"Take a risk, start a business!" = disingenuous in practice?

Disclaimer: I don’t know if this topic is particularly objective – it’s simply a question I am putting forth for the sake of feedback because I have no idea if my opinion is founded in reality or skewed by confirmation bias.

It always bugs me when I hear wealthy rightwingers tout the merits of “taking a risk” by getting out there and starting a new business (and in turn becoming rich off it).

What I notice (at least in my experience) is that the kids who got out there and took risks in making their own startups are precisely the kinds of kids who aren’t really exposed to the downsides of their own risks in the first place. I know the pitfalls of anecdotes as an argumentative tool, but I will share one to explain what I mean here:

I have a friend who comes from a wealthy family. Had his schooling paid for so he did not have any debt upon graduation. He must have torn through at least 10 startup ideas, and every one of them failed. However, he was only able to do this because he was wealthy in the first place and could afford to take the risk.

Contrast that to someone like me. I had to pay for my own education, and graduated with lots of debt. Lenders wish to be paid back very promptly, and typically, the monthly installments are not comfortable. Had I taken a risk like that and invested money (that I didn’t have) into a business idea and have it fail? I’d be on the streets. It’s much more realistic to simply go work for someone else who’s already established (typically a firm).

In other words, it really irks me when people claim they “took risks” in starting their own business because I feel like, much of the time, they had some sort of safety net that would pad their downside in the first place, thereby allowing them to take that risk without worry. Without that safety net, starting one’s own business is orders of magnitude harder.

Now, I could be TOTALLY OFF here, and if so, I’d appreciate some clarification. Otherwise, thoughts?

You’re not off, but I guarantee people will come into this thread to shrilly insist that you are.

I have the same doubts. It’s a little like the people who say “I didn’t wear a bike helmet growing up and I turned out just fine”. People who died from not wearing a bike helmet can’t rebut. People who succeed at entrepreneurship, while certainly risk takers, usually do so having a good understanding of the risks and have a plan to mitigate them. But it’s not as impressive to say that as it is to say “I rolled the dice, betting everything I had, worked my ass off, then PROFIT!”

Missed the edit…

There are entrepreneurs that will tell you that they learned the hard way about the risks and adjusted their game accordingly, to be fair.

Well, I think there is some truth to it.

If you want to get WEALTHY, starting a business and growing it is for most people the only way its going to happen for them. Though that is certainly far from a sure thing.

But starting a business as a way to make a living? IMO its pretty darn risky (unless its something on the side you can grow while having a job on the side to cover expenses till you switch). And that’s even for people who have some idea of WTF they are doing. Random Joe Schmoe working at the tire factory? Probably not a very good idea.

And yeah, the selection bias thing too.

I agree. Just because some people got rich starting their own business doesn’t mean it’s anything but a long shot for the majority of people. These days it’s too huge of a risk unless you’re married to someone who can supply health insurance and you have a lot of money or an extra income to fall back on. I see people buy into this all the time and hugely fail but they don’t advertise and try to make money off of books about how to fail at your own business.

Your OP is a jumble of generalities. Who specifically are these “wealthy rightwingers” you are talking about?

Government statistics show that 50% of small businesses fail in the first 5 years. You really think all or even most of those folks have a cushy safety net?

Yes, I’m making a generality – and am interested in how accurate it is, if at all.

I brought this question up because almost every single business owner I’ve run into is a right-winger who (in my opinion) has an extremely strong confirmation/selection bias. It seems as if the successful businesses largely occur when the person at the helm has a decent safety net to fall back on to absorb any blows along the way, whereas someone without a lot of capital (or connections to yield that capital) is simply shut down the moment something goes wrong. The end result = business owners who didn’t really have to take on huge amounts of risk compared to others, making the advice feel disingenuous.

Lots of people who give this “I took the risk and look where I am today” advice are from a time or place for which the economy was booming and there were a lot of opportunities for growth. That is, their risk was substantially lowered by the economic climate, although they rarely give that aspect any credit.

Post WWII California, where my parents started their ultimately thriving business, is a good example.

I might also point out that my dad unsuccessfully looked for a good job after he got out of college (tab was on the GI Bill) all over the east coast and midwest before he “took the risk” and drove out to CA to try his luck.

