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Why Startups Condense in America
Posted by
Hemos
on Mon Jun 12, 2006 07:37 AM
from the finding-the-why dept.
from the finding-the-why dept.
bariswheel writes "The controversial genius developer/writer/entertainer Paul Graham writes an insightful piece on Why Startups Condense in America. Here's the skinny: "The US allows immigration, it is a rich country, it is not (yet) a police state, the universities are better, you can fire people, work is less identified with employment, it is not too fussy, it has a large domestic market, it has venture funding, and it has dynamic typing for careers. Inquire for details within."
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Better Universities? (Score:5, Insightful)
But I don't agree with all of it: That's odd, all the studies and anecdotal evidence presented to me suggest otherwise. I don't think the universities themselves are better, you're just more likely to make better contacts here than abroad. And the only reason for that is because Americans have money and a lot of them use it to invest (as Paul pointed out).
I've been through undergrad and grad schools in the US and I have to say that there were more than a few courses where I didn't learn anything.
Why is he asking about Universities in Europe? What about Eastern Europe or the Ukraine or Russia? What about the results to the programming challenge that everyone made a big fuss about? What about China's Universities?!
I'm not as confident about the US as Mr. Graham is. In fact, I'm kind of afraid when someone like him writes an article like this because it feels like we're creating a false sense of security as an industry leader.
Re:Better Universities? (Score:3, Interesting)
Re:Better Universities? (Score:5, Interesting)
It's about quantity. If Chinese Universities were able to handle the demand of top Chinese students, they wouldn't flood to American universities by the thousands. There are top universities around the world, but if you write down all the "tier 1" universities in a particular discipline, more than half of them will be in America.
Re:Better Universities? (Score:5, Interesting)
Good point, which gets lost in most discussions like this.
For some reason, most people will read a sentence like "America has many of the world's top universities" and think it said "No country but America has a top university."
This is mostly a sign of the abject level of the teaching of basic logic at schools around the world. In America, too, because most Americans will misread things in the same way.
What I've always found especially curious is the mismatch of the American higher-education system with the open and blatant anti-education attitude of much of the American public. It's not just George Bush; signs of education and intelligence are carefully hidden by most American politicians, because they understand that this would be a major flaw to a huge fraction of the voters.
Meanwhile, people make jokes about how education is now America's major export industry. Funny how a country can make and export something that they don't like to use at home.
Re:Better Universities? (Score:5, Insightful)
This is mostly a sign of the abject level of the teaching of basic logic at schools around the world. In America, too, because most Americans will misread things in the same way.
Well, the resason for the confusion is because, if you read "Top University" as "Top 10" or something like that, the statements are basically synonymous. According to most rankings, America does have a near monopoly at the very top, though Oxford and Cambridge will always be there, and the best Asian universities are certainly improving very rapidly. According to this [sjtu.edu.cn], America has 8 of the top 10 and 17 of the top 20. So I'd forgive someone of the "error" of believing all the top universities are American. I'm not saying it's a good thing, but it's not far off.
What I've always found especially curious is the mismatch of the American higher-education system with the open and blatant anti-education attitude of much of the American public.
That's a bit of an oversimplification. Pretty much the *entire* American public is pro-education. Some of them simply differ on *what should be taught*, which is a pretty significant distinction. And there are a handful of very conservative American universities - not many, but some - so even the most conservative Americans support education and send their kids off to college. And also, the Bible-thumping crowd is a very vocal minority, but a minority nonetheless. I believe the average American doesn't really care about the whole evolution thing to get very riled up.
signs of education and intelligence are carefully hidden by most American politicians, because they understand that this would be a major flaw to a huge fraction of the voters.
I'd say that's a little off too. It's more that the southern and rural voters I believe you're referring to - who may lack sophistication, but not intelligence - don't take well to condescending intellectuals *at all*. Like, say, John Kerry, who came off that way. Contrast that with Bill Clinton, who is brilliant but not condescending, and got on very well with voters of all classes.
To disclose, I grew up in the south, went to undergrad at a bottom-tier university, grad school at a top-10 American school, and now live in a major city on the east coast. So I've seen a few different perspectives on the whole "Education in America" thing.
Re:Better Universities? (Score:5, Insightful)
The only trouble with this is, it blinds us to what makes those empires really succesful -- natural resources, opportunism and good old blind luck, in the form of historical happenstance.
