“It’s hard to take risks if you don’t have a safety net”

https://twitter.com/eastdakota/status/1129929178382446592

by boramalper • 7 years ago

548 372 7 years ago

jacquesm2• 7 years ago

How do countries with good social safety nets factor in here? In EU people are definitely not nearly as likely to start their own business as in the US, and many people that would otherwise be labelled 'jobless' (or on the dole) are 'self employed' instead.

skrebbel2• 7 years ago

In many EU countries, the safety net is much better if you had a job than if you had your own company. Eg in NL, if you get fired after working more than x months, you get 70% of your last salary for max 2 years while you can go find a job. But if your company goes to shit, all you can get is "bijstand" which is much lower benefits and you have to sell all your assets (eg if you owned a house, you have to sell it and move to rent, even though that's usually more pricey than the mortgage, etc) before you get it. So if your company goes bust and you come from a middle class (or higher) background, you'll probably prefer to depend on your family for a bit while finding a job (or a freelance gig etc). But if you have nothing like that to depend on, then it means that starting a company is extremely risky (I'm not sure most Dutch Uber drivers realise this).

IMO if NL really want to encourage more entrepreneurship, and if they want do so in a way that matches our culture and values, then they should create the same safety net for entrepreneurs and employees. But lots of entrepreneurs are against this because ofc this safety net also means paying more taxes. I think that's stupid. I'd gladly take a 5% pay cut if it helps make my country more entrepreneurial, and me more safe. Plus, now I buy commercial accident insurance (pays out monthly if I can't work ever again), which would also be covered by said safety net, so in effect the cost difference would be smaller than 5%.

EDIT: I'm only just seeing who I'm replying to. I think you knew the above already so I must've misunderstood your question.

gingabriska• 7 years ago

I read somewhere most businesses in US are started by immigrants. So only a person with means can immigrate to US, I guess even the people coming from India or China or Eastern Europe do have people back in home backing them financially or in other words they've enough financial moat to take risks through which they are able to jetset themsleves into new businesses.

I've this friend in Europe he's working on a startup idea once it's developed and become bit popular he plans to move it to states because of stronger private property rights and less taxes and better benefits for employers there and a bigger market.

So maybe a lot of people come to US to start a new businesses once they've some idea and implementation in their mind and enough resources to execute it.

faceplanted• 7 years ago

Do remember that immigrants aren't usually trying to start the same kinds of businesses as the "natives", small businesses make a lot of sense if you want to be able to rely on yourself and not an employer who might not appreciate that you're just learning the language, and if you're willing to make use of the labour of your entire family rather than just a breadwinner.

If you're an immigrant there are small businesses that are closer to stable jobs and you can start immediately with your savings, whereas if you're a native the reason you'd start a business is because you're interested in that thing or you want to be an entrepreneur and grow that business into something bigger.

KaiserPro10• 7 years ago

This is demonstrably untrue.

Looking at the official docs here: https://www.sba.gov/sites/default/files/advocacy/2018-Small-... for the US and here: https://researchbriefings.files.parliament.uk/documents/SN06... for the UK (both are PDFs)

In the USA for the first quarter of 2016, there were 240,000 new companies. So just million in a year, assuming that trend. Also, that is all companies, including those with no employees

in 2016 for the UK in the whole year, there fore 416,000 new businesses, all of which had at least one registered employee.

The USA, in 2016 only created twice as many companies compared to the UK.

Given the gulf between population _and_ economy, I would say the US is significantly underperforming compared to the UK

jacquesm2• 7 years ago

The UK and quite a few other places require gig economy operators to register as an independent business.

vonmoltke9• 7 years ago

The US number is only counting businesses with at least one employee (owners are not employees, even if they work day-to-day), and may only be counting businesses that incorporate, or are formed via articles of organization. The source is unclear. As someone else noted, the UK number also leaves out certain types of businesses. Therefore, I can't tell that this is actually comparing apples to apples.

njepa5• 7 years ago

I does factor in, it is somewhat hard to see because startups will always be marginal. In Sweden both Markus Persson (Minecraft) and Daniel Ek (Spotify) come from non-privileged background, with little university experience. When you see this in the US it is usually that someone got into a well known school first, with the contacts that bring.

chongli• 7 years ago

Anyone who was born a citizen of Sweden is highly privileged on a global level. Compare with anyone from a developing country and it's easy to see all of the advantages that enabled those fortunes to be made.

hef198987• 7 years ago

At least in Germany IMHO the biggest risk of ones own start-up is failure. While the social security network is rather strong, even if it used to be stronger, you can basically ruin your whole future career once potential employers perceive you as a failed entrepreneur. The reasons are many, but mostly cultural. And that is huge risk you take.

The state is actually encouraging people to start their own business out of unemployment with various programs and incentives. Not in the most efficient way or at a start-up scale but still.

Jhsto• 7 years ago

My anecdote is from a Finnish perspective: First things first, some people make more money being unemployed than working (though for only short periods of times, to my knowledge max. couple months). This is related to entrepreneurship because owning a company, whether it makes any money or not, labels you to the workforce. This is problematic because it obliterates your unemployment aids. In some circumstances, this can be extended into your close family. Now, if you own a company, you (and in some cases your close family) do not get the same social safety net as others! Bad! This also extends (to the entrepreneur) to other class of social safety net, which is living aid. For entrepreneurs, the living aid is calculated from the (mandatory!) retirement account (which are a mess by itself, the public sector chooses private companies which handle this money, with no control of the individual to seize the money before government defined retirement age) contributions. If you have little to no contributions (e.g., your company makes little money and you rather pay yourself salary), you cannot get living aids. Further, taxes are higher. First, entrepreneurs pay 5% more taxes than the same bracket in income as an employee. Next, if your company becomes profitable, the system incentivizes you to increase your personal income hence the tax bracket, because otherwise, the company gets taxed 20% of the money left into the company.

The reality is much like pictured here https://imgur.com/a/o5MGARc for entrepreneurs. That is, in Finland, we do not need to have this Twitter discussion, because by default entrepreneurship is a viable option for the ones who can patch up the holes in the safety net that the government has removed.

ahje• 7 years ago

https://imgur.com/a/o5MGARc

The really bad part is that your spouse will lose most benefits if you start a business (because it's automatically considered to be a family business apparently).

brohee• 7 years ago

Numbers for UK have been given earlier, but in 2017 France had 591k company creations, of which 349k are "classic" (not individual) companies. This would put both France and UK well over the US in per capita creation...

(https://www.insee.fr/fr/statistiques/3314444)

skrebbel2• 7 years ago

It's a nice mini soap opera but the core is that actually they agree but have a different definition of "rich kids".

rlue2• 7 years ago

I agree, and would go a step further to say that the response to PG is woefully exaggerated. The fate of the poor is truly deplorable in the US, but that doesn't mean that every conversation about risk, opportunity, and entrepreneurship has to rise to the defense of the disadvantaged.

PG is saying you don't have to be rich to launch a successful startup. By this, I believe he means private-school, summer-house, frequent-flyer-miles-in-your-early-20s rich. I would contend this is at least 90th-percentile rich for US households.

His critics suggested he be sensitive to those who literally have no safety net, and could not move back in with their parents if it all came crashing down—I would contend this is at most 40th-percentile "rich" for US households.

Can we cut the guy some slack and let him speak to the 50+% of people in the middle? Honestly, that's undoubtedly where the bulk of his target audience resides—people who'd like to launch a startup but worry that they're not sufficiently privileged to do it.

njepa5• 7 years ago

By this, I believe he means private-school, summer-house, frequent-flyer-miles-in-your-early-20s rich.

The example given literally attended one of the top private art school in the world. The reason people are reacting is likely because of this often damaging non-differentiation of being temporarily and perpetually poor. Many people can't even afford to move to a city these days, let alone start a startup. And if they do it might have negative consequences for years and years.

UweSchmidt• 7 years ago

Which is a problem in itself: It is getting difficult to appreciate just how rich or poor you are!

- The income gap is growing, creating many more levels of wealth, each considerably richer/poorer than the next.

- A lot of wealth is kinda in the background, like the real estate someone's parents might have that isn't discussed, but will probably be inherited someday?

- Products and services cater to the different wealth tiers and create separation and filter bubbles.

This results in very weathy people innocently betraying their ignorance in various public statements, like

https://www.samefacts.com/2012/01/everything-else/mitt-romne...

https://www.wbur.org/onlyagame/2016/11/18/steve-young-usfl-4...

squish78• 7 years ago

I also wonder what the consensus definition of "start-up" is. Does it only mean a tech product with high scalability and potential to raise b/millions? What about the landscaper, mechanic, or plumber who is able to scale up a trade, get repeat customers and hire employees? Or do they even factor in a discussion like this

bryanrasmussen2• 7 years ago

I think if Paul G. came out a little less strong at the beginning - without 'bullshit' - this wouldn't be an issue.

