Countries with much broader safety nets for entrepreneurs are not producing the risky innovative companies that America is. But, as far as I can tell, health insurance really is the biggest factor keeping people from starting new companies.
For myself and my peers, with new families and houses and student debt, etc., it's the one thing that scares us more than anything else. The prospect of a business going under is nowhere near as terrifying of getting caught off guard without health insurance. It's positively paralyzing, knowing that it is something that could be essentially impossible to recover from, unlike simply writing off a failed venture. Hopefully the Affordable Care Act will mitigate some of that.
Countries with much broader safety nets for entrepreneurs are not producing the risky innovative companies that America is.
Could this be because countries with broader safety nets also have more regulation and make it hard to fire people?
I've always kind of thought a combination of making it easy to hire people and let them go, along with strong safety nets (ie, good unemployment insurance and not having health care tied to employment) would be optimal.
I think I agree with where you're going, but it doesn't seem like a huge paradox to me. As I understand it, it may be that all else being equal, a better social safety net (such as healthcare available outside of a corporate group plan) encourages more entrepreneurship, but all else isn't really equal: we don't have a version of the USA that is mostly the same except that it has a national healthcare system. Instead, we have countries that differ on dozens of axes, ranging from governmental policy to culture to physical land to history to language, and are trying to assign blame/credit to each of those axes. You could even do that within the USA: why are there no big tech companies out of Alabama or Ohio, despite their governmental systems being generally American-style?
I do agree that the American healthcare situation is a major problem, speaking as an American expat in Denmark who hopes to move back to the US someday, and sees healthcare as one of the major barriers. I'm cautiously hopeful that PPACA will solve the worst of the problems, enabling me to buy individual health insurance. But I think it's hard to prove that either way based on cross-country comparisons.
I can confirm that offering good health insurance is an important part of compensation when hiring, particularly for older candidates. At my startup, a generous health benefit was implemented early on in an effort to attract more senior employees. Often people in their 20s find it less valuable.
Health insurance tied to employment is a bad idea generally but that is the state of USian reality and so we make the best of that. Employer-based health insurance was a side effect of government regulation during the second World War that lingered long after the regulation has disappeared.
As a practical matter, the ACA is unlikely to help. The net effect is that it seems to be increasing overall costs per employee to maintain the status quo, and there are costs down the road that have not even been implemented yet. A company like mine can hide the cost but I can see why it would be problematic for businesses that are sensitive to total employee costs. As long as businesses are paying for health insurance, the math of the ACA is pretty grim; all it did was move the costs around and add some new ones. It is disappointing that it sort of ended up being the worst of both worlds.
Entrepreneurs have a tendency to go from where profits are highly taxed to pay for everybody's safety net to countries where they can keep more of their money.
A French engineer once explained to me how good the health care coverage is in France. But where is her high paying job? Not in France.
Countries with much broader safety nets for entrepreneurs are not producing the risky innovative companies that America is.
This could also be a culture thing. When I was in Canada until 5.5 years ago the golden ticket was to work for a big co. I was an ECE major and the top employer of choice was, even for me, BC Hydro (power company). I have no idea anymore why I'd have thought like that, but maybe now I am brainwashed this way. :-)
>The Agenda has often wondered if decoupling health insurance from employment might encourage entrepreneurship.
That is from the article. It's a stupid comment. Of course it will encourage entrepreneurship - no other outcome would make sense.
Why is health insurance coupled to employment anyway? All you need to do is reform the health insurance market so that it is individual based, rather than company based - your employer does not pay for auto, home or life insurance, so why health? To me, as an outsider looking in, it seems like collusion between big companies to make it harder for small companies to compete for staff.
As a non-US resident, I just buy my health insurance whether I'm working, not working, or doing whatever. If I got a job with bigcorp limited, they might offer it as part of a package, or maybe get a slightly better rate due to group rates, but it's not a case where I have to be employed in order to get insurance.
"Countries with much broader safety nets for entrepreneurs are not producing the risky innovative companies that America is."
I don't think that has any relevance to the question at hand. If we eliminated wasteful medical spending then we could literally insure every uninsured person at least 10x over. (Medical waste is ~700B per year, whereas it would cost about 50B to insure everyone.)
I suppose there's no reason why social safety nets and stifling heavy taxes and regulation need to go together, but in practice they do. In this country, the people pushing for higher taxes and regulation are also supporting greater safety nets. So if you see them winning on one front, they are probably winning on all three.
> Countries with much broader safety nets for entrepreneurs are not producing the risky innovative companies that America is.
But the fact that they have broader safety nets may have nothing to do with that. Maybe the reason they produce less risky innovation has to do with other ways that they differ from America.
OK, so, I am ardently socially liberal, and I've had a man-crush on Jon Stewart that hasn't waned ever since his appearance on Crossfire.
But.
I don't think that decreasing risk will result in more entrepreneurship.
I would support a wider social safety net for entrepreneurs -- er, business owners -- on principle alone, because I think what we should be saying is that these people are vitally important to our economy and to our nation's future, just as much as larger enterprise is, and we should support that.
But the thing is, most people don't want to run their own business no matter how safe you make it. I've spent the last few years encouraging people around me to start or run or improve their businesses, but so many of them just want to be a professional in their field; they don't want to deal with all of the other aspects of running a business.
So don't lower entrepreneurial risk because you think it will open more businesses, because you think that the guy with a good paying job and some savings is worried about his health insurance. If he (or she!) wants to open or run a business, he (or she!) will do that regardless. It's one of the few probably universal aspects of entrepreneurship that the people who will do well at it aren't really happy working for other people anyway, they have this itch that they can't scratch unless they strike out on their own, risks or not.
But do lower entrepreneurial risk because you recognize the value of entrepreneurs and you want to make sure that small business owners with families can still get good health care and dental care and afford a modest living.
>I don't think that decreasing risk will result in more entrepreneurship.
