Dynamism in Retreat: Consequences for Regions, Markets and Workers(eig.org)
eig.org
Dynamism in Retreat: Consequences for Regions, Markets and Workers
http://eig.org/dynamism
83 comments
Regulation is certainly a problem, but the unfettered growth and merging of many companies over the last decade has been nothing short of breathtaking. Amazon, Google, Facebook are all essentially monopolies in their space. Banks have combined to form behemoths (and good luck starting a bank these days with Dodd-Frank on the books). Until the government addresses unfair and anticompetitive behavior and concentration, this trend will continue.
Dodd-Frank barely affects small banks. It was intended to reduce "too big to fail", that is, big banks. Lobbyists have duped you.
I'm sorry, but that is blatantly false. I don't know what sources you could possibly have used to form that opinion, but nobody who is informed agrees with you (ex, http://www.politico.com/agenda/story/2016/09/community-banks...)
There are several moving parts to this. The regulative requirements on ALL residential loans has increased to make sure the loan requester (consumer) has sufficient ability to pay back the loan. After the Great Recession, the reasons for this should be obvious. This will increase "paperwork" for all banks doing home loans. The banking industry overall had RECORD PROFITS last year. Thus, Dodd Frank (DF) is not a general bank killer.
Now, by some accounts smaller banks are more heavily impacted by DF regulations even though there are less rules for small banks. Why? Some analysts say big banks are better able to leverage "economies of scale" in DF compliance. Others say it takes time for software vendors to small banks to implement DF-related features, and that over time the burden will decrease as the software glitches are worked out so machines can do more of the grunt work. Democrat legislators agree DF should be better tuned for some issues related to small banks, but point out we don't want to throw the baby out with the bathwater: bad loans hurt everybody. Due to political gridlock, some of the suggested small-bank-related changes are stuck in political molasses. You can blame both parties and voters for that.
Now, by some accounts smaller banks are more heavily impacted by DF regulations even though there are less rules for small banks. Why? Some analysts say big banks are better able to leverage "economies of scale" in DF compliance. Others say it takes time for software vendors to small banks to implement DF-related features, and that over time the burden will decrease as the software glitches are worked out so machines can do more of the grunt work. Democrat legislators agree DF should be better tuned for some issues related to small banks, but point out we don't want to throw the baby out with the bathwater: bad loans hurt everybody. Due to political gridlock, some of the suggested small-bank-related changes are stuck in political molasses. You can blame both parties and voters for that.
Nope. See http://www.politico.com/agenda/story/2016/09/community-banks... and many others.
Treed!
Aren't Google, Amazon, and Facebook examples of the dynamism we want to foster?
Facebook and Google hardly "do" anything, in past senses of the term "do". In other words: are Facebook and Google really part of the reason the US no longer has the dynamism it possessed in 1975? Surely they have only added new types of dynamism at little expense to old markets.
Quick and messy statements, sorry. But I leave it there and move to Amazon. No doubt the (supply side) business environment for traditional goods and services has been greatly disrupted by Amazon at net increase to the average happiness of the (demand side) consumer. Then focus there and I have this to say: Consumers voted for amazon against traditional methods of purchase and consumption. To break-up amazon in favor of traditional competitors is a tax on consumers and a subsidy to inefficient, less-dynamic providers of those same goods. If amazon got big by doing something illegal then prosecute. If something specific needs to be made illegal then let's do so. But blanket persecution of companies just because they are large misses the consumer side point.
Back to supplier side stuff, small businesses thrive on the internet, providing all manner of goods. Much of this is facilitated and protected by the big 3 above. Let's pop some popcorn and see how net-neutrality-esque issues play out over the long haul. I say that to the extent that big players remain free from the shackles of Washington DC, the free internet stands a fighting chance. Net neutrality wouldn't even be an issue if the backbone of the internet was made of more companies like google, and zero companies like Comcast and AT&T. Sorry to mix in more issues but competitive behemoths compete to the benefit of the consumer. Government sponsored behemoths are free to be as terrible as they want. Don't believe me? Call your local provider and have a chat about internet speeds.
