Jim Manzi does the math for an entrepreneur thinking of making the “leap” in the Obama world:
Consider a hypothetical aspiring entrepreneur: an engineer, say, with an idea for a new company. First she has to invest a lot of her own time just to develop her idea to the point that it could win funding from a venture capitalist or angel investor. The odds of going from idea to funding are, say, ten to one against. But let’s assume that after working nights and weekends for a year to produce a working prototype, write a business plan, and recruit a team, she finally gets funded by a professional venture capitalist. Having cleared this hurdle, she gets to quit her job and work much longer hours for much lower wages for about a decade. All the while, our engineer knows that she has only a 20 percent chance of steering the company to a successful exit that makes her a lot of money
That sounds about right to me.
But wait… let’s factor in the Obama spending/taxing plans. Manzi calculates that factoring all of that in, you would needs a 30% chance of success to achieve the same financial result after taxes, inflation and other governmental cost additions.
Net result… your idea has to be 50% more sound before you try it under Obama’s regime.
Net Net result…. less entrepreneurs, less vibrant economy, and probably, a 1 term much despised President.
March 4th, 2009 at 2:31 pm
[...] stuff in their garage (heck, Guy Kawasaki even named his venture capital company Garage ).Tim On Incentives – kennelson.com 03/04/2009 [ image]Â Jim Manzi does the math for an entrepreneur thinking of [...]
March 5th, 2009 at 5:48 am
I think you way over-estimate the effect of marginal tax rates on entrepreneurs. They are much more driven by the opportunity for a big win of some sort, of often unknown profitability, and the chance to be their own boss. Business plans for future businesses aren’t accurate enough for such fine calculations anyway. Many more factors of unknown size and effects dominate their thinking.
March 5th, 2009 at 7:52 am
Hmmm, agree with Carl! How many fail the first time? The second time? The third time? How many successes by non-engineers? No stats, no confidence interval, it’s a story about Bambi’s campaign promises, worthless.
March 5th, 2009 at 9:11 am
Hmm…. let’s see, I’ve done it. You guys haven’t. I know what I looked at.
The probability of losing 70% or so to taxes stops me cold. I’m at wits end about what to do abot it now. I’m pissed, certainly.