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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 in

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

_delirium 14y ago
I think I agree with where you're going, but it doesn't seem like a huge paradox to me. As I understand it, it may be that all else being equal, a better social safety net (such as healthcare available outside of a corporate group plan) encourages more entrepreneurship, but all else isn't really equal: we don't have a version of the USA that is mostly the same except that it has a national healthcare system. Instead, we have countries that differ on dozens of axes, ranging from governmental policy to culture to physical land to history to language, and are trying to assign blame/credit to each of those axes. You could even do that within the USA: why are there no big tech companies out of Alabama or Ohio, despite their governmental systems being generally American-style? I do agree that the American healthcare situation is a major problem, speaking as an American expat in Denmark who hopes to move back to the US someday, and sees healthcare as one of the major barriers. I'm cautiously hopeful that PPACA will solve the worst of the problems, enabling me to buy individual health insurance. But I think it's hard to prove that either way based on cross-country comparisons.
kdsudac 14y ago
"Countries with much broader safety nets for entrepreneurs are not producing the risky innovative companies that America is." I was wondering whether this was the case. Is there actual data to back this up, or is it just anecdotal?
- jcromartie 14y ago
  American companies dominate the startup space, and I don't think it's selection bias (i.e. because we are reading English language startup news) because the non-US startups seem to get attention as easily as US ones when they deserve it.
- Tycho 14y ago
  http://www.economist.com/node/21559618 http://www.economist.com/node/21559618
abbasmehdi 14y ago
Countries with much broader safety nets for entrepreneurs are not producing the risky innovative companies that America is. This could also be a culture thing. When I was in Canada until 5.5 years ago the golden ticket was to work for a big co. I was an ECE major and the top employer of choice was, even for me, BC Hydro (power company). I have no idea anymore why I'd have thought like that, but maybe now I am brainwashed this way. :-)
- JonLim 14y ago
  In my opinion, this state of mind still exists in Canada. Entrepreneurship is being celebrated, but the default for many, many students is to get a job with a large corporation and get your stripes.
  - paulgb 14y ago
    It's changing, at least in the Waterloo area. When I started university, the smartest kids were crossing the border to work for Google and Microsoft. By the time I graduated, most of the smartest kids were going to startups or doing their own.
- tjmc 14y ago
  I think the same attitude exists in Australia. Lots of people start small businesses, but the actual startup scene is very small. People who do go out on their own tend to stick to established business models. Nothing wrong with that I suppose but it inevitably leads to less innovation. The other factor here is the almost total absence of VC funding. Startup culture needs a critical mass of entrepreneurs and money. [edit] - the other big issue in Australia is there's less social tolerance for businesses failing.
  - demallien 14y ago
    Well, there's also the minor detail that the Australian market is small, and transport to other markets is expensive... But you're dead right about the social tolerance aspect. My younger brother started a car detailing company - OK, it's not innovative or anything, but he was really looked down upon by the wives of some of his friends...
deleted 14y ago
[deleted]
suresk 14y ago
Countries with much broader safety nets for entrepreneurs are not producing the risky innovative companies that America is. Could this be because countries with broader safety nets also have more regulation and make it hard to fire people? I've always kind of thought a combination of making it easy to hire people and let them go, along with strong safety nets (ie, good unemployment insurance and not having health care tied to employment) would be optimal.
- msrpotus 14y ago
  I think the Netherlands tried something similar. Not sure if it really worked.
- _delirium 14y ago
