As a self-educated software engineer, entrepreneur, and business owner I cringe whenever data statistics of ”educated” people are only represented by individuals who have a masters, Ph.D., or doctorate.
I have studied at universities, but unfortunately, the education system in the USA is not suitable for Autism. From an early age I had to teach myself because 99% of my teachers and professors didn’t have the resources or time to help me. Does anyone here have a similar experience?
https://www.theatlas.com/charts/Syh34PDZm
That graph is fascinating. The decreasing value of formal higher education to becoming a successful entrepreneur is being accelerated from so many angles. The cost of collegiate education itself has risen dramatically, while at the same time the cost of access to collegiate educational materials has plunged to zero due to the internet and open publishing. If this trend continues, I wonder if motivated, aspiring entrepreneurs will be better off skipping formal higher education altogether. Could that already be true today? If someone can decide that the college path is not for them at a young enough age with a high enough level of maturity, then they can unschool and skip the bull-shit college-admittance optimization altogether, and instead focus on actually becoming an educated, masterful individual in domains that will help them create new value that they, and society, care about.
Of course, there's so many confounding factors feeding into this one simple graph that I may have over-extrapolated to this particular thrust, but I think it's a perspective completely absent from the article that should be articulated.
Every nascent industry is dominated by startups and little guys becoming big guys. It happened with oil, the auto industry, electronics, and among many, many others.
Although I believe we're only in the midst of the information revolution it would make sense that over time as the industry matures it becomes more and more difficult to break into it. The big guys have leverage and lawyers and I think what we see today with many startups being built to get bought rather than as new enterprises that will stand on their own is evidence of this new phase shift.
I would love to see if there is a correlation between the quantity of startups VS new major innovation waves.
Yes, there are less new startups today but if you come to think of it, we don't have a major innovation at the moment that's easy to jump into. Look at the late 90s, we had the INTERNET, anyone could make a website with frontpage or a little html tag understanding.
Then in the late 2000s we had the MOBILE PHONES... I have an idea for an app! (everyone did!)
At the moment, we have AI/ML but my opinion is that it's not ripe for an average person to start an ML company. Another major upcoming branch is blockchain but it's also not mature enough for this major innovation to trickle down a leaf tree of startups.
What do you think?
Oh, almost forgot to mention AR/VR! Not there yet!!
I'm not sure "the startup is disappearing" is the only explanation for this data. Isn't it possible that companies are just lasting longer than 2 years?
What if there was a larger percentage of age 0-2 companies '85 because back then, so few were making it past 2? Maybe easier access to capital has increased survival rate (or at least slowed down dissolution by a few years).
This explanation also fits better with the massive influx of cash into VC over the last ~10 years.
I am curious about the methodology to count startups. One of things is sure that we are now in a consolidation phase. We are seeing a glut of M&A deals. In that vein many startups are disappearing because they are getting acquired by larger companies. No one wants to be the next Yahoo refusing to buy a company which might become their next chief competitor. And the cheap credit environment is making this easier.
I don’t have enough broad economic insight to know if this should be worrying generally or possibly even be seen as good.
But what I do know is that work conditions, pay, and equity risk characteristics in start-up jobs are miserable, not to mention that work life balance is often poor and the start-up management is often deluded about the scope and importance of the business.
I would be happy if entrepreneurs believed they needed a far greater amount of initial capital before starting a business, and viewed it as essentially mandatory to provide market rate salaries, comprehensive insurance, and seriously professional work life balance and workplace behavior, all before even hiring the first employee, and also even after accounting for early stage equity.
If it was something of a cultural norm that you are a shyster, suspicious “entrepreneur” if you attempt to convince people to work for you without already having the capital arranged to invest that significantly in giving them good jobs from day one, I think this would be a great thing for the labor market generally, and would greatly deter a bunch of hype-driven nonsense startups that essentially allow already wealthy people to treat it like lottery tickets at the expense of employees.
In my experience, only the founders of startups make any money. If the startup is successful, then the founders walk away with millions. Everyone else would be financially better off if they worked for a large company instead.
Also, the executives of the startups take free trips and expense everything on the company's dollar. While the employees receive low pay.
I don't think the large companies are winning. The startups are killing themselves.
The author of the article uses "start up" to refer to a business less than 2 years old - fair enough. As someone who runs a business which falls into this category, it certainly is frustrating to know how heavily our government subsidizes well-funded, monied large corporations (whereas small business owners have very little government-supplied - or otherwise - financial incentive to fuel their endeavor).
I don't suppose I would want them to stop subsidizing certain deals in the private sector with corporate America. A lot of that seems to be smart business to me. But I certainly would like to see the government to place a higher value on small business innovation. Starting something from nothing is already hard enough.
They always want to equate disappearing startups with lack of labor supply. That just seems completely ridiculous. Lack of labor in startups is a result/effect, not a cause. Labor, as a general rule of thumb, always follows the money. If Startups were more successful, they'd get more investment and more labor. If you doubt this, just remember what happened when facebook opened up it's app store. Just like that, overnight, thousands of developers and start ups appeared out of no-where. As soon as people smell the money, they'll leave their cushy jobs at google or anywhere else in a heartbeat. It all comes down to opportunity.
I mean, just look at the ycombinator and other investor's acceptance rates. They're that low because there's only so many opportunities. When there's too many people chasing too few opportunities, this is the result.
The real reasons why start ups are far fewer, is much more complicated: an it has to do with fewer opportunities. Some opportunities are limited legally, some due to market barriers and some are just due to what's currently possible.
The solution is to look at all those barriers and see what govt can do to reduce or get rid of the barriers. Look at the industries in most dire need of innovation: transportation, housing, and health insurance (where need is measured by $ opportunity) ~ and all the downstream industries that support these - like manufacturing, raw materials, etc. How many start ups are addressing these needs, and why is it so low?