On the other hand there is the habit nowadays of having to guard and specify ones statements zealously in order not to get called out for something a reasonably lenient reading would allow, but calling something 'bullshit' probably doesn't get you into that other hand category.

Havoc• 7 years ago

Yeah that seemed way over the top

55555• 7 years ago

Agreed. I'm guessing they have some personal beef/history. Hence "I would normally..."

adamlett4• 7 years ago

Idk, it seems to me that PG is just wrong about this. Not categorically and in every single instance, but on the whole. It's like saying women are physically stronger than men, and pointing to some woman who is clearly an outlier. You could word it less strongly and say that some women are stronger than some men. But then what would be your point?

rgoulter• 7 years ago

I read the two as "You don't need to be rich to be a founder" and "it's very beneficial to be rich to be a founder".

This would be more analogous to "you don't need to be a man to be strong", rather than "women are stronger than men".

I think PG's concern is if it's understood "you need to be rich to be a founder", then if you're not rich, you think it won't be possible to be a founder.

tomp2• 7 years ago

He's saying more something along the lines of "women can be elite performers too" (and that being genetically/on average less strong shouldn't stop them from trying) - which isn't entirely wrong, especially since we're already talking about like 0.01% of the population (successful entrepreneurs / elite sports(wo)men).

mbeex• 7 years ago

I think if Paul G. came out a little less strong at the beginning - without 'bullshit' - this wouldn't be an issue.

The much more interesting remark is the following part:

"...because it discourages people who aren't from trying it"

This is the soil he makes a living from, eventually. Cui bono, essentially.

kirillzubovsky• 7 years ago

Conveniently I just heard this on a podcast, and it's called "escalation of commitment." Basically, people hate to be wrong in public, and the more public person you are, the harder it gets. So instead of admitting a fault, they double-down on what's obviously a false statement.

Details from the podcast -> https://smashnotes.com/p/this-is-your-life-in-silicon-valley...

PandaRider• 7 years ago

I'm shaking my head right now because I can't believe people at the top is still susceptible to sampling/survivorship bias.

I've tried searching but cannot find a good empirical study of privilege and entrepreneurship correlation. However, I've found an essay paper [0] that exactly predicted this twitter drama; that entrepreneurs simultaneously present and erase this conversation about class and entrepreneurship.

The paper also concluded:

Whereas gender, together with race, have long been foregrounded in studies of entrepreneurial identity and difference, class may be a more powerful organizing discourse, though certainly one supported by discourses of gender and race.

[0] https://journals.sagepub.com/doi/pdf/10.1177/135050841246489...

KaiserPro10• 7 years ago

The only data I can get is this: https://www.kauffman.org/what-we-do/research/2009/04/educati...

93% had a degree, with 30% having a masters, That would suggest to me that you'd need a decent wedge of cash.

Now, what is interesting, is that in 2016 at least, the US created gross 960k new companies (there is some smoothing here, so +- 100k) The UK created 460k. Seeing as how the UK is 60 million, versus 300 million people, either the US is under performing, or the UK is wildly over performing. (https://www.sba.gov/sites/default/files/advocacy/2018-Small-... and https://researchbriefings.files.parliament.uk/documents/SN06... for stats)

Perhaps, as we don't have to worry about healthcare or no competes, that might be a factor.

rahimnathwani2• 7 years ago

Registering a company in the UK, and keeping it running, is both simpler and cheaper than in the US.

Registering a company takes a few minutes and costs less than $30. Compulsory annual filing costs less than $20. If your company's revenue is below some threshold, you don't need to register for VAT (similar to sales tax). And there's another (even higher) threshold below which you can file very simple annual accounts (unaudited, and including neither income statements nor cash flow).

pjc504• 7 years ago

The UK also makes company formation very easy and still slightly advantageous for sole traders, which may be a factor. I did check the criteria and they do include "must be listed for VAT or PAYE", so they're all real businesses to some extent and not just shells.

The US would do well to look at its business licensing requirements to see if they could be simplified in terms of paperwork.

sfifs• 7 years ago

Interestingly, only a quarter of the businesses are employers in UK, so most of the company creation is presumably basically city of London financial engineering :-)

bko3• 7 years ago

Why do you need "a decent wedge of cash" to have a degree?

There are plenty of universities that are affordable. For instance, City University of New York (CUNY) offers four year undergrad degrees for $6,730 a year [0]. You can get a room share in an outer borough for maybe 500 - 1.5k a month or Jersey for even less [1]. And this is one of the most expensive cities in the world. If you're smart, avoid unnecessary expenses, you can probably get by on 20k a year in expenses, which comes out to 26 hours a week at $15/hr, ignoring taxes. Taxes at about 15% at that low income means you'll probably want to earn closer to 25k to have 20k net which means 31 hours a week. But realistically you'll probably want to work full time or over time during the months school is not in session and closer to 20 hours a week at other times. Or try to find a job that pays more.

Don't know much about health insurance so that's also something you'll have to consider getting maybe through the school or some city program or just go without it.

Or just move to a more affordable city and probably cut everything above in half while hopefully only giving up a bit of the wage you'll earn

[0] https://www2.cuny.edu/financial-aid/tuition-and-college-cost...

[1] https://newyork.craigslist.org/d/rooms-shares/search/roo

ekianjo3• 7 years ago

Suggesting one variable explains such differences is incredibly reductive. Plus, The US is not a single country, there is federalism and you should treat all states differently since setting up a business in NY is supposedly a lot harder than in other states.

luckylion• 7 years ago

The UK used to (?) be a haven for Ltd creation because of low costs, low bureaucracy and quick reactions. It's what lead to Germany's laws regarding UGs (Unternehmergesellschaft, literally entrepreneur company), much more comparable to the Ltd regarding easier access, much lower startup costs than the typical GmbH.

It will be interesting to see where these numbers move post-brexit.

jonathankoren• 7 years ago

Why is it surprising? There’s a combination of blindness, and inflated sense of self worth. America romanticizes the “self-made man”, and so any help is discounted. (Famously, a $1M family loan in 1975 (4.8M in 2019 dollars) was described as “small”.) Not coincidentally, these is a strong correlation with ascribing their success to a meritocracy, even though luck has been repeatedly shown more influential factor in success.[0]

[0] https://www.fastcompany.com/40510522/meritocracy-doesnt-exis...

huffmsa8• 7 years ago

It's romanticized because the majority of Americans had someone in their family throw caution to the wind and get on a boat and cross the Atlantic with zero knowledge of what was going to happen.

pfortuny• 7 years ago

You are totally on spot. Survivorship bias is the ban of any honest discussion on this.

bubblewrap10• 7 years ago

Class may also mean you have no examples of entrepreneurship in your environment.

I don't think PG claimed that poor people are as likely as rich people to become successful founders. That's not the same thing. He says you don't have to be rich to succeed.

zepto10• 7 years ago

Sure but he’s making a category error, and it’s so obvious as to be irresponsible coming from a person in his position.

All it takes is one person who succeeds who is not defined as rich for his statement to be technically true, even if every other poor founder fails and dies in poverty.

buro9• 7 years ago

class may be a more powerful organizing discourse

Yes! Yes! Yes!

Other things contribute to class, but it remains a class issue.

I'm reminded of this: "If your feminism isn’t intersectional, it isn't feminism.".

We need something similar for those who think the issue is one-dimensional - "the poor".

Because why someone is poor, and what conditions and circumstances result from being poor... poverty (which includes the psychological impact of being poor)... deeply affect the individuals affected, and some of those factors have wider societal causes (racism, homophobia, xenophobia, perceived sex, sexual identity, etc).

KaiserPro10• 7 years ago

In the US, Class is a pretty good proxy to wealth, far more than say the UK.

ad_hominem• 7 years ago

It's okay to call yourself a feminist if you're not okay with biological males demolishing female sports records. It's okay to not go down the infinite intersectional/deconstructionist rabbithole to the point where it's normative for 8-year-olds to dress in drag and do sexually suggestive stripteases while men throw money. It's okay to retain your common sense.

michaelmcmillan5• 7 years ago

In which direction is causality flowing here, and how do you justify it? We didn't choose our brains––so how do we differentiate the privilege we got from our "class" from the traits we were born with?

Does privilege imply that you got it from your "class"? This seems like a classic nature/nurture fallacy.

coldtea4• 7 years ago

In which direction is causality flowing here, and how do you justify it? We didn't choose our brains

No, but our privileged parents did contribute to them, and their our upbringing, early months, lack of childhood stress over things as food and war, familial support, good schools, and so on.

Brains is hardly the best contributor to entrepreneurial success. In fact a plot of IQ vs success I've seen plotted looked like random noise except below a certain threshold (obviously seriously cognitive impaired people will have much more trouble becoming entrepreneurs). But aside from that, whether you are 105 or 120 or 150 didn't seem to make much of a difference.

pjc504• 7 years ago

Privilege is not a trait. You cannot look at a person in isolation and say whether they have it or not. It's a property of how other people relate to them in society.