  Denmark has been moving in that direction. Its overall level of safety nets, taxation, infrastructure spending, etc. is much higher than in the U.S. (tax revenues about 2x as high, as a percentage of GDP). But in some ways it's actually more privatized: for example, the bus system in Copenhagen is bid out to private corporations to operate. The government comes up with the fares, set of routes, etc., and then the corporations bid on how much subsidy they'd need to operate under the specified parameters (Movia won the current contract). Whereas, most American transit systems are operated by city or state employees. And: it's fairly easy to fire someone, certainly easier than in most of the rest of Europe. The compensating factor is that the social safety net for the person who gets fired is also quite good, and not just in monetary benefits, but in active assistance to help them find a new job (both through job banks and training/internship programs). Incidentally, that is also outsourced, with a number of private (though subsidized and nonprofit) "a-kasse" social-insurance organizations competing for members. I'm a member of one that specializes in researchers, for example. If I become unemployed, for the first two years I would deal with them, not with the state. That tends to lead to people joining the organizations that they feel will provide the best job-finding assistance. Some element of competition is introduced, since a totally useless a-kasse would (hopefully) see an outflux of members.
  - zerostar07 14y ago
    Denmark has a reputation for being the most flexible job market in northern europe. I wonder if this strategy has payed dividends basedon your experience
Alex3917 14y ago
"Countries with much broader safety nets for entrepreneurs are not producing the risky innovative companies that America is." I don't think that has any relevance to the question at hand. If we eliminated wasteful medical spending then we could literally insure every uninsured person at least 10x over. (Medical waste is ~700B per year, whereas it would cost about 50B to insure everyone.)
- MichaelApproved 14y ago
  Can you please cite sources for those numbers?
  - njs12345 14y ago
    Here's a study from the New England Health Institute: http://media.washingtonpost.com/wp-srv/nation/pdf/healthreport_092909.pdf http://media.washingtonpost.com/wp-srv/nation/pdf/healthrepo...
  - Alex3917 14y ago
    Medical waste: http://iom.edu/Reports/2012/Best-Care-at-Lower-Cost-The-Path-to-Continuously-Learning-Health-Care-in-America.aspx http://iom.edu/Reports/2012/Best-Care-at-Lower-Cost-The-Path... 30 cents of every dollar spent on medical care is wasted. There were roughly $2.7 dollars of spending on medical care in 2011. The cost of insuring 100% of Americans would be 34 - 69 billion: http://www.amsa.org/AMSA/Libraries/Committee_Docs/CaseForUHC.sflb.ashx http://www.amsa.org/AMSA/Libraries/Committee_Docs/CaseForUHC...
jandrewrogers 14y ago
I can confirm that offering good health insurance is an important part of compensation when hiring, particularly for older candidates. At my startup, a generous health benefit was implemented early on in an effort to attract more senior employees. Often people in their 20s find it less valuable. Health insurance tied to employment is a bad idea generally but that is the state of USian reality and so we make the best of that. Employer-based health insurance was a side effect of government regulation during the second World War that lingered long after the regulation has disappeared. As a practical matter, the ACA is unlikely to help. The net effect is that it seems to be increasing overall costs per employee to maintain the status quo, and there are costs down the road that have not even been implemented yet. A company like mine can hide the cost but I can see why it would be problematic for businesses that are sensitive to total employee costs. As long as businesses are paying for health insurance, the math of the ACA is pretty grim; all it did was move the costs around and add some new ones. It is disappointing that it sort of ended up being the worst of both worlds.
arbuge 14y ago
I second this. Just went down with appendicitis - doctors call this a "routine" surgery. Well, the bill came to $50,000+...
- Evbn 14y ago
  Was it worth the money?
  - krakensden 14y ago
    Well, appendicitis can kill you, so theoretically, it's always worth the money. On the other hand, when clever people notice this and decide to get in on that infinite, inelastic demand, the rest of society tends to get grumpy. Hence the ceaseless political trench warfare over how to pay for health care since the Johnson administration.
    - jacoblyles 14y ago
      In a free economy, a company would notice that, say, 2% of people get appendicitis in their lifetimes and that it costs $50,000 to treat - an expected cost of $1,000. Then they would offer you lifetime appendix insurance for $1,500. Unfortunately there are tens of thousands of pages of regulation preventing that from happening.
      - arbuge 14y ago
        The "it can't happen to me" syndrome would likely stop anyone buying anything so specialized as appendicitis insurance. If you tried selling that to me 10 days ago I would have shrugged it off as unnecessary. But something does need to give or at least should. The system is so broken and involves such huge amounts of money that whoever figures out even a small piece of this will become a billionaire many times over. I'm open to ideas if you need a cofounder ;)
  - arbuge 14y ago
    I hope so - haven't fully recovered yet. Doctors do a good job of selling this as "minor" and "routine". Anyways, after insurance the bill is likely going to be around $5k. Still pretty nasty, but one order of magnitude does make a difference. ps. I cannot for the life of me fathom how hospitals in the USA justify charges of $4-$8k/night for hospital stays. To be clear, this is just for the room. The surgery and anaesthesia costs are billed separately. 90% of the bill is the hospital stay.
