[FoRK] Interesting analysis of entrepreneurship and risk

Jeff Bone jbone at place.org
Thu Aug 28 19:54:57 PDT 2008


In case you missed this, an interesting study:  "THE BURDEN OF THE  
NONDIVERSIFIABLE RISK OF ENTREPRENEURSHIP."

   http://www.nber.org/papers/w14219

In case you needed any additional evidence to suggest that, at least  
apropos "startups", raising the long-term cap gains rate is a bad  
idea.  Russell will insist that Obama wants some kind of exclusion for  
this type of activity, but I'll agree with James that this is both  
smokescreen and entirely impractical from a legislative or  
administrative perspective.  In any case, doing so w/o carve-out  
actually increases the entrepreneurial burden, the so-called  
"certainty equivalent-value of the entrepreneurial opportunity."

How much would you *pay* for the opportunity to become a founder in a  
promising startup?  Turns out that for a risk-neutral individual, it's  
about $4.4M.  For a person with a normal level of risk-aversion, it's  
barely positive.  As a serial entrepreneur, clearly, I'm not  
particularly risk averse.  That should factor into how you folks think  
about my statements about likely risks.

Myself, don't care much anymore from a personal impact perspective.   
Out of that racket.  On strike for almost 4 years now.  I'm John  
Cusack in Say Anything:  “I don't wanna sell anything, buy anything,  
or process anything as a career. I don't wanna sell anything bought or  
processed, or buy anything sold or processed, or process anything  
sold, bought, or processed, or repair anything sold, bought, or  
processed, you know, as a career, I don't wanna do that...”  Well,  
anymore.  Too many idiots trying to screw up your deal.  Generally  
even when you win, you lose.  The economics don't justify the  
frustration, at least for me anymore after several iterations;  the  
world's full of idiots anyway, you don't have to invite them over for  
tea and crumpets.  Far easier ways to make money.


jb





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