, it may seem to them the only way to climb the ladder.
Countries where life is a little more ... comfortable? ... may have fewer people willing to roll the dice (so to speak).
I think the VC one is the main factor here, as is how risk adverse many investors seem to be in Europe. Put simply, the majority of them don't like investing in B2C companies, they don't like investing much money in general (by US standards) and they certainly don't like investing in businesses where it'll take years for it to pay off if they're lucky.
This means that if you ask for investment in something like Facebook/Twitter/Instagram/YouTube/Reddit/whatever you're almost certain to be turned down by European investors, because they're seen as too risky compared to say, a shop saying office software to ad agencies. But these high risk businesses are also ones with a high pay off if they do well.
There's also the fact European investors seem to have a relatively 'stingy' standard when it comes to how much money is worth investing in a startup. While over there in the US it seems like unproven companies are getting tens of millions of dollars on a whim, over here it seems like £50-100K is seen as a 'reasonable' investment amount, with some offering even less than that.
That money is not gonna be enough to hire Google level software engineers, have all the fancy buildings and facilities that many young folks expect, pay for high end hosting platforms, pay for a massive marketing/ad campaign, etc.
So even if you did get funding, you'd likely be outcompeted by US based companies flush with cash and resources that have years of runway compared to your 6 months or so worth.
It's interesting, when I look at EU supports for entrepreneurship or vc amounts it's largely a question of whether an investment of 6 months' salary is enough to quit my job. The scale is pathetic by comparison to the US.
Although, I'm hoping to bootstrap something here in Europe for my next gig. Public healthcare, insanely cheap houses (compared to California) and cheaper devs should help with runways.
Because everyone is overblowing the safety net thing. It's not so much a safety net, it's handouts for parents to seed companies (pay kid's employee salaries) or investments at an early age. Or a free place to live so that a lot of th income can go towards startups.
Sure. Even more so a safety net allows for entrepreneurship. My parents are not wealthy but they have always had a large enough home and enough extra income that I knew if I needed to move home and live when them I could comfortability for 3 months or more.
I'm not much of an entrepreneur risk taker anymore but every time I've had to make a difficult risk decision in the past I knew the absolute worst case scenario was that I would end up broke living in my parents basement. It's carpeted so it never seemed that bad.
> The next time someone claims that starting startups is for rich kids, remind them that Airbnb happened because its founders literally could not pay their rent.
Starting startups is not just for rich kids. But it is dominated by rich kids to an extreme that Paul Graham is completely blind to, living in the bubble he has his whole life.
Depending on your definition of rich, of course. Most of the benefit is being in the upper class, that's what "rich" means to people living in the lower classes. To upper class people, being "rich" means having a private jet.
Almost every major tech founder fits the profile of having had the benefit of SAT prep and tutors to game entry into an "elite" school and parents able to provide free food/shelter/funding. Many parents have connections to draw upon.
Steve Jobs is one of the very few exceptions. And, to my mind, it's not a surprise that he's the best tech founder that ever will be.
Airbnb founder Nathan Blecharczyk was definitely a rich kid.
"He grew up in an upper-middle-class family in Boston, Massachusetts. He attended Boston Latin Academy."
"He was also on the business staff of The Harvard Crimson during his time at Harvard."
The others maybe not. It's hard to know how much money a family has. But they moved to SF and rented an expensive apartment with no jobs. This isn't something most poor kids do. Who co-signed their lease, given that they had no income? Likely it was a parent ready to bail them out if they ran out of credit cards.
You could still agree with everything in the article and tweet this tweet. The article states the strongest predictor of entrepreneurship is parent's wealth. There are many other predictors.
UBI takes care of the financial risk component, less so the parental knowledge of the rules of the game, connections or free capital to invest.
I think this is all obvious if you dig just below the surface of most ultra successful people in NY/CA Finance & Tech space. These people are largely smart, well educated, but also raised in a particular way with connections that you only have from being in the top 5% at birth. There is the financial backing that allows these people to take large risks because they aren’t worried about a paycheck, the capital to invest in their ventures, and the connections to clients/partners/other investors.