TOTALLY disagree, as well as with folks who are saying that "risk is an important part!"
For one thing, there are a series of studies that show that people who are more risk tolerant actually create worse start-ups (for example, [1]). There is at least one meta-analysis that indicates that there's more risk tolerance in entrepreneurs (though the individual studies on that point are contradictory) [2], but OF COURSE there's risk in going off on your own, the biggest one being the opportunity cost of the cushy salary you're foregoing for a year.
No, it's not for everyone. But that doesn't mean that people who start businesses are reckless, and it is HARD to get a good price on health insurance in most states -- and if you get badly sick in the US WITHOUT health insurance, you're screwed (if and when the health insurance reform kicks in, this could change).
I personally refused to quit my job until I knew I'd be able to get health insurance, and it was much harder than I expected despite not having any health problems (as in, I was denied by two providers and had to get the "high risk pool" insurance). So I think it would be effective to reduce the risks of entrepreneurship for people in my situation (i.e., over 35 years old). It's risky enough to begin with; no reason to make it a matter of life-and-death as well.
I agree that starting a business isn't for everyone. I'm doubtful that I would enjoy it, but I would like to be an early employee at a company. If that company can't afford health coverage, then I can't take that risk for my family.
It just baffles me that health coverage is so tied to where you work. What if you could only send your kids to the schools that your employer selected, or eat at the restaurants the your company had a deal with? It's just weird. I don't know if government provided insurance is the solution, but employer provided just doesn't make sense as the only solution.
>most people don't want to run their own business no matter how safe you make it. I've spent the last few years encouraging people around me to start or run or improve their businesses, but so many of them ... don't want to deal with all of the other aspects of running a business.
True dat. But you point this out as if it is some moral failing on their part. People generally don't want to do uninteresting stuff. "all of the other aspects of running a business" is seriously uninteresting.
Its why I don't have a dog - am not interested in picking up dog poop :)
If its about the money...I have made 5-6 figures from simple butterflies & straddles - took me less than half hour to devise, and then I just wait for the right mkt opportunity to come along.
If its about independence, not working for anybody etc...my boss used to say that while I only have 1 boss (ie. him ), he has infinite bosses ( ie. all the customers of the company ). So I don't see what the big advantage is in being accountable to the masses of the planet because of some bug in some stupid software.
There's trons of things infinitely more interesting than being an entrepreneur - Family. Mathematics. Physics. CS.
But the thing is, most people don't want to run their own business no matter how safe you make it.
In the aggregate you may be right. Just from my own personally experience, I can think of at least a dozen folks (extremely well-regarded in their field) who have all expressed to me a desire to strike out on their own, but it's the company-provided healthcare that keeps them from doing that.
And (for the most part) these are folks in Massachusetts.
I'm totally with you about loving Jon Stewart and I'm all for removing barriers for those inclined towards entrepreneurship.
But the concept of creating safety nets to encourage more entrepreneurship strikes me as paradoxical. To an extent, the inherent risks that come with starting a new business is a good thing -- it forces would-be-entrepreneurs to assess critically what they would gain or lose before taking the plunge. The inextricable dependency on company health insurance, however, should not have to play a role in that risk assessment.
Maybe I'm just being picky over semantics, but instead of creating a "wide safety net for failure," which to me sounds like something that encourages poor business judgment, I would be in favor of reducing the extrinsic risks of starting a new business (e.g. insurance) so entrepreneurs could focus on the risks relevant to the business itself. But like I said, I might be nitpicking over choice of words, so forgive me.
Knowing there's a risk of failure isn't so bad -- it makes me try really hard at, well, not failing.
Sure, there's people who want to be entrepreneurs and people who don't, but to me it seems like the situation is perfectly analogous to supply and demand and consumer surplus. Most people, if they want something, they'll buy it at any price they consider to be reasonable. Why? Because they really want it – just like people really want to be entrepreneurs, or don't. But lo and behold, when the price of a consumer good goes up, demand almost invariably goes down, because for some people, the cost/benefit equation did change just enough to make it (not) worth it.
I know many, many people in Europe that have dreams of starting a company or startup, but without ready access to venture capital, making that dream a reality suddenly becomes much, much harder. So you compromise, and you focus on other dreams that are more attainable.
Yes, human psychology might be an important factor in deciding whether someone wants to be an entrepreneur or not, but people's attitudes are generally not as black and white as you make them out to be.
I have a rare eye disease. I'd love to start my own business, but I didn't because I feared a lose of insurance with a pre existing condition. I completely disagree with your premise that wouldn't do well at it because my itch isn't so strong as to make me risk losing insurance.
Btw, what data are you using to draw your conclusion?
Facing a potential health crisis without insurance has got to be one of the biggest disincentives to starting a business.
Even if that disincentive is irrelevant to most entrepreneurs, you still have potential entrepreneurs with health issues. If X% of potential entrepreneurs have managed but costly health problems, the disincentive to starting a business must be much higher.
"Risk compensation (also Peltzman effect, risk homeostasis) is an observed effect in ethology whereby people tend to adjust their behavior in response to perceived level of risk, behaving less cautiously where they feel more protected and more cautiously where they feel a higher level of risk. The theory emerged out of road safety research after it was observed that many interventions failed to achieve the expected level of benefits but has since found application in many other fields."
The industry joke at the time this research came out was that if the regulators were serious about auto safety they should mandate a sharp dagger sticking out from the steering wheel aim directly at the driver's chest. People would drive very carefully!
The US already has the most lenient bankruptcy law in the world. It already has the highest "social tolerance" for entrepreneurial failure.
I'm in great health, and young, so I'm not worried about saving for retirement (yet). But starting a company is still really damned hard. It's years of hard work, too much time at the office, too much time away from friends and family. Too much fear that tomorrow no customers will show up, or they'll go to your competitors or you'll find our your DB backups don't work and you have to go out of business. It's fear that you're not managing employees correctly, or not hiring the right people, or not prioritizing the right things.
