Creating jobs – The startup founder visa program

Tech investor and entreprenuer is Paul Graham is proposing a Visa program (in the US) to attract tech entrepreneurs and fuel the next wave of tech innovation and job creation. An idea, virtually free to implement, that could be replicated on this side of the Atlantic also?

Letting just 10,000 startup founders into the country each year could have a visible effect on the economy. If we assume 4 people per startup, which is probably an overestimate, that’s 2500 new companies. Each year. They wouldn’t all grow as big as Google, but out of 2500 some would come close.

Read the whole thing here.

  • Comrade Stalin

    Maybe I’m missing something, but where do these startup founders get the cash to do the starting up, and to which markets do they sell into considering that nobody is buying shiny new things ?

  • kensei

    Google is a company of such size it is unlikely even a few would come close. But many would be successful. But your thinking on this totally one dimensional, Mack. It’s very frustrating. If we just let entrepreneurs go then everything will be fine. But this is a multidimensional problem.

    Firstly, more startups may eventually succeed in creating more jobs. But there will be a very significant time lag on that, so it is not going to solve the immediate crisis. Second, the immediate crisis provides an environment that may kill otherwise viable businesses, due to a tightening of credit or demand or both. How do we protect businesses through that. Third, many of those businesses will die. What are the costs of that? And successful businesses require the right employees to fill those positions. Do we have the right skill mix? Do we need retraining? Are people willing to take risks in business as employees. And so on.

    We also cannot import business creators forever, and there will be intense competition in any case. We need to grow our own businesses, and that means increasing opportunities and reducing risk within our own populace.

    Inequality also matters. It’s oversold, but not everyone will be able to create business or get the top jobs. We need those further down the chain to support those further up, otherwise nothing can work. A rising tide can lift all boats, but a sustained period of growth differential towards the top end produces an economy where that top end has a disproportionate amount of economic and political power, because over time small differences are amplified. That hurts even the foundations of how democracy and we should have learned it by now. Can we convert some current crap jobs into good ones?

    That’s just off the top of my head in ten minutes. We need new thinking in all kinds of places. There are decent ideas worth trying here but ultimately pumping the same line over and over again is not enough.

  • The Raven

    “Inequality also matters. It’s oversold, but not everyone will be able to create business or get the top jobs. We need those further down the chain to support those further up, otherwise nothing can work.”

    An excellent and valid point. Too long has the “snobbery” of who does and doesn’t get support pervaded business support in this country. There is a beautician no more than 500 yards from where I live, who has a £200,000 turnover and makes a profit of around £120,000 per annum, employing four other people as a consequence of her success.

    She’s not export. She’s not over the £250k INI help limit. But doesn’t she deserve the same break as anyone else who isn’t in the shiny new IT market…? It’s a just a point, and I, in no way, wish to take away from the point of the original thread.

  • Mack

    Kensei –

    There are decent ideas worth trying here but ultimately pumping the same line over and over again is not enough.

    That’s a little harsh don’t you think? So far I’ve suggested

    1. Higher taxes to bridge the fiscal deficit, with tax breaks for money that goes into local business expansion / startups. (Things like reform of directors pensions provisions)

    2. Public spending cuts to reduce the fiscal deficit and restore competitiveness

    3. Government stimulus (at appropriate wage levels) where the private sector is unable or unwilling to create jobs, but also where the taxpayer will see a long term return. Pointed out a way the government to generate an off-balance sheet stimulus from the private sector.

    4. Pointed out Nassim Taleb’s excellent ideas for market reform that would lead to more robust financial system

    5. Pointed out Paul Graham’s idea to attract foreign entreprenuers.

    6. Guaranteeing deposits, and letting the banks go bust. Encouraging competent banks to take over the assets – wiping out creditors and shareholders, not taxpayers.

    7. I’ve highlighted Ireland’s flexible labour laws, that should lead to increased competitiveness in the private sector. In comments I’ve suggested cutting employers PRSI to further enhance competitiveness.

    8. I’ve also suggested privatisation of some state assets, liquidating the developers to get the property market to the bottom quickly in comments.

    9. Pointed out that Quantitive Easing by the ECB would be beneficial to Ireland, and the current bind ECB policy leaves us in. (With further medium term risks).

    There’s probably more…

    I don’t think this banging the same drum. Just that some of it isn’t Keynesian, I know 😉

    Btw, I think this problem is going to last a while in Ireland – so anything that creates jobs in four or five years is still going to be a big plus.

  • Mack

    Forgot an important one. I’ve always argued for the importance of protecting FDI in Ireland (80% of GNP) and the multi-national presence (remember our debate over corporation tax reform?).

  • Frustrated Democrat

    Raven

    No, she is not entitled to assistance, as her success will lead to someone else’s failure. There are a finite number of heads to tend and faces to pamper. If I wanted to open next door to her with a grant to subsidise my costs who would that help?

    If you are taking business from an existing local company it is a waste of public funds, you either have to prove import substitution or be an exporter from Northern Ireland. Churning grant aided jobs within Northern Ireland answers no problems.