The founder of the last firm I worked told a story about his father giving him the option of a big party when he came of age in middle school or to have the cash value of the party to invest. He chose to invest, and that is how he launched his investment career, he told us proudly.
Cool story, until you inflation adjust the dollar figure was something like $100k at the age of 14. So he started his young adult life +$100K whereas my wife&I started our adult lives (post college) -$100K in debt.
Another place I worked the founder started in his 20s with $1M equivalent in capital... etc etc
I would add that simply having been raised rich doesn’t guarantee any sort of success, it just makes it easier if the aptitude is there.. which is why so many of the ultra ultra rich come from ultra rich families who came from rich families who... Capital accumulates over time as long as the inheritor has some aptitude.
I live in a condo in NYC that is owned almost equally by three groups - investors, trust funders, rich worker bees.
The trust funders are an interesting lot to observe. We have the child of a minor politician in an oil rich countries in one of our most expensive units. My neighbor has never to my knowledge had any sort of a job in his life, but owned 4 apartments before age 30, before selling all of them at a loss in the last year. We have people in their 20s with job titles like “makeup artist”, “political organizer/activist”, “personal assistant”, “journalist”, etc living in paid-off $1M apartments.
Even the “investor” units are interesting as more than half of them are owned by some combination of the developer, the developers children, the developers silent partner, the developers lawyer, etc..
People are extrapolating way too much from a study in Israel about their market, culture, and system. While it is a truism that starting a company is easier with money than without, that doesn't explain the abundance of poor immigrants (here in the US) who build businesses. Nor is any of it a clear indicator that shifting policy towards blanket money hand-outs would be an efficient means of increasing entrepreneurship. The left-tech's attachment to universal hand-outs looks much more like a guilt-salve than reasoned, efficient policy.
I've worked with a few university programs that help some students sidestep these issues by wrapping entrepreneurship opportunities inside of their course load. Students use much of their junior and senior year time working on business plans, pitching investors, and trying to get their businesses started. It's a great model for leveling the playing field.
Anecdotally, local entrepreneurship circles are absolutely full of young people from wealthy backgrounds who think they're going to leverage their parents' connections and capital into personal riches.
They almost all fail the same way: They focus too much on quick-flip opportunities and the get-rich-quick schemes. They view entrepreneurship as collecting capital from investors and giving it to contractors to produce a business for them. They don't actually want to grind out years of work to get a business off the ground. They burn out after a year or two.
Paul Graham wrote about what YC looks for in startup founders in 2010 [0]. The first thing he notes is that intelligence wasn't anywhere near as important as they expected it would be. And I think pg had a much better definition of intelligence than "academic achievements and standardized test scores." So I don't think this paper is really making a strong-man case for parent's income being the most important factor in entrepreneurship, they've ignored all 5 aspects that experts like pg think are the actual most important factors and focused on one that he thinks isn't as important as people think it is.
Intelligence is overrated. It's one piece of the puzzle. If we look for "one factor" that's responsible for success we are going to be searching for a long time.
Income is a more robust metric because it is a somewhat natural combination of many personal characteristics.
If you're concerned about paying for living expenses, you will find it an uphill climb to risk entrepreneurial things.
If your living expenses are taken care of, you can think more strategically, look to higher goals, and look for meaning in them.
I can definitely say my life changed the first time I got ahead of my bills instead of reacting to them. I would imagine a similar sort of change with a sense of set for life (although it could also work against you)
I'm not sure how you hope to avoid this problem. People with more resources can accomplish more. This is true even in a strict meritocracy. All that's modified in a meritocracy is who the top performers are. It doesn't level out the playing field for everyone.
The causation v correlation here just raises more questions, wouldn’t “smart” people inclined towards entrepreneurship become smart parent and reinforce the tradition?
It's even hinted at in the article: "A significant connection between the parents’ level of education and entrepreneurship was also noted." The clickbait title confirming people's priors isn't surprising though.
