WSJ Bemoans Rise in Rationality, Um, Decline in Entrepreneurial Risk-Taking

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It’s hard to know where to begin with a story up at the Wall Street Journal, Risk-Averse Culture Infects U.S. Workers, Entrepreneurs.

The headline alone raises the question of whether the Journal knows anything about real entrepreneurship, as opposed to fantasy version noisily promoted by management gurus and other folks in the fee-extraction business. While any class as large as “entrepreneurs” or small business founders is going to have a great deal of variability within it, studies have repeatedly found that business founders aren’t gamblers or risk seekers. They typically think hard about the downside of launching a venture and take steps to limit it, such as syndicating risks (like getting suppliers to supply financing or materials, as Steve Jobs did by taking his first purchase order for Apple and persuading vendors to give him parts against it). And the “infects” in the headline suggests that the former wild-man thrill-seeking new business types have been afflicted with a mad cow disease variant that eats away at the parts of their brain that produces animal spirits. No, it’s even worse than that: America has gone “soft on risk”. Flaccid dick alert! Bring out the entrepreneurial Viagra!

Here’s the overview:

Companies add jobs more slowly, even in good times. Investors put less money into new ventures. And, more broadly, Americans start fewer businesses and are less inclined to change jobs or move for new opportunities.

The changes reflect broader, more permanent shifts, including an aging population and the new dominance of large corporations in many industries. They also may help explain the increasingly sluggish economic recoveries after the past three recessions, experts said.

“The U.S. has succeeded in part because of its dynamism, its high pace of job creation and destruction, and its high pace of churning of workers,” said John Haltiwanger, a University of Maryland economist who has studied the decline in American entrepreneurship. “The pessimistic view is we’ve lost our mojo.”

The article deplores the fact that:

In 1982, new companies—those in business less than five years—made up roughly half of all U.S. businesses, according to census data. By 2011, they accounted for just over a third. Over the same period, the share of the labor force working at new companies fell to 11% from more than 20%.

It does not occur to the author, Ben Casselman, that he’s got the causality backwards, that it was never terribly rational to start new businesses to being with. Even in the supposed heyday of the early 1980s, the rule of thumb was that nine out of ten failed in their first three years. And in our new economic paradigm, of the deliberate effort to weaken labor bargaining power, reduce regulations, foster the growth of an increasingly predatory financial services industry and rein in government (and let us not forget that government has been a major spur to innovation, both through financing R&D and critical infrastructure, as well as through regulations that spur innovation, as tougher fuel standards) has, despite its billing of being business-friendly, instead simply redistributed income and wealth to the top 1%.

Unfortunately, I can’t track down a source, since I saw it back in pre-Internet stone ages, but one factoid I read right after business school stuck with me: the most common characteristic of people who started new businesses back then was that they’d been fired twice. That applied to my father, who was fired once and later forced out as a result of a reorganization that had him supposedly slotted to take over a division when it turned out the guy running it had no intention of giving up his post. If you have the personality to thrive in or at least tolerate being on the corporate meal ticket, you need to be nuts or have delusions of grandeur to throw that over and take a flier on a new business.

Now having said that, there situations where it’s not a big leap of faith to start a new venture. Amar Bhide, who was the first academic to do large-scale studies of the non-VC backed companies that constitute the bulk of new businesses (even the majority of Inc. 500 companies), found that the most common type that succeeded was when the founder(s) had worked in an established firm, noticed that there was a niche that was being ignored by industry incumbents and set out to take advantage of it.

And let’s go back to 1982. Aside from the fact that the era of stagnant worker wages and rising levels of consumer debt was just getting started, what else was different? First, even though the economy sucked (the Volcker-induced early 1980s recession was short but painful), the PC revolution was in full throttle. Atari was the hot employer in business schools. All sorts of software and hardware and peripheral companies were being built, not just Apple but Lotus, VisiCalc, WordPress, Compaq, Sun, Oracle, disk drive makers, etc. In those days, with better labor markets, if you flopped as a young (or not so young) person starting a new business, the normal between-job period was six months or less. You might have a bruised ego, have lost some of your own and your friends’ and family’s money, but you weren’t worried about eating out of garbage cans and sleeping on the street if you bombed. Oh, and let’s not forget about another sea change, namely, the brain drain to Wall Street. Why take a flier when you can make big bucks before you are 30 with someone else taking the risk?

And what about the lack of corporate hiring? The Journal, again:

In the eight recessions from the end of World War II through the end of the 1980s, it took the U.S. a little more than 20 months, on average, for employment to return to its prerecession peak. But after the relatively shallow recession of the early 1990s, it took 32 months for payrolls to rebound fully.

After the even milder recession of 2001, it took four years. Today, nearly four years after the end of the last recession, employment has yet to reach its precrisis peak….

Companies, too, are taking fewer risks. Rather than expanding payrolls, for example, they are keeping more cash on hand—5.7% of their assets at the end of 2012, up from under 3% three decades earlier, said the Federal Reserve, a rise that accelerated after the recession. Workers are hired more slowly, particularly at newer companies, Labor Department data show.