White skin is something you're born with. White privilege is what happens when you live in a society that assumes that black people are more likely to be criminals than white people, so you get a more favourable reception when you walk in a room.

x86_64Ubuntu2• 7 years ago

Do you really think someone's ending point as an adult is largely limited to their "brains"? Like, how are you going to completely exclude the upbringing environment and the scarcity and struggle for resources that some folks face.

coldtea4• 7 years ago

I'm shaking my head right now because I can't believe people at the top is still susceptible to sampling/survivorship bias.

Why the disbelief? They are the one who are primed to be the most susceptible to that!

Miner49er• 7 years ago

There are studies that show that welfare increases entrepreneurship. https://www.theatlantic.com/politics/archive/2015/03/welfare...

So providing more people with safety nets increases entrepreneurship. Having a strong safety net is a form of privilege.

bubblewrap10• 7 years ago

If you take the word of some gender studies person over his, OK... So fine, don't do a startup. Take up gender studies instead.

AlexTWithBeard2• 7 years ago

I had to borrow money from my mom to pay my taxes

I would agree that in some US locations the taxes are a bit too high...

KaiserPro10• 7 years ago

or that lump sum taxes are somewhat perverse (see PAYE in the UK)

praptak• 7 years ago

A poor person betting everything on their startup is definitely good for pg - it increases the pool of people whose work he can profit from.

It's not that obvious if it's good for the poor person. I guess that everybody has their own risk aversion threshold.

AlexTWithBeard2• 7 years ago

A poor person betting everything... a poor person usually doesn't have much, besides the time and dedication.

duchenne• 7 years ago

GP's point of view: A poor person can have a small safety net that separates him from absolute poverty and homelessness. If they start their own business, fail, and end up without enough money to pay for the rent, the consequences could be terrible. They also have a finite time to save enough for a descent retirement. Spending several years on a startup with a high fail rate can dramatically reduce the quality of their old days.

malux85• 7 years ago

There’s a big difference between poor and zero, and a poor person betting on a startup can hit zero really quick.

At zero, you cannot pay rent and are likely to get evicted. Once evicted you are potentially NFA, which means you can’t get a bank card posted to you if you have problems with your card. How can you pay for food? Where can you use the bathroom? What about the electricity bill before you got evicted? The electricity bill that was late and now unpaid that’s ruining your credit score? Now you have bad credit and will find it harder getting a flat.

The above sentences where not chronologically cohesive because there’s so much working against the poor and those at zero, and I’m on mobile, I couldn’t take an hour to type it all out.

How on earth do you expect a poor person to do a startup, when they can barely feed themselves and keep a roof over their head?

watwut2• 7 years ago

Heathcare that was provided by employer before and house in low crime area, say.

hatmatrix• 7 years ago

There is opportunity cost (of a stable industry job) that the educated but poor person is foregoing.

ekianjo3• 7 years ago

A poor person not betting on anything is bound to stay poor. Your point is?

hef198987• 7 years ago

Isn't that oversimplifying the whole social issue of why people are poor, stay poor or become poor?

adamlett4• 7 years ago

To you it may seem there is little difference between being poor and being financially wiped out. To the person experiencing it, the difference is huge. Among other things, it can mean the difference between struggling to make rent, and not being able to.

throwaway555544• 7 years ago

A poor person not betting on anything is bound to stay poor. Your point is?

And the poor know this. And yet, they still have literally everything to lose if they fail. They don't want to be poor, but being poor is better than being with absolutely nothing.

bluGill8• 7 years ago

Some bets are safer than others. A poor person betting everything had better have a sure bet that will pay off quickly. Not many of these exist.

A poor person is safest betting on a stable (if low paying) job and ensuring he keeps it. Taking on a few side projects on the weekend can earn some extra cash, but there comes a time you either need to bet on growing that side business, or not: if you bet on it you better have enough contacts to grow it to a real job quickly, if not you have to start refusing work for the side job - the worst thing you could do is to fall asleep and get fired from the day job while the side job isn't paying enough to live on.

bubblewrap10• 7 years ago

Sure, PG is obviously only driven by his desire to exploit poor people by telling them lies about startups. How could it be any other way. He is rich, so that's what he does, right? Exploiting poor people, that's what rich people do to fill their days.

mlthoughts20182• 7 years ago

It is probably not actually good for PG, because the majority of such people will fail and end up destitute, casting bad publicity (rightly or wrongly, doesn’t matter) on whatever start-up churner generated that outcome.

Additionally, founders who already come from wealth or have political connections, etc., are probably much more likely to succees in the financial senses that PG wants.

The only limited sense in which it’s good for PG is if there is a lottery winner he can claim credit for, a rags-to-riches story to whip up blind support for some ludicrous tech millionaire idealism.

pnongrata• 7 years ago

Not many people care about startup failures, except high profile ones.

DanielBMarkham2• 7 years ago

Twitter wins again.

We keep reducing these complex multivariate social issues to simple cause-effect situations then beating one another up over what the simple cause is.

When we're doing definitions, the key phrase is "necessary and sufficient" In this case, being rich or poor is neither necessary nor sufficient since we have plenty of examples of things working out with either of these two things being missing. So really the discussion is much more like "Does condition X provide a 3 or a 4 percent boost?"

But that's not as fun to argue about.

We oversimplify life and public policy-making at our own peril.

esolyt• 7 years ago

So really the discussion is much more like "Does condition X provide a 3 or a 4 percent boost?"

I think it's more like whether it brings a 400% boost. It is definitely an important discussion to have. Whether Twitter is the place is another story.

DanielBMarkham2• 7 years ago

I agree. Also note that moving from a 1% chance of success to a 4% chance of success _is_ a 400% boost. It also may be trivial. Moving from .1 to .4 works the same way. Both statements can be true at the same time.

These things get tricky quickly. In a different medium, say forcing yourself to 100 characters instead of 280, we would have even more of a difficult time discussing it.

aestetix• 7 years ago

Yep.

At this point, to encourage health and respectful public discourse, the first step is to delete your twitte account. And probably facebook too.

znpy• 7 years ago

We keep reducing these complex multivariate social issues to simple cause-effect situations then beating one another up over what the simple cause is.

Twitter is cancer and this is why i keep off it.

njepa5• 7 years ago

It isn't like 3 or 4 percent though. Starting a startup ranges from a largely risk free career move to impossible. Most people today start at negative. Want to live in a decent sized city? That's at least $2k a month. An education? Might very well be $50k in debt. Job security? Need to put in the hours young.

Otherwise there is a very real chances of getting evicted, not being able to find a decent job, not being able to keep your friends or start a family. Plenty of people who are successful today have their parents pay for university, their first apartment and/or a safety net. And that is just to have a normal career.

bluGill8• 7 years ago

Cost to live in a decent sized city are much less than that in most cities. Sure Silicon Valley is going to be more. Also every city has rich areas that are more. However in most cities there are poor neighborhoods where rent is under $1000, and you can share that with a few roommates. If you tastes are to a stove that you don't need to light with a match, sidewalks that are even, and other nice things: that will cost you.

vorpalhex• 7 years ago

An education? Might very well be $50k in debt.

You can get a perfectly decent degree from your community college for very affordable prices. Likewise you may not be able to live in downtown manhattan, but you can probably live anywhere in a whole bunch of the square states on $1k a month.

bubblewrap10• 7 years ago

Even the privileged YC founders seem to have made some sacrifices early on, like living on Ramen, sleeping in their office and sharing a rented space with many people. Must admit that "want to live in a decent city" is not really something that triggers my empathy.

These days you can also do Kickstarters, apply for money from YCombinator, and other ways.

And you don't have to sacrifice everything. You can try the startup for 3 years and still get an education if it fails.

o10449366• 7 years ago

Twitter is one of the worst social media sites, in my opinion, and it makes me concerned how much it's caught on with American politicians (no, I'm not just referring to Trump). It limits discourse and incentivizes "outrage culture" by design. I see more racist and outright intentionally false information content on Twitter than any other social media platform and its only gotten worse with time. They've shown very little to no initiative in preventing this.

I get the impression that the only reason Twitter isn't as heavily scrutinized as Facebook is because their executives are simply more likable, which isn't a high bar to pass when you look at Mark Zuckerberg. I think the same applies to Google, too.

zapita• 7 years ago

I think the main reason Facebook is under more scrutiny than Twitter is that they are so much more influential, and therefore more dangerous. Between facebook.com, Instagram, and the tentacular reach of Facebook connect, they have the ability to track and influence vastly more people than Twitter.

I agree that Google is not getting nearly enough attention. I think it because they’re better at PR, and have been developing a “respectable” image. Facebook has been much more blunt and careless in their communication, and now they’re paying the price.

