4 ms·

Hard work is not the main obstacle for America's small businesses. Government is.

davidw 18y ago
Good as a sound bite, but as an example, what percentage of YC companies have fallen afoul of government interference problems? What percentage have given up? And so on for other problems. I'm guessing that the "government problems" group is relatively small, and mostly focused on IP issues, which are quite a can of worms but not quite "the government" vs "businesses". Some businesses use those laws to make their own money, whether we agree with that or not. Try Europe sometime if you really want to see government making life difficult. In short, I think the main problem most companies face is "making something people want" and doing so profitably, not "the gubmint".
- Darmani 18y ago
  Thanks to the influence of Milton Friedman, the US government has a fairly minor role in the micro sphere and a very active role in the macro sphere. The government interference is still there, but it's mostly invisible -- it comes in the form of higher food prices (mostly due to ethanol subsidies, less so to tariffs) and a constantly-depreciating currency (due to the Federal Reserve's power). Oh, and taxes. The invisible macro-interference may be overall more minor than having to pay a large incorporation fee and filling out tons of paperwork, but it's also going to be much harder to remove.
- fallentimes 18y ago
  It's actually higher than you think, although I do not have exact numbers. I know for a fact though that some YC companies have died due to passports, Visas and government paperwork. If as a YC company (or any company really) you do not file an 83b form within a month of formation you are essentially dead. This has happened. When I wrote the original post I wasn't even thinking in terms of IP, but you're probably right there. Europe's government, in terms of red tape, is an abortion too, but that doesn't mean America's is good. They're both infuriating and full of subsidized bureaucrats and arcane processes. TicketStumbler Inc is actually the third company I've started. In each case, the amount of redundant paperwork I've had to do is astronomical. Last year, for my smallest company, I spent more time on paperwork and tax filing than I did actually running the company. Mark Cuban has a great post on this here (ignore the tax free stuff): http://is.gd/16pS http://is.gd/16pS I'm not suggesting government elimination or anything crazy like that, but rather complete streamlining and optimization (I should be able to do 99% of the TPS online). Additionally, while I agree that "make something people" is problem number uno, the government is doing their part to make sure that this doesn't happen.
  - davidw 18y ago
    It would be pretty hard to argue against streamlining, and reducing the complexity of the process. If I recall correctly, the ease of opening new businesses is proportional to the wealth of countries. It would also be difficult to say that things are anywhere near perfect in the US. Still, I just don't see it, ultimately, as one of the biggest problems compared to other things that cause businesses to fail. Good point about the immigration stuff: it's something I personally loathe, having faced the sharp end of the stick myself in Italy. It's probably something more prevalent in Y combinator than most small businesses, though.
- halo 18y ago
  >Try Europe sometime if you really want to see government making life difficult. You've just made one big sweeping generalisation about 47 different independent countries.
  - davidw 18y ago
    Yes, I have, and it's one I feel is fairly accurate. Do you have some counterexamples of where life for new, small businesses is easier in Europe? There might be a few: the Estonian corporate tax is supposed to be pretty good; the UK and Ireland aren't as expensive as continental Europe, but by and large, I stand by my statement.
- ivankirigin 18y ago
  The DMCA is screwing a ton of potential music startups. Tipjoy is in a ridiculously regulated space of finance. Plenty of YC startups get screwed by immigration laws. I dislike arguments about government size that bring up Europe to say the US is great. Certainly, conditions could be worse, but they are far from perfect.
  - davidw 18y ago
    > The DMCA is screwing a ton of potential music startups. Tipjoy is in a ridiculously regulated space of finance. Plenty of YC startups get screwed by immigration laws. Like I said below, those are pretty good examples, but "America's small businesses" are not primarily comprised of that sort of thing. I guess I just reacted to the blanket "government is the problem" statement, which I feel is inaccurate. It's certainly a problem, but not the problem for most businesses. It's also a source of many benefits for businesses, such as an educated workforce, infrastructure, enforcement of contracts, but that's getting into an extremely long, drawn out and complicated argument: "the ideal level of government", that is guaranteed to go nowhere. I think we can all agree that certain things ought to be streamlined, though.