Banks are machines (one big mega machine anyone?) of wealth re-distribution from the relatively poor masses to the wealthy and connected few via the combination of inflationary disposition and fractional reserve banking. I would say that small banks will never be dynamic as long as they remain of the same ilk.
Quick and messy statements, sorry. But I leave it there and move to Amazon. No doubt the (supply side) business environment for traditional goods and services has been greatly disrupted by Amazon at net increase to the average happiness of the (demand side) consumer. Then focus there and I have this to say: Consumers voted for amazon against traditional methods of purchase and consumption. To break-up amazon in favor of traditional competitors is a tax on consumers and a subsidy to inefficient, less-dynamic providers of those same goods. If amazon got big by doing something illegal then prosecute. If something specific needs to be made illegal then let's do so. But blanket persecution of companies just because they are large misses the consumer side point.
Back to supplier side stuff, small businesses thrive on the internet, providing all manner of goods. Much of this is facilitated and protected by the big 3 above. Let's pop some popcorn and see how net-neutrality-esque issues play out over the long haul. I say that to the extent that big players remain free from the shackles of Washington DC, the free internet stands a fighting chance. Net neutrality wouldn't even be an issue if the backbone of the internet was made of more companies like google, and zero companies like Comcast and AT&T. Sorry to mix in more issues but competitive behemoths compete to the benefit of the consumer. Government sponsored behemoths are free to be as terrible as they want. Don't believe me? Call your local provider and have a chat about internet speeds.
Banks are machines (one big mega machine anyone?) of wealth re-distribution from the relatively poor masses to the wealthy and connected few via the combination of inflationary disposition and fractional reserve banking. I would say that small banks will never be dynamic as long as they remain of the same ilk.
Add in things like share buybacks instead of dividends (because tax treatment of capital gains is more favorable than of distributed income), and corporate refusal to repatriate and reinvest overseas profits.
Not sure why you say "corporate refusal." They're trying to minimize their tax liability, which is their fiduciary duty. If you owned a slice of that company, would you want money to go to distributions or taxes? Congress is to blame here. The US tax code is essentially the only one of all countries that doesn't have a regional income policy. The IRS just follows companies and individuals around the world.
Shareholders would generally far prefer that tech companies repatriate the money, accept the tax hit, pay it out in dividends.
I don't think you speak for all shareholders. Is there some evidence investors (except for the Carl Icahns of the world) want their companies to lose 40% of their foreign cash holdings?
Next you'll be telling us they have a legal obligation to maximise shareholder value!
There's no such fiduciary duty to internationally minimize tax liability. Shareholders might push for it, but it's not a legal fiduciary duty. The board of an American company could perfectly well choose to repatriate all foreign income, pay U.S. taxes on it, and then pay out a dividend using the repatriated income. That would even be the more traditional course of action, rather than sitting on a ton of overseas cash that you never pay out to shareholders.
> The board of an American company could perfectly well choose to repatriate all foreign income, pay U.S. taxes on it, and then pay out a dividend using the repatriated income.
Considering US corporate tax rate is among the highest in the world, Apple, GM and Coca-Cola have to pay a higher repatriation tax than Samsung, Toyota or Nestle. This seems to give foreign companies a strategic advantage as far as having larger R&D budgets, flexibility to drop prices, etc.
Considering US corporate tax rate is among the highest in the world, Apple, GM and Coca-Cola have to pay a higher repatriation tax than Samsung, Toyota or Nestle. This seems to give foreign companies a strategic advantage as far as having larger R&D budgets, flexibility to drop prices, etc.
What exactly counts as repatriating income? Could a foreign subsidary buy shares of the US entity (akin to a buyback) instead of putting money into the US entity's treasury?
Not that I'm a fan of playing games with the market cap rather than rewarding owners...
Edit: apparently the IRS did not take kindly to IBM doing exactly this: https://seekingalpha.com/article/893331-how-microsoft-can-fr...
Not that I'm a fan of playing games with the market cap rather than rewarding owners...
Edit: apparently the IRS did not take kindly to IBM doing exactly this: https://seekingalpha.com/article/893331-how-microsoft-can-fr...
