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What Happened to the Breakout Startup?

Posted by dbhalling 8 years, 10 months ago to Economics
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"The number of fast-growing startups has been falling since 2000, leading to fewer jobs at dynamic new companies and possibly holding back the kind of technological diffusion that would lead to faster productivity gains across the economy."

The funny thing is they could have saved money and just bought my book The Decline and Fall of the American Entrepreneur for less than $20.
SOURCE URL: http://blogs.wsj.com/economics/2015/12/08/what-happened-to-the-breakout-startup/


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  • Posted by 8 years, 10 months ago
    Technology start-up companies are built on three foundations: intellectual capital, financial capital, and human capital. All three of the pillars have been under attack since 2000. Our patent laws have been weakened reducing the value of intellectual capital. Sarbanes Oxley has made it impossible to go public reducing financial capital for start-ups and the FASB rules on stock options have made it harder to attract human capital to start-ups.


    The Decline and Fall of the American Entrepreneur: How Little Known Laws and Regulations are Killing Innovation http://www.amazon.com/Decline-Fall-Am..., explains these problems in more detail.
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    • Posted by Herb7734 8 years, 10 months ago
      Actually, the title pretty much says it all.
      When I first went into business in the 60s, I did so on a wing and a prayer. My total assets were just enough to get started and a few thousand for money to feed the family. My biggest asset was me. I couldn't begin to do that today. I was located in a strip center in which the office supply store, the restaurant, and a barber shop were all started on a shoestring like me. They all became successful. I remember being angry over the fact that I had to pay for an occupancy permit ($100.). Ha! I'll bet anyone today would settle for that in a heartbeat.
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    • Posted by $ MichaelAarethun 8 years, 10 months ago
      Question. In what other countries, if any, might one start a business including the probability of a foreign partnership. If a business is going to go offshore anyway why not just cut to the chase and start offshore?
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        Posted by freedomforall 8 years, 10 months ago
        If my current project pans out, it goes offshore to a no income tax country. Profits in income tax countries will be very predictably low. I gladly support the American ideals that I was taught, but the United States does not embody, promote, or defend those ideals. I would rather produce less and starve the looters. Wonder where that idea came from.
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      • Posted by 8 years, 10 months ago
        I am not an expert and it depends on the business, however Honk Kong and Singapore are probably good places to look at.
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        • Posted by ohiocrossroads 8 years, 10 months ago
          Or maybe the Independent Republic of Texas after it secedes.
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          • Posted by $ MichaelAarethun 8 years, 10 months ago
            Neat idea but they lost that right in 1865. Care to explain why?
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            • Posted by $ blarman 8 years, 10 months ago
              I'd check their joining conditions very carefully. Montana has an explicit condition of membership citing protection of individual right to own firearms and it is an automatic term of succession if that right is revoked by the Federal Government. Many states carry such provisional riders, though I am not as familiar with Texas'.
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              • Posted by $ jdg 8 years, 10 months ago
                Texas' treaty of accession gave them both the right to secede, and (alternatively) the right to break Texas into up to five states.

                Of course such treaties stop being enforceable as soon as the two countries merge. A former nation that is no longer sovereign cannot have treaty rights.

                In Montana's case, of course, there wasn't even a treaty. Eastern Montana was part of the Louisiana Purchase; western Montana was part of the Oregon territory when we split it with the British, both well before statehood. A state constitution that asserts a right to secede is a joke.
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                • Posted by $ blarman 8 years, 10 months ago
                  "Of course such treaties stop being enforceable as soon as the two countries merge."

                  Your reasoning being...? It is a contractual agreement. Neither Texas nor Montana have given up their status as governing bodies. They are both States within the group called the United States of America. The terms state that they can enjoy membership in the United States of America and are entitled to all the representation therein, and in return they are subject to the laws of the Constitution.

                  "A state constitution that asserts a right to secede is a joke."

                  Legally, it is no difference than a pre-nuptial agreement. Both sides agree to terms under which the deal may be nullified. And for both Montana and Texas, it is far from a laughing matter. Texas especially prides itself on its independent streak. Both Montana and Texas are probably two of the states most capable of self-determination as both have good energy reserves. Texas additionally has ready access to shipping.
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  • Posted by wiggys 8 years, 10 months ago
    you can not have startup companies if the people are un educated. thank the government for this situation because they control the schools and the student body is NOT taught to think. all one has to do is look at the arab world to see the result of eons of what happens when the youth is exposed to government schools. the decline in the usa will continue to continue its downward spiral untile we enter the savage stage.
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    • Posted by DrZarkov99 8 years, 10 months ago
      You are so right! Currently, just as one example, Oklahoma has 85,000 jobs that can't be filled because they can't find qualified candidates for IT and biological research positions, or even truck drivers. I'm sure there are other states with the same problem, but I'm also sure we have lots of college grads with degrees in ethnic studies flipping burgers.
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      • Posted by $ jdg 8 years, 10 months ago
        I spent a year driving trucks, and burned out. (It isn't bad work, but it doesn't pay worth a darn.) It turns out I was about the industry average. I believe trucking will and should be one of the first and biggest uses of Google's self-driving vehicles.
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      • Posted by $ MichaelAarethun 8 years, 10 months ago
        Well some body has to make the bichi burgers and you can't get more PC or ethnic than that. What wlse are they good for?

