Do Startups Create Jobs or Destroy Them(betabeat.com)
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Do Startups Create Jobs or Destroy Them
http://www.betabeat.com/2011/11/03/do-startups-create-jobs-or-destroy-them/
5 comments
I think the Vonnegut reference is an apt one. But there is also a simpler question at hand. When we romanticize startups, do we actually undermine the larger, perhaps less interesting companies who are better at generating employment and economic growth.
In the same way that the American dream of home ownership came back to bite us, perhaps the cult of entrepreneurship could use a hard look.
In the same way that the American dream of home ownership came back to bite us, perhaps the cult of entrepreneurship could use a hard look.
You don't increase wealth by being inefficient. The cult of startups leads to more startups, but it doesn't make them more successful.
There are some exceptions, but the market can always be irrational for a little while. LinkedIn and GroupOn aren't real businesses and eventually the stock price will reflect this. However, in the short run they are able to pump the stock price by having a microscopic float and getting listed on things like Russel 2000.
Oracle, Cisco, Intel, HP are all startups, they are just very old and established. They employ tons of people. They aren't doing us any favors if they barely survive, however. Inefficiency makes us all poorer, even if in the shortrun it makes some people better off because of a paycheck (HP employee for example).
There are some exceptions, but the market can always be irrational for a little while. LinkedIn and GroupOn aren't real businesses and eventually the stock price will reflect this. However, in the short run they are able to pump the stock price by having a microscopic float and getting listed on things like Russel 2000.
Oracle, Cisco, Intel, HP are all startups, they are just very old and established. They employ tons of people. They aren't doing us any favors if they barely survive, however. Inefficiency makes us all poorer, even if in the shortrun it makes some people better off because of a paycheck (HP employee for example).
Let's take an example - Etsy has grown to 80 engineers in the last year. If 50 of these workers had decided they wanted to go their own way and create a startup, how many jobs would have been created and how many of those people would be out of work?
Easy money at the seed stage means a lot of companies that are small ideas trying their hand at building a business.
Easy money at the seed stage means a lot of companies that are small ideas trying their hand at building a business.
Startups have different goals. Some want to stay lean and disrupt old industries. Others, like Groupon, are inventing new kinds of comapanies and hiring like mad.
Whatever the net-net is in terms of jobs created or killed by startups, the US is better off for having a class of creative people in the technology space trying to create new business models.
Whatever the net-net is in terms of jobs created or killed by startups, the US is better off for having a class of creative people in the technology space trying to create new business models.
I'm always surprised that people claim things steal jobs. If you look at the record of the unemployment rate, it's pretty obvious that it stays the same over time. There are ups and downs, but they are not caused by inventions or efficiency increases.
When you automate a process to scale, you reduce the need for people. In that sense, startups destroy jobs.
But when you create new ways in doing things like unlocking value (like how Facebook has done with connecting the world), jobs are created.
But when you create new ways in doing things like unlocking value (like how Facebook has done with connecting the world), jobs are created.
Startups are really just businesses. So, when people say "I'm going to do a startup", why don't they just say "I'm going to start a business". Well, partly because if you said "I'm going to start a startup" it would sound redundant.
But why don't we say "business" instead of "startup"? The just-so story I am drawn to is that startups must be disruptive. A business can be opening a chain of car washes, or a McDonald's franchise. Nobody is going to use the word 'startup' there. However, what if I started a business, and my goal was to develop a paint that never required washing. That would almost certainly be considered a 'startup'.
Now, when you disrupt, you are disrupting commerce that is happening. It's real money changing hands, people's jobs and so on. For the 'no wash paint' startup, success means putting all the car washes out of business, eventually anyway.
Finally, should we care? No. Nearly every business would fire all of it's employees if it could. The carwash you are putting under? If it could do the same quality of washing with half as many employees, it would fire half of them. If it could do the same job with no employees, it would fire all of them. The point is that there is no moral issue here, merely an issue of who is going to collect the money. And of course the money not going to carwashes will go to something else blah blah blah saddle makers blah blah blah Model T.
Now, there is a Player Piano scenario to worry about. What happens when, inevitably, we automate all the mindless tasks we currently pay people to do? Sure, lawns will look great, cars will be clean, shelves will be stocked, houses will be immaculate, and you'll never see peeling paint again, and ipods will be fully assembled by robots. What are all the mindless people going to do? I don't honestly know. We need to figure this out.