I'd be careful to include facebook in that group. Several mobile apps are very strongly keeping them in check.
Disagree. While there are certainly other social apps, there is no (significant) direct competitor to FaceBook's core product. When you buy a car (e.g.) you generally have plenty of very similar options. That's not the case here. If we use the car analogy, FaceBook could be a sedan, and if you don't want a sedan your options are...well...not much. Of course you can buy a motorcycle (Instagram), moped (Pinterest), or van (Snapchat), but none of these are really the same thing other than the fact that they're motorized transport devices.
Tell that to the editor of the New York Times.
Agreed I keep Facebook for legacy support meaning older family and their friends.
Snapchat is my go to for my friends or just plain group text. Snapchat is nice because I can post freely in my groups and not be worried about random people seeing the posts like FB. I doubted Snapchat for years. Trying to do more Instagram next...
Snapchat is my go to for my friends or just plain group text. Snapchat is nice because I can post freely in my groups and not be worried about random people seeing the posts like FB. I doubted Snapchat for years. Trying to do more Instagram next...
ooops...moving back to a facebook product.
How is that? Everybody and their mother (and their grandmother!) has a facebook account. And instagram stories now boasts more users than Snapchat.
I'm guessing much of this "failure to thrive" among startups is driven by the inability of a small US company to deliver services that are commercially sustainable. Most startups don't make a product; they resell or provide a service. So their profitability devolves to the margin between their hourly service charge rate and their hourly labor cost. And that profit margin has continued to shrink due to continuing optimizations by large/foreign players in our hyper-optimized global marketplace.
Though the article doesn't propose specific causes, since 2008 I suspect the causal changes in small US business to be:
1) domination of product sales and distribution by a handful of on-line mega-retailers (Amazon, Alibaba, Walmart) due to their high efficiency and ever broader and deeper market penetration and hyper-efficient distribution networks, and
2) increased mobility and adaptability to quickly fill newly created market niches from low labor cost foreign firms (still 2X-5X cheaper), and
3) the rising cost of US employees (esp. healthcare).
As such, the ability of the traditional ma and pa startup company to eke out a positive cash flow has become more difficult than than it was in 2008.
Though the article doesn't propose specific causes, since 2008 I suspect the causal changes in small US business to be:
1) domination of product sales and distribution by a handful of on-line mega-retailers (Amazon, Alibaba, Walmart) due to their high efficiency and ever broader and deeper market penetration and hyper-efficient distribution networks, and
2) increased mobility and adaptability to quickly fill newly created market niches from low labor cost foreign firms (still 2X-5X cheaper), and
3) the rising cost of US employees (esp. healthcare).
As such, the ability of the traditional ma and pa startup company to eke out a positive cash flow has become more difficult than than it was in 2008.
What's the correlation between rate of forming new businesses and the rising costs of healthcare?
Quit your job to start a business and not only do you have to figure out your own insurance (at a vastly inflated rate), but you have to figure out how to play medical provider for anyone you hire. It's crazy that in the US, healthcare is so closely tied to employment. Single payer healthcare detached from the employer would vastly increase the opportunity for people to become entrepreneurs.
Quit your job to start a business and not only do you have to figure out your own insurance (at a vastly inflated rate), but you have to figure out how to play medical provider for anyone you hire. It's crazy that in the US, healthcare is so closely tied to employment. Single payer healthcare detached from the employer would vastly increase the opportunity for people to become entrepreneurs.
ACA's goal was to de-couple insurance from employment by having exchanges that anyone can enroll, and in theory you gain some negotiating power by participating in a plan that thousands of others have chosen.
I think one problem is perception - when you don't see the health insurance premiums on your pay stub, you tend to think of them as $0, so going from $0 a month to $800 a month does seem outrageously expensive.
The other problem is the tax treatment of health insurance premiums - they're deductible for the employer, but not deductible for an individual. One of those inconsistencies needs to change, most likely deductibility on the corporate front, as that somewhat contributes to the rise of total costs ("who cares if it's 5% more expensive this year, it's a write-off") and is a corporate subsidy - the money that could've gone to the benefit of all citizens is funneled to large corporations to help those nice fellows cover their costs of doing business.