    - ivankirigin 18y ago
      "Regular" small businesses are screwed on the more general evils of taxes and workplace regulation. These are minor issues at startups that have bigger issues to take care of - but they are major issues for any other small business. An educated workforce would appear without the government. Private roads and dark fiber are tenable infrastructure alternatives. Enforcement of contracts is one of the two things I'd like government to take care of. That and punishment of violent crimes. I agree that arguing about the ideal form of government is a bit of a waste. The solutions have been clear to me for years.
- bokonist 18y ago
  It's not the existing YC companies that suffer, but it's the companies that never get started because they know it's impossible to do business in certain highly regulated sectors. How many YC companies are trying to fix healthcare? Or sell educational software? Or fix the financial sector? All of these sectors are desperately in need of new startups and new business models, but regulations make it nearly impossible for a startup to compete.
  - menloparkbum 18y ago
    How is the educational software sector regulated? I haven't heard of this before.
    - newt0311 18y ago
      regulated because the government controls all the customers -- the elementary, middle, and high schools. It may not be direct regulation but it is dependent on government regulations all the same.
    - bokonist 18y ago
      If you're selling straight to individuals it's not, but if you sell to schools, you are selling to an entirely socialized sector. A friend in Teach For America told me how his principal was obsessed with technology but had no ability to judge software. The result was that teachers and students were forced to use almost non-functional software that some company had duped the principal into buying. My friend said that if he had no ethics, he would go into selling educational software, be schools wasted so much money on crap programs. It ends up being entirely about sales and manipulating the bureaucracy, rather than creating the best software.
      - menloparkbum 18y ago
        ah, ok. the 'enterprise' market. I was thinking of "where in the world is carmen sandiego?"
    - laut 18y ago
- laut 18y ago
  Have you read Bastiat? http://bastiat.org/en/twisatwins.html#broken_window http://bastiat.org/en/twisatwins.html#broken_window What is not seen is all the businesses that are not started. What is not seen is how business could deliver better products/services, that people would want, but don't because of government regulation. And so on.
  - davidw 18y ago
    Yes, I have, and that's an excellent point. However, I would be willing to bet that opportunity costs weigh far more heavily in most people's minds in terms of "businesses not started". Sure, there are some sectors where the barrier to entry is probably too high due to regulations, but for most small businesses, the thing stopping people is more likely fear of failure, worries about foregone income at a stable job, health insurance, or issues along those lines.

Good as a sound bite, but as an example, what percentage of YC companies have fallen afoul of government interference problems? What percentage have given up? And so on for other problems. I'm guessing that the "government problems" group is relatively small, and mostly focused on IP issues, which are quite a can of worms but not quite "the government" vs "businesses". Some businesses use those laws to make their own money, whether we agree with that or not. Try Europe sometime if you really want to see government making life difficult. In short, I think the main problem most companies face is "making something people want" and doing so profitably, not "the gubmint".

Darmani 18y ago
Thanks to the influence of Milton Friedman, the US government has a fairly minor role in the micro sphere and a very active role in the macro sphere. The government interference is still there, but it's mostly invisible -- it comes in the form of higher food prices (mostly due to ethanol subsidies, less so to tariffs) and a constantly-depreciating currency (due to the Federal Reserve's power). Oh, and taxes. The invisible macro-interference may be overall more minor than having to pay a large incorporation fee and filling out tons of paperwork, but it's also going to be much harder to remove.
fallentimes 18y ago
It's actually higher than you think, although I do not have exact numbers. I know for a fact though that some YC companies have died due to passports, Visas and government paperwork. If as a YC company (or any company really) you do not file an 83b form within a month of formation you are essentially dead. This has happened. When I wrote the original post I wasn't even thinking in terms of IP, but you're probably right there. Europe's government, in terms of red tape, is an abortion too, but that doesn't mean America's is good. They're both infuriating and full of subsidized bureaucrats and arcane processes. TicketStumbler Inc is actually the third company I've started. In each case, the amount of redundant paperwork I've had to do is astronomical. Last year, for my smallest company, I spent more time on paperwork and tax filing than I did actually running the company. Mark Cuban has a great post on this here (ignore the tax free stuff): http://is.gd/16pS http://is.gd/16pS I'm not suggesting government elimination or anything crazy like that, but rather complete streamlining and optimization (I should be able to do 99% of the TPS online). Additionally, while I agree that "make something people" is problem number uno, the government is doing their part to make sure that this doesn't happen.