For public companies, the answer is easy: it’s the short-term-ism! Notice how the change in hiring activity in a recovery dates to the early 1990s. Ahem, that coincides with the publication of what may be the most destructive single paper ever written, which by Michael Jensen arguing that CEOs should have significantly equity-linked pay…so they’d act like entrepreneurs. Yet while most real entrepreneurs I know are serious about building their organizations and shudder at the idea of getting rid of people to bolster margins and placate investors, it’s become the norm in major corporations. After all, it’s hard and takes time to build new products and operations. It’s so much easier to take an established franchise and run on brand fumes by cutting service levels, advertising, and running the staff you do retain to the bone.

But what about the under-investment?

Investors, meanwhile, appear to be losing enthusiasm for startups. Total venture capital invested in the U.S. fell nearly 10% last year and has yet to return to its prerecession peak, said PricewaterhouseCoopers.

The share of capital going to new business ventures has fallen even faster, PricewaterhouseCoopers data show, and is more concentrated: Silicon Valley took 40% of venture funding in 2012, up from about 30% in the late 1990s.

The problem here is drunk under the streetlight. Investment in new businesses is conflated with VC investment, when fewer than 2% of all startups have institutional backers. The overwhelming majority of new businesses are funded through savings, family, friends, and credit cards. And in the aftermath of the crises, as the Journal in particular recounted, a lot of small businesses got killed when credit card companies slashed credit lines on established customers with good payment histories and FICOs because they were in the wrong ZIP code (the credit line reductions were particularly aggressive in the markets with the biggest home price declines). Many small businesses use credit cards seasonally, placing large orders in the spring or summer for materials so they can build and ship in time for fall season buying. The survivors often downsized, and anyone who knew someone who got whacked like that would likely be wary of using that type of financing.

As for venture capital firms, one of my VC buddies predicted the decline of VC in 2004. He said then if you looked at industry returns, it was due almost entirely to the dot-com era, and then to a remarkably small number of monstrously profitable deals at the top players. Once those deals were far enough in the past to no longer be included in fund consultant metrics, the allocation to VC would fall sharply. The industry did get a new lease on life due to the social media boomlet, but that is past its peak.

Moreover, investor behavior tracks corporate short-term-ism. Why tie up your money in an illiquid investment when you can play the markets? Andrew Haldane of the Bank of England has found that investor return requirements are several percent higher than they ought to be. That restricts investments of all sorts, particularly on ones with longer-tailed payoffs.

The article does, at points, mention changes in the structure of the economy which make it harder for small businesses to succeed, such as:

One barrier for prospective entrepreneurs may be the growing dominance of large corporations in nearly every industry, which make it tough for new ventures to gain a foothold. A small bookstore no longer needs just a better selection or a friendlier staff than the crosstown competition—it also has to compete with national chains and, increasingly, such Internet retailers as Amazon.

Funny how it fails to mention how failure to enforce anti-trust rules is a big culprit in the increased dominance of large firms.

But the really bizarre omission is the crappy state of the economy. Casselman seems puzzled that people who have jobs are staying in them longer. Did he somehow miss what happens when people, particularly those over 35, lose a well to decently paying job? They might never work as anything more elevated than a burger-flipper or Walmart greeter ever again. For the most part, the employed hang on to jobs for dear life because the downside of job loss is so much worse than before.

Another gaping oversight in the decline in starting new businesses is the failure to mention indebtedness, particularly student debt. The sort of kids who might have bootstrapped a company in 1982 are often saddled with loans. Older people who are carrying personal debt (say a car lease, which would have been almost unheard of in 1982, and likely higher mortgage payments relative to income as banks raised the debt to income levels they’d approve) would often correctly question the wisdom of taking on more debt to fund a venture.

The story also tisks-tisks the reluctance to move:

Americans move less often, with rates of interstate migration falling for at least 20 years, according to census data. They also have less workplace wanderlust: 53% of adults last year held the same job for at least five years, up from 46% in 1996, according to the Labor Department.

The author clearly missed it, but one reason is companies themselves transfer people less often. When I was a kid, the “I’ve Been Moved” life of mid level to senior corporate managers was sadly common. It went out of fashion partly because the managers themselves started pushing back (bad for kids, and hard to manage with the rise of two-earner households) but also because the companies stopped subsidizing it, realizing it was one of those costs it could live without (when I was a corporate brat, the companies not only paid for the move, they’d advance proceeds against the sale of the house in the old location, and would eat any losses on its sale. This happened more often than you’d think, since a move in a 2-3 year period would mean the house would not appreciate enough to recoup brokerage costs). And with the job market so competitive, someone looking for a job long-distance is even more disadvantaged than the past.

So for the most part, this article ignores the elephant in the room: “It’s the economy, stupid.” It’s completely rational to shun entrepreneurship when conditions are crappy. Too bad the paper resorts to blaming workers as risk slackers rather than fingering the real perp, namely, failed neoliberal policies.