deleted 14y ago
[deleted]
- stretchwithme 14y ago
  If that were true, eliminating all risk would lead to an explosion of risk taking. But it doesn't. Plenty of trust fund babies face no risks and accomplish nothing. Of course, another way to look at things is to realize that taking no risks is the biggest risk of all. If one wishes to sit and wait for life to do whatever to you, you can always do that. Don't go to school, don't strive. Don't ever invest in anything that isn't 100% guaranteed. No, there is already incentive to take risk. If anything, the government "help" we've gotten so far makes it harder to take risks. Just ask the people with student loans or those in an upside down mortgage if that helps them take risks. Those programs are designed to help the person that goes down a specific track, not help the person who thinks different. And those programs don't even actually help once they are converted into corporate welfare.
  - njs12345 14y ago
    If anything, the government "help" we've gotten so far makes it harder to take risks. Just ask the people with student loans or those in an upside down mortgage if that helps them take risks. This is more due to the poor design of these programs in the US than anything else (speaking as a someone with a fairly significant amount of student debt in the UK).
    - stretchwithme 14y ago
      It doesn't matter how they are designed. They are eventually changed to suit the various lobbies. Things are seldom re-evaluated logically. These programs go on for decades without obvious problems being fixed. If you have a business and you figure out that something that was supposed to make you money was NOT actually making you money, you change it ASAP. With government, change only happens when something becomes a political issue. Nobody even knows the true cost of things so nothing can actually be weighed without great effort. People are incented to do things that validate the program, that give a politician a big number he can point to. The housing bubble is the worst example of this. There's no way people would spend so much to buy so big a house without all of the subsidies and tax breaks and assistance. Notice how things devolve over time. Assistance for first time buyers, for example. Now they've changed the definition of what a first time buyer to include people who've owned homes before. But they won't every change the name of the program, as they still want to misrepresent as something it no longer is.
stretchwithme 14y ago
Entrepreneurs have a tendency to go from where profits are highly taxed to pay for everybody's safety net to countries where they can keep more of their money. A French engineer once explained to me how good the health care coverage is in France. But where is her high paying job? Not in France.
- kdsudac 14y ago
  Which is why California is such a startup magnet...cause of those high state taxes in Nevada, Texas, Oregon!
  - Evbn 14y ago
    You may have noticed that entrepreneurs leave California before they cash those lottery tickets. See Arrington, Severin...
kalleboo 14y ago
It could be that countries with a less risk-taking culture created the safety net due to that culture, instead of the safety net causing the culture.
brc 14y ago
>The Agenda has often wondered if decoupling health insurance from employment might encourage entrepreneurship. That is from the article. It's a stupid comment. Of course it will encourage entrepreneurship - no other outcome would make sense. Why is health insurance coupled to employment anyway? All you need to do is reform the health insurance market so that it is individual based, rather than company based - your employer does not pay for auto, home or life insurance, so why health? To me, as an outsider looking in, it seems like collusion between big companies to make it harder for small companies to compete for staff. As a non-US resident, I just buy my health insurance whether I'm working, not working, or doing whatever. If I got a job with bigcorp limited, they might offer it as part of a package, or maybe get a slightly better rate due to group rates, but it's not a case where I have to be employed in order to get insurance.
jacoblyles 14y ago
I suppose there's no reason why social safety nets and stifling heavy taxes and regulation need to go together, but in practice they do. In this country, the people pushing for higher taxes and regulation are also supporting greater safety nets. So if you see them winning on one front, they are probably winning on all three.
jamesrcole 14y ago
> Countries with much broader safety nets for entrepreneurs are not producing the risky innovative companies that America is. But the fact that they have broader safety nets may have nothing to do with that. Maybe the reason they produce less risky innovation has to do with other ways that they differ from America.

