The Sobering Reality of Entrepreneurship in the U.S. | Hacker News Reader

The Sobering Reality of Entrepreneurship in the U.S.

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32 pointswherespaul37 comments

Self employment in Mexico City is a bit different than the startups you find in San Francisco.

No, it's not a bit different. It's completely different. It's another universe.

The vast majority of self employment in DF is a fruit stand or selling cigarettes at traffic lights (not that there's anything wrong with that).

I spent some time with an Italian entrepreneur a few weeks ago and he told me "we have three VCs in our country. and two are out of money."

The Sobering Reality of Entrepreneurship in the US is that we have it better than everybody else in the world, and even more so if you are an entrepreneur in SF, NY, Boston, Austin, etc.

Yes, the US economy is better than most places where entrepreneurship is a necessity. But it's also a world of paperwork, high tax and stifling administrative work -- and that's if you happen to be making a profit.

The problem is that the US is hostile to small businesses. Are you a single member LLC? Then you are personally liable for claims against your business. Want health insurance? Get ready to pay through the nose. How about at tax time? You'll have self-employment tax, and most likely special state taxes on businesses (NY has this) to look forward to. The list goes on.

If you have a successful software business and don't need to be in the US it's actually better to leave and run it elsewhere.

Do you think it's better anywhere else in the world. Up until a year ago, the country I am in made it inconceivable to be an entrepreneur. And they invented the fking word! You think paying taxes at tax time is bad. How about paying taxes before you are allowed to start your company.

If people could do a startup elsewhere you don't think they would already. Taxes, liability, and health care are the least of the problems for a startup.

You might as well be saying people should emigrate to country other than the US. There are far easier entry ports, yet the US still manages to be #1 no matter how many hoops they make you jump through.

While this infograph is inconclusive it gives an accurate picture overall http://grasshopper.com/img/blog/entrepreneurism-us-europe.PN...

Yes, many countries are better than the US for entrepreneurship. I'm sorry that France is not one of them, but that doesn't really speak for the rest of the world -- your countrymen invented the word 'entrepreneur,' but they also invented 'bureaucracy' and 'laissez-faire'.

In Austria, if you become unemployed, and want to use that as an opportunity to start a company, the govt will extend your unemployment benefits by 6-18 mos, and give you a big break on your social taxes for years.

Also, you get unemployment insurance as a self-employed person, as of a few years ago.

And, naturally, everyone - no matter what they do or how much they earn - is covered by social health insurance, which is excellent. (Also pensions!)

Also, yes, you have to come up with 20-30K euros to start a true LLC -- but you can do business for "free" as a selbständig, or self-employed person, including employing another. However, if you do set up an LLC, you can never be liable for more than that 20-30K euros - it is not a fee, it is an escrow. If you were to close the business, without outstanding liabilities, you would get your money back.

Taxes, liability and healthcare may SEEM like the least of worries for a startup -- right up to the point where they suddenly become life-or-death, mission-critical. Naturally.

You've only addressed the bureaucratic part of startup. Many countries are only now seeing the benefits of encouraging entrepreneurship instead of taxing them out of existence. But just because the government writes a decree doesn't mean everyone stops what they are doing to change course.

There is a reason its called a startup culture. It takes a societal shift to get one running not just a few tax incentives.

Also unemployment doesn't change it. There are certain people that have what it takes to run a successful startup. These people are in demand and are never unemployed.

I was told by my lawyer recently that Georgia LLC law has been clarified to provide the same protections for single-member as multi-member.

I do agree with your other general sentiments.

Dumb question: What is DF?

Mexico City's proper name in Spanish is Mexico Distrito Federal. It is sometimes abbreviated Mexico DF, rather like Washington DC.

One large reason is the lack of universal health care in the United States. Should you or your family be hit with a major illness while you're busy being entrepreneurial, you are sunk. One of the best things the United States could do to promote entrepreneurship would be to implement proper universal healthcare. Sadly, it's unlikely to happen in the near future.

If that's what's holding a person up they probably don't have the necessary risk tolerance to be an entrepreneur.

Or perhaps they just got genetically unlucky. Say someone has a chronic condition and would never be able to afford insurance outside of a group plan. Does that mean the world should be deprived of their entrepreneurial efforts?

The article is really talking about "self employed" people. It would be erroneous to assume that self employed people all need to have a high risk tolerance. There are more self employed low paid and menial workers than there are schmoozy, Valley "entrepreneurs" and I wouldn't expect a self employed cleaner, nanny or au pair to be adopting a high risk profile.

Isn't this supposition a little broad? There is no magic bullet, in anything.

