Parents' income, not smarts, key to entrepreneurship
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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.
I don't mean these classes where they get out and write
class Dog(Animal):
def bark(self):
print("a Dog is barking!")
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.
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.
edit: and probably also superfast internet, and a machine with a GPU, and maybe even some way of setting up a server cluster
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!
https://www.gatesnotes.com/About-Bill-Gates/Early-Days-as-a-...
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 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.
This is how humans work. This cannot change with UBI.
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.
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.
Right now, only the wealthy can really risk things.
Often because there aren't any good jobs there. With UBI entrepreneurs can self-select and live in places with low rent and weak job markets.
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.)
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.
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.
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.
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?
> 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.
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.
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.
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.
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.
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.
[1]https://www.tal.gouv.qc.ca/en/news/calculation-of-the-2020-r...
No, that'll just create a lottery system and unemployment or lower wages, because people won't be able to move to the jobs.
> eliminating zoning restrictions that limit housing
Yes, this would be great.
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.
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.
Here are few examples among some EU countries: setting a minimum density and number of floors in urban areas to prevent "mcmansions".
Mandated commercial areas (aka shops) on the ground floor on new buildings.
Requirements on walkability applied to new road design to prevent sprawls e.g. limit cul-de-sacs.
Minimum and maximum percentage of buildings for industrial / office / shop / domestic use.
Minimum and maximum apartment size.
Tons of limitations on renovation of historical buildings.
A lot of this stuff makes it very difficult to quickly transform an already urbanized area into a bunch of super-luxury villas or similar.
As does creation of market rate housing[0], even in the short term.
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.
Well, you know, everyone but the uber-wealthy.
On the other hand it has never been cheaper to start a side hustle.
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.
But we have many start-ups, which usually migrate to the US as soon as they grow big.
- 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 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.
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."
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.
However, I think it's orthogonal. Limitations are good, but having a basic fallback is also good.
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.
Also, where did you find these numbers indicating such a big difference?
Germany is pretty close to the United States, despite the United States being a wealthier nation by comparison.
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.
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.
> 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.
[1] https://archive.org/details/trapsellingoutto00broo/page/108/...
If this was true you'd see people from poor families being more entrepreneurial than those from rich.
This is not something to argue about, this is something that that we should measure.
> From what I understand EU has way better social safety nets, yet much smaller entrepreneurship rates compared to USA.
> Counter-intuitively, limitations drive innovations.
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.
Go talk to the owners of the five nearest local small businesses, ask them how they started, and see how it goes.
Speaking from experience, btw.
*: 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
Essentially, Swedes have far greater economic freedom due to greater economic equality. Despite not having UBI.
Try firing an employee in France. It's a two year process minimum and in the end a judge might rule you can't do it.
Also the regulatory landscape in the EU imposes such a high burden on entrepreneurs. Coupled with investors being way more conservatives.
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.
You don't need your parents to be millionaires to get that, but in today's terms this is definitely upper middle class.
We do. I welcome UBI and I will quit my job.
Just stating plainly I welcome the opportunity to do it full-time.
Going to college is not required to become a successful entrepreneur.
Not a requirement, but increases your chances a lot.
Unless we are only talking about Bill Gates.
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 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.
In the US, any person has access to consumers all across the US. I think this is a big part of the success of US companies.
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.
https://www.pcworld.com/article/243311/former_ibm_ceo_john_o...
"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."
Providing entertainment and insight has no value to society?
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.
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)
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?
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.
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.
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.
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).
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.
I'd rather not find it out.
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.
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.
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.
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.
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.
He is not your friend Bill from across the street that most of people could compare with.
Still this is the whole point of the article, he makes a reasonable example.
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?!?
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.
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.
[0] https://www.cnbc.com/2020/08/05/how-bill-gates-mother-influe...
[1] https://www.suttontrust.com/our-research/elitist-britain-201...
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.
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....
Gates went to Lakeside, often considered the top private school in Washington state.
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.
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
Edit: formatting
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....
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.
However, the engineer in me would hate to not be building the thing myself.
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.)
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.
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.
And not so famously the 90%+ of entrepeneurs who failed and lost everything.
Survivorship Bias is sooo rampant in SV.
https://www.wired.com/2013/11/silicon-valley-isnt-a-meritocr...
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.
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]”
[1] https://www.exeter.edu/admissions-and-financial-aid/tuition-...
[2] http://gsi.berkeley.edu/media/tool-recognizing-microaggressi...
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.
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.
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.
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].
[1]https://www.technologyreview.com/2018/03/01/144958/if-youre-...
[2]https://www.bloomberg.com/opinion/articles/2016-12-22/if-you...
[3]https://www.forbes.com/sites/rogerkay/2015/02/02/if-youre-so...
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.
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.
Moral - choose your parent carefully, or if you miss that boat marry rich.
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.
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.
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.
[0] https://infographic.tv/wp-content/uploads/2019/06/Map-Who-th...
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).
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.
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.
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.
[1] https://twitter.com/paulg/status/1129897694984646657?s=20
A short quip on Twitter does not mean anything when you have quantitative data against you.
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."
https://en.wikipedia.org/wiki/Nathan_Blecharczyk
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.
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 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..
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.
Income is a more robust metric because it is a somewhat natural combination of many personal characteristics.
Because, Since I was young, I've been hammering a cinderblock away that can grow 3 new heads at random intervals
English is my first language and I still have no idea what this means?
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)
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.
I'd like to see the same study conducted in the US and - separately - in Europe as well.
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.
And, why should smarts and entrepreneurship be correlated, anyway?
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?".
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.
So which is it: income, or wealth?
Did these studies normalize for those confounding variables, because both are heritable.
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.
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.
Those parents who adopt a more enterprenurial mindset are able to make more money.
Thus they pass on this enterprenurial mindset on their children.
Children of middle class workers are indoctrinated into a 8 hour job.
In the same way one can think that children of enterprenurs are indoctrinated into entreprenurship.
Obviously being a company owner will net you much more money than being a worker.
Most middle class people are feeling guilty just for asking for a raise.
Children of enterpreneurs think completely differently.
"Owning a company" is much broader than the SV startup scene.
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.
Plumbers: $60k https://www.salaryexpert.com/salary/job/plumber/united-state... https://www.salary.com/research/salary/alternate/licensed-pl...
Now those aren't self employed, but
"What Kind of Money Can a Self-Employed Master Plumber Make Annually?"
Suggest maybe 20% more for self employed
https://bizfluent.com/info-12088771-kind-money-can-selfemplo...
"The salary for a master plumber with more than 20 years of experience ranges from $43,790 to $74,700 a year"
Do you have any data rather than your self-selecting annecdote?
For every painter that owns his own company, a dozen guys are climbing ladders and slinging paint buckets for him.
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".
The actual cause is more than likely: parents who have high income set a precedent for self-employment.
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.
Perhaps if the source of the parents' money were lottery winnings, the correlation with entrepreneurial success would vanish.
https://www.propublica.org/article/the-story-behind-jared-ku...
Society will be far better off once Harvard's endowment is taxed and redistributed to oblivion.