_delirium 14y ago

I think I agree with where you're going, but it doesn't seem like a huge paradox to me. As I understand it, it may be that all else being equal, a better social safety net (such as healthcare available outside of a corporate group plan) encourages more entrepreneurship, but all else isn't really equal: we don't have a version of the USA that is mostly the same except that it has a national healthcare system. Instead, we have countries that differ on dozens of axes, ranging from governmental policy to culture to physical land to history to language, and are trying to assign blame/credit to each of those axes. You could even do that within the USA: why are there no big tech companies out of Alabama or Ohio, despite their governmental systems being generally American-style? I do agree that the American healthcare situation is a major problem, speaking as an American expat in Denmark who hopes to move back to the US someday, and sees healthcare as one of the major barriers. I'm cautiously hopeful that PPACA will solve the worst of the problems, enabling me to buy individual health insurance. But I think it's hard to prove that either way based on cross-country comparisons.

kdsudac 14y ago

"Countries with much broader safety nets for entrepreneurs are not producing the risky innovative companies that America is." I was wondering whether this was the case. Is there actual data to back this up, or is it just anecdotal?

jcromartie 14y ago
American companies dominate the startup space, and I don't think it's selection bias (i.e. because we are reading English language startup news) because the non-US startups seem to get attention as easily as US ones when they deserve it.
Tycho 14y ago
http://www.economist.com/node/21559618 http://www.economist.com/node/21559618

abbasmehdi 14y ago

Countries with much broader safety nets for entrepreneurs are not producing the risky innovative companies that America is. This could also be a culture thing. When I was in Canada until 5.5 years ago the golden ticket was to work for a big co. I was an ECE major and the top employer of choice was, even for me, BC Hydro (power company). I have no idea anymore why I'd have thought like that, but maybe now I am brainwashed this way. :-)

JonLim 14y ago
In my opinion, this state of mind still exists in Canada. Entrepreneurship is being celebrated, but the default for many, many students is to get a job with a large corporation and get your stripes.
- paulgb 14y ago
  It's changing, at least in the Waterloo area. When I started university, the smartest kids were crossing the border to work for Google and Microsoft. By the time I graduated, most of the smartest kids were going to startups or doing their own.
tjmc 14y ago
I think the same attitude exists in Australia. Lots of people start small businesses, but the actual startup scene is very small. People who do go out on their own tend to stick to established business models. Nothing wrong with that I suppose but it inevitably leads to less innovation. The other factor here is the almost total absence of VC funding. Startup culture needs a critical mass of entrepreneurs and money. [edit] - the other big issue in Australia is there's less social tolerance for businesses failing.
- demallien 14y ago
  Well, there's also the minor detail that the Australian market is small, and transport to other markets is expensive... But you're dead right about the social tolerance aspect. My younger brother started a car detailing company - OK, it's not innovative or anything, but he was really looked down upon by the wives of some of his friends...

deleted 14y ago

[deleted]

suresk 14y ago

Countries with much broader safety nets for entrepreneurs are not producing the risky innovative companies that America is. Could this be because countries with broader safety nets also have more regulation and make it hard to fire people? I've always kind of thought a combination of making it easy to hire people and let them go, along with strong safety nets (ie, good unemployment insurance and not having health care tied to employment) would be optimal.

msrpotus 14y ago
I think the Netherlands tried something similar. Not sure if it really worked.
_delirium 14y ago
Denmark has been moving in that direction. Its overall level of safety nets, taxation, infrastructure spending, etc. is much higher than in the U.S. (tax revenues about 2x as high, as a percentage of GDP). But in some ways it's actually more privatized: for example, the bus system in Copenhagen is bid out to private corporations to operate. The government comes up with the fares, set of routes, etc., and then the corporations bid on how much subsidy they'd need to operate under the specified parameters (Movia won the current contract). Whereas, most American transit systems are operated by city or state employees. And: it's fairly easy to fire someone, certainly easier than in most of the rest of Europe. The compensating factor is that the social safety net for the person who gets fired is also quite good, and not just in monetary benefits, but in active assistance to help them find a new job (both through job banks and training/internship programs). Incidentally, that is also outsourced, with a number of private (though subsidized and nonprofit) "a-kasse" social-insurance organizations competing for members. I'm a member of one that specializes in researchers, for example. If I become unemployed, for the first two years I would deal with them, not with the state. That tends to lead to people joining the organizations that they feel will provide the best job-finding assistance. Some element of competition is introduced, since a totally useless a-kasse would (hopefully) see an outflux of members.
- zerostar07 14y ago
  Denmark has a reputation for being the most flexible job market in northern europe. I wonder if this strategy has payed dividends basedon your experience