Re:Better Universities? (Score:3, Interesting)
18th Century: France
19th Century: Britain
20th Century: USA
21st Century: China?
I can't necessarily see China succeeding on the level of the previous empires, though, due to their
Re:Better Universities? (Score:5, Insightful)
If you want to read a story about how an economy is not a matter of resources or luck, but rather how little or much a government meddles in the economy, read about Zimbabwe.
http://news.bbc.co.uk/2/hi/business/2780775.stm [bbc.co.uk]
Economies are based on the decisions of its citizens... a million little decisions controls the tide of the economy. When a hands-off, rational minded government or political climate takes place, economies do better. When a meddling, irrational government takes seed, then that's what you get.
If natural resources take such a huge stance, why are most of the oil producing nations still 'poor'?
Your reference to the empires of 100+ years ago doesn't apply because the wealth of that period was 'exported', a.k.a. stolen and redistributed. The American 'exceptionalism' you quote was by large not built on Empire wealth but by the wealth of industry of its citizens. And that itself is pretty exceptional.
Re:Better Universities? (Score:4, Insightful)
Now, what about the laissez-faire free market that was instituted in Albania after the fall of communism? Answer: the whole economy collapsed under the weight of Ponzi schemes and Enron accounting. Go read "Eat The Rich" by P.J. O'Rourke (hardly anyone's idea of a socialist) and learn that your simplistic reasoning isn't actuall born out by studying a range of countries.
Re:Better Universities? (Score:5, Informative)
So, as much as I hate chaufinism (either US or otherwise), this is not it but just a basic truth.
Re:Better Universities? (Score:5, Funny)
I can't stand it either. Learn to drive your own damn car!
Re:Better Universities? (Score:4, Funny)
I don't know whether it can characterised as "chaufinism," but in the US people do seem to prefer driving themselves around, even when going to school, and insist that the the right hand side of the road is, well, the right side of the road on which to be driving.
Or did you mean "chauvinism?"
Re:Better Universities? (Score:3, Insightful)
Does he have extensive and long experience with foreign universities to ascerta
Re:Better Universities? (Score:3, Informative)
I agree with the entire article, BUT (Score:3, Insightful)
Re:Better Universities? (Score:3, Informative)
Re:Better Universities? (Score:3, Interesting)
$1200 per YEAR for college is peanuts.
Re:Better Universities? (Score:3)
It's the Coke (Score:4, Funny)
Re:It's the Coke (Score:5, Funny)
startups (Score:5, Insightful)
Of course part of the problem (both in the US and over here) is that a lot of businesses tend to have a blinkered restricted view of just selling/dealing with their domestic market (which of course in the US is larger) rather than doing business globally (which in a lot of businesses is the best way to grow).
Bay Area-centric (Score:5, Interesting)
As a European I find the article rather America-centric.
As an American I find this article to be Bay Area-centric. Silicon Valley ceased being an engine of significant economic growth after the dotcom bust. It is unlikely to return to its former glory. It is kind of humourous that pundits like Paul Graham are still taking victory laps for an era of growth in Silicon Valley he had little to do with. In the US the economies of the southwest and southeast are much more vital.
Re:Bay Area-centric (Score:4, Informative)
Ahem?
VC Funding by region, Q1 2006 [pwcmoneytree.com]
Silicon Valley startups still receive more VC funding than the next four largest regions combined. Why is this? Stanford and UC Berkeley nearby? The pretty scenery? The affordable housing? In part. But mostly, it's because tens of billions of dollars in VC money resides within a few blocks on Sand Hill Road. And for the most part, VCs don't have any reason to leave the area in search of investments. The Web browser was invented in Illinois, but when it came time to found Netscape, the founders moved West because this is where the VC money lives. That hasn't changed.
France (Score:5, Insightful)
No, really! Type that into Babelfish and ask for an English-to-French translation, and it spits the same word back at you. OK, maybe it's in French dictionaries, but it's obviously one of those words that they're always borrowing from other languages (e.g. the days of the week sound suspiciously like the Italian names).
Let me get this straight... (Score:5, Insightful)
Does this say more about higher education in Europe or the US?
Re:Let me get this straight... (Score:4, Insightful)
Speaking as someone who works in one of the Oxbridge Colleges, I can tell you that what you see from the outside is nothing like what you see on the inside. If I were ever to have kids, I would strongly suggest they avoid either Oxford or Cambridge as a potential place of study.