The government can't make any of those things go away. And the only issue it could help is money, which has terrible downsides to go along with it.
As an entrepreneur I agree that it's very hard and not everybody is cut for it. But I also believe a lot of people who are cut for it might never find out, because they are not given an opportunity to try.
Improving healthcare coverage for aspiring entrepreneurs would level the playing field and expand the pool of potential entrepreneurs. And that would in turn create more wealth for all of us to enjoy.
What we need to do in this country is make it a softer cushion for failure. Because what they say is the job creators need more tax cuts and they need a bigger payoff on the risk that they take. … But what about the risk of, you’re afraid to leave your job and be an entrepreneur because that’s where your health insurance is? … Why aren’t we able to sell this idea that you don’t have to amplify the payoff of risk to gain success in this country, you need to soften the damage of risk?
Without some kind of medical safety net, quitting your job to start a business becomes the luxury exclusive to the really healthy, the single, the really rich or the really lucky.
If you have any kind of condition that requires continuous oversight, you're screwed unless you have a ton of money saved up to afford a very expensive insurance plan.
If you're initially healthy, but suddenly get seriously ill, you might be set back by 7-10 grand before your cheapo $100/mo insurance plan kicks in. Even then you might still have to fight against the insurance company to have the necessary care approved and covered. You might hit the limits of your coverage.
If you have a family, you better hope that your spouse's job provides you with a comprehensive family-wide coverage, otherwise you'll have to deal with the exorbitant costs of insurance.
It's clearly sub-optimal, but the conservative side will often argue in favor of this system. I've (anecdotally) been told that if we provide everybody with universal health care then the masses will all start shooting up heroin all day and we, the hard working citizens, will have to foot the bill.
I have to respectfully go against the crowd here and disagree.
When you're leaving your job to start a business, the assumption is that you have some money saved. You're guaranteed not to be turning profit for a certain period of time. Depending on how lucky and how good you/your idea are, that could be anywhere from a month to a year or two.
Not having government health insurance just means you'll have to get your own. I am speaking here from experience: I quit my job, posted about it on HN, bought myself health insurance, and started my own software company.
How much did the health insurance cost me? 200 dollars a month. (Edit: yes, this is in the USA. IL to be exact.)
Yes, 200 dollars is not nothing. Yes, it would be nice to not have to pay that. But then again, I'm paying 1200 for my apartment, 80 for my cellphone, 80 for electricity, and I'm sure I can come up with some other monthly obligations that I have. Health insurance is maybe ~10% of my "maintenance costs" that I can't avoid.
Why aren't we arguing that the government should provide apartments for everyone so they don't have to worry about finding a place to live when they take the risk of leaving their jobs? Or require special restaurants that are publicly funded so that you don't have to worry about that, either?
I know a lot of people will take issue with this, but, keep in mind, I am not saying I'm against government health insurance. I'm saying that this isn't a very good reason for it. Going off on your own is and always will be a risky situation, unless you're already independently wealthy. By definition, it involves giving up a cushy job and steady pay for the chance of striking it rich on your own or (as in my case) doing what you love. That's the nature of the beast, and that's why we have both entrepreneurs and employees.
Hi. I am an entrepreneur, and like you, I sought out my own health insurance. Where I differ from you: 1) I am female. 2) I have a prescription for birth control.
Currently, my birth control prescription is through Planned Parenthood, and it's cost me about $25/month for many years.
When I applied for my own health insurance, they asked me to list any prescription drugs I took. Even though I get checkups and my birth control prescription from Planned Parenthood, I dutifully listed it in the form (knowing, too, that lying about this might cause me to get disqualified if I claimed something later.)
I received a letter from the insurance company that I had been declined for insurance. Reason? Prescription medication. This was the only prescription I was on at the time. Yes, apparently the fact that I have a prescription for birth control makes it worth it for a health insurance company to not insure me. This is completely legal for any insurance carrier to do in the United States if you are a single person applying for insurance. And guess what? Once you've been declined for single-person health insurance for any reason, you're pretty much screwed.
I don't know what the solution is, and I don't think our government got it 100% right when they passed different laws recently. But I also know that something is not right when I can get declined for health insurance for being on birth control (that the insurance company would not have even had to pay for anyway.)
The system is broken, and you are the exception. Let us hope that you never have a spouse who would like to be on birth control, or that you never have to take a prescription drug for any reason for any length of time.
You don't have a pre-existing condition if it only costs you $200/month.
I have a friend who had a serious back injury (near paralysis) in his 20s which requires constant physical therapy and visits to specialists. He can't buy health insurance on the open market at any price (literally), and so he must move carefully from group health plan to group health plan, rather than pursue his interest in startups.
The comparison with apartments is not fair - imagine that the only way to get a place to live was through your employer.
Note that in the US, health insurance you can actually use, for a family (two adults plus one or more children), is no less than $1000/mo edging closer to $1500/mo. Getting pregnancy/childbirth covered at all on an individual policy is often difficult too. You can get a high-deductible policy if you generally don't need insurance but you personally can't control what your family members will decide they need routinely. That's part of why being an entrepreneur in your 20's is so ideal.
I absolutely support this. I think a lot more experienced people would do startups if they didn't have to risk their families' health in the process. And I think there is a lot of benefit to experienced people doing startups versus young kids who can tolerate the risk because they have little to lose.
I agree entirely. I'm only one data point but I've only been able to get as far as I have in business because of the good graces of the Australian tax, welfare and health system.
Perhaps this is why the model for entrepreneurship in the US is so heavily geared towards huge, VC funded worldbeaters with far less "mircopreneurship" - a trait of the Australian economy that is said to be a mainstay of economic resilience.
or we could remove the tax break for employers that provide health insurance. If health insurance was tied to the individual it would stay with them in between jobs. You could also find plans with lower premiums and higher deductibles/less coverage if there was a market for insurance.