I do hope Google gets in more trouble, they have a lot to answer for. Youtube in particular has a disturbing history of propagating toxic content. Their ad division has been very eager to look the other way when their customers engaged in questionable methods. And they are in great part responsible for demolishing the traditional news business and replacing it with the “engagement” business model that fuels clickbait and outrage-inducing content.

sophacles• 7 years ago

Speaking of over-reduction, "Does condition X provide a 3 or 4 percent boost?" is pretty much an over reduction - it doesn't even acknowledge that most of these issues aren't even discussed in genuine way - The opposing "sides" are optimizing on different sets of variables. And of course the notions of 2 sides ignores the reality that there are several viewpoints optimizing several different sets of variables and the "left"/"right" distinction is just the result of some sort of really bad clustering algorithm. (Lets temporarily ignore the part where in actual reality, the various groups can't even agree what all the variables are, or how to measure the results).

devy• 7 years ago

In this case, being rich or poor is neither necessary nor sufficient since we have plenty of examples of things working out with either of these two things being missing.

You are totally missing the point Matthew Prince is trying to make, that is, you need to have a "safety net" before you can take risks. If one can't even get them fed and not worrying about what the next meal is and where to stay, all bets are off.

If you don't agree with me, name one entrepreneur who has found a startup that exited successfully(IPO or Acquisition) by now and that the founder(s) were living below poverty line or on social welfare. Borrowing money from parents doesn't count as living below poverty does it? Having parents or friends or family to lean onto economically means there is a safety net there.

alanfalcon• 7 years ago

The lore goes that Airbnb was started because the founders couldn’t pay rent.

gist2• 7 years ago

that is, you need to have a "safety net" before you can take risks. If one can't even get them fed and not worrying about what the next meal is and where to stay, all bets are off.

To take the other side of this (not to entirely disagree with you) people have a different attitude toward risk and betting the ranch given the exact same safety net or lack of it. Someone with rich parents may not take the risk (for fear of 'I told you so' or being derided) and someone poor might be quite the gambler and think 'I really don't care if I fail and if I can't feed my family this is just right and the time is NOW!'

If you don't agree with me, name one entrepreneur who has found a startup that exited successfully(IPO or Acquisition) by now and that the founder(s) were living below poverty line or on social welfare.

Very possible also that the people giving the funding are not aware of a safety net and therefore think the entrepreneur is less bankable because they actually fear for them failing since they know the chance of failure is quite high. So they pass thinking they are doing them a favor. This (per my above statement) would vary with the amount of a gambler the investor is and/or how much of a conscience they have.

skookumchuck4• 7 years ago

"Rowling has lived a "rags to riches" life story, in which she progressed from living on state benefits to being the world's first billionaire author."

https://en.wikipedia.org/wiki/J._K._Rowling

Oprah's another:

https://en.wikipedia.org/wiki/Oprah_Winfrey

jimmydddd• 7 years ago

I agree with your point. But I think people are looking at the categories differently. You're comparing poverty to middle class, while others are comparing middle class to upper middle class/wealthy. I think Paul G. is saying you don't have to be upper middle class to be a founder. I don't think he's saying you could be living on a park bench with no food and your six kids on Monday, and be a founder on Tuesday.

Jommi• 7 years ago

That would mean that places where nearly everyone has safety nets (countries with welfare) would have a higher amount of entrepreneurship. That is not the case.

Entrepreneurship seems to strive in harsh do or die conditions like in US or Israel.

DevX1012• 7 years ago

They're talking past each other. Thing is, they're both right.

Paul seems to be saying you don't have to be rich to do a startup.

Matthew is saying lots of founder have some resources (family home, savings, great education, i.e. middle-class) that made doing a startup feasible

Both these positions are true and aren't incompatible. Being middle class (Matthew's position) and prudent with savings can afford you probably a year of runway.

But I'd never recommend someone who was truly destitute or food insecure to do a startup. If you come from a poor family there will also be family/cultural pressure not to do a startup and instead get a good paying job(assuming you have the ability).

lotsofpulp4• 7 years ago

It’s a tough calculation to forego a presumably high chance of having a comfortable life and providing a good base for your kids by working a regular job, versus shooting for the moon and possibly losing that comfortable lifestyle.

emsy2• 7 years ago

They’re not even talking past each other (that would require a back and forth). Matthew responds to something pg didn't say.

lotsofpulp4• 7 years ago

If that’s the case, then Paul Graham chose a very poor subject as an example.

humanrebar• 7 years ago

It's the difference between "a founder can be anyone" and "a founder can come from anywhere" to paraphrase Ratatouille.

c0vfefe• 7 years ago

Rather, the difference between "a founder can be anyone" and "anyone can be a founder."

shafyy2• 7 years ago

The problem is PG says that you don't have to be a rich kid, and then takes Airbnb as an example where the founders are definitely rich kids compared to the rest of the nation and world (not rich as in "daddy has a private jet", but definitely in the top couple of percent).

Of course PG is right that you don't need to be a rich kid, but he chose his anecdote poorly.

PS: Also Sam recently said (in the StrictlyVC interview) that most founders at YC are from upper middle class families, so there's your data.

grenoire2• 7 years ago

Worldwide, definitely top 0.1% (at approx. 80K annual income).

idlewords8• 7 years ago

Graham is making a different claim, that you don't have to be from the middle class. Read the entire exchange.

badatshipping2• 7 years ago

Wait, his claim is that you don’t have to be from the upper middle class.

https://mobile.twitter.com/paulg/status/1130121128033300480

noelsusman5• 7 years ago

"You literally need six figures in your bank account to do a startup" isn't a thing that people actually argue. Paul might be technically correct but he's arguing against a strawman. In this context, rich is a shorthand for financial privilege, which doesn't tend to come in the form of dollars in your bank account when you're young.

Kalium• 7 years ago

It's difficult to have a meaningful discussion about social issues when words like "rich" can range in meaning from "peer of Warren Buffet" to "some member of your extended family owns property somewhere in the world". This is not made easier when not all parties in a given conversation are using the same definitions and haven't stopped to compare notes.

Fuzzy definitions are great when you're posturing politically. In those cases, you want people to be able to apply their own definitions. But political posturing is antithetical to meaningful discussion, so...

randyrand• 7 years ago

Why not? If you secure investor funding, you could easily pay for your meals.

mritchie712• 7 years ago

Like so many things in life, it depends.

I just like PG said "would ordinarily just let your bullshit go". I spit out some water, easily the best thing I've read on twitter this year.

huffmsa8• 7 years ago

Easier, sure. Not having a backstop means failure == death. Which isn't for the faint of heart, but that's the story of almost every Americans lineage at some point in the past. It takes a bit of luck, but rarely is it more luck than nose to the grindstone effort.

My anecdotes:

I have one great-great-grandfather who thought he had an office job in British Columbia, but by the time he sailed from England and crossed the continent the company had folded. But his family was already on their way, so he started working every mining job he could, and invested every spare pence he had into real estate. His sons did the same.

My paternal great-grandfather came over from Italy, got harassed out of NYC by the Irish, bought a small farm in Oklahoma, and his children did the same.

bubblewrap10• 7 years ago

That seems overly dramatic. Not everybody who loses their job dies. Most people seem to not die in that situation, actually.

Failing at your startup would at most be equal to losing your job. You won't die just because of that.

Even if you end up in debt, there are insolvency laws. You can just go flipping burgers for a couple of years and be good.

huffmsa8• 7 years ago

Of course it's recoverable. If you're under 35 you can join the miliary as well. There are options. Not glamorous, but survivable. Better to have tried and failed than to never have tried.

But when you're an Italian who can't speak English or out west in the late 1800s, it was a case of with your shield or on it.

bubblewrap10• 7 years ago

Most people, even poor people, have parents who would help them out in case of need. They seem to be discussing a pretty low bar here.

And of course it is a "privilege" to have supporting parents. So what? If you don't have that privilege, what are you supposed to do? Kill yourself?

I think such privilege discussions are rather silly. What's the point? That people should be showered with tax payer money to even out their privileges? Or people with bad parents should be given state assistance (substitute parents)?

KaiserPro10• 7 years ago

I'd suggest you think more deeply.

All parent, regardless of class/richness want to be supportive. the question is what support can they offer? Sure, a sofa, most people have that. But thats not a long term solution. What if your parents don't have any savings, how will they help you with that debt?

They can't

Its not an issue of will, its an issue of possibility.

Now, I intensely dislike the use of "privilege", as its more often than not tool to stop discourse. But, to assume that every parent is _capable_ of providing long term accommodation, financial, transport or other support is shore sighted at best.

I suggest perhaps you might want to expand your social circle, so you can see this sort of thing first hand.

bubblewrap10• 7 years ago

I was thinking of the basic "moving back in with the parents fallback".

Of course different people have different advantages and disadvantages.

Paul Graham's children will probably have an enormous head start in becoming entrepreneurs. They'll have "startup privilege" en masse. But so what? Should we begrudge them having it? Should we compensate children of other parents for the non-privilege of not being Paul Graham's children? And if so, how? What amount of money would be appropriate? Or should we punish his children to take away their unfair advantage?

I just think the whole "privilege" mindset is unhelpful and unproductive.