The place is rife with incompetentence, and absolutely dogged with bureaucracy, politics and backstabbing. I can't understand how the word hasn't got out. It seems to be an extrordinarily well kept secret.
Re:Let me get this straight... (Score:5, Insightful)
I think you've just described every institution of higher learning known to mankind.
Largely true but a flipside too (Score:5, Insightful)
But the US style has it's problems. US companies wind up as slaves to the markets and often damage their engineering skills. The problems in the US car industry show this. While the German car industry has come up with fuel injection, ABS braking and constant four wheel drive over the past 20 years the US industry has invented the cupholder and the SUV.
Likewise, somehow the Japanese are great craftsmen. This skill is reflected in the quality of Toyota's manufacturing and the remarkable qualities in Japanese portable electronics. Apple may have invented the ipod, but the walkman and the transistor radio all came out Japan.
It's good that the world is like this. Countries specialise. But presuming that one companies system is superior for everything to all the others is silly. The best is what is created when the systems work together - as in the computer industry where the parts are made in Asia and the software comes from all over the world, and in particular from the US.
Re:Largely true but a flipside too (Score:5, Insightful)
Re:Largely true but a flipside too (Score:5, Insightful)
Not exactly... GM had fuel injection in the 1950s. All wheel drive was developed in Germany because Audi competed heavily in rally racing. A from of racing that isn't all that popular in the US. Not to mention that AWD isn't all the great of an addition to most cars. It eats more gas and is expensive to maintain. It is good for people that like to drive fast in really bad weather. As far as US contributions to the Automotive art? Pollution controls are a huge one. The US had pollution controls on auto decades before anyone else did. As such they paid for the majority of the development costs.
"Likewise, somehow the Japanese are great craftsmen. This skill is reflected in the quality of Toyota's manufacturing and the remarkable qualities in Japanese portable electronics. Apple may have invented the ipod, but the walkman and the transistor radio all came out Japan."
The transistor radio came out the US. The Transistor came out of the US. http://en.wikipedia.org/wiki/Transistor-Radio [wikipedia.org] "The first commercial transistor radio, the Regency TR-1, was announced on October 18, 1954 by the Regency Division of Industrial Development Engineering Associates of Indianapolis, Indiana".
Followed by, "Transistor radios did not achieve mass popularity until the early 1960s when prices of some models fell below $20, then below $10 as markets became flooded with radios from Hong Kong."
One of the big jokes about "Transistor radios from Japan" was the Transistor wars. Japanese companies would advertise how many transistors they put in the radios, so they would put in extra transistors that really did nothing. I guess they thought more was better even if it really wasn't. Honda and Toyota both build cars in the US now. According to consumer reports many US cars are now more reliable than most cars from EU countries now. Toyota, Honda, BMW, and VW all build cars in the US now. You may say that Toyota and Honda have a culture of high quality in automotive production how ever to make the claim that it is cultural sort of ignores Suzuki which really doesn't have that high of a reliability rating or Nissan which while makes some very good cars also has some that have gotten poor reliability ratings. the US does seem to have a remarkable history of innovation. Some countries like the UK has a great history of destroying innovation. Read about Frank Whittle sometime. The real key to the the success the US has is that is seems to be willing to adapt to change and to take the best of other cultures and allow it to become part of the US culture.
You are just repeating tired stereotypes that mean nothing and are frankly just not true.
Re:Weak stereotyping (Score:4, Insightful)
Easier to find investors (Score:5, Interesting)
Innovation comes from freedom of expression (Score:5, Insightful)
I'm a consumer whore. And how! (Score:5, Funny)
American Chauvinism (Score:5, Insightful)
And this survey demonstrates what, other than the parochialism of the American computer science professors with whom Graham happens to be acquainted?
greater fractioning (Score:5, Insightful)
Re:American Chauvinism (Score:5, Insightful)
Laws are it. (Score:5, Insightful)
I'd rather not put a startup in the US (Score:3, Insightful)
But with the patent laws and the legal system around it, opening a biz in the US is risky. As soon as you're actually starting to make money, some corporation will cover you with suits 'til you hand it over for a nickle or a dime because some harebrained patent they got offers them a foot into that door.
In other words, startups are the risk-free way of "innovation" for corps. If it doesn't fly, it doesn't cost them money. If it does, hand it over!
Yes, but startups alone don't help the economy. (Score:4, Interesting)
Movie producers run out to California, mostly to escape legal process servers because a patent cartel wanted to price-gouge them for the unlicensed cameras they were using, stayed, and founded Hollywood.