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  1. Richard R

    Another fantasy about entrepreneurship is that all these daring souls are manufacturing the latest innovative widgets. At one time I would guess that most small business start ups were in retail. But how do you compete in retail when big boxes and national retail chains have taken over? Small retailer often can’t buy goods at prices that allow them to make a profit and they have trouble being able to lease decent space.

    Without small retailers, small start up manufacturers have no one to sell to. There is no way to start small and build organically.

    There used to be 70 to 80 thousand independent hardware stores in America. Now there’s Home Depot, Lowe’s and some independents hanging on. Do you want to start a hardware store? Or a shoe store? Or an auto parts store?

    1. NotTimothyGeithner

      There is no West to move to either from just new communities such as the frontier or development along the lines of federal spending in California. Despite the federal spending, the Washington metro area besides the older communities in Maryland is nothing but chains because they are the only ones who can afford the risk because the money is so concentrated in one area*.

      Of course, Wal-Mart wouldn’t exist if Truman didn’t cook up that Cold War nonsense. Walton’s original stores were outside of rural, Cold War era bases which catered to soldiers by amazing the rubes or providing the products one bought at home (another con, but I imagine a soldier from Brooklyn wasn’t impressed by a Wal-Mart’s building.)

      *Then they whine about “their” tax dollars supporting other parts of the state while remaining oblivious their whole economy is based on the collective insanity of the fascist state.

  2. marty

    WSJ too often resembles FOX News – a fact-free zone where one’s pre-existing ideological bias is the starting point and “facts” – those pesky things – are arranged to fit into the ideological box.

  3. David Lentini

    I’m not surprised at all by the Journal, it’s been nothing but neo-classical propaganda for years. And now that QE has been in place for years with no visible results for the economy, they have to offer an apologetics about why it’s not the failure of neo-classical economics. First, it was those lying, smelly, stupid, consumers who borrowed too much money for their own good. Then it was government regulation and “uncertainty”, and it’s always taxes (of course). Now they turing oh so gently on their own class, calling our the investors and CEOs for not taking enough risk.

    Which, it seems to me, ironically is the death knell for the Friedman-Schwartz explanation for the (First) Great Depression and an appeal to that nasty Mr. Keynes’s “animal spirits”. Clearly, bailing out the banks and making money nearly free to borrow didn’t bring ’em all back to the casinos to start a new round of investment. Clearly, in contradition to Friedman’s blather about investors wanting to make money on real commerce, we now see real investors just want to make money as fast as possible; so they prefer to ride the stock market and any other bubble they can find.

  4. ArkansasAngie

    I am a tiny angel investor. I have one company right now that has a great new product, patent pending. The product is simple simple and doesn’t require an info commercial to understand its use. I have no doubt in the 80’s, 90’s that it would have found its market. Today, however, it is questionable. Why? Because it needs consumers to buy it. Nobody has any discretionary money.

    BTW — I do agree with many of points on entrepreneurs. Taking risks and gambling are not the same.

  5. vlade

    About the best business school teacher on entrereneurship I met said “you never want to risk your money, you risk other people’s money. You risk your time, which is precious enough, so get someone else to risk their money”. Enterpreneurs take _calculated_ risks. Not “let’s go an dive in” risks. In fact, the inability to look at the risks is usually the most common reason for failure. Ventures that would succeed fail because people think all will run well from day one. The a cashflow problem comes, and they die.

    1. PQS

      Yes – what’s that joke from “The Producers”?

      “Don’t put your own money in the SHOW.”

  6. banger

    One thing that was not mentioned was health-care. If you have children you have to stay in your job if you get some kind of insurance there because it’s unlikely you’ll find anything you can afford as a small business owner. I doubt Obamacare will do much to change that but I could be wrong.

    As for the WSJ POV, it is standard stuff for them. They assume that we live in a world we do not live in–it is one we ought to, according to them, live in but does not deal with the real world where everything is gamed where law-breaking, fraud is ignored if you are a big player. People know this–they sense that there is a fix and are reluctant to get into business. The rewards are small and the risks enormous.

    1. Mcmike


      Access to group insurance is the elephant in the living room. It is smothering economic “turnover” and in that sense making people risk averse.

    2. curlydan

      Amen! Lack of single payer is a huge impediment to entrepreneurial behavior for those with families. Any family person with moderate savings who wants to start a business probably thinks about 3 things: pay the mortgage, buy the food, and have health care for the kids. Food can be cheap, selling the house and renting is a possibility, but health care is crucial.

      1. jrs

        of course the rent may be no cheaper than healthcare. It’s the overall COST of *basic* living – it’s astronomical.

    3. Kokuanani

      Health care costs [insurance premiums] have to cramp the “established businesses” as well.

      I’ve never been able to understand why “business” didn’t get behind single payer/Medicare for all in the health care debate. It would be so much to their advantage. Why can’t they see that?

      1. normal ordered

        During the health care debate, proponents of single-payer should have made these kinds of arguments targeted at the “other side”. They should have pointed out that single-payer health insurance would restore the American entrepreneurial spirit to bring people over to their side. Instead they preached to the choir about utopian ideals.