Are mom and pop stores included in the data? What about law firms, doctors offices, mutual funds? I don’t think we’d consider those new businesses to be start ups.
I'm surprised nobody's mentioned it, but the bureaucracy of licensing, taxes, and now national sales tax collection is unhelpful to the startup. Not that it's a startup, but I just jumped through all the hoops required to legally hire a nanny in the US state of Washington:
- obtain Federal EIN number - obtain state business license & UBI number (still waiting on this, and I need childcare now) - file with state employment security department - pay state labor & industries insurance - pay state employment security taxes - pay my portion of income taxes for the nanny - pay payroll company to deal with all the tax payouts and paychecks
Oh, and actually pay the nanny.
All of this to just have a nanny and be above board. And what I do for my startup is way more complicated than this.
Another factor could be that before, big companies kinda sucked for the employee. Today's big companies like Google and Facebook are wonderful place to work for. In the grand scale of things, the new management styles are considerably more comfortable for the employee, the decision making and the promotion methods are significantly more efficient, interesting and smart. Not saying they are perfect, there is definitely room for improvement but 30 years ago, it was all wage slavery.
Small local businesses / startups get squeezed out by larger brands with name recognition. No one looks for stuff in the yellow pages anymore - they go to the most successful brand off the internet.
Additionally, the risks of starting a business / startup are much higher when the cost of housing and healthcare is so much higher. And on top of that you have student debt.
> This means that, contrary to popular belief, jobs in the US are far more secure than they were in previous decades.
This is a fallacy. Your job is not secure if you're not able to speak up about injustices because there's no competitors to hire you if you were to get fired about speaking up about something that's immoral but not illegal.
the paper seems to be talking about "startups" as firms less than 2 years old. i guess this includes startups in plumbing as well as startups in software.
maybe the reason a young plumber doesn't go out and start their own new firm is different from the reason a young software engineer doesn't go out and start their own new firm.
If startups fail (test bad ideas) 5x faster than in the 80's and 90's and if most founders quit entrepreneurship after their 1st failure, even if 2x more people are founding companies, then it's probably normal that, overall, less man-years would be spent in startups every year in the US.
What I always thought the economic system would naturally come to is actually happening now. It's interesting why it's only happening now, likely because of the new growth dynamics of data companies.
> Startups are struggling in this era of rising market concentration.
To rephrase it, current anti-trust is often too toothless.
Oh please... People are just realizing that startups aren't all that glamorous and at times attract a special breed of shitty egotistical workaholics.
By the merits of this article we should wait to see Paris or some other benign socialist hell-hole become "the next startup hub". I can assure you that won't be happening anytime soon.
Silicon Valley is an incredibly un-sustainable incestuous bubble. The future of startups will be distributed, not in one place.
From the article:
Startups are struggling in this era of rising market concentration. In most industries, since the 1980s, the share of all sales going to the top firms is increasing. Startups may have a hard time competing with these mega firms, which can out pay them for the best talent and sometimes attempt to drive them out of the industry. Previous Brookings research found there are fewer startups in states where a smaller number of companies dominate the market
From Lenin, "Imperialism, the highest stage of capitalism" (1916):
This transformation of competition into monopoly is one of the most important — if not the most important — phenomena of modern capitalist economy.
I paid out $100,000 to pay off my wife & my own student loan debt early. Student loan debt can not be discharged by bankruptcy; it's always waiting for you.
This implies several things immediately:
- You have to take a job which can make payments on the debt.
- You have to choose stable jobs which will not suddenly fold under you.
There's also a somewhat hard to define aspect to the problem where you have to ensure that your local system is fiscally stable.
Anyway, non-1% Americans graduated from college not taking risks in their first 10 years out? Totally predictable, just from the debt perspective.
Then, at 32, 34, a lot of people are married and/or have a kid on the way. Welp, there's your high levels of downside again.
Add in to all this the fact that housing prices are effectively tethered to the availability of cash provided to the "highly paid" market (inequality increases)....
... so if your startup fails, you'll lose your place to live, and remote jobs are very rare, so you're in trouble in the big city with now-unaffordable costs of living.
the solution, in part, has a simple policy component: declare jubilee on all federally-originated student debt; free college for all students who maintain adequate gpas, no more federal loans. impose cost controls on universities that take federal money.
that effectively derisks an entire generation and opens up new options.
housing costs are less directly tractable and more politically problematic: the effective solution is to federally strip single family zoning from all land, and mandating density minimums and other supply-increasing zoning. (I assure you, the housing market is an interstate commerce system. :) ). But that only staunches the wound, it doesn't bring down housing prices into line with the median American's income.
Wait, this is about startups? Ha! No. That's a third order consequence caused by increasing early-career & mid-career risk, which in turn is increased by the planning & zoning codes and governmental defunding of education.
Thanks Trump.
Regulations are the problem, imagine wanting to build something and finding out you'll need to spend $20K on lawyers to go through thousands of pages of GDRP.
That's even before hiring a developer to actually build an MVP.
... And people laughed when Trump said he wanted to eliminate two regulations for every one being added.
Very interesting chart in this article that shows more educated people (masters, bachelor's, some college) are less entrepreneurial than they were 25 years ago. On the flip side, less educated folks (high school graduates and non-high school graduates) have seen an increase in entrepreneurship.
"In 1992, 4% of 25-54 year olds with a master’s degree or PhD owned a small company with at least 10 employees. In 2017, this was true of only 2.2%."
Could it be that the cost barrier is lower today than in the past, but there is much more money to be made as an educated employee today than 25 years ago?