A guy named Chesney starts up a business in Pittfield, MA and GE ends up headquartered there, and employing tens of thousands of people prior to Neutron Jack Welch.
Digital Equipment Corporation starts up in Maynard because the guys who founded it were connected with MIT, and there was cheap space in an old mill there... and grow in that location to a multi-billion-dollar company.
But I can easily see an unstable state in which the United States continues to be a good place for startups, for the reasons mentioned, but all of the really economically important activity gets moved overseas just as the company begins to take hold. Over time, of course, that will undermine all the things that make the U. S. a great place for startups, but not immediately... just as U. S. researchers continue to win Nobel prizes for work performed under conditions that existed in the U. S. decades ago.
Tangentially, New England is a great place for startups because of the existence hundreds of small, independent machine shops that can do prototype work. I believe those shops are a long-lived legacy of a century or two ago when New England and its mills were the most sophisticated industries in the U. S. I wonder whether anyone in the state government is paying attention to the care and feeding of those small businesses?
Faulty logic (Score:3, Insightful)
From the article:
"it is not (yet) a police state"
Why is it there are people in this country are screaming and yelling about their imagined "police state", yet want to leave the other countries in the world to people who want to turn the whole world into a police state?
Mr Graham needs to travel more... (Score:5, Insightful)
- Immigration: The US has a great immigration policy, but it's not really that much different from a lot of advanced Western countries, esp. when it comes to skilled workers (researchers, college graduates, etc). E.g., the UK has a much larger talent pool it can draw from for immigrants (esp. Commonwealth citizens) yet there have been very few successful UK startups. Same could be said for Germany, the Nordic countries, and most of Southern Europe.
- The US is a rich country: so is most of Western Europe, Australia, NZ, Southeast Asia, Japan, etc. Arguably the latter regions have even better infrastructure than the US.
- The US is not a police state: again, neither is any EU member or the rest of Western Europe. Still, the only big European startup as of late has been Skype, and even that was US-funded.
- American Universities are better: absolutely, but not for the reasons stated. American universities are just more free to make money from their R&D, unlike most say European ones. Since they can run research for profit they can also hire the best professors and researchers they can find and that creates a virtuous cycle. In Europe for example, most research schools are state institutions and thus professor salaries are set to a nationwide scale. Plus it's much harder to profit from R&D.
- You can fire people in America: labor mobility is not a US invention. If you are faced with stifling labor laws, you can work around them. You can use contractors, bankruptcy law, subsidies, the list goes on. Plus, Anglo-Saxon countries with liberal labor laws (UK, Australia), still haven't fostered startups that well.
The rest of the list is even more wooly than these bits. Here's my take as to why the US does startups better:One important factor... (Score:5, Insightful)
Don't forget that, for many years, the USA have been at the forefront of technology and science because the US Governement -- meaning you, Happy American Tax-Payers! -- has been very happy to sign big, fat juicy checks to US corporations, US Universities, US Think Tanks, etc. Also, the US Governement was able to do this because, right after the end of WWII, the USA were one of the very rare country in the world with industries left intact and a lot of natural resources.
Now that the US Governement is pretty much anti-science, and that the US debt is soaring to ever more dangerous summits, I am not so sure the USA can maintain their advance on the rest of the world. But we'll see.
American dream is a (partial) scam (Score:4, Insightful)
However, the statistics are against you if your goal is to become very rich - but it is the possibilty that motivates people.
Here in the USA, we have an interesting cultural/political phenomenon: many lower middle class people strongly support the republican party whose policies are very biased towrads helping the very rich. I think that part of this phenomenon occurs because people dream of having a great idea and striking it rich.
I think that having one's own business is a good idea (http://mark-watson.blogspot.com/2006/04/owning-y
It is a rich country - not for long (Score:3, Interesting)
The bad news, is that I don't think there is anything that can stop an economic collapse, the good news is that I think after the collapse the US has the highest potential of any country in the world for a spectacular recovery assuming that people don't panic and impose all sorts of controls that take away economic freedoms.
