That sounds like a completely different argument than you made in your OP.
As someone said upthread, work for the man every night and day until you pay off your debt. Then the world’s your oyster.
I think monumental college debt is a relatively recent phenomenon. But in a sense, wasn’t that a risk you took when you went to college? Just like someone who takes out a loan to start a business instead of going to college?
Everything’s a risk, but some are more risky than others
There’s lots of different kinds of risk, too. Don’t forge the risk of being derided as a failure. If you go to college, take on debt, but can’t get a job, you get all kinds of sympathy. If you take on debt to start a business and fail, some folks are going to think you are a failure. Personally, though, I don’t really see much difference.
There is no way to refute what you say in general, without some very extensive (and expensive) studies that cover a lot of startups and analyze their founders and their histories. But anecdotally:
I came to this country with my family with zero capital and no English. Went to college about half a year after coming here, having somehow passed TOEFL with high scores, and ACT high enough in math to compensate for lower English scores. Worked my way through college (state university), full time, starting with washing test tubes etc. then in later years working software jobs. Graduated, freelanced for a couple of years, went abroad for 6 years or so, came back, worked in a cubicle, switched to freelancing again (which paid great until 2000 or so), during that time started a software project that I worked on with my brother, eventually, around 1999, went full time on it. No capital borrowing was needed, everything was sweat capital. Developed it further, living off it, sold the company in late oughts, worked for the “man” for a few years, am out now and developing other software.
So - am I in the category of “those who found businesses because they have a safety net to fall back on”? Or the “Take a risk, start a business!” ones?
The OP is obviously in pointing out that people born into wealthy or at least middle class have an advantage in opening a business … though that’s hardly breaking news.
The OP is absolutely right in pointing out that student loan debt can be a crippling burden that keeps people from taking entreprenerial risks.
But the OP is completely wrong thinking that people of modest means are not out there taking risks and chasing the dream. To match the argument-by-anecdote, none of the people I know who are successful business owners started out wealthy.
Of the three entrepreneurs I know well:
One grew up in a trailer park supported by a single mother, then paid his way through state college while living at home. He’s had two businesses barely get by, and now, having just had unplanned twins, is starting a third (this time with corporate backing, which he got because they were impressed by his initiative with the earlier ventures).
Another grew up working-class in a deeply dysfunctional family (both his parents committed suicide), and only did three semesters of college before dropping out and moving to LA to get into showbiz. When that didn’t work out, he took a job, found a niche for himself, and basically invented a new occupation. AFAICT, he’s always been on the edge financially, but his job is much more interesting than most, and gives him a lot of travel, perks and prestige.
The last grew up pretty solidly middle class, but left a solid career in his 40s so that he and his wife could both work full time selling herbal supplements.
So, yeah: non-rich people are out there taking chances.
That’s an astonishing discovery you’ve made. You should publish those results!
To be fair, I did not say this. I don’t mean to imply that modest-means types are taking risks – just that their failure rate is going to be much, much, much higher (IMO).
There’s also a huge difference between starting out with nothing and starting out with nothing + debt.
All in all, it just bothers me when people say “Well I did it, and so can you” without being honest about how they were able to do it in the first place.
I really don’t see much reason to think so. The consequences of failure might be a little worse, but I don’t see any reason to think a poorer person would be less savvy. If anything, a really wealthy person who has parents or some sort of inheritance might be more inclined to be careless/sloppy/unrealistic than someone who knows its all on them.
Yes, you’re right. Excessive student debt is a major societal problem.
In fairness, though, nobody made you take on that debt, and if you were inclined to start a small business right out of college, you made a very bad choice in accruing that debt. An understandable one, perhaps, but we all live with the consequences of what seemed like a good idea at the time. I should have taken more math classes in college. I didn’t and it’s now a big problem for me. Live and learn.
What makes you think people are being dishonest? Who are these people, specifically?
wrong thread
Without getting into the politics of it, I think there’s a legitimate issue being asked here. Is it a good idea to advise people to start their own business?
Suppose you were a highly influential person and you’ve got ten million followers who will listen to your advice and act on what you tell them. Should you tell them “take a risk, start a business”? As you point out, a lot of start-up businesses fail. Five million of your followers are going to end up owning a failed business. That’s going to hurt the entire economy.
You’d have been a lot more responsible if you told your followers, “play it safe, go get a steady job working for somebody else.”
I think the best advice to give to potential entrepreneurs is “don’t quit your day job”. Followed by “if you don’t have a day job, go out and get one before starting your own business” and “if you can’t work a day job yourself, make sure your spouse has one while you start up your business.”
Does it bug you as much as it bugs me when liberals try to give all the credit for any success to the government for providing us all with a safety net (that, ironically, few take advantage of)? Or attempt to downplay risk with dubious anecdotes that don’t really say what they think they are saying (i.e., even in your example in the OP the family there DID take risks…and they were risks that didn’t pay off. That they weren’t living in destitution due to their risks not paying off hardly indicates that the risks were pain free).