  • The Raven

    FD, you miss my point.

    Also, assistance at her level, for any company, is rarely wads of cash. Most INI assistance for local companies is not cash – regardless of how their own performance reports portray it. I didn’t think I had to explain that part, but there it is.

  • kensei

    Mack

    It’s all focused on the same thing – get money to entrepreneurs! – as if that will solve all problems. And wrapped up in Atlas Shrugged rhetoric that does my head in, to boot.

    I don’t think this banging the same drum. Just that some of it isn’t Keynesian, I know 😉

    Is any of it Keynesian? Some of the suggestions there are fairly nuts. Privatisation of anything at this point? That is madness of the highest order, if no other reason that people will inevitably under pay.

  • Mack

    Kensei – In fairness out of the 10 points listed only two related to entreprenuership – one (private sector stimulus favoured before government stimulus) is hardly radical. Doubtless private sector investment wouldn’t be of the scale needed, so you’d be left with public investment (despite devoting a couple of paragaphs you totally missed it). I’m stumped why you are so opposed to it. Wrt privatisation, nobody has to sell anything unless they get a good price for it.

  • Mack

    As regards Keynesianisms, it’s just I’ve noticed you’re very positive about Keynes, Krugman etc. and opposed straight off the bat to a lot of other stuff. I would have thought government investment if the private sector isn’t investing is classical Keynesian counter-cyclical fiscal policy, no? Even encouraging counter-cyclical investment from the private sector (paid out of opportunity cost tax revenues) might even fit that bill too…

  • Frustrated Democrat

    raven

    Why should Investni spend anytime helping local companies compete with each other in Northern Ireland, it would be a complete waste of taxpayers money.

    They have to concentrate on areas where there is a net benefit to NI that is in the export of skills and goods or import substitution.

  • The Raven

    Really? And why then do they sponsor Local Enterprise Agencies? Why do they work occasionally with local councils through their economic development programme?

    Surely by your argument, Go For It! and the Growth Programme should be done away with?

    All I am arguing for, (and if the search function worked properly here, I’d direct you to where I have written this before) is that if we have a business development agency with
    – (IIRC from someone else’s post) around 600 staff,
    – little or no FDI happening at the moment (certainly none outside Belfast and Newtownabbey)
    – 35,000 people currently unemployed

    …then the chains should be loosened somewhat.

    Or are we not really *that* concerned with developing any sort of entrepreneurial culture?

    Frankly, within my own job role, if someone came to me from, say, a neighbourhood renewal area, and asked for help to start up his own window-cleaning business, I’d welcome him with open arms.

    I’ll leave the Keynes and Krugman bits to others. Tomorrow I have meetings with three local potential start-ups. If they stack up and get going over the next six months, it’s at least ten people off the dole. Only one of them has export potential. But it won’t stop me seeing the other two.

  • kensei

    Mack

    Kensei – In fairness out of the 10 points listed only two related to entreprenuership – one (private sector stimulus favoured before government stimulus) is hardly radical. Doubtless private sector investment wouldn’t be of the scale needed, so you’d be left with public investment (despite devoting a couple of paragaphs you totally missed it). I’m stumped why you are so opposed to it. Wrt privatisation, nobody has to sell anything unless they get a good price for it.

    Except apparently the government, Mack. And “good” now and “good” in a recovery are two drastically different things.

    I’m not opposed to helping business creation, It just won’t pull us out of this crisis, at least not any time soon. You also wrap everything up in the type of rhetoric that got us into this mess, which gets my back up right away. The focus is on the top end, let the wealth creators do their work and so on. We need to improve business creation at all levels. We are probably not far off in the nitty gritty tbh, but temperamentally it’s a gulf.

    My sense is you want to get back to the 1990s. I want something better. We cannot support the levels of inequality we have been running. It distorts the market, and it distorts democracy. Small differences become huge difference when magnified by time.

    As regards Keynesianisms, it’s just I’ve noticed you’re very positive about Keynes, Krugman etc. and opposed straight off the bat to a lot of other stuff. I would have thought government investment if the private sector isn’t investing is classical Keynesian counter-cyclical fiscal policy, no? Even encouraging counter-cyclical investment from the private sector (paid out of opportunity cost tax revenues) might even fit that bill too…

    Having read all the arguments, I think the Keynesian ones make the most sense in the current context. Monetary policy is dead when interest rates are at 0. Cut spending and you will choke demand, making things worse. That said, Ireland is a tough one. The budget hole is so drastic and it is such an open economy I can’t where else it has to go other than pro-cyclical again. In the long run, we don’t want to be here again.

    The government could just give the private sector a big pile of money and that would count as stimulus. I just wouldn’t class it as a particularly useful way of doing things. If we are going to spend public money, we need to put it in places that will help with the current problem and hopefully leave something tangible for the future. I am not sure your suggestions qualify under those criteria.