Easy access to insurance that isn't provided by an employer is important for entrepreneurship, but if by "proper universal healthcare" you mean single-payer insurance, I disagree. The individual insurance market sucks in America because of preexisting conditions and the higher taxes on individual insurance than on employer-provided insurance. The former is getting fixed. I'm not sure if the latter actually made it into the final bill, but I don't think it did, and that's a shame.

Beyond that, the only advantage single-payer systems have is the lower prices that result from wielding monopsony power. I don't think it's possible to maintain the quality and pace of improvement of health care when people are funding it less than they would be willing to. Health care is expensive because we value it so much that we throw tons of money at it. People try to provide better care in order to get some of that money, and if you take some of the money away, there will be less people advancing the industry, which isn't what people want.

Having lived in two countries that have free public health care at a good level, I can say that starting my own business is much more relaxing in that environment. I would not dream of doing the same in the USA at my age or family situation.

Of course it's more relaxing. You don't have to worry about researching your insurance options because the choice has already made for you. I don't think "more relaxing" is a very compelling reason to choose a policy on its own, especially when the cost of that relaxation is a slowed pace of advancement in medicine.

If the U.S. government stops incentivizing the connection between employment and insurance, starting a company wouldn't need to have any effect on your health care. No single-payer system required.

I'm starting in the UK and I'm more relaxed because I don't have to worry about health care - I'm covered come rain or shine. I'm not relaxed because of avoiding researching options.

Also, you assume a slow in advancement in medicine. This can't be further from the truth. Small example: all of the patients registered in the UK (i.e. residents) are getting digital patient records.

I don't assume a slower localized advancement in medicine. There is a global market for medical technology, and it will be sold wherever it is profitable enough to do so. The fact remains: the further the price of health care is forced down by insurers who comprise the bulk of their respective insurance markets (usually governments), the less money will be available to incentivize people to produce medical technology.

Americans will be covered rain or shine once the healthcare reform bill kicks in. If you can afford it, you have to by insurance. If you can't, it will be subsidized so you can afford it. That's the goal, anyway.

Markets require choice to function properly. I think the American approach is less likely to result in unintended consequences.

Just show me where the US excels, especially on per dollar terms, on health care on any metric relative to any other modern industrial economy.

We spend more on health care in large part because we have way too much surgery going on. There's other stuff going on too, but there's a lot of waste to go with us 'valu[ing] it so much'.

I don't think per-dollar outcomes are a good metric to optimize for. That will get you high quality care at low prices today, but the future quality of health care will be lower than it would've been otherwise.

If there's too much surgery going on, that can be fixed without a single-payer system. My point about the value we place on health care is that even if we fixed all the problems with health care in America, we'd end up paying more than countries with single-payer systems because those systems force the price down below what people would be willing to pay on their own. That is a bad thing.

>because those systems force the price down below what people would be willing to pay on their own

This is very far from the truth. Worry not, rich people can spend to their hearts content in single payer countries. They still spend less and have better outcomes.

In the abstract maybe we do want to spend a lot of money for health care. However, medical costs have been growing at double digit rates. Hopefully that pattern does not continue for too much longer.

Yes, I know that one can still purchase supplemental care in single-payer countries. However, there are plenty of people in the middle who are paying full price for health care in America who wouldn't purchase supplemental care in a single-payer system. That will lead to less funding for advances in health care that people are willing to pay for. That is a bad thing.

Medical costs are rising because people have more and more disposable income, and they're choosing to spend it on the things they value most, like health care and education. Instead of letting that price signal serve as motivation for more people to supply the goods and services that people value most, single-payer systems force prices down and result in less investment in the products that people want to purchase. Forcing people to buy a product from a single vendor hinders competition. Forcing prices down by hindering competition is bad for the future of any market. It's a bad idea.

I'd love to see you produce so data for any of these claims. People in Japan get access to MRIs for much cheaper than Americans. How is that a bad thing?

The median real income has been hardly been growing at a fast rate. You'd need it to get growing at an incredible 10% a year for your explanation to be at all credible.

MRIs are cheap in Japan because the Japanese government will only pay so much for them. As a result, there is less of an incentive for people to develop new imaging technologies since the government will similarly limit the profit that can be made from them. That doesn't mean that innovation in that field will stop, especially since more profit can still be made in other countries. The pace of innovation is just likely to be slower.

I didn't say incomes were rising. I said disposable incomes are rising. I can't find data to back that up, especially since the economic definition is different from the colloquial meaning of "disposable income." However, it's clear that technology has made both the necessities and luxuries of life far cheaper over time, which leaves more money for us to spend on other things even with a stagnant income.

The difficulty with pre-existing conditions is that if the insurance companies can't reject people because of them, people will wait until they need insurance to get it. Since the insured population will be much more sick than the population as a whole, insurance will be much more expensive (or much worse in quality). That will cause some people who need insurance not to get it, and for the people who aren't sick to shy even further from it.