There is nothing disingenuous about encouraging people to start businesses. You are never going to get rich (or even be at the upper end of ‘well to do’) working for someone else (someone who, you know, took a risk). The fact that many businesses fail doesn’t mean that it’s disingenuous, it just means that it’s not a guarantee of success. Now, if someone is telling you (or someone) that starting a business is a guarantee of success and wealth, that’s different…that WOULD be disingenuous, to be sure. Just like telling a 6 year old that if he goes out and plays football or whatever that s/he WILL be a sports star and make millions would be disingenuous, while telling them that if they train hard, are lucky and really, really good they MIGHT be such a star is simply encouraging them.
Here’s my own anecdote. I started my own IT consulting company after the dot com bust through me out of work with my investments in ruins. It kept food on my families tables while things slowly rebuilt in the IT field and the jobs started to come back. It never did better than that, however, and eventually I turned em in, folded my company and went back to work for someone else. Why? Lots of reasons, but the biggest one IMHO is I’m not suited to being a big wheel in business. I don’t have the right instincts. I’m also too lazy…I can work for 12 or 16 hour days, but not 6 days a week for years on end. Just not in my nature. I’m better working for someone and being a key asset for someone else’s company.
On the other hand, my dad was driven. He was able to start a company and work like a maniac for years and decades building it up from nothing to the point where it was worth millions when he retired. Did he have help from the government? Sure…it helps to be a minority when bidding on government contracts, plus he had training from the Navy (same as me), and then there was the fact that they let us move here in the first place. And for this munificent help the government was able to, you know, tax him, his company, and his employees.
If simply creating the environment and providing a safety net were enough then everyone would be a success story like my dad, as opposed to a failure (at least wrt being a business wheeler and dealer) like me. But it’s not. You have to have the drive to succeed, and the willingness to risk capital or whatever to make it happen…and to work like hell, live with privation and all the rest, at least if you weren’t born with a silver spoon in your yap. A bit of luck doesn’t hurt, either, but it’s again not the primary factor either.
-XT
Well, the idea is that the education gives you the skills and knowledge that allow you to leverage your abilities and add some value to society for fair compensation. However, I feel that the job market turned out to be much worse than I anticipated and the NPV of the college investment, so to speak, feels like it was actually negative… or at least hazy at best.
I can only speak in terms of anecdotes here so my response would not be particularly useful. Too many successful entrepreneurs I’ve run into all seem to have had some sort of backing that the average person does not (namely, lots of financing from either supportive family members or through other connections).
Although, actually, pretty sure Mitt Romney gave the “take a risk” advice, too.
Well, I don’t think the government, per se, is directly responsible for a lot of success, but our country’s infrastructure sure is, no question – and many things go into that.
And yes, the family in the OP did take risks, but my point is that it’s not really a “risk” with the same connotations when you’re completely loaded. Yes, they’re rolling the dice and hoping the business pans out – and maybe the dice turn up shit and the money is lost – but they aren’t risking their financial well-being or anything like that, is what I mean. And when you don’t have money, it’s much harder to take similar risks WITHOUT risking your financial wellbeing in some form.
Success typically depends on a variety of factors – be it hard work, working in the right field, luck, being in the right place at the right time, brains, connections, money, support, etc – and lacking one means you just have to make it up elsewhere.
My gripe is with those (who I’ve come across often) who attribute success to their own sweat, blood, and tears and completely disregard their massive support bases when they indeed exist.
It’s no more ridiculous than attributing any success to either luck or the government…which I’ve seen blithely done by some in the past. There is a balance here. Certainly, without the government base structure built in this country over 2 centuries ago and refined to what it is today then success would be more difficult (it still happened even in the bad old days, however). Without the infrastructure paid for by generations of Americans success would be more difficult as well (so would life, for the vast majority). And without luck it would be more difficult. But without people willing to take risks, even rich people, it would be more difficult as well. Same without folks willing to pay the price of success in 16 or 18 hour days, no family or home life, and other privations. It takes all of those things to make success. Pretty obviously ideology is going to color which of them someone wants to emphasis as the most important or crucial. To me, it’s the will and fortitude and willingness to risk that makes the difference, because most of the other things are pretty equal (leaving aside the silver spoon in yap effect, which I concede is a factor). After all, all that infrastructure and such is available to all of us, but only a few will take advantage of it…and, for the munificent gift we all give to everyone, the few who succeed are going to pay us back in the form of taxes, not just their own but those paid by the companies they build and by the employees that they hire. YMMV on what you think is most important.
-XT
I’ve noticed a few folks have brought up the computer/IT business stuff. IMO that a relatively new and specialized business start up. A computer, some brains, and lots of hard work and off you go.
Most IMO businesses require a substantial capital investment for actual physical stuff. And that means either you’ve invested a good chunk of change or you got a loan/sucker to do so for you.
Which reminds me of something. You always hear the ole story of “I started X businesses that failed before I hit the big time”. I always wondered who paid for the X failures.
^ this.
The infrastructure is there for everyone. Saying someone succeeded **because **of it is meaningless. If infrastructure was what it took to succeed, everyone would be successful.
It is my understanding that the majority of small businesses are started by people who used to be employees in other businesses, but after building their skill set and/or clientele they strike out on their own and start their own business. That does not fit the profile of the wealthy person who can afford to lose again and again.
But by and large, I do agree that it is a pollyannaish concept to tell people to go into debt to start their own business in an economic climate where demand is stagnant.