The Sobering Reality of Entrepreneurship in the U.S.

http://www.mint.com/blog/trends/entrepreneurship-06252010/

by wherespaul • 16 years ago

32 37 16 years ago

_delirium• 16 years ago

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.

jellicle• 16 years ago

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.

crikli2• 16 years ago

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

abstractbill• 16 years ago

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?

petercooper2• 16 years ago

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.

patrickgzill• 16 years ago

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

natrius6• 16 years ago

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.

onoj• 16 years ago

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.

rortian3• 16 years ago

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'.

JeffJenkins• 16 years ago

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.

lakelse• 16 years ago

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.

crikli2• 16 years ago

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.

lawrence• 16 years ago

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.

holdenc• 16 years ago

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.

yardie2• 16 years ago

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...

jhancock• 16 years ago

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.

j_baker• 16 years ago

Dumb question: What is DF?

patio11• 16 years ago

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

sh1mmer• 16 years ago

"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.

petercooper2• 16 years ago

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.

tptacek• 16 years ago

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...)

dennisgorelik• 16 years ago

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

Locke1689• 16 years ago

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

usaar333• 16 years ago

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.

softbuilder• 16 years ago

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.

known• 16 years ago

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

The Sobering Reality of Entrepreneurship in the U.S.

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