Try to make the most of what you have. Can only PG's children become successful founders? I think not. Maybe your children will only become millionaires if the become founders, and PG'S children will become billionaires. Cry me a river.

throwaway555544• 7 years ago

Most people, even poor people, have parents who would help them out in case of need.

No, they don't. You're thinking of lower middle class.

bubblewrap10• 7 years ago

I was thinking of the case of "moving back to the parents".

RickJWagner• 7 years ago

It makes it easier to launch a startup if you've got a strong safety net, but not impossible.

I think the article misses the point, though. Look at Bill Gates-- he had rich parents, and so he started Microsoft. Which has gone on to make millionaires of lots of ordinary folks and continues to provide good jobs to many, many people today. It's a good system, it benefits a lot of people.

Entalpi• 7 years ago

I like to think Swedens extensive social safety nets are a factor to the large number of startups here.

dudul• 7 years ago

How does this large number compare to the US? Genuinely interested. Having lived in a few EU countries before moving to the US, I've always been under the impression that creating a startup in the US was way easier/more common.

CPLX2• 7 years ago

A story where a billionaire downplays the problems created by wealth inequality. How novel.

carlsborg• 7 years ago

He said hard, not impossible. You're playing with a higher difficulty level, because you need to spend time and effort and divert your focus on mitigating the worst case scenarios instead, and market timing is one of the big factors in getting it right.

slowprogrammer• 7 years ago

PG and Matthew are talking past each other here.

PG is defining "rich kids" as the spawn on the 1% and is arguing that these kids don't have any significant advantages over more normal people when it comes to accessing funding from VCs etc and that such a belief is harmful.

Basically that there is a point of diminishing returns to being "rich" and that it's probably lower than you think.

Matthew is arguing that being in crushing poverty is probably a barrier to building a successful startup.

Both views can be basically correct.

kstenerud2• 7 years ago

It's easy to take risks when there's little to lose.

If the only fallout is wasting some family money and at worst delaying your entry-level career by a couple of years for some experience that many employers consider valuable anyway, there's little downside to throwing the dice.

grenoire2• 7 years ago

What seems like "little to lose" to you is "everything" to a lot of people. Breaking even at lower middle class is still something you can lose.

throwaway555544• 7 years ago

It's easy to take risks when there's little to lose.
If the only fallout is wasting some family money and at worst delaying your entry-level career by a couple of years for some experience that many employers consider valuable anyway, there's little downside to throwing the dice.

This, in no way whatsoever, resembles the conditions of the poor.

kstenerud2• 7 years ago

That's right. It doesn't.

cbanek2• 7 years ago

Pretty disappointed in PG's response:

"I would ordinarily just let your bullshit go, but this myth that you have to be a rich kid to start a startup is terribly dangerous, because it discourages people who aren't from trying it. Brian Chesky's parents were social workers. That is not a rich kid."

As if having two parents with stable jobs isn't considered a safety net. I agree, you don't need to be rich, but I also agree if you are struggling to work enough to eat, you aren't really working on making a startup.

There are huge swaths of people with a much less stable safety net than the example he provided.

StavrosK3• 7 years ago

Agreed, "I can't pay rent and I'll have to move to my parents' basement" and "I can't pay rent and I'll have to live on the street" are two very different ways of struggling to pay rent.

cbanek2• 7 years ago

Exactly. In that in one of them, your landlord isn't likely to cover you, and is likely to kick you out, but your parents probably would cover the shortfall if they are able (at least for a couple of months). And if they aren't, you'll just go back home.

On the other side, many young people end up having to help their parents make rent. They don't have the position to take on any of their own risk.

lazyjones• 7 years ago

Why is it disappointing to that he points out that "having a safety net" and "being rich" are different things? The whole thread seems to revolve around people trying to misunderstand him deliberately in order to post their "progressive" complaints.

ricardobeat2• 7 years ago

The “rich kids” qualifier came from his own tweet. I think it shows a big disconnect with how average the average potential-startup-entrepreneur is, and how privileged most successful ones are.

idlewords8• 7 years ago

He specifically says later in his replies that he's debunking "the meme that you have to be upper middle class to start a startup." But his chosen example is exactly that, three upper-middle-class kids (Harvard and RISD grads).

austhrow743• 7 years ago

Paul said you don't have to be rich. Matthew responded as if he'd said that it's not beneficial to have a safety net. That's putting a statement in to his mouth that he did not make.

Anything more than a "fuck off" from PG was charitable.

casion2• 7 years ago

The problem is that it gets read as a false dilemma.

Talking about rich people and saying "you don't have to be rich to..." is like walking into a room of black people and saying "You don't have to be white to...". Nobody there is going to think that you're talking about asians.

The statement doesn't really say anything except that 'being rich' is something that can come from some other non-rich state. It doesn't specify at what level you can be to reach that state. He could be implying that poverty is sufficient, or "middle-class" or that upper class CT is sufficient (and we don't even know if he thinks that means " rich").

It's just a complete non-statement that attempts to pander to an audience that has little choice but to misinterpret it or assume that he's stating the blindingly obvious.

JangoSteve• 7 years ago

I think the response was reading more into the meaning behind what pg said than the actual words he used. This makes sense to a degree, since what pg actually said makes little sense unless you read more into it. When people say startups are for rich kids, they probably don't mean you _have_ to be rich to succeed in startups, since there are plenty of examples to the contrary. What they mean is that your chances of success are significantly higher when you already have means.

So pg arguing that startups aren't for rich kids probably isn't just a claim that you don't need to be rich to start a startup, because that would be a response to a claim no one is making. I think this is why it's reasonable (maybe incorrect, but reasonable) for some people to infer that pg is trying to discredit the underlying notion actually meant by such claims as he referenced, which is that building a successful startup is often less of a meritocracy than we'd like to believe.

Of course we could argue all day about the nuances of each argument, and what was said versus what was meant. But we all know this is the problem with any claim made on Twitter; it invites inference, since abbreviated excerpts don't allow for proper context or dialogue.

idlewords8• 7 years ago

Graham said you don't have to have a certain class background, and then cited the example of three people with that background. Read the entire exchange. He's talking specifically about upper middle class kids—his words.

noelsusman5• 7 years ago

Having a safety net is what people mean when they say you have to be rich to found a startup. If you have a place you can always go if things go south, then you are "rich", even if you personally struggle to pay rent on a regular basis.

I was poor in college like a lot of people, but I had a stable family I could rely on. I knew people who didn't have that, and they had to make very different decisions than I did. I didn't have much money in my bank account, but I was rich compared to many of my peers. No matter how badly things went for me, there was no scenario that would have left me homeless or hungry.

If PG's only point is "you don't literally need a six-figure salary to found a startup" then he's arguing against a strawman.

casion2• 7 years ago

I've had this argument with various people many times.

Until your, and your offspring's, survival as a living human revolves around working 16 hour days to barely hold it together... it's almost impossible to understand.

Poor isn't having 2 loving parents with stable jobs, growing up in a middle-class neighborhood and going to college on your parent's dime/credit.

Only a billionaire can begin to think of that situation as "poor". If that person fails then they just go home and live with their parents, that supported them through adolescence, without any major repercussions.

That situation isn't going to happen, except for extraordinary anomolies, for a person that possibly manages to finish high school with siblings in tow, no parents and already holding down 1+ jobs. This is an extreme example, but it presents the issue further.

"Poor" comes in many flavours: monetary, social, responsibilities, safety, time etc...

Once you're poor in any two areas it becomes life threatening to take risks.

No money? No family/friends? Then taking a risk isn't even possible.

No money? Responsibilities (relatives to care for)? Then you have no time.

Responsibilities? No safety net? Now you're not risking your own welfare, but the welfare of those that you care for.

No time? This is a single limiting factor alone. Yes, there are people with very little to no time, where their ability to spend their time is directly proportional to their survival.

There's even rich people that are poor in multiple areas, which disallows them from ethically taking risks. If you're sitting on a cool $100k beyond what _you_ need a year, but you're also supporting an extended immigrant family then it's irresponsible to go throwing money into a high-risk startup. It might not even be the right thing to do for your bloodline, instead opting to provide a stable life so your offspring can take risks.

I got to grow up very poor, and middle-class and now live upper-middle-class. I only made it here because of grandparents that sacrificed to allow my parents to eventually succeed (big time). Even with that safety net, they had almost zero time. I know my father had big dreams, but he had to spend 12 hours a day working/travel to make sure his kids had a chance. Mother had health issues, which complicated things even further.

As an adult I spent many years working with children in poverse circumstances, and _even as children_ they lacked resources to get an education. No time, no access to resources, often with family responsibilities, sometimes abuse, etc... Carry that on to adulthood and now you have to support yourself. Where's ability to dump a few grand into a shot in the dark?

Anyway, tldr; being poor is unfathomable until you're poor.

ldoughty2• 7 years ago

Totally agree. I have great ideas of things to work on, but I'm essentially a single income household (my wife is in grad school, and her part time pay barely covers her education and school). I can't quit my job and work on a dream venture, who will pay for my wife's upcoming childbirth and related expenses? Who will ensure we can still make payments on our home and food?