        My parents when they were alive asked why I didn't work in my degree field of Political Science and History. I remember choking back the laughter....my sister answered the question for me. "He can't afford to take the pay cut." I was at the time an Able Bodied Seaman working deck on a frieghters and tankers. When i calmed down and wiped the tears i said, "Seriously?" What's a degree got do with making money? At the time when things were fat in the industry I was working 16 hour days and actually working 13 seven days a week for four months plus straight through...union rules. sundays worked eight paid for 12. I worked eight months plus and drew unemployment of $500 to $700 every week the other two months with full medical coverage on or off the job. i'm trying to imagine a job in political science and history that pays that well. so my answer was, "Educations is for my own personal pleasure and use. it's a way to spend my off duty time." which led to working on my boat learning navigation which led to rediscovering science and mathematics.Did you know that navigation is just spherical trigonometry in motion and quite poetic in it's own right." But you have to settle for your skill levels and for some burger flipping is the limit as is sociology.

        . .
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  • Posted by $ jlc 8 years, 10 months ago
    Looking at the graphs, what is striking to me is that our 'current ho-hum economy' stats are below those of the past that marked times we now label as economically catastrophic. So what we now consider normal, we consider abysmal in the past.

    The information given is a bit downstream of the startpoint, I note: I would also be interested in knowing what the rate of <1yr startups is. Are we dealing with a comparable rate of initial startups and an increased failure rate? Or are people not even sticking their toe in the water any more?

    Jan
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    • Posted by freedomforall 8 years, 10 months ago
      The game has been rigged (via law) to crush competition by smaller innovative companies. This also discourages innovators from forming such companies. Those who do are played with by Wall St until they have extracted all their resources,. Those fine innovators who are now failures in their own minds end up as slaves to the looters who arranged to legally steal the inventors production and self respect.
      Wall St and its corruption must die for productivity to return.
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      • Posted by 8 years, 10 months ago
        The simplest way to do that would be to eliminate all the laws and regs related to securities. Eliminating the legal tender laws would be a good additional step.
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        • Posted by freedomforall 8 years, 10 months ago
          Completely agree.
          Wall Street pretends to protect widows and orphans while lining their pockets with their savings.
          Today it would be safer to buy stock in a company that sells its shares online (with rational due diligence) than to buy from a Wall Street legally devised con game.
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      • Posted by blackswan 8 years, 10 months ago
        Wall Street has been around for over 2 centuries, during which time we went from an agrarian to an industrial society. It's not Wall Street that's the problem. The problem is government. Period.
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        • Posted by 8 years, 10 months ago
          It is a problem with the laws related to Wall Street. Until the mid 1920s there were not securities laws and companies were free to raise funding from however was interested. Every securities law passed entrenched the big players in Wall Street and hurt our economy.
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    • Posted by $ MichaelAarethun 8 years, 10 months ago
      why should they?

      Remember the parable of the two brothers? What profit the risk taker when the profit is confiscated.?"

      My old Vo-Ag teacher solved the riddle. He found out Japan had no way of producing sufficient cattle feed especially for the famed Kobe Beef. He found that a certain area in the west produced the best hay but could not find a decent market. Then he noticed both were near the ocean one by the Columbia river...He also noticed car carriers from Japan operated on a tight schedule and went back empty.

      He found a Japanese business type and piroposed filling the empty and easily cleaned spaces with hay in either cubicle or the giant round bales which he would provide FOB to the Columbia River docks.The shipping company welcomed the extra revenue and he talked them into doing it for overhead costs one way. His Japanese partner took care of that end and the Japanese beef had a steady supply of munchies. The farmers were happy so it was the old find a need an fill it solution. As I recall the shipping company paid the longshoreman who went from unloading cars to loading hay. From school teacher to millionaire in a few short years.


      Someone else said why not bring Kobe beef production to the source of the food supply... it's now raised near the market area in the USA. But with out the profit that makes effort worth while ....he would still have been teaching school..oh yes and he gave many of his students jobs in the peak summer months...

      The equipment would have been otherwise idle.