Jon just nailed the problem in the head: frankly I'm tired of hearing rich kids talking about how easy it is just to leave everything you are doing and make a startup, and to add insult to injury the new buzzword is to say that you don't even need an idea.
Yeah sure you can leave your job or college and just start throwing darts at post-its to come up with an app idea if you have a rich dad who is willing to bankroll your adventure in the Bay Area. You need at least $36k a year just to rent a decent flat in that place, some families, not just people but actual families, live on less than that in this country.
I had friends on highschool who had tremendous hacker potential, but they also had problems, REAL problems like bad health and a poor family. Most of them are quite happy right now working for the evil corporations that pay them those $75k a year salaries that the rich kids laugh at. They depend on company healthcare and can't even dream to let that and their paychecks go just to give startups a try.
And that is just one side of the problem, the other is the facade of equal opportunities in startups, the idea that everyone applying to YC or other incubators is in the same level.
The social network movie made a lot of generic hacker culture statements but it forgot to mention that the zuck had a private programming tutor paid by his parents. Seriously, how many of you here had parents who could afford that? I tried to hire a Java tutor when I was in highschool and it was incredibly expensive, more than hiring several tutors for most of my school subjects.
I have met entrepreneurs with amazing companies that didn't get into YC, yet the guys from diaspora, the same guys who burned through a quarter of a million and did next to nothing, they got in, and with what? a meme app, because that's important, another memegenerator clone.
I'm using a throwaway account because I know this is going to be downvoted to hell, many of these rich kids make an overwhelming clique in HN and other sites, and they don't like when it when someone speaks up and shatters their BS.
The irony here is that this country is fast becoming like the third world hellholes that immigrant entrepreneurs where escaping from. The stories you hear from those places are becoming eerily familiar: a guy from South America told me how over there all entrepreneurs are rich kids, legacies from generations of crony capitalism and favoritism. Practically none are coders or hustlers, they get their parents to bankroll a clone a cookie-cutter startup and take advantage of the wage slave condition of engineers over there, after all what are those poor souls going to do? they can't afford to make a startup and don't have any connections to investors, so what is left for them? get a visa and come here? nice try...
And that is what America is becoming, a place not of opportunity but of class lockdown, social mobility is at an all-time low and everywhere you hear pundits whose idea of equality in America is actually that of Sweden's, which ironically is a socialist country.
But go ahead, keep believing we are all in the same league, by all means try to defeat my point by saying how you help other less fortunate entrepreneurs with your link-bait blog full of empty advice, keep saying that all of us who are not in the same position than you are a bunch of envious and resentful pricks, or that you are where you are right now because you worked for it when actually you are where you are right now because you were half the way ahead to being with.
This addresses a larger issue, but the specifics discussed hit home with me. I started my company several months ago and lost my health insurance. After paying into the system for the last 8 years, I feel like I've just been giving my money away. I had always been under the impression that I could never be denied for insurance if I had an existing policy but obviously that was misguided.
I'm overweight, I'm a smoker, and I have high blood pressure. Starting a company could literally kill me (on top of aforementioned dumb decisions). The rich used to pay 90% taxes and we still had Vanderbilt, Carnegie, and Morgan.
Great Scott! It's just crazy enough it might just work!
I've always felt that America's psyche is evolving us to a "Everybody's a CEO." mentality. With the introduction of 401K we upped the risk taking, driving white collar workers into consulting away from full time employment with benefits of incorporating, tax benefits of corporations, preferential tax treatment of capital gains vs salaries. These are all incentives to create your own corporation over being a salaried employee, but they all involve taking more risk. We are rewarding risk more and more while devaluing safety. Not passing judgement per se, but making an observation that America might be interested in this if they understood it. And that America might need this anyway because we are pushing more people into accepting the risk without their choice. (see 401K as an example).
Another side benefit to this is it might drive up competition for workers because more people might be interested in working for smaller companies because benefits are more equalized. Driving competition for workers means higher salaries too on a whole as they compete for the talent. That's the real societal benefit.
Now, if I could just figure out a way to pay myself entirely in dividends over a salary I think they might give me an honorary 1%'er membership. :-)
But on the other hand. All I know is that it won't be that much fun when everyone is doing it. It never is.
We can pretty clearly see that lowering risk is increasing the number of software startups. You can see a pretty clear micro example of this just by looking at YC applications.
The number of YC Applicants has increased as the risk of doing YC has gone down.
When someone going into YC had an expected outcome of basically $25000, less people were willing to leave jobs to go start companies. Think about pre 2009 YCombinator.
Now consider post 2009 Ycombinator.
As the process became less risky: more guaranteed capital (the Ron Conway, Yuri Milner portfolio strategy), and more Acquahires. The value of the average company went up, the downsides went down, and the risk to starting a company went down. Thus, more people were willing to apply to YC, and Paul and the YC partners were able to accept more companies.
You could probably argue that this was a function of the popularity of YC. I believe that founders are rational, and the popularity of YC again decreased their risk. How many founders do not quit their jobs until they get into YC? (many)
This is a separate argument from whether or not we need government healthcare, but I think it's pretty clear that risk evaluation is absolutely part of being an entrepreneur.
(As an aside, dealing with healthcare is just one of many things that we as founders have to do that provides very little net benefit to our business. The less of this BS we have to do, the better we will deploy capital and the more focused we will be on important problems)
Consider the organizational qualities that create successful startups: agility, speed and clear vision. Entrepreneurs live and die by efficiency and effectiveness. This is the exact opposite of what government programs give us. Believing that any government initiative will enable entrepreneurship is naive. Founders relying on a government cushion to lower risk will be inviting unnecessary encumbrance.
Government programs across the board, from corporate tax credits to welfare programs are universally gamed. Creating a government net to catch failing entrepreneurs will only increase the cost of doing business, while slowing down the pace of entrepreneurship.