      2. PQS

        I wondered that, too, and still wonder. The best answer I’ve seen from around the web is that Big Bidness doesn’t WANT free agent employees. They want wage slaves who will work for any reason, up to an including Health Insurance. It seems likely, but not terribly convincing, IMO.

      3. banger

        We need to understand that the community of corporate oligarchs is very tight and has always been tight–they think alike and have learned, after Roosevelt how to act collectively to move the country as far to the right as possible. In order to do this they have to insist that the media not present alternate views thus the fact most Americans have no idea of how good other system are as systems because they offer universal coverage at close to half the cost. People don’t know that today the federal government pays 9% of our GDP on health care–if it had a single-payer or other rational system that would nearly cover covering everybody.

        Thus the 9% fact, the fact there are a multitude of alternatives, the fact most illnesses are caused by stress which our decision-makers believe is good, the fact we pay twice the average of the OECD and so on and so on. The corporate oligarchs and their employees, the politicians refused to say anything about all that and thus the media did not cover the issue other than as a horse-race. We have yet another reason to, frankly, demonize the press which today is nothing more than a corporate PR/propaganda bureau.

        If the system were to be reformed and it worked that would take away the argument that “there is no other choice” that keeps these nasty MFs in power.

        Imagine, if our HC was universal, relatively hassle-free and cheaper, then people might think that other things could be reformed as well and that government might be effective. The corporate sector wants to keep us ignorant and fearful and not confused by reality. I think that making sure nothing works in government is a terrific way to seize direct power–that is what those guys are after, btw, nothing less–not so much profits but absolute power is their goal–why that is the case has to wait for another time.

  7. DSB

    You better understand the entrepreneur and small business owner better than most. You hit all the high points and some nuance too. Please pass along this post to Barry Ritholtz. I would add to your comment about that “… It’s the economy, stupid” that it is a balance sheet recession too, which you cover in your comments.

  8. Mickey Marzick in Akron, Ohio

    Let’s see… for well over the past 30 years, if not longer, most people have been told to come to work and leave the “thinking” to management. And for those who thought for themselves and rocked the boat, they often found themselves looking for employment with their coworkers observing the consequences of such behavior. So what did they do? They came to work and did what they we’re told, leaving the “thinking” to management. Now, their CEOs are preaching “innovation” but can’t tell you what it entails or can’t understand why their employees are risk averse. How can any “bureaucrat” who climbed the corporate ladder on the stairway to heaven playing the game know anything about innovation in such a corporate culture? For many, innovation is a new reorg chart with names listed in a box… all form without any substance.

    Indeed Yves, do you recall the article “Managing Our Way to Economic Decline” written in the early 80s? What has changed? Individuals from accounting/finance with no real knowledge of the business or “project mangers” who can manipulate an EXCEL spreadsheet but who readily admit that they have no technical understanding of what the project entails. Then too, innovation in manufacturing and that in service-related industries is not the same. Adding a fee for every service once provided for free is hardly innovative – more like rent extraction. Banking “services” come to mind in this regard. Likewise, when you purchase an appliance [washer/dryer/refrigerator] and have to have it delivered, there is a delivery fee, an installation fee, and a disposal fee for the removal of the old one – all of which occurred for free at one time.

    Innovation in manufacturing occurs with the product or the process in which it is produced, usually involving engineers, metallurgists, chemists, machinists, plastic extrusion – someone familiar with both the product and process whereby it is produced. The product is either improved or cheapened [product differentiation] or the process whereby it is produced is rationalized so as to reduce the cost of producing it. To the extent that information is manufactured, information technology has some interesting parallels. But there is one helluvah difference between an electrical/chemical/mechanical engineer and a financial engineer or run of the mill MBA. Reducing cost and how one goes about doing so for the former differs from that for latter. And once you understand this difference you know the difference between “innovation” and “rent extraction”. Trouble is in too many cases, finance now trumps everything else which brings me back to how we “managed our way to economic decline”.

  9. Susan the other

    So many things have happened it’s a wonder there is any business left at all. Why should anyone start a new business when it is not just risk that must be managed but a completely incompetent government who has no qualms about pulling the rug out from under you because the entire – entire – financial industry collapses? The WST calls this “risk taking.” What a laugh. Add to that the whirlwind of the future, and not just climate change. Internet retail; investment sink holes like Africa because the return could be enormous; a manufacturing sea change soon to happen with 3-Printing; and the whole idea of green living on ice for some mysterious reason. We hear that oil will boom, but we know it wont so we deduce the cost of energy will be difficult for businesses; we see a justice system that has failed to work and laws that are never interpreted in favor of small people. Securities law has been ignored. Fraud is the favorite business model, if you are a big corporation. “Entrepreneur” is a word that means someone with a big idea, but patent law will not help to protect that idea in most instances. We have no risk-takers because we have no economy, we have no economy because we virtually have no country. The WSJ is a true fish wrapper.

  10. washunate

    “So for the most part, this article ignores the elephant in the room: “It’s the economy, stupid.” It’s completely rational to shun entrepreneurship when conditions are crappy.”