(PS, those people who have written off gold and silver as barbaric immature monitary systems are going to be in for a very rude awakening, he he)
biz in Europe (Score:4, Insightful)
I don't know about Asia or other regions, but these are my thoughts about the relative difficulty of starting business in Europe:
#1 reason: Government is an obstacle rather than help or even better: JUST DON'T MESSING TOO MUCH. Bussinesses in Europe has to comply with municipal, state, country and european community regulation. Municipal laws are often vary a lot whithin even the same province. The local government has to give permission and get taxes (not cheap) just to open the company's door. Also the nation's government. And guess what? They are not exactly very fast nor cheap. The high costs of starting a bussiness make it very difficult for people who is not already rich or other bussiness who have already a lot of money! Paradox of social-democracy? Government as reverse Robin-Hood?
Other:
- the "progressive" taxes system doesnt award personal effort and risk. The taxes for businesses are as high as 30% or 35% of profits, even higher for wealthy individuals (Social Security not included). Where does this force capital to go? Easy question: any other place.
- Public workers are impossible to fire. Once they pass their exams they can even just not go to work and they will keep their salary and benefits forever. Not the best to stimulate efficiency and speed. They also have higher salaries than private companies employees. Young people here dream about working for the government.
- Trade unions degenerated to political parties. Their leaders and representants are too busy doing nothing and helping #1 in their labor to increase regulation.
- We spend about 40% of the E.U budget subsidizing the low-margin, low-innovation, low-tech agricultural sector. This money should be better in their legitimate propietaries' pockets thus lowering the high tax pressure on business and individuals. As a side effect we screw up emerging economies with our protectionism (OK, maybe also the USA)
- We have literally dozens of different languages. I dont think this is necessarily wrong, it's just a consecuence of our history. But the really stupid thing is the politicians are very busy trying to revitalize dead or semi-dead languages and dialects like galician, basque and catalan to have another more justification to fight with other regions, get local privileges, and keeping their positions. Of course these languages are studied in schools, diminishing the time young people should rather use studying maths, literature, economics, english or whatever. Mix this with governmet regulation and you get a lot more overhead for business.
- We dont fight strong enough against terrorism, instead we let the terrorists (convicted killers included) form political parties and negotiate with our governmets as equals. Shame on us. Insecurity scares the capital who tends to go away.
It's not that is easy to start a bussiness in the United States because they are rich: they are rich because is easy to start a bussiness.
Immigration ? (Score:5, Informative)
When I was growing up, all I ever wanted to do was move to the USA. When I finished school, my parents could not afford to send me to university, so I had to start work straight out of school. I spent 5 years working my way from cable laying guy to networks guy to Unix guy, and then tried to move to the USA. After 2 years of trying, I gave up and moved to the UK.
Next year, I will _finally_ be eligible to apply for an H1B visa, but I won't be. Because I don't have a degree, I need 12 years work experience. The first 8 years of that experience are no longer technically relevant to anything I do today. Sure, it taught me a lot about dealing with people and integrating into the 'real world', but I don't see how that is relevant since I would have been eligible for entry fresh out of university with none of that experience.
Even if I did want to apply, I would have no guarantee of permanent settlement. I would have to 'emmigrate' to the USA knowing that if the company I was working for went under, or declared a loss for a number of years running, or laid off too many other people, I would have to pack my life back into boxes and go home. 30 is too damn old to be taking that kind of chance.
I took that chance coming to the UK at 25, and even then I was almost guaranteed permanent settlement when I moved here. It was certainly never tied to the company that I moved here to work for. At 25, I could take those risks, but not anymore.
So instead of adding to the US economy, I've got a successful life adding to the UK economy. Overall, the US immigration policy is NOWHERE near as friendly as many places in Europe.
Re:Fewer bureaucratic barriers (Score:5, Informative)
Actually, here in the Netherlands, I have spoken to a few businessmen which deal or have dealt with the US. They all find dealing with the Americans an enormously bureaucratic process. Also note that lots of rules come from overseas from our point of view, Sarbanes-Oxley comes to mind.
To start a company in the Netherlands, you do two things:
- visit the local Chamber of Commerce and spend 10 minutes to tell your new
business its name
- Fill in one (1) form and send it to the (equivalent of the) IRS for a
VAT-number
That's it. How unbureaucrative can you get?Re:the Western nation that least protects its work (Score:3, Insightful)
Re:Distortion by size (Score:5, Interesting)
My point is that most Americans, even ones who travel, have no concept of any other way of life. That's not a criticism, just an observation. If everyone in Europe spoke the same language, ate the same food, etc, etc, we'd be saying the same about them. We don't have a concept of neighboring countries, except Canada and Mexico, because we never bump into any.