Is the goal here to promote new businesses, or is that just an excuse to push for socialized health care? If the goal is provide health care, then the best option is to lower the barrier of entry for new businesses in the health field, whether insurance providers, healthcare practitioners or pharmaceutical companies. This is another topic, but there are many safe and legitimate ways to do this by cutting out corruption and waste.
I think that this would result in hundreds of thousands of bad ideas hitting the marketplace and then the government having to bail out all of the crap that didn't succeed. Risk is there for a reason, it's to stop you from doing something stupid, to make you think twice about the decision you're about to make. I don't believe that we need government to bail out risk takers... not with the amount of national debt that we already have.
You know what happend the last time there was no risk? Banks lended out sub-prime mortgages to just about anyone with a job that walked in the door. You know why they were able to do this? Because those sub-prime loans where bundled up and then sold off to investment banks which then packaged them as mortgage-backed securities. We all know how that one turned out... Risk is a necessary part of life, we need to accept it.
But - what problem are we solving? Do we think there are too few entrepreneurs, and this will help create more? How many is enough, and how much should we spend to create them?
The problem Stewart seems to be solving is that he'd prefer to remove ammunition from his opponents' argument, which isn't an actual problem.
I started my own business right out of school. As a result, I better be damn successful considering I have a lot of student loan debt to mop up. I have wondered, why not offer advantages in these situations to people who start businesses (say a window of ~6-12 months after graduation)? Either some sort of tax break or little to no interest rate on my debt would be handy.
Another big one is health insurance. I've been swimming in open waters without insurance for about a year now. The only plans that I can get are abysmal with 5k plus deductibles (please direct me to a better deal if I'm being naive and something exists).
Even though I've taken the leap to build a business ahead of my peers, I'm getting the crap end of the stick.
[+] [-] jcromartie|13 years ago|reply
For myself and my peers, with new families and houses and student debt, etc., it's the one thing that scares us more than anything else. The prospect of a business going under is nowhere near as terrifying of getting caught off guard without health insurance. It's positively paralyzing, knowing that it is something that could be essentially impossible to recover from, unlike simply writing off a failed venture. Hopefully the Affordable Care Act will mitigate some of that.
[+] [-] suresk|13 years ago|reply
Could this be because countries with broader safety nets also have more regulation and make it hard to fire people?
I've always kind of thought a combination of making it easy to hire people and let them go, along with strong safety nets (ie, good unemployment insurance and not having health care tied to employment) would be optimal.
[+] [-] _delirium|13 years ago|reply
I do agree that the American healthcare situation is a major problem, speaking as an American expat in Denmark who hopes to move back to the US someday, and sees healthcare as one of the major barriers. I'm cautiously hopeful that PPACA will solve the worst of the problems, enabling me to buy individual health insurance. But I think it's hard to prove that either way based on cross-country comparisons.
[+] [-] jandrewrogers|13 years ago|reply
Health insurance tied to employment is a bad idea generally but that is the state of USian reality and so we make the best of that. Employer-based health insurance was a side effect of government regulation during the second World War that lingered long after the regulation has disappeared.
As a practical matter, the ACA is unlikely to help. The net effect is that it seems to be increasing overall costs per employee to maintain the status quo, and there are costs down the road that have not even been implemented yet. A company like mine can hide the cost but I can see why it would be problematic for businesses that are sensitive to total employee costs. As long as businesses are paying for health insurance, the math of the ACA is pretty grim; all it did was move the costs around and add some new ones. It is disappointing that it sort of ended up being the worst of both worlds.
[+] [-] stretchwithme|13 years ago|reply
A French engineer once explained to me how good the health care coverage is in France. But where is her high paying job? Not in France.
[+] [-] kalleboo|13 years ago|reply
[+] [-] unknown|13 years ago|reply
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[+] [-] abbasmehdi|13 years ago|reply
This could also be a culture thing. When I was in Canada until 5.5 years ago the golden ticket was to work for a big co. I was an ECE major and the top employer of choice was, even for me, BC Hydro (power company). I have no idea anymore why I'd have thought like that, but maybe now I am brainwashed this way. :-)
[+] [-] brc|13 years ago|reply
That is from the article. It's a stupid comment. Of course it will encourage entrepreneurship - no other outcome would make sense.
Why is health insurance coupled to employment anyway? All you need to do is reform the health insurance market so that it is individual based, rather than company based - your employer does not pay for auto, home or life insurance, so why health? To me, as an outsider looking in, it seems like collusion between big companies to make it harder for small companies to compete for staff.
As a non-US resident, I just buy my health insurance whether I'm working, not working, or doing whatever. If I got a job with bigcorp limited, they might offer it as part of a package, or maybe get a slightly better rate due to group rates, but it's not a case where I have to be employed in order to get insurance.
[+] [-] kdsudac|13 years ago|reply
I was wondering whether this was the case. Is there actual data to back this up, or is it just anecdotal?
[+] [-] Alex3917|13 years ago|reply
I don't think that has any relevance to the question at hand. If we eliminated wasteful medical spending then we could literally insure every uninsured person at least 10x over. (Medical waste is ~700B per year, whereas it would cost about 50B to insure everyone.)
[+] [-] arbuge|13 years ago|reply
[+] [-] jacoblyles|13 years ago|reply
[+] [-] jamesrcole|13 years ago|reply
But the fact that they have broader safety nets may have nothing to do with that. Maybe the reason they produce less risky innovation has to do with other ways that they differ from America.
[+] [-] unknown|13 years ago|reply
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[+] [-] thaumaturgy|13 years ago|reply
But.
I don't think that decreasing risk will result in more entrepreneurship.
I would support a wider social safety net for entrepreneurs -- er, business owners -- on principle alone, because I think what we should be saying is that these people are vitally important to our economy and to our nation's future, just as much as larger enterprise is, and we should support that.
But the thing is, most people don't want to run their own business no matter how safe you make it. I've spent the last few years encouraging people around me to start or run or improve their businesses, but so many of them just want to be a professional in their field; they don't want to deal with all of the other aspects of running a business.