Alex3917 14y ago

"Countries with much broader safety nets for entrepreneurs are not producing the risky innovative companies that America is." I don't think that has any relevance to the question at hand. If we eliminated wasteful medical spending then we could literally insure every uninsured person at least 10x over. (Medical waste is ~700B per year, whereas it would cost about 50B to insure everyone.)

MichaelApproved 14y ago
Can you please cite sources for those numbers?
- njs12345 14y ago
  Here's a study from the New England Health Institute: http://media.washingtonpost.com/wp-srv/nation/pdf/healthreport_092909.pdf http://media.washingtonpost.com/wp-srv/nation/pdf/healthrepo...
- Alex3917 14y ago
  Medical waste: http://iom.edu/Reports/2012/Best-Care-at-Lower-Cost-The-Path-to-Continuously-Learning-Health-Care-in-America.aspx http://iom.edu/Reports/2012/Best-Care-at-Lower-Cost-The-Path... 30 cents of every dollar spent on medical care is wasted. There were roughly $2.7 dollars of spending on medical care in 2011. The cost of insuring 100% of Americans would be 34 - 69 billion: http://www.amsa.org/AMSA/Libraries/Committee_Docs/CaseForUHC.sflb.ashx http://www.amsa.org/AMSA/Libraries/Committee_Docs/CaseForUHC...

jandrewrogers 14y ago

I can confirm that offering good health insurance is an important part of compensation when hiring, particularly for older candidates. At my startup, a generous health benefit was implemented early on in an effort to attract more senior employees. Often people in their 20s find it less valuable. Health insurance tied to employment is a bad idea generally but that is the state of USian reality and so we make the best of that. Employer-based health insurance was a side effect of government regulation during the second World War that lingered long after the regulation has disappeared. As a practical matter, the ACA is unlikely to help. The net effect is that it seems to be increasing overall costs per employee to maintain the status quo, and there are costs down the road that have not even been implemented yet. A company like mine can hide the cost but I can see why it would be problematic for businesses that are sensitive to total employee costs. As long as businesses are paying for health insurance, the math of the ACA is pretty grim; all it did was move the costs around and add some new ones. It is disappointing that it sort of ended up being the worst of both worlds.

arbuge 14y ago

I second this. Just went down with appendicitis - doctors call this a "routine" surgery. Well, the bill came to $50,000+...

Evbn 14y ago
Was it worth the money?
- krakensden 14y ago
  Well, appendicitis can kill you, so theoretically, it's always worth the money. On the other hand, when clever people notice this and decide to get in on that infinite, inelastic demand, the rest of society tends to get grumpy. Hence the ceaseless political trench warfare over how to pay for health care since the Johnson administration.
  - jacoblyles 14y ago
    In a free economy, a company would notice that, say, 2% of people get appendicitis in their lifetimes and that it costs $50,000 to treat - an expected cost of $1,000. Then they would offer you lifetime appendix insurance for $1,500. Unfortunately there are tens of thousands of pages of regulation preventing that from happening.
    - arbuge 14y ago
      The "it can't happen to me" syndrome would likely stop anyone buying anything so specialized as appendicitis insurance. If you tried selling that to me 10 days ago I would have shrugged it off as unnecessary. But something does need to give or at least should. The system is so broken and involves such huge amounts of money that whoever figures out even a small piece of this will become a billionaire many times over. I'm open to ideas if you need a cofounder ;)
- arbuge 14y ago
  I hope so - haven't fully recovered yet. Doctors do a good job of selling this as "minor" and "routine". Anyways, after insurance the bill is likely going to be around $5k. Still pretty nasty, but one order of magnitude does make a difference. ps. I cannot for the life of me fathom how hospitals in the USA justify charges of $4-$8k/night for hospital stays. To be clear, this is just for the room. The surgery and anaesthesia costs are billed separately. 90% of the bill is the hospital stay.