If I had to guess at the causal graph it would something like:
smart -> income
smart -> entrepreneurship
entrepreneurship -> income
income -> entrepreneurship
And even without the last two connections the smart confounding variable would induce a relationship between income and entrepreneurship.
This seems to be interpreted as a meritocracy vs. oligarchy sort of thing. I agree with the basic takeaways there (about opportunity, resources, discrimination, network effects, etc.), but even if we had a meritocracy, I'm not sure this would be an unexpected outcome.
Since when did anyone think the smartest people, those with the best booklearnin learning acquisition, would be the best entrepreneurs? I don't know that the biggest Ayn Rand cultist would have that expectation. It's equally plausible that the traits that lead to entrepreneurship are heritable but not learning-related.
So everything is at it should be. People who cannot afford to risk big, should not risk big. It is a simple fact that being wealthy allows one to risk more, financially.
Even if you gave poor promising candidates free money with no strings attached, they would still be better of going into a stable career path with stable growth, rather than try to start a startup because of the opportunity costs.
And, why should smarts and entrepreneurship be correlated, anyway?
It's because we like to believe we live in a meritocratic society, where the people who have wealth have earned and deserved it.
There is a strong incentive for the successful to ignore all the many advantages they had in getting where they are in order to believe they 'pulled themselves up by their bootstraps' and that anyone as hard working or intelligent as they are could do the same. By convincing themselves of this, they are able to believe that they deserve everything they have and poor people deserve to be poor, and, being inherently superior, it is therefore ok to exploit their lessers.
This thinking is a hallmark of prejudice. White supremist have long held that black people and other races are genetically inferior, less intelligent, lazier, more prone to violence or criminality, etc. to justify their position. I have less experience with it, but it seems the same sort of rationalization is at work with the Indian caste nonsense too.
P.S. While your question seems to be meant in the objective sense of "why would one expect that intelligence and entrepreneurship are correlated?", it is apparently being interpreted as "why should society function such that entrepreneurship is a path available to anyone with enough intelligence?".
Correlates? Sure. Causes? I strongly doubt it. Drop a million bucks on Joe Blow and see how things turn out.
I see the milieu of having semi-affluent parents--being steeped in the ins-and-outs of business, law, assets, broader social ties, and higher social standing--as a far more powerful edge than a wad of cash.
1) This is ideological bullshit rather than a good faith argument. 2) Adjusted for inflation, I'm sure this description fits more than one president, so you'll need to be more specific. 3) Whichever example it may be, I'm sure that president also had a wealth of credentials, connections, shibboleths, etc. of greater value than a mere one-million fiats.
> income of someone’s parents is the factor that correlates most to entrepreneurship, with higher wealth connected to a greater likelihood of being a start-up founder
Ironically, the type of studies you're citing make the same mistake in not controlling for the effects of income.
One reason that poor children are likely to "fail" the marshmallow test is because growing up in poverty means that promises made to you are less likely to work out - so, having learned from experience, they make the rational choice.
Social psychologist here. The article doesn't back the headline. They never mention the effect size, how much parental finances matter. The mention that smarts "explain 11% of the gap" or something, but they don't provide the number for parental finances, so we're left to just have some vague impression that this variable is "key" to entrepreneurship.
This was a government study, where the government researcher is explicitly talking about how the findings must have specific policy implications. I would bet that they advocated for those policies before ever conducting the study, and that any result would have been used to advance such policies. All we know is that the effect was north of 11% in variance explained. So, is 12%? 17%? 25%? What is it? And at which threshold does this variable become "key" to entrepreneurship? (Also, what would people have predicted in advance? And does the reality alter their policy prescriptions?)
They're also doing potentially invalid things with the stats in not using continuous variables, but rather dichotomizing them. And their slices are arbitrary. They're comparing the top 20% on one thing to the bottom 60% on another, for example, and it's not clear why they chose those specific slices. It could be the it was specifically those arbitrary slices that gave them the story they wanted to tell.