The solution is requiring everyone to pay for insurance so that the pool of insured people is as large as possible. My personal preference is either a single payer, or multiple payers who are all registered non-profits and required to keep a very high Medical Loss Ratio. The individual mandate will do this to some degree in the US, but it may still be cheaper to just pay the fine than get insurance.

I think the problem with pre-existing conditions is that insurance benefits are misaligned with the risks they're supposed to mitigate. The policies are written to cover care month by month rather than condition by condition.

Say I buy an insurance policy to mitigate the risk of treating cancer, should I develop it. I would like a contract that said, "The average cost of treating this is $X and its incidence is %0.Y so if you pay us $X * %0.Y + Profit, we'll agree to pay to treat you if you ever develop it."

Or say I already have cancer and want help treating it. I'd like a policy that said, "It might cost you $10,000 or it might cost you $500,000 to treat this. But we'll offer you the average cost split into payments over several years, and we'll absorb shocks in the price for you."

It seems bizarre to me that health insurance is sold the way it is. It's as if I had auto insurance that paid for repair work to be done that month--whether or not the accident occurred while on that particular contract.

I have to agree. A few years ago I was in the states for a conference. At lunch, there was a bunch of us sitting around a table and we got to talking. Turned out, I was the only Canadian at the table and also the only self-employed. The rest of the table agreed that they couldn't leave their jobs because they didn't want to give up their health insurance. I recall feeling shocked at the time, realizing that there could be other incentives to entrepreneurship that weren't necessarily capitalistic.

As defined in this article (% of people self-employed / owning small businesses), I think there are some other factors involved. I only know about Greece first-hand (about half my family lives there), but one reason there is that regulations and incentives generally discourage large corporations from entering a whole lot of markets, though they've been relaxed somewhat recently.

For example, Greece's high self-employment rate includes a lot of one-man grocery store or fruit/vegetable stand operations, because large supermarkets were more or less banned until recently. More generally, there were (again, recently relaxed) regulations on how many hours you could have a retail establishment open per week, and what hours they could be, intended to make it easier for small businesses to compete with the large ones: a one-man store can't reasonably be open more than maybe 60 hours/week, so the law generally banned businesses from being open more than a certain number of hours a week, and required them to close at least one or two days a week (depending on market segment). That made it much easier for small operations to compete with the large ones, because your mom-and-pop store open 6 days a week, 8 hours a day, wasn't up against a 24/7 chain store.

Some though is perhaps just cultural. When a rich Greek builds a vacation villa, for example, he'll typically get a independent architect to design it and oversee its construction, rather than going with a big design/architecture/construction corporation, which is seen as too cookie cutter / less prestigious. I bet just architects alone account for several thousand of the self-employed Greeks, whereas most American architects work for corporations (exceptions only on the very high end of world-famous architects). It even extends to commercial real-estate: the typical 6-story office or apartment building in Thessaloniki or Athens is designed and built by a small independent firm.

Entrepreneurship ain't for everyone.

You will: - work more hours. - deal with so much more stress. - flirt with financial ruin at least once. - struggle to balance work and family.

But some folks are just cut out to do it. It's like a genetic predisposition that can't be denied. And if one can learn to cope with the issues I mentioned (and more) being an entrepreneur is one of the most rewarding life experiences out there.

Turkey, Greece and Mexico had the highest self-employment rates as a percentage of total employment.

I bet Mali or Niger have an even higher rate, given most of the working population are subsistence farmers. Further, many countries don't have the laws that, say, the US and UK do to prevent abusing "self employed" workers by treating them as employees without benefits.

"Self-employment" doesn't mean what we think of entrepreneurship.

PG has the great metaphor two saplings, one of them is a redwood sapling, it's expecting to grow. On that measure we don't create self-employment with entrepreneurship we create jobs.

HNers want to create a lot of employed people when they are succeeding.

And now, a word about entrepreneurship in Greece:

http://network.nationalpost.com/NP/blogs/fullcomment/archive...

(and, less humorously: http://online.wsj.com/article/SB1000142405270230425270457515...)

The first link doesn't look humorous at all. The article is pretty serious.

I don't know, the comment at the end of the article is pretty funny.

I read this book and while the statistics were interesting the author's complete disregard for correlation!=causation was extremely disappointing. It was mostly conjecture and hand waving. Also if you're a minority woman, don't read this book. It will seriously bum you out.

I think America is saturated and suitable for people who will live on http://en.wikipedia.org/wiki/Passive_income

entrepreneurship is stressful? Other countries, especially developing ones, have more small businesses?

This might be one of the least insightful articles ever on mint life.

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