Why Startups Condense in America
Why is america currently the location for so many new startups and innovators? Why are there certain locations in america, inside the US and Canada, where startups are particularly likely? Writer Paul Graham has a few ideas, which he penned in his essay, "Why Startups Condense in America."Here is a list of his reasons:
- The US allows immigration.
- The US is a rich country.
- The US is not a police state.
- American universities are better.
- You can fire people in america.
- In america, work is less identified with employment.
- America is not too fussy.
- America has a large domestic market.
- America has venture funding.
- America has dynamic typing for careers.
There are also a couple things you could do to beat America at the national level. One would be to have lower capital gains taxes. It doesn't seem critical to have the lowest income taxes, because to take advantage of those, people have to move. [7] But if capital gains rates vary, you move assets, not yourself, so changes are reflected at market speeds. The lower the rate, the cheaper it is to buy stock in growing companies as opposed to real estate, or bonds, or stocks bought for the dividends they pay.He could have added that american immigration policy lets a lot of not-so-smart people sneak in. People who are a burden on the law enforcement and welfare systems. That cannot be good for startups, unless you are referring to prison startups.
So if you want to encourage startups you should have a low rate on capital gains. Politicians are caught between a rock and a hard place here, however: make the capital gains rate low and be accused of creating "tax breaks for the rich," or make it high and starve growing companies of investment capital. As Galbraith said, politics is a matter of choosing between the unpalatable and the disastrous. A lot of governments experimented with the disastrous in the twentieth century; now the trend seems to be toward the merely unpalatable.
Oddly enough, the leaders now are European countries like Belgium, which has a capital gains tax rate of zero.
....American immigration policy keeps out most smart people, and channels the rest into unproductive jobs. It would be easy to do better. Imagine if, instead, you treated immigration like recruiting-- if you made a conscious effort to seek out the smartest people and get them to come to your country.
A country that got immigration right would have a huge advantage. At this point you could become a mecca for smart people simply by having an immigration system that let them in.
Knowing how to create wealth is one of the hardest things for politically oriented people to comprehend. Redistributing wealth comes easy to politicians and bureaucrats--creating wealth is almost impossible for them.
That is why for the purpose of nurturing the geese that lay the golden eggs, it is best for the politicians to step back, and give the innovative and entrepreneurial people some room. You have to create the wealth before you can re-distribute it, you politician morons. Think for once!
Labels: America
posted by al fin at 11:23 am
5 Comments:
On the government and creating wealth, don't you think that the basic science that they fund creates wealth? I had read somewhere that the return on investment of basic science is better than most companies. In the US, I think of the NSF and DARPA funding the initial stages of microprocessors and the internet. Funding the research for areas that won't have a payoff for decades seems like an area that only the government will be willing to undertake.
On the issue of capital gains tax, I hear what you are saying. On the other hand, I have an issue with Warren Buffet having a lower tax rate than his secretary (and so does he). Taxing capital gains at 50%+ doesn't make much sense to me, but the current level of 20% or so seems fair. Especially if they use that money to fund some basic scientific research.
Interesting comment, thanks. We have derived a lot of good things from basic research that was originally government funded, including the internet.
A lot of people who hate the military, and want to cut defense spending, are very willing to enjoy technology and benefits that originated with defense funded research.
There is no such thing as all good or all bad, when it comes to government funding. Some good will result, and some bad will result, whenever funds are taken (by force) from taxpayers, and allocated by government workers, who see it as "other people's money", to do with as they wish. The good and the bad of it, is a matter of opinion, which is why elected officials are made accountable to the people through elections.
In a lot of countries, governments own the telephone companies, or the airlines, or the oil companies. People in those countries cannot imagine any other way of doing things. Always the government. Let the government do it, yes?
Personally, I feel that for every governmental function, there is at least one viable private alternative. There is a lot of literature devoted to that concept. Because it takes a lot of imagination and thought to envision a society with minimal or no government, such thinking is done by a distinctly vanishing minority.
But what to do about the equity in science and finance degrees in terms of earning power (but not in terms of rigor of required study)? I chose the business school because I'll be able to live comfortably and have enough intellectual alacrity to survive in businessy fields like accounting, finance, or management. In biology or engineering, I probably would have struggled. Maybe the increased demands of one of these fields would've been desirable enough if the compensation was competitive given the workload.
While I'm absolutely with you on anti-merit immigration with its infinite host of externalities, I'm more ambivalent on h1-bish immigration. Perhaps a merit-immigration system that is numerically limited in a way that attempts to strike a balance in leveraging the US' competitive position in the world (the best place to live, raise a family, get educated, and conduct business) without having a deleterious effect on America's long-term competitiveness. We don't want to get into an imbroglio where we have to perpetually rely on high-skilled immigrants to sustain our position as the globe's cutting-edge technological powerhouse.
mping,
Warren Buffet's tax rate is low because he doesn't sell anything. He's a traditional investor, humbly admitting he doesn't understand tech stocks. Ross Perot's tax rate is insanely low because he invests so heavily in muni bonds and other instruments exempt from federal income tax.
Incidentally, Warren Buffet's bequest to the Bill and Melinda Gates foundation will allow him to waive the capital gains tax he'd otherwise have to pay at the stock's sell date. The government is really getting hosed (well, I shouldn't say that--sounds like I believe the government deserves Buffet's money in the first place!)
The government isn't getting hosed--Buffet's donation to Gates is the whole point of exempting charity from taxes!
Al, I suspect that the thinking you're talking about--replacing government with private interests--isn't taking place not for lack of creativity but for lack of motivation. People LIKE democracy. Why should we desire a world with smaller government, which is in reality a world with smaller democracy and bigger oligarchy?
crush: People who make career choices with all the facts in mind should not later claim they had been tricked. There is no such thing in the real world as "equity" or "justice". A person should always be looking out for his own interests. "Public servants" in particular are looking out for their own interests, and not the public's
KAT: In the muslim world and undeveloped third world, democracy often means "one person, one vote, one time."
Whether or not people likes "democracy" probably has a lot to do with how that "democracy" is administered. A lot of people might prefer to live in Luxembourg, Monaco, UAE, or other non-democracies if they could live as well as the average person there.
Democracy is simply mob rule. If you are referring to "rule of law" and "constitutional representative rule", well that is a different thing than democracy.
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