    Yves, thank you for your lonely but vigorous quest of continuing to state the obvious in a world full of stoopid.

  11. charles sereno

    Attention philosophers: Yves has just delivered a magnificent MOOC course while, I daresay, she was neither educated that way nor does she approve it now. Paradoxes are the meat of philosophy!

  12. Dan Kervick

    The headline alone raises the question of whether the Journal knows anything about real entrepreneurship, as opposed to fantasy version noisily promoted by management gurus and other folks in the fee-extraction business.

    Great point, Yves. The US public is constantly urged to worship the “build it and they will come” model of the entrepreneurial guru-genius like Steve Jobs. On that model, the role of the entrepreneur is to be a far-seeing visionary who understands what people will ultimately want, long before those people themselves know they want it.

    But as far as I can tell, most business innovation comes from clear no-nonsense communication between entrepreneurs or existing businesses, on the one hand, and their actual or potential customers. The customers communicate a want to the business along with some indication of what they will pay, and then then the business works to satisfy that need, seeking to minimize risk to the greatest extent possible.

    Of course, if people are averse to throwing their money away in a casino, that is bad news for the casino owner – which is where WSJ is coming from.

    1. washunate

      I would actually offer a different perspective there on Steve Jobs. His primary success in business was in offering products today that customers want (and implicit in that, getting the people around him to produce those products he was offering).

      Of course that involves long-term planning and vision, but the key component is in having the focus to turn most of that down, to do what can actually be delivered today rather than vaporware for tomorrow.

      When major strategies were unveiled, like the digital hub or iPhone OS (iOS), they were long-term declarations of where the company was going, but integral always were products to be bought today to fund the development and ecosystem and customer excitement to get to tomorrow.

      Or to go back to the 1970s, what Jobs and Wozniak and Wayne were doing was selling an actual device that worked then, not promises and visions of the future. It was Jobs’ ability to advertise a product, not a vision, that allowed them to make initial inroads in the now infamous Homebrew Computer Club and Byte Shop computer store.

      And of course, it’s good for any entrepreneur to have good people around him – one of the most interesting tidbits I think from the Apple I from a business perspective is that Jobs wanted to charge more initially, but Wozniak convinced him that a lower price would be better. How many leaders today in government and business have partners they allow to challenge them, let alone change their mind after being challenged?

          1. Jackson Bane

            — whoops
            is the idea that it was one lone pioneer. Jobs had plenty of help, as did Bill Gates, largely in anti-social ways. ‘Nuff said on that, read up.

          2. washunate

            What Jobs and Wozniak (and Wayne) did was very different than what Gates and Allen did. Apple was primarily selling complete machines to end users – hobbyists who wanted to play around with computers – and made it big with the Apple II. Microsoft was primarily selling components (software) to business clients (Altair BASIC), and then came to become a big company through sales through IBM of MS-DOS. IBM’s idiocy in allowing a supplier to have a monopoly (but no exclusivity) over a key component was exploited quite successfully by Gates (and another huge profit center, Intel).

            But agreed with the above comment, let’s not romanticize these developments. Gates and Jobs were both relentless and ruthless business leaders. What’s interesting is that out of the universe of jerks, why did those two particular men create great value? We also shouldn’t be too hard on them, because the very act of starting your own business, no matter how big it ultimately grows, is a very audacious act – your sales pitch is that you are so good that other people should pay you money for what you create.

            And in contrasting the legacy of the two, why did Gates’ vision hamstring Microsoft, while Jobs’ vision has empowered Apple? The difference, I think, is in the focus on the product – Apple wanted to make products that were great; Microsoft wanted to force users to use their products even where they’re not very good (the ‘Windows Everywhere’ strategy has made it remarkably difficult for Microsoft to enter the mobile computing paradigm).

            As far as Sam Walton, he was very similar to Jobs in ruthlessly focusing on delivering what customers wanted (or at least, you know, his vision thereof). But unlike Jobs specifically, and really all of tech generally, being a retailer meant much more head butting with opposing stakeholders (workers, community groups, competing business owners, etc.). When Tower Records went out of business, Walmart was the largest music retailer in the US. But it wasn’t Walmart that put local ‘mom and pop’ music stores out of business – it was Tower Records that had already done that with their new ‘big box’ strategy of selling a variety of entertainment products under one roof. Of course, then they got out-big boxed by discounters like Walmart and Target, electronics stores like Circuit City and Best Buy, and bookstores like Borders and Barnes and Noble. And of course, Circuit City and Borders have since disappeared, too!

            The main public policy problem with Walmart is that we don’t have universal health insurance, universal unemployment insurance, or a decent minimum wage. It’s not like Best Buy and Whole Foods and Papa Johns are Awesome Places to Work.

        1. banger

          Walton rationlized retail by using a completely systems approach including techonology. He saw the waste in the system and cleared it up by doing the only rational thing. Walmart, initially, made complete sense. That it disrupted communities really is not the point–if communities didn’t want to be disrupted they would have done something about it.