So don't lower entrepreneurial risk because you think it will open more businesses, because you think that the guy with a good paying job and some savings is worried about his health insurance. If he (or she!) wants to open or run a business, he (or she!) will do that regardless. It's one of the few probably universal aspects of entrepreneurship that the people who will do well at it aren't really happy working for other people anyway, they have this itch that they can't scratch unless they strike out on their own, risks or not.
But do lower entrepreneurial risk because you recognize the value of entrepreneurs and you want to make sure that small business owners with families can still get good health care and dental care and afford a modest living.
[+] [-] SomeCallMeTim|13 years ago|reply
TOTALLY disagree, as well as with folks who are saying that "risk is an important part!"
For one thing, there are a series of studies that show that people who are more risk tolerant actually create worse start-ups (for example, [1]). There is at least one meta-analysis that indicates that there's more risk tolerance in entrepreneurs (though the individual studies on that point are contradictory) [2], but OF COURSE there's risk in going off on your own, the biggest one being the opportunity cost of the cushy salary you're foregoing for a year.
No, it's not for everyone. But that doesn't mean that people who start businesses are reckless, and it is HARD to get a good price on health insurance in most states -- and if you get badly sick in the US WITHOUT health insurance, you're screwed (if and when the health insurance reform kicks in, this could change).
I personally refused to quit my job until I knew I'd be able to get health insurance, and it was much harder than I expected despite not having any health problems (as in, I was denied by two providers and had to get the "high risk pool" insurance). So I think it would be effective to reduce the risks of entrepreneurship for people in my situation (i.e., over 35 years old). It's risky enough to begin with; no reason to make it a matter of life-and-death as well.
[1] http://paraplyen.nhh.no/sfiles/85/88/1/file/hvide-panos-2012...
[2] http://psycnet.apa.org/?&fa=main.doiLanding&doi=10.1...
[+] [-] Nogwater|13 years ago|reply
It just baffles me that health coverage is so tied to where you work. What if you could only send your kids to the schools that your employer selected, or eat at the restaurants the your company had a deal with? It's just weird. I don't know if government provided insurance is the solution, but employer provided just doesn't make sense as the only solution.
[+] [-] dxbydt|13 years ago|reply
True dat. But you point this out as if it is some moral failing on their part. People generally don't want to do uninteresting stuff. "all of the other aspects of running a business" is seriously uninteresting.
Its why I don't have a dog - am not interested in picking up dog poop :)
If its about the money...I have made 5-6 figures from simple butterflies & straddles - took me less than half hour to devise, and then I just wait for the right mkt opportunity to come along.
If its about independence, not working for anybody etc...my boss used to say that while I only have 1 boss (ie. him ), he has infinite bosses ( ie. all the customers of the company ). So I don't see what the big advantage is in being accountable to the masses of the planet because of some bug in some stupid software.
There's trons of things infinitely more interesting than being an entrepreneur - Family. Mathematics. Physics. CS.
[+] [-] Anechoic|13 years ago|reply
In the aggregate you may be right. Just from my own personally experience, I can think of at least a dozen folks (extremely well-regarded in their field) who have all expressed to me a desire to strike out on their own, but it's the company-provided healthcare that keeps them from doing that.
And (for the most part) these are folks in Massachusetts.
[+] [-] viviantan|13 years ago|reply
But the concept of creating safety nets to encourage more entrepreneurship strikes me as paradoxical. To an extent, the inherent risks that come with starting a new business is a good thing -- it forces would-be-entrepreneurs to assess critically what they would gain or lose before taking the plunge. The inextricable dependency on company health insurance, however, should not have to play a role in that risk assessment.
Maybe I'm just being picky over semantics, but instead of creating a "wide safety net for failure," which to me sounds like something that encourages poor business judgment, I would be in favor of reducing the extrinsic risks of starting a new business (e.g. insurance) so entrepreneurs could focus on the risks relevant to the business itself. But like I said, I might be nitpicking over choice of words, so forgive me.
Knowing there's a risk of failure isn't so bad -- it makes me try really hard at, well, not failing.
[+] [-] stdbrouw|13 years ago|reply
I know many, many people in Europe that have dreams of starting a company or startup, but without ready access to venture capital, making that dream a reality suddenly becomes much, much harder. So you compromise, and you focus on other dreams that are more attainable.
Yes, human psychology might be an important factor in deciding whether someone wants to be an entrepreneur or not, but people's attitudes are generally not as black and white as you make them out to be.
[+] [-] jshen|13 years ago|reply
Btw, what data are you using to draw your conclusion?
[+] [-] hotpockets|13 years ago|reply
Even if that disincentive is irrelevant to most entrepreneurs, you still have potential entrepreneurs with health issues. If X% of potential entrepreneurs have managed but costly health problems, the disincentive to starting a business must be much higher.
[+] [-] digisth|13 years ago|reply
"Risk compensation (also Peltzman effect, risk homeostasis) is an observed effect in ethology whereby people tend to adjust their behavior in response to perceived level of risk, behaving less cautiously where they feel more protected and more cautiously where they feel a higher level of risk. The theory emerged out of road safety research after it was observed that many interventions failed to achieve the expected level of benefits but has since found application in many other fields."
[+] [-] dmfdmf|13 years ago|reply
[+] [-] arohner|13 years ago|reply
I'm in great health, and young, so I'm not worried about saving for retirement (yet). But starting a company is still really damned hard. It's years of hard work, too much time at the office, too much time away from friends and family. Too much fear that tomorrow no customers will show up, or they'll go to your competitors or you'll find our your DB backups don't work and you have to go out of business. It's fear that you're not managing employees correctly, or not hiring the right people, or not prioritizing the right things.
The government can't make any of those things go away. And the only issue it could help is money, which has terrible downsides to go along with it.