Also, parental finances will correlate with lots of variables, including culture, values, all sorts of behaviors and social norms, as well as concrete domain knowledge in things like business and banking. There could be a disposition effect where the children of people who are more likely to be entrepreneurs are themselves more likely to become entrepreneurs, which is almost trivial right? Or there might be a culture effect where these kids are exposed to the phenomenon of entrepreneurship in a way that is less likely or less strong for other kids.
What I mean is that starting a business doesn't even occur to some people, for various reasons. Like no one they ever knew growing up had a business, compared to someone growing up in Silicon Valley where starting a business or being employee # ≤12 at a startup is almost as common as having two arms. I noticed this kind of cultural difference in the US. I'm a Mexican-American from Arizona, but I've lived in Silicon Valley and the American South (North Carolina). When I lived in Chapel Hill, I ended up knowing a lot of natives from other areas of the state. They would talk about wealth as something that you got from your family – they just assumed that's where you got money. So if they meet someone and notice something expensive they have, like a car or pricey jewelry, or even housewares that seem high end, they might ask others afterward "Does she come from money?" I had never heard that expression elsewhere in the US. Does so and so "come from" money? It didn't make any sense. No one talks like that in Silicon Valley. People don't come from money here – they make it. They talk that way in Mexico though, where entrepreneurship of this sort is rare and poverty and class structures abound. So I think people who grow up affluent are more likely to think about starting a business because it's just kind of obvious or normal to them – it's what people do. It's a natural part of their choice space, something to think about and consider, whereas for others it's totally not, and wouldn't even come up in their thinking, planning, etc. The effect of having affluent parents could mostly be about the literal money situation, like people here are thinking, which is about having access to funding, or it could mostly be behavioral/cultural assumptions. I don't have any predictions or opinions about which is the strongest effect. It would take careful research to find out. But their affluence cutoff includes lots of households that wouldn't have nearly enough money to fund most start-ups. Making $125k a year is not the same as being able to provide seed capital for some business. So in that case, it might about networks and knowing people who have more money to invest. That kind of spills over into the cultural aspect of thinking of starting a business as a totally normal and smart thing to do.
Not all middle class workers are salaried. My electrician/plumber/etc own their businesses but they're closer to the middle class than the 1%. And while I have a salaried job I probably make twice their salary.
"Owning a company" is much broader than the SV startup scene.
My father-in-law got together with his brother to buy a bulldozer and ran a business putting in curbs and sidewalks.
Today my wife teaches people to ride horses.
Thus she had a precedent in her family of someone who succeeded at self-employment and she wound up doing something similar in work.
John Kenneth Galbraith would say that that sort of self-employed person is highly exploited, etc., that it isn't a realistic vision for many people to get ahead. But I know many people who've succeeded that way. I've known a number of successful academics (like Galbraith), but I met them in grad school or after they were successful.
2000+ years before Marx the greeks talked about "class" as being networks of families that gravitate to towards certain family wells and that is alive and well today.
This is probably key. If GP's comment is accurate, I suspect it has more to do with "small business owner" than "tradesman". Of course they may just have a inaccurate view of real net, also. I know a few guys who would brag about "I made X last year" as a self-employed sub, but on a little interrogation it became clear they were very handwavy between company gross revenue and "I made".
Doesn't fit in with what I've seen personally. Most of the people I know who've started companies have parents in high-paying jobs where they work for someone else, e.g. finance, medicine.
Edit: I'm also not saying you need to have family help to be a successful entrepreneur. Maybe the most successful person I know personally did it on his own, but he is unusual.
From my anecdotical experience: more children from well off families are optimistic and have more tolerance to economic risks. It's not that they need the family's money to start a venture, but that they know they can fall back on it, if it doesn't go well
Why didn't I? That was my very first thought. The reason was, I had to work halftime to pay tuition and buy food. I was mired in working to live. Ol Bill had a family to support him as he bought resources (ads in magazines etc), recruited staff, took meetings etc. Always a hot meal on the table when he got home from a big day.
One result of a Basic Income: more folks can be entrepreneurs, if they're willing to live off that few dollars a month. It could make all the difference.