Living with parents is definitely a safety net. If you have dependants, you can't afford to take risks.

nichos• 7 years ago

This may come off rude, but I certainly don't mean it to be, but you have a choice to make. It sounds like you're chosing to have a kid and your wife go to school. If you want to do the startup, skip the kids, have your wife work and support you while you do the startup. Not everyone can have everything.

taytus2• 7 years ago

You don't have to quit your job.

What is the product/service you want to develop? Do you have a defined potential customer (friend/family)?

It's something you can create putting 1-2 hours per day?

What is the minimum amount of work you need to put in to go and show it to someone (even if it is a mockup)

How many customers do you need to break even?

You can do ALL of this and more without quitting your job.

bko3• 7 years ago

This is a kind of No True Scotsman fallacy. Anyone that is successful was 'advantaged' because her family was rich, or she had two parents, or she had a parent, or she was born in America, or she was born with the right number of chromosomes... The whole conversation strikes me as just snarky and reductive. I don't see the point. Why not try to promote a conversation to lift people up and empower them rather than writing off the hard work and perseverance of others?

SolaceQuantum• 7 years ago

Well, yes, that's the conversation of intersectionality. It's important to recognize that the 'lone genius' narrative is largely false in order to have the discussion that empowerment is necessary in the first place. Otherwise the overarching narrative may be that people who suceed do so purely under their own power and therefore there is no systematic mistreatment to address (which perpetuates systematic mistreatment).

It's true that a wide variety of things contribute to someone's success, and many of them are outside of their power. Being able to acknowledge this can be taken to the extreme, but all of your statements are entirely valid assessments to make that have real effects on how realistically difficult a task may have been- or if the task was possible at all.

wastedhours• 7 years ago

Anyone that is successful was 'advantaged'
Why not try to promote a conversation to lift people up and empower them rather than writing off the hard work and perseverance of others?

I think these two can live together - if you succeed, there was something that allowed that. Whether it was privilege, whether it was luck, or timing, or the right application of hard work and a blend of them all.

It's important to recognise what advantages are best leveraged for success, and then we can optimise to ensure most people have access to it.

In the argument in question, what advantage did Airbnb's founders have that allowed them to take that risk? How did they get the flat they were struggling to pay for in the first place for example? Why did they not skip rent and have to work 3 part time retail shifts to cover it like large swathes of workers in a similar boat.

Identifying privilege is an important piece of the puzzle - noone succeeds solely by hard work alone (otherwise all coal miners would be millionaires, and 996ers would be everywhere), so if we can spot the factors that successful people leverage, we can support others to get there (whether that's better education, cheaper housing, familial support etc...).

Frost1x2• 7 years ago

I think it's an important conversation to have. What if the story of success is a complex sum of contributing factors but it turns out, certain factors have significantly higher weights than the others. If you don't explore all of the cases, you may perpetuate a narrative that does many a disservice by promoting factors that don't empower but ultimately suppress.

Many may think their chosen set of contributing factors will make them successful and it turns out, those factors might not be all that useful. By ignoring that information and falsely giving equal weight to all factors, you might empower them down a path far more likely of failure than of success. That path could be a good portion of their lives so I think stepping on a few toes in conversation is well worth trying to resolve those problems instead of only speaking in the positive.

CPLX2• 7 years ago

I mean if the person is living in Scotland and has a Scottish accent and is wearing a kilt they might be Scottish.

Or, more relevant, if someone is in the dominant social and ethnic group in the richest country in the world and raised in a dual-income white collar family with a degree from an absolutely top-flight internationally recognized college where they met their co-founder, they probably don't fit any reasonable definition of poor.

mikeash• 7 years ago

Typical tech industry nonsense. People stuck in a job because they need the health insurance? People saddled with massive debt because you’ll have a hard time getting hired to manage a McDonald’s without a college degree? Rent increases eating up disposable income? Meh. But being told by some rando on Twitter that you need a safety net to take a risk on a startup? “Incredibly dangerous”! Because if some people who might start a startup instead choose a conventional career, I guess the world will end.

0x445442• 7 years ago

Yeah, Silicon Valley is pretty much a "Cult of Money" now. Maybe I'm way off base here but it doesn't seem like the mentality of creating products and services which genuinely help people while at the same time providing a living for, say, 100 families for the next 20 years is a thing there.

Slightly iterating on and pumping old ideas in social media with the goal of conjuring billion dollar valuations for the next ad platform seems to be the norm.

harrumph• 7 years ago

“Incredibly dangerous”!

Totally agree about how inane and insufferably out of touch this complaint is. As if today's now-totally-normalized tech company valuations, openly built on nothing more than cash bonfires, aren't dangerous at all.

Tycho• 7 years ago

When someone uses the word “privilege” it’s a good indicator that the rest of the discussion is going to be a waste of time.

sfkdjf9j3j• 7 years ago

Can you elaborate on this?

crankylinuxuser4• 7 years ago

Not parent.

But in my experience, but "privilege" usually relies on invoking stereotypes (males, females, white, etc) and then shutting down individuals by invoking that their discussion is just 'privilege'.

I saw a 'yelling over each other' thread on Facebook in which white feminists were being name-called by black feminists calling them names of various sorts for supporting only white rights. Any modicum of discussion was drowned out by chest-beating of lines of racism and sexism. I believe that thread is still going on.

"Mansplaining" is yet another term that does that on sex based grounds. The term "manspreading" is yet another term with a sexist root- as only men can sit down and spread their lags in relaxation.

jkingsbery• 7 years ago

For whatever it's worth, there was a recent episode of Econtalk in the guest discusses his work with those below the poverty line and how some communities have been successful in entrepreneurship: http://www.econtalk.org/extra/discovering-positive-deviants/

I don't know of a quantitative study and obviously the source is biased, but the guest came himself from a "no safety net" situation and now works with others in a similar situation, so his take is interesting even if one disagrees.

snowwrestler• 7 years ago

PG seems worried that tweets saying you have to be rich to do a startup will discourage non-rich folks from trying a startup.

This doesn’t give those folks much credit. It implies that a few tweets will have a bigger impact on their decision-making than their own detailed understanding of the constraints and anxieties of their own lives.

I don’t think PG is in a good position to understand those constraints and anxieties. And he is somewhat incentivized not to, since YC benefits from having more startups to choose from. But YC does not experience significant downside on the startups that they reject or which fail. Unlike: the founders of those failed startups.

gist2• 7 years ago

I don’t think PG is in a good position to understand those constraints and anxieties. And he is somewhat incentivized not to, since YC benefits from having more startups to choose from. But YC does not experience significant downside on the startups that they reject or which fail. Unlike: the founders of those failed startups.

Exactly. And I have been avoiding saying this but keep in mind that from what I remember PG got the idea for YC when he was 'walking through Harvard Yard with Jessica'.

https://www.fastcompany.com/3002810/aha-moments-made-paul-gr...

All VC's are like this by the way. Even though they know there is a great chance that many ideas they fund will not work they still push the investments because it's not their mess to cleanup. That said there is actually probably more downside for employees. After all a founder with a big startup failure has been marked as someone 'in the mix' and can usually parlay that to other opportunities. Look at even Sam Altman and what happened after Loopt.

https://en.wikipedia.org/wiki/Loopt

Then he goes on having made his mark to running YC.

ordu• 7 years ago

Nicely said. It is an irrational economic decision for a non-rich to begin a startup. Even if memes could change their decision it would make matters worse for them, not better.

csomar2• 7 years ago

I'm not an expert on the subject but according to "science", the reason that woman do not go to engineering fields in the US is a byproduct of their environment not a difference in their genetics.

If I got it right, Robert Sapolsky claims that the way to make more woman into tech is to make young girls believe that they can do tech. They already have the cognitive capacity.

In this same sense, PG might be hitting the nail in the head: The reason poor people don't do startups is because they believe they can't; and that it is a white privilege.

If they believe they can't, they will not try. If they don't try, the probability that they succeed is exactly %0. Re-enforcing the myth and further convincing poor people not to try.

The only way out is to convince them otherwise and see what the real odds are.

Robert Sapolsky also claims that we need to change our speech and views (ie: remove "negativity") in order to level the playing field. PG is doing the same. He thinks that other ideas need to be censored as it is important to maximalize the propaganda.

That's a dangerous thinking as it touches on freedom of speech. One might wonder if you can level the social "cognitive" field while also preserving freedom of speech. Educating people is the only way I guess.

noelsusman5• 7 years ago

They won't try because the consequences for them could be disastrous. It's not even about how much money is in your bank account, though that obviously helps. It's more about how stable and reliable your support structure is. Without that the consequences of failure can be devastating.