[+] [-] shykes|13 years ago|reply
Improving healthcare coverage for aspiring entrepreneurs would level the playing field and expand the pool of potential entrepreneurs. And that would in turn create more wealth for all of us to enjoy.
[+] [-] jeffool|13 years ago|reply
Anecdotal, but, did (m)any people here on HN graduate and then start a business while still in debt with student loans?
[+] [-] scottchin|13 years ago|reply
What we need to do in this country is make it a softer cushion for failure. Because what they say is the job creators need more tax cuts and they need a bigger payoff on the risk that they take. … But what about the risk of, you’re afraid to leave your job and be an entrepreneur because that’s where your health insurance is? … Why aren’t we able to sell this idea that you don’t have to amplify the payoff of risk to gain success in this country, you need to soften the damage of risk?
[+] [-] akurilin|13 years ago|reply
If you have any kind of condition that requires continuous oversight, you're screwed unless you have a ton of money saved up to afford a very expensive insurance plan.
If you're initially healthy, but suddenly get seriously ill, you might be set back by 7-10 grand before your cheapo $100/mo insurance plan kicks in. Even then you might still have to fight against the insurance company to have the necessary care approved and covered. You might hit the limits of your coverage.
If you have a family, you better hope that your spouse's job provides you with a comprehensive family-wide coverage, otherwise you'll have to deal with the exorbitant costs of insurance.
It's clearly sub-optimal, but the conservative side will often argue in favor of this system. I've (anecdotally) been told that if we provide everybody with universal health care then the masses will all start shooting up heroin all day and we, the hard working citizens, will have to foot the bill.
[+] [-] ComputerGuru|13 years ago|reply
When you're leaving your job to start a business, the assumption is that you have some money saved. You're guaranteed not to be turning profit for a certain period of time. Depending on how lucky and how good you/your idea are, that could be anywhere from a month to a year or two.
Not having government health insurance just means you'll have to get your own. I am speaking here from experience: I quit my job, posted about it on HN, bought myself health insurance, and started my own software company.
How much did the health insurance cost me? 200 dollars a month. (Edit: yes, this is in the USA. IL to be exact.)
Yes, 200 dollars is not nothing. Yes, it would be nice to not have to pay that. But then again, I'm paying 1200 for my apartment, 80 for my cellphone, 80 for electricity, and I'm sure I can come up with some other monthly obligations that I have. Health insurance is maybe ~10% of my "maintenance costs" that I can't avoid.
Why aren't we arguing that the government should provide apartments for everyone so they don't have to worry about finding a place to live when they take the risk of leaving their jobs? Or require special restaurants that are publicly funded so that you don't have to worry about that, either?
I know a lot of people will take issue with this, but, keep in mind, I am not saying I'm against government health insurance. I'm saying that this isn't a very good reason for it. Going off on your own is and always will be a risky situation, unless you're already independently wealthy. By definition, it involves giving up a cushy job and steady pay for the chance of striking it rich on your own or (as in my case) doing what you love. That's the nature of the beast, and that's why we have both entrepreneurs and employees.
[+] [-] ericabiz|13 years ago|reply
Currently, my birth control prescription is through Planned Parenthood, and it's cost me about $25/month for many years.
When I applied for my own health insurance, they asked me to list any prescription drugs I took. Even though I get checkups and my birth control prescription from Planned Parenthood, I dutifully listed it in the form (knowing, too, that lying about this might cause me to get disqualified if I claimed something later.)
I received a letter from the insurance company that I had been declined for insurance. Reason? Prescription medication. This was the only prescription I was on at the time. Yes, apparently the fact that I have a prescription for birth control makes it worth it for a health insurance company to not insure me. This is completely legal for any insurance carrier to do in the United States if you are a single person applying for insurance. And guess what? Once you've been declined for single-person health insurance for any reason, you're pretty much screwed.
I don't know what the solution is, and I don't think our government got it 100% right when they passed different laws recently. But I also know that something is not right when I can get declined for health insurance for being on birth control (that the insurance company would not have even had to pay for anyway.)
The system is broken, and you are the exception. Let us hope that you never have a spouse who would like to be on birth control, or that you never have to take a prescription drug for any reason for any length of time.
[+] [-] d2vid|13 years ago|reply
I have a friend who had a serious back injury (near paralysis) in his 20s which requires constant physical therapy and visits to specialists. He can't buy health insurance on the open market at any price (literally), and so he must move carefully from group health plan to group health plan, rather than pursue his interest in startups.
The comparison with apartments is not fair - imagine that the only way to get a place to live was through your employer.
[+] [-] OldSchool|13 years ago|reply
[+] [-] wh-uws|13 years ago|reply
[+] [-] 5vforest|13 years ago|reply
[+] [-] rayiner|13 years ago|reply
[+] [-] vinhboy|13 years ago|reply
For me, it's the opposite. I am considering leaving my business to get a job.
Why? Healthcare and retirement.
So I agree with the article. If we had universal healthcare, I don't think I would ever consider leaving my business.
[+] [-] dools|13 years ago|reply
Perhaps this is why the model for entrepreneurship in the US is so heavily geared towards huge, VC funded worldbeaters with far less "mircopreneurship" - a trait of the Australian economy that is said to be a mainstay of economic resilience.
[+] [-] cmcbride|13 years ago|reply
[+] [-] theinformantguy|13 years ago|reply
Yeah sure you can leave your job or college and just start throwing darts at post-its to come up with an app idea if you have a rich dad who is willing to bankroll your adventure in the Bay Area. You need at least $36k a year just to rent a decent flat in that place, some families, not just people but actual families, live on less than that in this country.
I had friends on highschool who had tremendous hacker potential, but they also had problems, REAL problems like bad health and a poor family. Most of them are quite happy right now working for the evil corporations that pay them those $75k a year salaries that the rich kids laugh at. They depend on company healthcare and can't even dream to let that and their paychecks go just to give startups a try.