          Jobs, on the other hand did not rationalize anything. Since he dropped acid he knew that there were other ways of “knowing” and he trusted his intuition to guide him to his destiny and he really just tuned in knowing that what he thought was cool actually would turn out to be cools for most people. He, essentially, was kind of a magician rather than a systems thinker.

          1. Philly Dix

            Walton utilized powerful lawfirms, union busting, slave labor, a neo-liberal juggernaut. Everything that’s really wrong with consumer USA. Jobs relied heavily on everything from marketing to padding higher education with his NEXT cash cow. He picked up major parts of code that were free, like sand on a beach, prettied it up and sold it. Just like the Google kids, just like Twitter inc, there is no real heavy innovation, other that placing a price tag on something. That’s Wall Street for ya. Fund it, sell it.
            Neither figurehead or CEO had had any sort of Mozart like ingenuity or creativity as much as their marketing has successfully brainwashed a generation or two. Apple is closed sourced convenience, there is no need to carry a radio or use any device that says apple that couldn’t be done just as easily without it saying apple.

          2. skippy

            Jobs did like his musical heroes and dropped acid… on the front row of the gig – concert.

            Skippy… oldest marketing ploy… show them your religion in an altered state.

          3. Philly Dix

            “That it disrupted communities really is not the point–if communities didn’t want to be disrupted they would have done something about it.” We all have the opportuniy to spout off on NC. But good lord, in communities where people realize they do indeed have very limited power against a problem like Walmart THEY DO do something about it. The statement you’ve made is so troubling because that’s exactly the same sentiment from royalty when people lose their rights, or are tossed out of their houses, or lose due process …. etc. F-apple.

          4. AbyNormal

            Skippy’s on it! i happen to have read about it this weekend…(in PsychologyToday)

            The ‘Shroom Shift
            A continued sense of well-being was reported by nearly two-thirds of the 36 people in a Johns Hopkins psychological study who where given “shrooms”, magic mushrooms containing the psychedelic producing element, psilocybin. Steve Jobs reportedly called his LSD experiences creativity-enhancing and of significant importance in his life.

            Apparently a significant, positive personality shift took place with participants reporting a greater sense of life satisfaction. Changes in personality that would perhaps have happened subtly over many years appeared to occur nearly instantly. Similar experiments have been conducted with cancer patients suffering depression and others with different kinds of stress.

            I have frequently had hypnosis clients report that habits, behaviors and feelings which have held them back for years, been barriers to their sense of well-being had vanished after a few sessions in hypnosis. It has been as if new mental imprints had formed which enabled the client to overcome stress, sadness; excessive behaviors of all sorts like smoking, eating, drinking or gambling too much.

            The NYU psychologist Anthony Bossis reported that participants in his cancer study “… are telling us stories that I find stunning- that they’d have this kind of shift in one day and that it would last”.

          5. banger

            @Philly Dix

            Come on give me a break. This is the problem with the left–no sense of reality. Walmart is what people want and the reason why we have neo-liberal economics isn’t because it’s being imposed on us–people want it! They want cheap prices and slave labor as long as it’s kept quiet. There is a movement towards buying local products, food and so on and maybe more people other than the usual suspects will be interested in de-constructing the consumerist religion–but we’re not there yet.

          6. jrs

            How it often actually works is a Walmart wants to come to town, there are protests (ie the community is involved protesting), corrupt local politicians give into Walmart. End of story. Sure they still relying on people shopping there after that point, but the point is there is resistence, it’s outspent. Washington isn’t the only corrupt government in town.

          7. skippy

            “Walmart is what people want and the reason why we have neo-liberal economics isn’t because it’s being imposed on us–people want it!” – banger

            I have to disagree banger, completely~~~

            For someone of your professed knowledge, its a troubling – contorted – conflicted – omission of common fact.

            skippy… cortex injections from birth tell a different story… full immersion psychoanalytic high voltage 100s of billions of $$$$ auditory and visual waves… is not a shite and grin exercise. It is part and parcel of full spectrum dominance… duh…

    2. jrs

      If the public is taught to worship a blink risktaking version of entrepreneurship, then that is just another reason they want no part of it. It entrepreneurship is putting it all on red, then a job that doesn’t keep up with inflation, is rationally, mathematically preferable.

      1. jrs

        blink = blind

        So basically the cheerleaders (for a myth that never was) only help to contribute to the lack of anyone sensible dreaming about the entrepreneurship route.

  13. Steve in Flyover

    My last layoff gave me the opportunity to become a “small businessman.

    I can tell you about my accounting issues getting more expensive. Or no opportunity to make money on parts sales (where the real money is), because my primary/only source for parts doesn’t sell parts at “Jobber” price to anyone other than their approved service network. Or that there is no money to be made off of labor, no matter how highly skilled.

    Even all of these things aren’t the main problem…..which is: LACK of CUSTOMERS. On a good week, I might have 20 billable hours.

    Good thing I found a full time job.