I think one problem is perception - when you don't see the health insurance premiums on your pay stub, you tend to think of them as $0, so going from $0 a month to $800 a month does seem outrageously expensive.
The other problem is the tax treatment of health insurance premiums - they're deductible for the employer, but not deductible for an individual. One of those inconsistencies needs to change, most likely deductibility on the corporate front, as that somewhat contributes to the rise of total costs ("who cares if it's 5% more expensive this year, it's a write-off") and is a corporate subsidy - the money that could've gone to the benefit of all citizens is funneled to large corporations to help those nice fellows cover their costs of doing business.
With the ACA it isn't all that complicated, a small business doesn't have to offer health coverage, just pay enough to still have the job be interesting for people willing to buy a marketplace plan.
I also wonder if actual premiums paid by end users in the individual marketplaces (that is, prices after subsidies) are really vastly inflated compared to group plans (it's just the group plans hide a lot of the cost from the insured).
I also wonder if actual premiums paid by end users in the individual marketplaces (that is, prices after subsidies) are really vastly inflated compared to group plans (it's just the group plans hide a lot of the cost from the insured).
I agree that healthcare and employment should be decoupled, but it would then increase individual taxes, which is poison to Republicans. All our significant competitor nations have nationalized healthcare/insurance (NHCI). Thus, the existence of NHCI alone doesn't give us a disadvantage over such nations. You could argue that HOW we do NHCI is no good, but that's a long and thorny side discussion.
Small businesses are important:
Small businesses make up:
99.7 percent of U.S. employer firms,
64 percent of net new private-sector jobs,
49.2 percent of private-sector employment,
42.9 percent of private-sector payroll,
46 percent of private-sector output,
43 percent of high-tech employment,
98 percent of firms exporting goods,
33 percent of exporting value.
Source: U.S. Census Bureau, SUSB, CPS; International Trade Administration; Bureau of Labor Statistics, BED; Advocacy-funded research, Small Business GDP: Update 2002- 2010, www.sba.gov/advocacy/7540/42371.
Small businesses make up:
99.7 percent of U.S. employer firms,
64 percent of net new private-sector jobs,
49.2 percent of private-sector employment,
42.9 percent of private-sector payroll,
46 percent of private-sector output,
43 percent of high-tech employment,
98 percent of firms exporting goods,
33 percent of exporting value.
Source: U.S. Census Bureau, SUSB, CPS; International Trade Administration; Bureau of Labor Statistics, BED; Advocacy-funded research, Small Business GDP: Update 2002- 2010, www.sba.gov/advocacy/7540/42371.
> Small businesses make up:
> 98 percent of firms exporting goods,
> 33 percent of exporting value.
In other words, 2 percent of firms exporting goods (the part that is not "small businesses") make the remaining 67 percent of exporting value.
> 98 percent of firms exporting goods,
> 33 percent of exporting value.
In other words, 2 percent of firms exporting goods (the part that is not "small businesses") make the remaining 67 percent of exporting value.
Well, I'd imagine Oil is a pretty huge chunk of that, which is pretty much impossible to export as a small business. I only suggest it because I used to work in Oil and the numbers I saw across my spreadsheets were truly absurd.
Something that seems to have been happening for some time is people promoting "pro-business" policies when we should really be aiming for "pro-market" and "pro-competition". An extreme version of this is the recent championing of the coal industry, which is frankly already dead. Tax breaks for large multinationals fall into the same category.
It seems to me that we've been constantly performing short-term hacks on the economy, and the bill is coming due.
It seems to me that we've been constantly performing short-term hacks on the economy, and the bill is coming due.
Well we're crushing the middle and lower class. Refusal to tax the rich and redistribute it downward, the constant weakening of unions, ineffectual antitrust enforcement, all of these contribute. Our economy depends on people who have a high marginal propensity to consume having enough money to spend it on discretionary goods.
I agree with you and it's frustrating that this is sunk without a substantial response.