And that is just one side of the problem, the other is the facade of equal opportunities in startups, the idea that everyone applying to YC or other incubators is in the same level.
The social network movie made a lot of generic hacker culture statements but it forgot to mention that the zuck had a private programming tutor paid by his parents. Seriously, how many of you here had parents who could afford that? I tried to hire a Java tutor when I was in highschool and it was incredibly expensive, more than hiring several tutors for most of my school subjects.
I have met entrepreneurs with amazing companies that didn't get into YC, yet the guys from diaspora, the same guys who burned through a quarter of a million and did next to nothing, they got in, and with what? a meme app, because that's important, another memegenerator clone.
I'm using a throwaway account because I know this is going to be downvoted to hell, many of these rich kids make an overwhelming clique in HN and other sites, and they don't like when it when someone speaks up and shatters their BS.
The irony here is that this country is fast becoming like the third world hellholes that immigrant entrepreneurs where escaping from. The stories you hear from those places are becoming eerily familiar: a guy from South America told me how over there all entrepreneurs are rich kids, legacies from generations of crony capitalism and favoritism. Practically none are coders or hustlers, they get their parents to bankroll a clone a cookie-cutter startup and take advantage of the wage slave condition of engineers over there, after all what are those poor souls going to do? they can't afford to make a startup and don't have any connections to investors, so what is left for them? get a visa and come here? nice try...
And that is what America is becoming, a place not of opportunity but of class lockdown, social mobility is at an all-time low and everywhere you hear pundits whose idea of equality in America is actually that of Sweden's, which ironically is a socialist country.
But go ahead, keep believing we are all in the same league, by all means try to defeat my point by saying how you help other less fortunate entrepreneurs with your link-bait blog full of empty advice, keep saying that all of us who are not in the same position than you are a bunch of envious and resentful pricks, or that you are where you are right now because you worked for it when actually you are where you are right now because you were half the way ahead to being with.
[+] [-] netmau5|13 years ago|reply
I'm overweight, I'm a smoker, and I have high blood pressure. Starting a company could literally kill me (on top of aforementioned dumb decisions). The rich used to pay 90% taxes and we still had Vanderbilt, Carnegie, and Morgan.
[+] [-] chubbard|13 years ago|reply
I've always felt that America's psyche is evolving us to a "Everybody's a CEO." mentality. With the introduction of 401K we upped the risk taking, driving white collar workers into consulting away from full time employment with benefits of incorporating, tax benefits of corporations, preferential tax treatment of capital gains vs salaries. These are all incentives to create your own corporation over being a salaried employee, but they all involve taking more risk. We are rewarding risk more and more while devaluing safety. Not passing judgement per se, but making an observation that America might be interested in this if they understood it. And that America might need this anyway because we are pushing more people into accepting the risk without their choice. (see 401K as an example).
Another side benefit to this is it might drive up competition for workers because more people might be interested in working for smaller companies because benefits are more equalized. Driving competition for workers means higher salaries too on a whole as they compete for the talent. That's the real societal benefit.
Now, if I could just figure out a way to pay myself entirely in dividends over a salary I think they might give me an honorary 1%'er membership. :-)
But on the other hand. All I know is that it won't be that much fun when everyone is doing it. It never is.
[+] [-] bcx|13 years ago|reply
The number of YC Applicants has increased as the risk of doing YC has gone down.
When someone going into YC had an expected outcome of basically $25000, less people were willing to leave jobs to go start companies. Think about pre 2009 YCombinator.
Now consider post 2009 Ycombinator.
As the process became less risky: more guaranteed capital (the Ron Conway, Yuri Milner portfolio strategy), and more Acquahires. The value of the average company went up, the downsides went down, and the risk to starting a company went down. Thus, more people were willing to apply to YC, and Paul and the YC partners were able to accept more companies.
You could probably argue that this was a function of the popularity of YC. I believe that founders are rational, and the popularity of YC again decreased their risk. How many founders do not quit their jobs until they get into YC? (many)
This is a separate argument from whether or not we need government healthcare, but I think it's pretty clear that risk evaluation is absolutely part of being an entrepreneur.
(As an aside, dealing with healthcare is just one of many things that we as founders have to do that provides very little net benefit to our business. The less of this BS we have to do, the better we will deploy capital and the more focused we will be on important problems)
[+] [-] blago|13 years ago|reply
[+] [-] pinchyfingers|13 years ago|reply
Government programs across the board, from corporate tax credits to welfare programs are universally gamed. Creating a government net to catch failing entrepreneurs will only increase the cost of doing business, while slowing down the pace of entrepreneurship.
Is the goal here to promote new businesses, or is that just an excuse to push for socialized health care? If the goal is provide health care, then the best option is to lower the barrier of entry for new businesses in the health field, whether insurance providers, healthcare practitioners or pharmaceutical companies. This is another topic, but there are many safe and legitimate ways to do this by cutting out corruption and waste.
[+] [-] sodafountan|13 years ago|reply
You know what happend the last time there was no risk? Banks lended out sub-prime mortgages to just about anyone with a job that walked in the door. You know why they were able to do this? Because those sub-prime loans where bundled up and then sold off to investment banks which then packaged them as mortgage-backed securities. We all know how that one turned out... Risk is a necessary part of life, we need to accept it.
[+] [-] tlianza|13 years ago|reply
But - what problem are we solving? Do we think there are too few entrepreneurs, and this will help create more? How many is enough, and how much should we spend to create them?
The problem Stewart seems to be solving is that he'd prefer to remove ammunition from his opponents' argument, which isn't an actual problem.
[+] [-] rglover|13 years ago|reply
Another big one is health insurance. I've been swimming in open waters without insurance for about a year now. The only plans that I can get are abysmal with 5k plus deductibles (please direct me to a better deal if I'm being naive and something exists).
Even though I've taken the leap to build a business ahead of my peers, I'm getting the crap end of the stick.
Does seem a bit unbalanced.