      Anymore the exception rather than the rule. He said once his main advantage was very few employees. The farmers, transport workers (truck and shipping) all paid for those costs through their own companies. One of his sons had the abilties to check the hay for nourishment standards as one example. The son lessened the cost of his salary plus a substantial raise by convincing the Japanese they should do their own evaluation before the hay was loaded and he in turn would use their methods to assist the farmers in their production standards.

      Just a matter of making pieces of an unseen puzzle fit. Serendipity and Synergy. the sum of the parts were worth more than the parts separated. Providing no interference. that subtract value. Synergy minus VAT for example.
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    • Posted by 8 years, 10 months ago
      No we are not dealing with a comparable rate of start-ups, at least in the important technology sectors. Between SOX and the weakening of our patent system, startups cannot obtain the capital to take on important high quality projects.
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      • Posted by $ jlc 8 years, 10 months ago
        I am trying to differentiate between 'people cannot start companies' and 'people do not want to start companies'. (See my reply downstream, under Wm's post.) It would be interesting to know if the problem with current startups is now or if it is 40 years ago (probably 'both').

        Jan
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        • Posted by 8 years, 10 months ago
          My experience is if the return and opportunity are there people will create start-ups. This is true even if they were raised under socialism, or the educational system sucked when they grew up, or if their parents were corporate lifers.
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  • Posted by $ Thoritsu 8 years, 10 months ago
    Maybe we need to mandate startups like minority quotas or fleet average fuel economy? There must be something the government can do...America Invents?

    We have a recommendation Government: Get out of the way!

    BTW, I bet the graph on successful startups has a different shape.
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  • Posted by term2 8 years, 10 months ago
    Startup restrictions and costs have gotten bigger and bigger. This is my last startup. It's just too much hassle. Time to shrug has arrived
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  • Posted by $ WilliamShipley 8 years, 10 months ago
    The 90's were an unusual era with the dot com boom. With the internet being new and the potential for a company to quickly reach millions of customers there was a lot of excitement about getting in on the ground floor.

    Of course, the reality is that getting in on the ground floor often leaves you on the ground floor. I have a 1979 issue of Byte magazine, containing ads for all of the dominant companies in the then new microcomputer industry. Some, at the time well known companies had two page spreads. All of those companies are now gone, the only recognizable company is one that had a quarter page ad promoting the memory board they were selling - Microsoft.

    When the investors learned that a company losing millions of dollars a year on the internet but growing was not a sure thing, they became disillusioned -- and rightly so, many of those "high fliers" never made a buck. And so we have the dot com crash.

    In the years since 2000 it's been harder to sell investors on your latest internet idea -- and the obvious ones were taken in the first few years. There is still, of course, the opportunity
    to have the next great idea, but selling it is harder. Investors expect you to MAKE money.

    And, of course Sarbanes Oxley certainly hasn't helped.
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    • Posted by $ jlc 8 years, 10 months ago
      We have dealt with generational differences before. It is possible that what we are seeing is a trickle-down effect of the social climate 40 years ago. If people are raised in an atmosphere of affluence, and have little contact with reality, then the explanation might be that the people who were in their 30's in 2000 would rather work 8-5 at a big company for good money than to (work their butts off to) innovate on their own. (We are seeing this in recent MD's - most of them want to work for hospitals, do not start their own practices, and do little overtime.)

      Jan
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      • Posted by $ MichaelAarethun 8 years, 10 months ago
        One needs little overtime if you can get some of the gravy jobs like standby surgeon. Who often bill for much more than one standby situation at the same time. If none are needed the sky is limited only by the surgery list. If called to fill in the next on the list inherits. Another is the Xray readings people who do nothing but spend 10 seconds (I timed it once) as the second opinion reader. Next time you see that on your total medical bill imagine that dollar amount times six times sixty for an hours income. Normally the staff int he xray clinc set up the screens in advance. Now the new way is outsourcing the x-ray readings to India via the internet to cut costs...next time you see your hospital bill see if the costs have gone down.
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        • Posted by $ jlc 8 years, 10 months ago
          My point is that many of the people in their 30's and 40's do not want the 'gravy jobs' if these jobs mean working overtime. They do not want to work...they want to spend their time doing other things.

          Jan
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          • Posted by $ MichaelAarethun 8 years, 10 months ago
            I wondered. why only 30's and 40's? That's limited to certain skill and income ranges - absent a silver spoon I could do it because I chose a profession and it's risks with a twenty year retirement contract. My atttude was do it while you can and not regret it when you are too old." And then one that only demanded a certain minimum amount of time each year or so and retired at 43 with two breaks and then 65 and 65. Got to see much of the world including the Antarctic. After retirement the first destination was Easter Island and Robinson Crusoe Island. Quite interesting then up the coast of SA and picked up the Galapagos. I became one of the few to go all the way around and not write a book about it. That's a joke.
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