Sunday, May 5, 2013

Is America's entrepreneurial culture dying?

More than one economist is worried that America's entrepreneurial culture is dying -- statistics and other indicators here, including some damning differences in the creation of "start-up" jobs between the United States administered by Barack Obama and that of his predecessors.

There is an argument over the causes and consequences. From the linked post:

Hudson’s possible suspects for the slowdown: a) higher business taxes, b) Obamacare, c) an IRS crackdown on US employers that hire U.S. workers as independent contractors rather than employees, and d) a steady barrier erected to entrepreneurs at the local policy level. But whatever the cause of the entrepreneurial decline, two possible impacts: 1) A less productive and innovative economy, and 2) higher profits for big business thanks to fewer upstart competitors on the horizon.
The consequences seem probable to the point of being obvious, to which we would add a poorer future for our posterity and less opportunity and joy from the innovations to come (cue Brad Paisley). To the Hudson Institute's list of causes, however, we would add several more:

  • The end of the IPO exit for venture investors, which, obviously, means a lot less venture capital. Some of the cause is merely the market at work -- so many investors lost money when the "Dot Com" bubble burst, there are fewer individuals and professional money managers willing to buy shares in "pre revenue" IPOs. But some of it is regulation. Sarbanes-Oxley not only massively increased the costs of going public, but the requirement for an "internal controls" audit can and does hurt the ability of small public companies to capitalize on their main advantage, which is their own entrepreneurial culture.
  • There has been under President Obama a huge increase in heavy-handed regulation in three of our most dynamic industries -- finance, energy, and health care. There is a reason for each with which one might agree or disagree (the financial crisis, climate change, and the Obama Administration's belief that the FDA was not adequately safeguarding the public health), but there is no denying that both the overhead burdens and the sheer regulatory uncertainty has increased in all three of these sectors, which combined account for more than 30% of GDP.
  • Finally, the current administration, in a thousand ways large and small, reminds prospective entrepreneurs that it neither understands their challenges nor appreciates their accomplishments. We see this in new regulations to increase the leverage of employees over employers, the now-abandoned effort in the face of a terrible job market to eliminate the secret ballot in unionization votes, the huge increase in approval times to bring new regulated products to market (such as in the medical device industry), taxes on revenues instead of profits (which by definition are brutal for start-ups), subsidies for politically-connected businesses ("green tech" boondoggles) that cannot raise money in the private sector, and the constant political attacks on the "rich" (all entrepreneurs being, in their own mind, aspiring rich people). To name but the smallest fraction of such offenses.

    All is not lost. Cultural change does not happen in just a few years. We can recover our inner animal spirits we start celebrating enterprise, and elect politicians who understand that they cannot live their redistributionist dreams if they also do not care for the golden goose. This is something that Bill Clinton understood, and Barack Obama manifestly does not.


    1. Re: "Is America's entrepreneurial culture dying?"

      Beth Chee, San Diego State University, 1 May 13:


      Are today’s youth really more materialistic and less motivated than past generations, or do adults tend to perceive moral weakness in the next generation?

      San Diego State University psychology professor Jean M. Twenge — along with co-author Tim Kasser, professor of psychology at Knox College — has set out to answer that question.

      In a study published today by "Personality and Social Psychology Bulletin," Twenge and Kasser show that there is in fact a growing gap for today's young adults between materialism and the desire to work hard.

      “Compared to previous generations, recent high school graduates are more likely to want lots of money and nice things, but less likely to say they’re willing to work hard to earn them,” said Twenge, author of the book “Generation Me.”

      “That type of 'fantasy gap' is consistent with other studies showing a generational increase in narcissism and entitlement,” Twenge said.

      Twenge and Kasser drew from a nationally representative survey of 355,000 U.S. high school seniors conducted from 1976 to 2007. The survey examines the materialistic values of three generations with questions focused on the perceived importance of having a lot of money and material goods, as well as the willingness to work hard.


      Meanwhile, in Singapore (now the world's richest city, according to the Wall Street Journal) an ethnic Chinese business executive who is a very close friend of mine wrote in an email to me this week:

      "I find it very difficult to work with the younger generation as their attitude towards work is different from mine. My passion is growing my business whilst their passion is growing the list of 'friends' they have on their Facebook."

      - DEC (Jungle Trader)


      Link to SDSU article:

    2. Not good news, I suppose, without a significant revision of our expectations for prosperity.


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