I think it's dangerous to encourage people to gamble their lives on a low probability outcome if they don't have a strong network of friends and family to fall back on. If you have that, then go for it, but don't pretend that anybody can pull themselves up by their bootstraps and do what you did (I'm using the royal you here). That attitude is what the criticism is aimed at.

marssaxman• 7 years ago

I wish that more people had discouraged non-rich me from launching a startup! I was young and had not yet had time to develop a detailed understanding of the constraints of my life. I had been bathed in pro-entrepreneurship messages throughout my upbringing, and genuinely believed that technical chops and the kind of classical-conservative, small-business-focused money management advice I'd been given were going to be enough to build a successful company. I was wildly wrong about that, and I had no idea how far out of my depth I was. I had no safety net and I got badly hurt. It took years to recover.

tluyben2• 7 years ago

Everyone from my country (NL) has a safety net to start with (you can screw up but still) and that goes for many EU countries anyway and yet all the entrepreneurs I know from NL are extremely risk averse compared to the US ones. Most of my NL friends are entrepreneurs but more of the lifestyle kind than even wanting to become the #1 in their field with the monetary status that comes with it. I dare to say that I only know Chinese and US entrepreneurs that look beyond getting more than few million on their account and that is it.

I wonder why that is.

kaybe• 7 years ago

I wonder too.

One idea I have: In these countries you don't really need that much more because you're already cushioned against risk. You also don't need to provide a cushion to anyone around you (since everyone's taxes are already doing that). Which means, below you is not the gaping abyss but a shrub that is a little bit thorny.

bumby5• 7 years ago

I've often wondered about this. I wonder how much is a cultural mindset. In other words, is the U.S.'s relatively risk tolerant stance an artifact that many U.S. citizens are the progeny of people willing to take risks to start out as an immigrant in an unknown land and has that artifact become part of the collective mindset? Or possibly does the slow morphine drip of a safety net make one perceive all risks as something to avoid as opposed to a calculated risk? Or is all this based on a nonsense notion of American exceptionalism?

idlewords8• 7 years ago

Let's not forget that Graham has also publicly written he would be loath to choose any woman as a startup founder "who had small children, or was likely to have them soon." The man has a type, and the demographics of YC reflect it.

_Microft2• 7 years ago

Do you maybe have a source for it?

altaccount1• 7 years ago

Footnote 2 of this Paul Graham essay:

http://www.paulgraham.com/start.html

idlewords8• 7 years ago

Search on the verbatim phrase in your search engine of choice.

badatshipping2• 7 years ago

I... would too? Startups take over your life, and so does taking care of young kids. Pretty hard to do both at the same time. Not impossible, but pretty hard, which is presumably why he said he’d be reluctant, not absolutely unwilling.

idlewords8• 7 years ago

Leaving aside that there are driven people who work their asses off despite having young children, and that "startups consume your life" is the kind of belief VC have an interest in perpetuating, note that Graham in this statement is treating kids as a women's issue.

mattxxx2• 7 years ago

The reality is that money lets you "take risks," and money gives you options (in this world).

To be honest, I don't think that starting your company with the "risk" that you might move back in with your parents if it fails... is at all a meaningful risk.

zpeti2• 7 years ago

Psychologically this is not true at all. It's much easier to take risks when you have nothing to lose.

How many 18-30 year olds do you see having a swing at it and trying something, vs 30+ people with families and savings to burn?

PaulHoule• 7 years ago

My trajectory might not be "normal" but for me I have been more inclined to take risks as I've gotten older.

There is a sense of urgency (e.g. if I don't do it now I won't get another chance) that counteracts the feeling of "nothing to lose")

Timpy• 7 years ago

I think everybody in this discussion is working with a different model for the word "risk". This is a problem of concision inherent to a platform like Twitter. I don't think the argument is that 18 year olds are risking less than 30+ year olds with established families. I think the argument is that for young middle/upper class people with social capital, the risk is moving back in with your parents. The conversation stems from the question "are startups riskier for rich kids or not-rich kids?", and not "are startups riskier for 18-30 year olds vs some other demographic?"

noelsusman5• 7 years ago

Having nothing to lose is an advantage, but you also need to consider what the worst case scenario is. That's where the safety net comes in. A lot of people don't have anywhere to go if things truly go south.

theplague42• 7 years ago

Most successful startup founders are in their 30s and 40s.

Providing a link: https://www.kauffman.org/what-we-do/research/2009/04/educati...

majkinetor3• 7 years ago

You always lose time.

Frost1x2• 7 years ago

All the risks are skewed to portray a traditionally projected hopeful image when the reality is: the risks are skewed against the average person.

Most start-ups (businesses in general) fail. Hard Work® and Dedication® will only get you so far in this country even though that's the garbage fed to many for generations. A great idea is certainly a good start, then ingenuity/creativity/follow-through go a long way, but many times, success comes down to dumb luck, timing and resources. For evidence, look no further than successful companies that push new product/service lines out which fail and are abandoned--it happens quite often.

The American Dream® often boils down to simply rolling the dice. It turns out, you can roll the dice more times if you have more money/wealth when you start to play the game. Everything that isn't the cost of the admission fee can be manufacturing new dice. Heck, with enough money, one can even purchase loaded/weighted dice from your local politicians but I digress.

For many, it's hard to roll the dice when you have to decide if you want food and housing or to play the game. Yes, rewards require risks, that's what our economic system encourages (and I agree with this approach) so one shouldn't be risk averse, but everyone needs to acknowledge that risk is a very relative/proportional quantity that needs to be considered for each case.

Relative risk for Jeff Bezos starting a local business (let's say a simple coffee shop) is not the same as the relative risk for your local barista turned manager wanting to take their years of Hardwork®, Dedication®, and intimate knowledge of the industry to spin up a business. If Bezos cafe fails, he probably didn't even realize it (a drop in the Olympic sized pool) but if your barista fails, they could be on the streets. Bezos can simply hire others with intimate knowledge and operate at a loss for far longer than your local barista can. They need to eat, perhaps their family does. Perpetuating this oversimplified view isn't good for our society and keeps tossing blame on otherwise productive citizens who simply weren't rewarded the same starting hand of cards and opportunities to seize.

ryandrake• 7 years ago

The discussion reminds me of a founder I knew who was very proud that his successful company was bootstrapped and of how much of a risk taker he was. He’d be quick to point out that in order to be truly successful you needed to “lay it all out on the line” and “have skin in the game.” What he wouldn’t tell you, and you had to dig and do a little internet stalking to find out was that this was his fourth attempt, and after each of his past failed businesses, he’d just fall back to his upper middle class family (attorneys), chilling there while he dreamt up his next business idea.

Big risk taker, for sure.

mattxxx2• 7 years ago

Yes, completely agreed. You distilled it: "you can roll the dice more times if you have more money/wealth"

pier25• 7 years ago

Yeah it's very different when you are in your 40s with a mortgage and kids.

taytus2• 7 years ago

Fuck the rich kids. And I'm not saying this as an insult. I mean it as "good for them". In terms that I'm 38 years old and I have enough maturity to know that:

1-Life isn't fair 2-Some people start the game 50 tiles ahead of you.

None of these reasons are going to stop me (a poor entrepreneur) to build the company I want to build.

I think PG's comment is idiotic, but I think he is very smart.

commandlinefan2• 7 years ago

Well, that's not really a risk then, is it?

bettrsocial• 7 years ago

I don't think anyone else should pay for a startup's safety net. Doing a startup requires calculated risk. It may or may not work. Whoever wants to attempt need to sit down and calculate the costs and the risks and take precautions. This is not the same as someone becoming unemployed because they got laid off, and it's not the same as providing welfare to people in poverty. Startups by their nature are risky and no one else should have to pay for a safety net in case it doesn't work out. The market does well weeding out the bad ideas and companies that aren't actually solving any problems. Creating a safety net might just contribute to perpetual "startupdom" (with everyone else paying for it), when in reality certain ideas and efforts need to just die off.

programminggeek• 7 years ago

It's not taking a risk if you have a safety net. That is the point of the safety net, to eliminate the risk.

jasonkester3• 7 years ago

Silly Twitter fight aside, the key piece of advice that us regular non-rich folk should take away is this:

"Your first goal after university should be to build yourself a safety net."

Once you have $10k in the bank, you can start taking risks just like those privileged kids that are starting all the startups with their unfair advantages.

Best of all for us, we work in software, where socking away your first ten thousand dollars happens automatically after landing an entry level dev gig, provided you don't go out of your way to blow your entire outlandish salary on silly possessions.

idlewords8• 7 years ago

In the United States, people who don't have significant financial support from their parents graduate from university with a great deal of debt.

jasonkester3• 7 years ago

Indeed. But those are the same people getting those $150k entry-level salaries from companies in the Bay Area.

Even after paying down $50k/year in debt one would be hard pressed to spend the rest of that without saving anything.

You spend your college years sharing a house with 5 roommates, driving an $800 car and living on Costco pallets of canned chili. Keep that up for another few years after school while pulling down a dev salary and you'll be out of debt reasonably fast.