A few months back, Matt Bruenig nailed it: "The unwritten story of the Juicero debacle is that high income inequality causes capital to be misallocated towards luxury production."
A few months back, Matt Bruenig nailed it: "The unwritten story of the Juicero debacle is that high income inequality causes capital to be misallocated towards luxury production."
I have been trying to start my own business for years now. The hoops you have to jump through in every industry I have looked at are not insignificant. It makes a huge barrier to entry which makes the risk vs. reward ratio a little more skewed towards risk than I can handle. We really need to do something about unnecessary overregulation. We can protect our environment without needing a team of lawyers to open a lemonade stand (hyperbole).
What are some specific examples of regulations that made it too burdensome for you?
In my experience, losing employer provided healthcare has been the number one thing preventing people from starting a small business.
In my experience, losing employer provided healthcare has been the number one thing preventing people from starting a small business.
I'm young and healthy so that wasn't an issue for me. I have looked at everything from starting shooting ranges to specialty chemical companies. Most regulations are local. Just look at your local zoning and building codes. It's probably 500+ pages. The other main ones are dealing with taxes. "Straightforward" ventures like algotrading suddenly become not worth it when you realize you will spend more time writing code to ensure that all of your transactions are meticulously recorded than you will actually analyzing data and writing trading algorithms. Not to mention you probably need a team of accountants for the million+ trades that can happen in a year. Without a specific industry I can't really explain the regulations as each has their own. I'll try to come back later and explain more but I'm pretty busy today
Not to nitpick or anything but guns and chemicals might not be the very best choices of industry for those looking to first dip their feet into the startup pool...
Regulations regarding shooting ranges, chemical companies, and algotrading seem burdensome to you... Somehow I think you are exactly the person that we create laws to protect ourselves against.
ygfvvhygvn(1)
Algotrading has those regulations for good reason though... The last thing we need is a thousand silicon valley cowboys running around causing flash crashes all the time.
As far as algotrading regulations, they were put in place because bad apples took advantage of loose rules. If you can describe a way to prevent the bad apples from gumming things up WITHOUT regulations, you deserve a genius prize.
[deleted]
I've started several corporations over the years and the regulations aren't that bad. I have a partner that will get an S-corp going for a few hundred bucks.
In any case, the article shows that dynamism was higher in the 70s when there was more regulation.
In any case, the article shows that dynamism was higher in the 70s when there was more regulation.
Blaming the lack of business dynamism on environmental regulation is both wrong and dangerous. Tt encourages people not to take you and the problem seriously, because they (quite reasonably) write you off as just another crony capitalist upset that he can't poison the world without consequence.
That wasn't my intention but I see your point. It's not even the majority of the laws, and was just meant to be part of the joke at the end. However I specifically said we should protect the environment so anyone who feels that way probably doesn't have great reading comprehension
Can you better describe what kind of hoops you are talking about in your case, or at least what industry? Other than ordinary incorporation (easy) and a few industry specific licensing requirements I have never felt that to be my limiters in starting a business or the risks that put me off it in most things I looked into.
What hoops have you had to jump through?
Unfortunately, in an attempt to do something about this, the people got conned.
Respectfully, I find this a vague response to a vague post.
I don't know what you mean by "this" in "something about this" because I don't understand what sort of regulations the OP is talking about, and I don't know what you mean by "the people got conned."
I don't know what you mean by "this" in "something about this" because I don't understand what sort of regulations the OP is talking about, and I don't know what you mean by "the people got conned."
I think with this election cycle people have taken a scorched earth approach with regards to limiting government involvement in their daily lives and/or addressing the loss of small businesses. I'm not sure throwing the baby out with the bathwater is the right approach.
I heard about this on NPR. My thought is that most new businesses never go beyond a couple of people. I think many of them are related to local services, such as realtors, small shops, and services. The Internet's allows a relatively small team to reach and impact a lot of people. We see new industries disrupted all the time. These industries have real small businesses that are impacted.
Just as Walmart put small retailers in a bind, Amazon is going to put Walmart in a difficult spot. IMHO.
Just as Walmart put small retailers in a bind, Amazon is going to put Walmart in a difficult spot. IMHO.