  14. Javagold

    i was always told the best time to start a business is when things are BAD, as you would be ready to go when things ramped up

    I do not believe THIS TIME, that is or will be the case

  15. Rehabber

    Deregulation? What’s been the growth of local ordinances, state regulatory schemes, and the federal regulatory state since 1982? The federal government is churning out an average of 68 new regs each day. Most local government entities have passed multiple tomes worth of regulations that are enforced ruthlessly against the small, especially home-based entrepreneur. Add in the federal strucures like OSHA, FDA, USDA, EPA, FCC, Title III to the ADA, then layer in the individual state regulatory structure – and the cost of compliance is not worth it to the average person who may want to start their own business.

    Let’s dispense with the deregulation fantasy, or at least delineate between regualtory effect and enforcement based on corporate size. There are legions of new regulations pouring out of every level of government. And many, if not most, are targeted at squelching competition for existing large corporations, because thos corporations are lobbying for and writing them. The enforcers go for the small fish because its an easy win, and they want to work for the big fish one day. If they actually tackle a big corporation, then the large corporation has the on-call lawyers and elected officials to string things along, while expensing legal fees and fines as a cost of doing business. Why would entreprenuers put themselves at risk in this minefield?

  16. Me

    I always hear about “confidence in the markets”, how we have to make the “markets” happy and confident about investment. The problem is that there is no distinction between financial and industrial capital. When people in power talk about market confidence they are talking entirely about financial capital. Financial capital wants to take money in and out of countries, they want little to no regulation, they want little inflation (ie growth), they want more debt (private or public, both are good for financial capital) and they want their dirty hands on public recourses for pennies on the dollar. The privatization of parking meters in Chicago is a perfect example of what they want. Then they can charge a market up price and, since the privatized assets are not given to a free market but to at best oligopolies, there will be no punishment if there are no alternatives to turn to.

    Productive capital wants entirely different things. Productive capital invests years in advance. It takes lots of money to build a factory, it takes money to move production elsewhere and it usually takes a while to earn back profits on investment. Many times it takes years. So what gives productive capital confidence? NOT giving financial capital the ability to take money in any out of the economy since that creates instability. Higher inflation than financial capital would want since that allows for higher profits and means, usually, that workers are spending more and the velocity of money (how quickly money turns hands) is likely higher. Most importantly they want DEMAND. If private institutions aren’t, or can’t, spend more, if consumers are maxed out on debt and their wages haven’t grown in decades, that leaves only government stimulus (on the real economy, not funneling everything through parasitic banks) to raise demand.

    However, those in power (including many at the WSJ) have made sure the government doesn’t do just that. Government spending will NOT increase demand. I don’t believe for a second they didn’t see this coming.

    The fundamental problem is that finance is now a much larger share of domestic profits than in the past and the demand for finance’s product (debt) is now not there. We have offshored our production, so when the dollar goes down we can’t take advantage like in decades past from the lower currency value. The only fix is to increase investment in industries that will grow out of necessity in the coming years (green industries and public transportation) along getting back to protecting domestic industry. That is what the US did for a century and a half; we had the highest industrial tariffs in the world during our developmental phase. Having said that, the WTO and the coming TPP will make that very hard to do (although not impossible, witness modern China).

    As I said elsewhere, no fix exists within the status quo. The answers to these problems are necessarily radical in nature and require a fundamental break with existing economic policy. That isn’t in the cards any time soon though since the mass movements that are needed to push those changes through and to put the economic alternatives in place don’t exist at the present time.

  17. jfleni

    None of these wrong-headed and silly conclusions are a surprise when you consider the deranged “Dorian Gray” character who bought and polluted the formerly sober and reflective Wall Street Journal.

    Nor is reluctance to move very surprising when moving sometimes means landing directly into a place where lunatic Republicans and their odious neo-Confederate allies call most of the shots locally, despite almost no public support! Moving could literally be jumping from the frying pan into the fire, losing almost everything in the process!

    1. jrs

      Reluctance to move = family values. That is the value of the extended family and of community networks in times of uncertainty. It’s a good thing in general, although clearly not if you have a bad family. But it’s not lone wolf against the worldish enough, this having extended family or community support, despite the fact that it is a sensible counter to a frayed social safety net (again if your community and family aren’t crazy – many people’s are).

    2. Mike G

      Who in their right mind would accept being transferred around the country every few years for corporations that treat everyone below the executive suite like garbage, that will dump you onto the street at the drop of a hat?

      It was one thing to accept transfers in a grey-flannel age when it was, for many, part of a long-term career plan that would steadily move you up the ladder. But be the chump who moved to Omaha at the corporation’s bidding and in a few months find yourself laid off in a city where you have no social support network? Treating people like disposable diapers has consequences.

  18. allcoppedout

    Literature on the entrepreneur is vast and mostly nonsense. One guess I make is that it would be weird if we could teach it and if we could we would destroy it. Creative strategies only last so long because of copying. Much self-employed business is hardly entrepreneurial at all – taxi driving, most small shop-keeping – and many self-employed people do work learnt with former employers and taken from them. A huge amount of current self-employment simply exploits the job market conditions.

    To look at what was thought to make an entrepreneur about the time Yves might have been leaving business school one might start here

    It’s a complex paper, but the answer boils down to inheritance.