Sadly, most people don't do that, and match their choice of new apartment and new car to exactly equal their new income. That's a shame, but it's also why I gave the advice I did above.

vonmoltke9• 7 years ago

That is an absurdly broad statement, and incorrect as stated. This is the case for many, but it is far from a guarantee.

radcon2• 7 years ago

we work in software, where socking away your first ten thousand dollars happens automatically after landing an entry level dev gig, provided you don't go out of your way to blow your entire outlandish salary on silly possessions.

This is shockingly out of touch with reality, just like PG's original tweet.

There are plenty of people with CS degrees who can't find a job, and plenty more who have jobs that barely pay enough to cover their expenses.

Spend some time reading through something like the CSCareerQuestions subreddit if you want to get a glimpse of life outside your bubble.

vostok4• 7 years ago

There are plenty of people with CS degrees who can't find a job, and plenty more who have jobs that barely pay enough to cover their expenses.

If anything, this comment is out of touch with reality as it stands for most software developers in the US.

The median salary for a software developer in the US is over $100k. In Silicon Valley MSAs it's even higher of course.

The median income for similar careers like computer programmer is also very high even if it's less than $100k and those careers cover far fewer people anyway.

fucking_tragedy2• 7 years ago

$10k is hardly a safety net.

drenvuk• 7 years ago

if you're living in a tent eating rice and beans and getting your wifi from google fi 10k will last a very long time. I'm not being facetious, a friend went this route.

rb808• 7 years ago

Yeah I was going to say 10k is a trip to ER after a small accident.

dyarosla2• 7 years ago

Depends where you live? Hard to say what diff people in diff situations and in diff places need and/or consider a safety net.

jasonkester3• 7 years ago

Feel free to adjust your numbers if you like. Personally, I have a hard time spending that much in a year.

The idea, though, is to save up enough that you don't need to think about losing your job as an existential threat. That's an easily attainable goal for a software guy, and it puts you in a nice position in a lot of ways.

wnevets• 7 years ago

It's certainly better than 0

vostok4• 7 years ago

Make that $100k+. It sounds like a lot, but it's a maximum of 2 years savings for someone on a low risk, high pay track. It's not the end of the world to be 2 years "behind".

abhiyerra• 7 years ago

I believe that this is missing a lot of nuances. Just because you have a safety net doesn’t automatically make you more risk-averse.

Going to a relatively poor school where teachers were literally getting beat up and then heading to Berkeley it was sort of a shock psychological. Furthermore, having to pay myself through college with no social safety net was one thing but the feelings of being an outsider, having constant imposter syndrome to having a good job, and feeling somewhat removed from other founders in that regard sticks with you.

It is also hard to really think about startup and yourself when you may be the lifeline for your parents if they need money. A safe job does provides that. This may be the biggest challenge I had to overcome to going on my own. When a person from a comfortable upbringing decides to strike on their own they are really not beholden to others, someone who is poorer has a whole social net that they may have to consider before going out. Furthermore, try getting a loan with no one else underwriting you, it is next to impossible.

So the answer is, no, having $10k in the bank doesn’t automatically make you more likely to start a company because there is both a psychological and sociological aspect of poverty that lingers long after one has left it.

umvi• 7 years ago

So why aren't highly socialized countries with tons of safety nets meccas of innovation?

gaspoweredcat• 7 years ago

exactly, its a different matter when that risk isnt "oh ill lose a bit of my buffer" but "if this doesnt work im on the streets"

you may have a fantastic idea but if youre working for min wage theres a good chance youre little more than one missed pay cheque from being in serious trouble

but those from privilidged backgrounds see it differently, many of them have never been "broke" and i mean truly broke so i guess they simply dont understand what theyre saying, theyve never taken an actual risk in their lives

PorterDuff• 7 years ago

The original twitter post, twitter responses, and responses here made me muse about how the definition of 'start-up' has changed in the last few decades. Ennui ensued.

majani• 7 years ago

Actually the headline of this is the takeaway you should get from this story. People with safety nets are the ones who get to do startups. This is logical and how it should be. If you weren't born into a rich family, then make saving up your number 1 financial priority to build that nest egg for yourself. Even the kids from privileged families are mostly in that position because their parents made a series of good financial decisions in regards to savings.

mcguire• 7 years ago

Is anyone keeping statistics on YC applications?

What happens to people who don't get funded (by YC or otherwise)? What happens to those who do get funded but then fail? What proportion succeed, for various definitions of success?

skookumchuck4• 7 years ago

By definition, it's not a risk if there's a safety net.

simplecomplex• 7 years ago

The world isn’t fair. Pontificating about how the world isn’t fair is useless. It’s a waste of your time.

Both Paul and Matthew would be more helpful by providing advice to effectively deal with one’s situation in order to found a company. That would be valuable, instead of engaging in adversity olympics which is what most of Twitter seems to be nowadays.

nemonemo• 7 years ago

A close cousin of this topic would be the background of new full professors in major universities. Ph.D. is risky, especially considering the slim chance of getting the full professorship and its tremendous opportunity cost. The competition to become a full professor in a major institution is fierce and also it takes longer and longer as the competition heats up. The path is quite comparable to that of the unicorn founders in many ways.

I'd wonder how much study has been done around the socioeconomic backgrounds of those prominent professors. I'd also be interested how those backgrounds have been shifted as time goes by. It would be also interesting if not much research has been done about it when some of them are supposed to do such a thing.

RenRav• 7 years ago

This a common debate point for basic income, providing the safety net for entrepreneurs, startups, artists, etc. Really was expecting a mention but it seems to have shifted toward boring arguments about privilege.

csomar2• 7 years ago

“It’s hard to take risks if you don’t have a safety net”

Okay, here is a twist: How much do poor people spend on lottery/gambling activity? How much is that proportionally to their income?

From looking at small casinos, betting shops, lottery and online sites (sports) it seems that poor people are risk takers. One reason, in my opinion, is that they have little to lose. They also have really shitty lives and are looking for an escape.

If you were starting a startup alone in Bangladesh vs. starting solo with YC in SF. Building a remote-based startup that sell SaaS online for clients all over the world. Location of clients is everywhere.

Technically, the playing-field is equal. You start a C-Corp from Bangladesh and trade your business. But which one do you think will make it? Which one do you think will raise funding? Or succeed if both do not raise funds?

You live your life trying the optimize a problem. There is a number of steps that if you take, carefully, you'll become rich in some duration of time. You don't know these steps, so you keep searching. You know gradient descent. Life is like that, if you are moving successfully down, you are probably on the right track and so you keep moving on that direction.

However, you start stochastically on a random location and keep trying to find a path that leads somewhere. That's where YC comes in. They help you reduce the surface area of your search. You are less likely to land somewhere futile.

What poor people are missing is discovery of this surface area. It is a very complicated problem for them and they lack resources and education to optimize the problem.

They are hoping that this lottery ticket will help land them directly on the optimized spot. Their lack of understanding of why this doesn't work explain why they can't navigate the surface area.

vec• 7 years ago

Of course people have different risk appetites, including poor people.

The point isn't so much about "risk" per se, it's about whether or not there's a viable Plan B.

If I'm working two jobs to barely keep a roof over my head and play the lotto and lose, I'm still keeping a roof over my head (by working two jobs). The odds are long, but the cost of failure is low.

If, on the other hand, I have the Best Startup Idea Ever (and all the necessary skills to make it a reality) then I will still be unable to pursue it. Sure, I'm like 80% certain it's going to be a huge success, but in the 20% case I'm fuuuuuuuuucked so taking a swing at it is a nonstarter.

gubbrora• 7 years ago

Here is a crazy thought I had. If you're poor and save a bit money you get less aid. So saving is meaningless. You are stuck in a feedback loop. But if you buy lottery tickets as a way of "savings", you either lose and get full aid, or you win big to achieve poverty escape velocity.

I'm not saying this is true for all poor people, but I wonder if it could be true for some.

julienfr112• 7 years ago

It depends also of your lifestyle : if you can't leave without buying expensive stuff, going in vacation in French Polynesia and skiing in Aspen, the safety net should be $100k or $1m. If you can leave in a cheap neighborhood, cook your own food, reading books and HN, doing cheap sport like running or cycling, $10k can take you a long way. The revenue and/or lifestyle of your significant other is also a huge factor.

bg24• 7 years ago

Experiencing first hand. I hope at this age, I should have saved enough. But, single income and mortgage means better be realistic. I do take risk though, working for startup on cutting edge tech, than for a large company. Basically insurance for future job security. The risk I cannot think of is starting my own business.

Related - it is impossible to take risks if you or family have crippling health issues.

And when you have both, why even bother to take major risks.

nswest23• 7 years ago

r/murderedbywords

richardriko• 7 years ago

If you are in india the emotional blackmail and the pressure to marry before 30 is a huge hindrance. In india a graduate has no real world knowledge when he gets out of college. It takes about 6 to 8 years to get the confidence in coding and creating something. But by the time the marriage is done and no way to take risk. To be honest the salary earned by women is like an additional income and never considered primary income in 99 percent marriages.

“It’s hard to take risks if you don’t have a safety net”

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