Jon Stewart: Lower entrepreneurial risk

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.<p>For myself and my peers, with new families and houses and student debt, etc., it's the <i>one thing</i> 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.

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.<p><i>But.</i><p>I don't think that decreasing risk will result in more entrepreneurship.<p>I would support a wider social safety net for entrepreneurs -- er, business owners -- on principle alone, because I think what we <i>should</i> 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.<p>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.<p>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.<p>But <i>do</i> 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.

This is the essence of the Peltzman Effect (<a href="http://www.angrybearblog.com/2012/01/peltzman-effect-why-economic-growth-has.html" rel="nofollow">http://www.angrybearblog.com/2012/01/peltzman-effect-why-eco...</a> and <a href="http://en.wikipedia.org/wiki/Risk_compensation" rel="nofollow">http://en.wikipedia.org/wiki/Risk_compensation</a>)<p>"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 US already has the most lenient bankruptcy law in the world. It already has the highest "social tolerance" for entrepreneurial failure.<p>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.<p>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.

One of the key comments made by Jon Stewart:<p><i>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?</i>

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.<p>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.<p>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.<p>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.<p>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.<p>When you're leaving your job to start a business, the assumption is that you have <i>some</i> 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.<p>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.<p>How much did the health insurance cost me? 200 dollars a month. (Edit: yes, this is in the USA. IL to be exact.)<p>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.<p>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?<p>I know a lot of people will take issue with this, but, keep in mind, I am <i>not</i> saying I'm against government health insurance. I'm saying that <i>this</i> 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 <i>chance</i> 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.

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.

A lot of people are talking in terms of "leaving" their jobs to start businesses.<p>For me, it's the opposite. I am considering leaving my business to get a job.<p>Why? Healthcare and retirement.<p>So I agree with the article. If we had universal healthcare, I don't think I would ever consider leaving my business.

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.<p>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 <i>how easy</i> 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.<p>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.<p>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.<p>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.<p>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.<p>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.<p>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.<p>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...<p>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.<p>But go ahead, keep believing we are all in the same league, by all means try to defeat my point by saying how you <i>help</i> 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.<p>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!<p>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).<p>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.<p>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. :-)<p>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.<p>The number of YC Applicants has increased as the risk of doing YC has gone down.<p>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.<p>Now consider post 2009 Ycombinator.<p>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.<p>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)<p>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.<p>(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)

So sad that in the US people like him host comedy shows.

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.<p>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.<p>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.<p>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.

I think it's a fair point.<p>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?<p>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.<p>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).<p>Even though I've taken the leap to build a business ahead of my peers, I'm getting the crap end of the stick.<p>Does seem a bit unbalanced.

It's interesting when I lived in the US it was surprising how many of my coworkers on their early twenties were averse to risk... they wouldn't start a new business venture and their reasons were: - I have student loans - I need health insurance - I need to build a foundation so that my kids can go to college. - After the economic crisis, it isn't worth it....<p>But living in a contry were: - You don't have student debt - Your health services are warranted - Your kids can go to college and even great colleges for free...<p>Makes being an Entrepreneur SO much easy... that you wouldn't believe.

We'll the USA already has the highest corporate tax rate in the world. Maybe if they were paying less in taxes, startups would have more money for health insurance for their employees?<p>All entrepreneurs know that they can get better employee retention with health care policy. If companies could afford it, then would there not be a higher incentive to provide it?<p>That being said, I believe national health insurance is a good idea. Assuming government spending is significantly restricted in other areas.

I would love to quit my current day job and work on my business full time if I could be guaranteed health insurance. When I graduated, more than anything I wanted a job with good health care. I could not risk joining a company that would drop me or not cover me if I got some major health problem. So I got a job with not the highest income but a very low likelihood of losing health insurance...state government.

Humans are complacent and humans are risk-averse. Increasing reward and decreasing risk play to different aspects of human nature.

FYI if you live in San Francisco and make less than 54k a year you can get Healthy San Francisco (<a href="http://www.healthysanfrancisco.org/" rel="nofollow">http://www.healthysanfrancisco.org/</a>). It can be free depending on how much you're making. When I had a startup I broke my arm and had to get surgery, it was only $100 bucks.

The funny thing is, you can lower entrepreneurial risk <i>without</i> lowering the rewards, at least in this case.<p>The US is by far the most wasteful healthcare spender in the world, with vast amounts of money producing very mediocre outcomes. But as we saw, the political will is barely there, perhaps in another decade or two.

Better social nets probably would create much higher wages as employees think "screw this I'm gonna at least try it on my own", so companies have to up the ante.<p>But I don't see more entrepreneurs turning into economic growth. That takes a specific, rare entrepreneur that focuses on building growth, rather than replacing a paycheck.<p>On the flip side, I don't see less taxes becoming economic growth either. Taxes have to be pretty damn high to change your operations. The amounts usually talked about are not going to cause a company to say "hey let's build a new product".<p>The question should be "what's preventing companies from growing" instead of this class warfare framework. In the US, I see big companies being limited from growth by their own C-level executives' eye on their stock take - which makes no sense until you realize the amount of money they can gain from short term manipulation. But I see more of a problem due to bad skill sets - too many people have the wrong set of skills. A retail store clerk is not going to help anyone grow these days.

for the Canucks:<p><a href="http://www.thecomedynetwork.ca/shows/thedailyshow?videoPackage=123198" rel="nofollow">http://www.thecomedynetwork.ca/shows/thedailyshow?videoPacka...</a>

who is going to provide this safety net?

The risks that exist today "weed out" failures before they ever exist (failures are very expensive/bad for the economy). Most people realize that they do not have a good enough concept, enough time/dedication/work ethic lack a high level of life/business/leadership/social skills/self confidence.I could go on and on here.<p>If people have little/no risk to follow a venture, we will see a lot more people quitting their 9-5s and starting garbage businesses.<p>HMM - This sounds a lot like people getting home mortgages who have no business getting them... I know that John was a big fan of the affordable housing act as well.<p>Why does John Stewart stop there? why not lower entrepreneurial risk even more and guarantee that if someones startup business fails that they get money to live on from the govt for the next 18 months? Oh wait we already have that (unemployment)<p>How about I become a full time entrepreneur then? I could probably make more money per year starting failed business after failed business. I have money to live on and free health care so why not? This sounds great for the economy. This Stewart guy is sure a genius!!!