- davidw 18y ago
  It would be pretty hard to argue against streamlining, and reducing the complexity of the process. If I recall correctly, the ease of opening new businesses is proportional to the wealth of countries. It would also be difficult to say that things are anywhere near perfect in the US. Still, I just don't see it, ultimately, as one of the biggest problems compared to other things that cause businesses to fail. Good point about the immigration stuff: it's something I personally loathe, having faced the sharp end of the stick myself in Italy. It's probably something more prevalent in Y combinator than most small businesses, though.
halo 18y ago
>Try Europe sometime if you really want to see government making life difficult. You've just made one big sweeping generalisation about 47 different independent countries.
- davidw 18y ago
  Yes, I have, and it's one I feel is fairly accurate. Do you have some counterexamples of where life for new, small businesses is easier in Europe? There might be a few: the Estonian corporate tax is supposed to be pretty good; the UK and Ireland aren't as expensive as continental Europe, but by and large, I stand by my statement.
ivankirigin 18y ago
The DMCA is screwing a ton of potential music startups. Tipjoy is in a ridiculously regulated space of finance. Plenty of YC startups get screwed by immigration laws. I dislike arguments about government size that bring up Europe to say the US is great. Certainly, conditions could be worse, but they are far from perfect.
- davidw 18y ago
  > The DMCA is screwing a ton of potential music startups. Tipjoy is in a ridiculously regulated space of finance. Plenty of YC startups get screwed by immigration laws. Like I said below, those are pretty good examples, but "America's small businesses" are not primarily comprised of that sort of thing. I guess I just reacted to the blanket "government is the problem" statement, which I feel is inaccurate. It's certainly a problem, but not the problem for most businesses. It's also a source of many benefits for businesses, such as an educated workforce, infrastructure, enforcement of contracts, but that's getting into an extremely long, drawn out and complicated argument: "the ideal level of government", that is guaranteed to go nowhere. I think we can all agree that certain things ought to be streamlined, though.
  - ivankirigin 18y ago
    "Regular" small businesses are screwed on the more general evils of taxes and workplace regulation. These are minor issues at startups that have bigger issues to take care of - but they are major issues for any other small business. An educated workforce would appear without the government. Private roads and dark fiber are tenable infrastructure alternatives. Enforcement of contracts is one of the two things I'd like government to take care of. That and punishment of violent crimes. I agree that arguing about the ideal form of government is a bit of a waste. The solutions have been clear to me for years.
bokonist 18y ago
It's not the existing YC companies that suffer, but it's the companies that never get started because they know it's impossible to do business in certain highly regulated sectors. How many YC companies are trying to fix healthcare? Or sell educational software? Or fix the financial sector? All of these sectors are desperately in need of new startups and new business models, but regulations make it nearly impossible for a startup to compete.
- menloparkbum 18y ago
  How is the educational software sector regulated? I haven't heard of this before.
  - newt0311 18y ago
    regulated because the government controls all the customers -- the elementary, middle, and high schools. It may not be direct regulation but it is dependent on government regulations all the same.
  - bokonist 18y ago
    If you're selling straight to individuals it's not, but if you sell to schools, you are selling to an entirely socialized sector. A friend in Teach For America told me how his principal was obsessed with technology but had no ability to judge software. The result was that teachers and students were forced to use almost non-functional software that some company had duped the principal into buying. My friend said that if he had no ethics, he would go into selling educational software, be schools wasted so much money on crap programs. It ends up being entirely about sales and manipulating the bureaucracy, rather than creating the best software.
    - menloparkbum 18y ago
      ah, ok. the 'enterprise' market. I was thinking of "where in the world is carmen sandiego?"
  - laut 18y ago
laut 18y ago
Have you read Bastiat? http://bastiat.org/en/twisatwins.html#broken_window http://bastiat.org/en/twisatwins.html#broken_window What is not seen is all the businesses that are not started. What is not seen is how business could deliver better products/services, that people would want, but don't because of government regulation. And so on.
- davidw 18y ago
  Yes, I have, and that's an excellent point. However, I would be willing to bet that opportunity costs weigh far more heavily in most people's minds in terms of "businesses not started". Sure, there are some sectors where the barrier to entry is probably too high due to regulations, but for most small businesses, the thing stopping people is more likely fear of failure, worries about foregone income at a stable job, health insurance, or issues along those lines.