Wal-Mart earnings top Street estimates as retailer's digital sales jump 63%
Here's what the company reported vs. what the Street was expecting:
Earnings per share: $1.00, excluding items, vs. expectations for 96 cents, according to Thomson Reuters analysts.
Revenue: $117.5 billion vs. a forecast for $117.74 billion, analysts said.
Same-store sales: 1.4 percent growth at U.S. stores
http://www.cnbc.com/2017/05/18/walmart-reports-first-quarter...
What does Amazon have that Walmart can't buy?
http://www.cnbc.com/2017/05/18/walmart-reports-first-quarter...
What does Amazon have that Walmart can't buy?
Pretty much every stat on small businesses in one place from the Small Business and Entrepreneur Council:
http://sbecouncil.org/about-us/facts-and-data/
"In 2012, according to U.S. Census Bureau data, there were 5.73 million employer firms in the U.S. Firms with fewer than 500 workers accounted for 99.7 percent of those businesses, and businesses with less than 20 workers made up 89.6 percent. Add in the number of nonemployer businesses – there were 23.0 million in 2013 – then the share of U.S. businesses with less than 20 workers increases to 97.9 percent."
The majority was 23 Million sole proprietorships, or people working for themselves, in 2013.
http://sbecouncil.org/about-us/facts-and-data/
"In 2012, according to U.S. Census Bureau data, there were 5.73 million employer firms in the U.S. Firms with fewer than 500 workers accounted for 99.7 percent of those businesses, and businesses with less than 20 workers made up 89.6 percent. Add in the number of nonemployer businesses – there were 23.0 million in 2013 – then the share of U.S. businesses with less than 20 workers increases to 97.9 percent."
The majority was 23 Million sole proprietorships, or people working for themselves, in 2013.
I think a lot of people here are focused on tech startups, but I think what is really apparent is the domination of large corporations in many other aspects of our economy. So many mom/pop restaurants are being pushed out by corporations, same goes for all the small grocery stores and retail stores that existed in the past. Everything is being collected under massive corporations who have the lobbying power to maintain their positions. I'm not sure there is much you can do about that. The distribution of wealth is affected by this too. You don't have as many owners and entrepreneurs making a living running their businesses, instead its going to the top tier at these corporations.
From the article: > We don’t know why people stopped
moving and became more settled in their
work arrangements. We don’t know why the returns to incumbency have increased.
What if the answer is the obvious one? What if the incumbents in the big cities are full of more efficient, better educated, richer, and smarter people?
A lot of big companies suck. But the ones that have concentrated wealth in the past decade or two -- Google, Facebook, Apple, Amazon -- are remarkably good at what they do. And the people I know who work at those places are, on balance, remarkably smart/educated/efficient. There are equally good or even better people at smaller shops in smaller cities, to be sure, but the sheer number of great engineers at Microsoft and Google alone is mind-boggling. And even among small shops there's an enormous geographical concentration of talent.
I don't know a lot about other industries, but maybe this is true elsewhere in the economy as well.
If that's true -- that incumbents aren't just big but also better -- then I fear our only hope for increased dynamism is access to new markets or new technologies. Both of which are identified in the report as contributors to decreasing dynamism. Hm.
What if the answer is the obvious one? What if the incumbents in the big cities are full of more efficient, better educated, richer, and smarter people?
A lot of big companies suck. But the ones that have concentrated wealth in the past decade or two -- Google, Facebook, Apple, Amazon -- are remarkably good at what they do. And the people I know who work at those places are, on balance, remarkably smart/educated/efficient. There are equally good or even better people at smaller shops in smaller cities, to be sure, but the sheer number of great engineers at Microsoft and Google alone is mind-boggling. And even among small shops there's an enormous geographical concentration of talent.
I don't know a lot about other industries, but maybe this is true elsewhere in the economy as well.
If that's true -- that incumbents aren't just big but also better -- then I fear our only hope for increased dynamism is access to new markets or new technologies. Both of which are identified in the report as contributors to decreasing dynamism. Hm.
Those companies don't really employ very many people. They won't explain widespread demographic trends.