    More recent research is summarized here
    and here

    Here is a recent argument that non-conforming entrepreneurial strategy is better than trend following

    I seem to remember supervising two dull PHDs done by a couple of bright people who quit and started businesses.

    A number of us could start a university business in here. In examining this as a thought experiment, we might establish what many of the issues are concerning business people, set up and development. No doubt a number of us know what the university business is and their costs (I reckon a 60% overhead we wouldn’t have). In many respects current universities resemble the UK shipyards in the 1980s – stuck with property assets of little relevance, expensive staff and manufacturing methods that can be undercut by mass production (we’d do mass customisation on a common base). The business plan isn’t too difficult and probably the first question to ask is what puts us off the relatively small effort in writing it. The answer in most business development I do is people have little faith in themselves to get start up money, overcome red tape or give up current security.

  19. jrs

    “If you have the personality to thrive in or at least tolerate being on the corporate meal ticket, you need to be nuts or have delusions of grandeur to throw that over and take a flier on a new business”

    The thrivers are probably few and far between but the tolerators (even just barely endure another day of it at a time)many. But what of it, when it’s the main way to survive in the world as it is, and when the point of the existing economic system is most definitely not human thriving (or perhaps even survival at this point).

  20. jrs

    Would it be horrible to say I read this article to figure out more on being an entrepreneur? :) Not that it’s anything I have to do, wage slavery is what it is, and working class not an identity I deny (I’m technically middle class but consider everyone who is not a capitalist to be working class at root). Just interested in sensible approaches to risk, not take it all to Vegas with a copy of “Think and Grow Rich”.

  21. JTFaraday

    Oh man. That video was too much.

    I really miss the days when you had to be a middle aged white guy to get away with bullsh*tting like that. And possibly not a bad example of what Susan Sontag would call “naive” or “pure” camp, to boot:

    “Creative destruction–the US has been better at that than just about anybody!”

    Yeah, you could say that.

    Zero, O, Zero percent chance either one of these guys has actually read Schumpeter.

    I’ve been trying to figure out if I read Schumpeter (quickly, not carefully) in a political science class I sat in on years ago. I’m not sure.

    Either way, even a quick wikipedia check reveals that Schumpeter agreed with Marx that teh capitalism was riven with internal contradictions, and that teh creative destruction could well lead to its demise:

    In Schumpeter’s vision of capitalism, innovative entry by entrepreneurs was the disruptive force that sustained economic growth, even as it destroyed the value of established companies and laborers that enjoyed some degree of monopoly power derived from previous technological, organizational, regulatory, and economic paradigms.

    However, Schumpeter was pessimistic about the sustainability of this process, seeing it as leading eventually to the undermining of capitalism’s own institutional frameworks:

    “In breaking down the pre-capitalist framework of society, capitalism thus broke not only barriers that impeded its progress but also flying buttresses that prevented its collapse. That process, impressive in its relentless necessity, was not merely a matter of removing institutional deadwood, but of removing partners of the capitalist stratum, symbiosis with whom was an essential element of the capitalist schema. [… T]he capitalist process in much the same way in which it destroyed the institutional framework of feudal society also undermines its own.”

    Which makes good sense if the term actually originates with Marx.

    Naturally, I’m assuming Rupert Murdoch didn’t go out an hire a bunch of closet Marxists… which brings us back to that unwarranted air of certainty about the beneficial nature of social instability.

  22. jrs

    I wonder if you are over 35 if entrepreneurship is really any more risky than retraining for a brand new career. And if not both are risky and maybe irrational. But there’s not much in alternatives if one hates their job, other than slowly counting down the days to a retirement they plan to steal anyway.

  23. Anon

    Great post. Apologies if Casselman actually adressed the point (‘cuz that’s a paywall I could stand to never see breached), but one more point he could have stood to mention is the necessity of bankruptcy in risk taking. Due to depressed risk appetite from lenders, entrepreneurs are increasingly obliged to rely on their own personal credit. Ford wouldn’t have made it to the Model T if he had been precluded by his first bankruptcy (Detroit Automobile Company) from even considering another risky, and ultimately failed, endeavor (the reorganization of DAC as the Henry Ford Company).
    There’s also a broader point here about success so regularly bred in willful ignorance of the roles of luck and privilege. But it’s ultimately less significant than a realistic understanding of risk so long as we (pretend to) encourage it’s incursion by individuals.

    1. JTFaraday

      Well, not just the role of luck and privilege, but living in an intolerant “one-strike and you’re out” society that does not permit the kind of failure to which you allude.

      On top of that, we increasingly see deliberate attacks on people, both collectively and as individuals, in order to undermine their “market value,” along with their confidence in themselves and their estimations of their own abilities, and thus their own sense of their future value in and to “the market.”

      Perhaps this counterproductive dynamic of deliberately induced fear and denigration “in the market” is adjunct to some of the things the philosopher Cornel West has characterized as “the niggerization of America,” primarily with reference to the growth of the police state in the wake of 9/11.

      In that kind of toxic environment many elect to keep their heads down and try to not get noticed.

  24. Anonymous


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