deleted 14y ago

[deleted]

stretchwithme 14y ago
If that were true, eliminating all risk would lead to an explosion of risk taking. But it doesn't. Plenty of trust fund babies face no risks and accomplish nothing. Of course, another way to look at things is to realize that taking no risks is the biggest risk of all. If one wishes to sit and wait for life to do whatever to you, you can always do that. Don't go to school, don't strive. Don't ever invest in anything that isn't 100% guaranteed. No, there is already incentive to take risk. If anything, the government "help" we've gotten so far makes it harder to take risks. Just ask the people with student loans or those in an upside down mortgage if that helps them take risks. Those programs are designed to help the person that goes down a specific track, not help the person who thinks different. And those programs don't even actually help once they are converted into corporate welfare.
- njs12345 14y ago
  If anything, the government "help" we've gotten so far makes it harder to take risks. Just ask the people with student loans or those in an upside down mortgage if that helps them take risks. This is more due to the poor design of these programs in the US than anything else (speaking as a someone with a fairly significant amount of student debt in the UK).
  - stretchwithme 14y ago
    It doesn't matter how they are designed. They are eventually changed to suit the various lobbies. Things are seldom re-evaluated logically. These programs go on for decades without obvious problems being fixed. If you have a business and you figure out that something that was supposed to make you money was NOT actually making you money, you change it ASAP. With government, change only happens when something becomes a political issue. Nobody even knows the true cost of things so nothing can actually be weighed without great effort. People are incented to do things that validate the program, that give a politician a big number he can point to. The housing bubble is the worst example of this. There's no way people would spend so much to buy so big a house without all of the subsidies and tax breaks and assistance. Notice how things devolve over time. Assistance for first time buyers, for example. Now they've changed the definition of what a first time buyer to include people who've owned homes before. But they won't every change the name of the program, as they still want to misrepresent as something it no longer is.

stretchwithme 14y ago

Entrepreneurs have a tendency to go from where profits are highly taxed to pay for everybody's safety net to countries where they can keep more of their money. A French engineer once explained to me how good the health care coverage is in France. But where is her high paying job? Not in France.

kdsudac 14y ago
Which is why California is such a startup magnet...cause of those high state taxes in Nevada, Texas, Oregon!
- Evbn 14y ago
  You may have noticed that entrepreneurs leave California before they cash those lottery tickets. See Arrington, Severin...

kalleboo 14y ago

It could be that countries with a less risk-taking culture created the safety net due to that culture, instead of the safety net causing the culture.

brc 14y ago

>The Agenda has often wondered if decoupling health insurance from employment might encourage entrepreneurship. That is from the article. It's a stupid comment. Of course it will encourage entrepreneurship - no other outcome would make sense. Why is health insurance coupled to employment anyway? All you need to do is reform the health insurance market so that it is individual based, rather than company based - your employer does not pay for auto, home or life insurance, so why health? To me, as an outsider looking in, it seems like collusion between big companies to make it harder for small companies to compete for staff. As a non-US resident, I just buy my health insurance whether I'm working, not working, or doing whatever. If I got a job with bigcorp limited, they might offer it as part of a package, or maybe get a slightly better rate due to group rates, but it's not a case where I have to be employed in order to get insurance.

jacoblyles 14y ago

I suppose there's no reason why social safety nets and stifling heavy taxes and regulation need to go together, but in practice they do. In this country, the people pushing for higher taxes and regulation are also supporting greater safety nets. So if you see them winning on one front, they are probably winning on all three.

jamesrcole 14y ago

> Countries with much broader safety nets for entrepreneurs are not producing the risky innovative companies that America is. But the fact that they have broader safety nets may have nothing to do with that. Maybe the reason they produce less risky innovation has to do with other ways that they differ from America.