(In fact, I imagine they tend to counter the specific trend, attracting people to high paying jobs)
(In fact, I imagine they tend to counter the specific trend, attracting people to high paying jobs)
> They won't explain widespread demographic trends
I know this, but I wonder if the same thing is happening in other industries. E.g. is Monsanto doing something similar to small seed distributors/providers? Are large banks doing something similar to small credit unions? Are large construction firms doing something similar to smaller ones?
> In fact, I imagine they tend to counter the specific trend, attracting people to high paying jobs
Maybe. But what if these firms are really so efficient that they're replacing 100 migrants to regional hubs with 10 or even 1 migrant to a national/global hub?
Again, I'm just asking questions :)
I know this, but I wonder if the same thing is happening in other industries. E.g. is Monsanto doing something similar to small seed distributors/providers? Are large banks doing something similar to small credit unions? Are large construction firms doing something similar to smaller ones?
> In fact, I imagine they tend to counter the specific trend, attracting people to high paying jobs
Maybe. But what if these firms are really so efficient that they're replacing 100 migrants to regional hubs with 10 or even 1 migrant to a national/global hub?
Again, I'm just asking questions :)
Interestingly enough, starting a c-corp is actually quite difficult and expensive.
You are probably looking at minimum 5k in legal fees to do it "right". You have incorporation paperwork, post-incorporation, trademarks, copyrights, patents, foreign qualifications, a lawyer to draft out founders agreement and employee agreements etc.
That's not chump change. Maybe to some HN developers, but to the average joe starting a company is very expensive. Especially if you go by the new age motto of trying a bunch of shit and failing and trying again.
After those legal costs you have to consider the costs of the average business, and the fact the financing is not avail. for the average joe. VC capital is not based off of merit, or much aside from connections and friendships. It's basically "bros funding bros".
There are opps. to get govt. funding, but not enough to support almost any business today. A 20k grant means nothing when you can't even afford a 280sqft studio on that
You are probably looking at minimum 5k in legal fees to do it "right". You have incorporation paperwork, post-incorporation, trademarks, copyrights, patents, foreign qualifications, a lawyer to draft out founders agreement and employee agreements etc.
That's not chump change. Maybe to some HN developers, but to the average joe starting a company is very expensive. Especially if you go by the new age motto of trying a bunch of shit and failing and trying again.
After those legal costs you have to consider the costs of the average business, and the fact the financing is not avail. for the average joe. VC capital is not based off of merit, or much aside from connections and friendships. It's basically "bros funding bros".
There are opps. to get govt. funding, but not enough to support almost any business today. A 20k grant means nothing when you can't even afford a 280sqft studio on that
There are several unanswered questions, such as which kind of businesses are failing more, or starting less; and how do US trends compare to other countries? And, are they counting everybody? For example, volume Ebay sellers could be considered "entrepreneurs" but may not formally register as a business.
Online and "big-box" stores have almost certainly reduced mom-and-pop retail, at least physical stores. Does this account for the entire drop, or just a part of it?
As far as blaming "regulations", I'd like to see some specific examples. Many times they are state or local regulations. Don't focus only on Federal regs.
Online and "big-box" stores have almost certainly reduced mom-and-pop retail, at least physical stores. Does this account for the entire drop, or just a part of it?
As far as blaming "regulations", I'd like to see some specific examples. Many times they are state or local regulations. Don't focus only on Federal regs.
I'm not sure if you were referring to my comment but if you were, they are state and local regulations. Federal regs that made roadblocks were usually tax related
How exactly is the number of people employed by startups related to the economy as a whole?
Disclaimer: I am not an economist.
But as I understand the theory, job growth mainly comes from smaller companies. Of those, startups are the fast-growth ones. (Mom-and-pop businesses aren't where the growth is.) The number of people employed by startups can therefore be regarded as an approximation of the first derivative of the economy (or, perhaps, of employment).
But as I understand the theory, job growth mainly comes from smaller companies. Of those, startups are the fast-growth ones. (Mom-and-pop businesses aren't where the growth is.) The number of people employed by startups can therefore be regarded as an approximation of the first derivative of the economy (or, perhaps, of employment).