My parents are active lifelong Democrats and so fully credit government help (college) and being in the right place at the right time (as well as astonishingly hard work) for their success.

In my experience, small business owners tend to be conservative types in general, so your selection bias may occur right there. Even if they don’t start out that way the “make it a success on your own or die” aspect of many small businesses will tend to draw out their conservative side over time.

If you don’t think that’s the case, try and find a liberal barber who owns his own shop. My barber has his trusty Analog TV tuned to Fox News all day. (I’m a liberal, so my barber and I have gravitated to complaining about the local sports teams during my haircuts. It’s a safe topic, and I’m fully aware that he’s carrying around sharp cutting tools <g>.)

Not all small business owners are conservative, of course, and Ulfreida’s parents are an example of that.

Having grown up in a self employed family and with many friends who are self employed I will disagree with this for many, when they start a business plan is their only safety net.

Unless you think that moving in with a friend or your parents and getting a normal job again if you fail is a safety net.

Now I am not claiming at all that this is the route to success and most people would not be willing to work as much as is required to be self employed but your claim is baseless speculation.

Not everyone has the option to move in with friends/parents though if something goes wrong.

Did your family/your friends have hefty student loans or other debt?

No, most couldn’t afford to go to college. But it is true if you are the type who will collect a lot of consumer debt you are probably not the right personality type to be self employed.

But not all people who start their own company do have friends and family, they are just willing to deal with that when it comes and have done their homework to try and reduce the risks which is exactly what a business plan is.

Maybe I am just not that well versed in business, but how does one realistically avoid/reduce risks when they basically have no leverage? If I’ve got debt nipping at my heals ASAP (otherwise I risk credit damage) and I don’t have family/friends to stay with if I fail, and no money to start something with / pay employees / spend the time / have enough money to live off of and so on, how does that even work?

I think at this point, from what you mentioned that starting a full time business is going to be right for you. You need to be working for the man, to keep paying your personal debt down.

Unless I have missed it, you have not really said what you want to do in the way of starting a small business or service, to be able to game what avoidance/reduction strategies might be in order.

Declan

It is called writing a business plan, basically you try and objectively run the numbers to make sure your idea is financially viable.

http://www.sba.gov/category/navigation-structure/starting-managing-business/starting-business/writing-business-plan

To start something you end up doing as much of the work you can do by your self and this happens for years or sometimes forever.

You live off top ramen and work almost every waking hour hoping it will fly.

FYI there are lots of resources for people to get low interest loans to start companies if you have an effective business plan but yes if you don’t make money you go hungry. This is why people who have a hard time delaying gratification and saving money do not make good self employed persons.

I personally like having a paycheck and unemployment insurance etc… and thus am not self employed.

This where the claim in the OP falls down is that many people don’t want to give up their entire lives for what may end up paying less than minimum wage nor do they have the personal discipline to live as frugal as is required when you start a company but to claim the risk part isn’t there is simply just false.

Too late for the edit button, but I posted up thread that from what it should have said is, starting one is not for you at this point.

Declan

So, you do think that most of those companies I referred to (the 50% of all business that fail) are started by people with comfortable safety nets. Is that right?

Most of the people who start businesses are stupid schmucks, and fail at their stupid, schmucky businesses as a direct result, while those who succeed are mostly just lucky stupid schmucks who happen to be in the right place at the right time–a few of those lucky ones who succeed are also hardworking, perceptive, dynamic, etc. but not very many. What they ALL have in common is a tendency towards being overbearing about their exalted status as entrepreneurs.

No, my point is that if you don’t have the right conditions in place when starting a business, you’re very likely to fail. The high failure rate is, to me, attributable to:

  1. People who try to start businesses who shouldn’t be because they’re taking on way too much risk that they can’t absorb

  2. People who can absorb the variance but still fail (variety of reasons could work as to why)
    Basically, my argument here is that I don’t see how it’s realistic to expect people to take risks when they can’t possibly afford to. Taking risk typically requires some form of capital to back it, which is even harder if you have perpetual debt. The banking crisis is a good example of this.