The startup scene now is more capital dominant, than innovation. Therefore regulation is more important than other things.
IMHO, this is a reflection of the stagnant of fundamental new technology breakthrough since the internet era started. Internet itself hardly brings anything new, it merely make things marginally more efficient.
Maybe AI is the true innovation we have been waiting for. But I doubt it plays nice with startups either.
IMHO, this is a reflection of the stagnant of fundamental new technology breakthrough since the internet era started. Internet itself hardly brings anything new, it merely make things marginally more efficient.
Maybe AI is the true innovation we have been waiting for. But I doubt it plays nice with startups either.
Its related to the dynamism of the economy. More startups/new businesses == more jobs, more competition, more creativity etc.
[deleted]
One small problem in California that needs to be fixed is the Franchise Tax on Corporations. This is a huge tax for a small startup. Its another example of taxing the small and poor rather than taxing the rich.
Probably not the only factor, but I imagine inequality and the reduction in the middle class' purchasing power plays a big role in this, too.
More money goes to a handful few = less money for everyone else to buy stuff = weaker economy = fewer companies that can be successful.
http://www.oecd.org/newsroom/inequality-hurts-economic-growt...
More money goes to a handful few = less money for everyone else to buy stuff = weaker economy = fewer companies that can be successful.
http://www.oecd.org/newsroom/inequality-hurts-economic-growt...
New businesses require capital to get started. That capital doesn't need to come from middle-class consumers - it can also come from large companies with hoards of cash to invest.
Such hoards of corporate cash are easy to find, there's trillions of it collectively across American corporate accounts [1]. There just aren't many start-ups for them to invest in. From an access-to-capital point of view, there's never been a better time to start a company.
[1] https://www.nytimes.com/2016/01/24/magazine/why-are-corporat...
Such hoards of corporate cash are easy to find, there's trillions of it collectively across American corporate accounts [1]. There just aren't many start-ups for them to invest in. From an access-to-capital point of view, there's never been a better time to start a company.
[1] https://www.nytimes.com/2016/01/24/magazine/why-are-corporat...
That's a false conclusion, in my opinion. There are plenty of startups in which money could be put in, but of course "smart investors" don't invest in all startups that may show-up at their doors. So they choose to save their billions and billions of dollars in Cayman Islands. That money goes largely unused in the economy.
Also, the vast majority of startups aren't funded by VCs or angel investors, but through personal economies and loans - again, an issue that depends on the strength of the middle class.
Also, the vast majority of startups aren't funded by VCs or angel investors, but through personal economies and loans - again, an issue that depends on the strength of the middle class.
Can't quit your job to start a business if you need health insurance. Which you do.
So a group with Innovation in its name says that decreasing innovation is the "core economic problem America faces today." Hmmm. Color me skeptical.
So the organization with the word "Environment" in its name (used to) claims that climate change is the planet's biggest problem (EPA).
I mean, really, having a certain word in your name precludes you from having an unbiased position on it?
I mean, really, having a certain word in your name precludes you from having an unbiased position on it?
See my comment about sibling. Similarly, EPA is a government org, tasked with specific roles. Kinda like how DOJ has specific opinions about whether criminals should be incarcerated.
> having a certain word in your name precludes you from having an unbiased position on it?
Of course not. But I'll bet EIG doesn't have an unbiased opinion on innovation :-) In the same sense that NRA can publish a study about crime in states with open carry.
> having a certain word in your name precludes you from having an unbiased position on it?
Of course not. But I'll bet EIG doesn't have an unbiased opinion on innovation :-) In the same sense that NRA can publish a study about crime in states with open carry.
That's not really fair. The data should speak for itself, and I for one found the argument cogent. Did you find any errors or bias?
Otherwise you might as well say the CDC saying something about Disease is invalid.
Otherwise you might as well say the CDC saying something about Disease is invalid.
[deleted]
We just need to give more tax cuts to the mega rich, they're surely use it to create new jobs!
But make sure poor people don't get their services or they'll become dependent on the government!