  • Mack

    Kensei –

    The focus is on the top end, let the wealth creators do their work and so on

    Sort of, but also fundamentally no. If we’re talking entreprenuers – anyone can do it, even if they don’t have two pennies to rub together. It’s better though, if the people making the investment decisions are doing it with their own money and have done it before. They’ll make a better judgement call than someone risking other peoples money, and a better judgement call than a niave (first time) investor.

    So there are two things (and maybe I haven’t broken it down properly before)..

    1. The guys with the idea & time to develop a product or service

    2. The guys with the money to fund them

    By definition you’d almost hope that 1. comes from the lower layers (in terms of wealth), and because if they had money already why would they go to such effort? I think they’re more likely to come from less wealthy sections of society. They’ll also employ less wealthy people too (as previously successful entreprenuers have probablty retired from actually creating to investing / funding). Thing is though, not everyone can be rich, and for the rich, excessive consumption is a problem (and breeds envy), but if the money is invested pulling everyone else up (and not on personal consumption) surely there is no problem?

    So why not structure the incentives to foster that? (Massive inheritance taxes, high property taxes, tax breaks for business investment etc)..

    I also like Nassim Taleb’s idea about enforcing small company sizes to breed intense competition and prevent the too big to fail moral hazard. His ten principles for a Black Swan-proof world are well worth a read…

    As for going back to the 1990’s no. I want to see continous innovation and improvement – with the destruction of existing business and wealth that entails. There are two outputs from labour. The direct output you get yourself (salary and benefits, socialism offers the best options for short term maximisation here) and the output society as a whole gets from others (and, ironically, it’s capitalism that offers best long term results here). Obviously, I do think there needs to be a balance between the two, but think the latter option is much more important in terms of the bigger picture. And in terms of crises and robustness – can’t recommend Nassim Taleb enough…

  • Frustrated Democrat

    Mack

    There is one major flaw in your arguement and that is the sucessful business people always sell out and retire, in my experience they continue to invest in either their own new companies or other peoples’; not only their money but also their time and expertise.

    The Dragon’s Den which is obvioulsy a ‘made for TV program’ with all the faults that brings does however mirror what takes place everyday, people with ideas trying to get people with money and expertise to invest in their idea.

    Look at Alan Mclay in Almac who sold out and then created an even bigger company and he is not the only example.

  • Mack

    Frustrated Democrat – I’m not sure that’s a flaw in my argument , that’s exactly what I’m talking about! I agree it already happens, but not on the same scale as Silicon Valley (and most agree that’s what makes that area special)..

  • Mack

    FD – I think I see what you mean now – what I mean is not that they don’t spend time, but that there are other promoters involved doing the heavy lifting – this often enables successful entreprenuers to aid multiple startups.

  • kensei

    Mack

    Sort of, but also fundamentally no. If we’re talking entreprenuers – anyone can do it, even if they don’t have two pennies to rub together. It’s better though, if the people making the investment decisions are doing it with their own money and have done it before. They’ll make a better judgement call than someone risking other peoples money, and a better judgement call than a niave (first time) investor.

    Entreprenuers != investor, Mack. And a presumption on the part of “experienced” people makes it harder for people to get that experience.

    I think here we find our fundamental difference. You are focused on an individuals. Fine. But I would focus on the system. None of those individual investors really matter. There are talented individuals, but success on one project does not guarantee success on the next. History is littered with examples of this. What matters is pluralism. Lots of people having lots of individual experiments. Some bad people will get lucky, some good businesses will die. But for us it won’t matter – the jobs will still be created. Statistics will do its job.

    I think it is helpful is people have skin the game. But it does not necessarily take going on all in to be worried about the success of the project. In an ideal world, I think you want the result to be painful but no disastrous, because you want those people to rebuild and start again. People failing for whatever reason are providing a valuable service to the economy. We need ot turn moral hazard on its head. We want people to take more risks, so make sure they have a bit of insurance to encourage them to do so.

    Oh and rich people often have the luxury to take on projects for interest or passion that poorer people lack, Businesses is one of them. I would guess that business creation at the low end is poor, but that is just a hunch.

    So there are two things (and maybe I haven’t broken it down properly before)..

    1. The guys with the idea & time to develop a product or service

    2. The guys with the money to fund them

    Again, pluralism. I believe that there should be multiple sources of potential startup money. Not everyone wants an investor on their back, and investors have their own prejudices. So maybe there is also some government money; tax incentives for companies to partner with new businesses; tax breaks for individuals prepared to risk their own limited assets; maybe support for the credit unions in micro business loans. Each bit will pick up thing the others might miss.

  • Frustrated Democrat

    Raven

    If your widow cleaner closes another one down what is the point. The whole ‘Go for It’ was a waste of many 10’s of millions of £ as new companies were subsidised to shut existing companies down. The same thing happens with social enterprise where, for example, existing gardening companies and coach companies were closed or reduced in size by social eneterprise ones.

    This whole thing is a joke we should offer no grants or subsidies to companies only trading within NI unless they are reducing imports. It is job creation gone mad and is creating a whole ‘job creation’ industry in InvestNI and elsewhere that does nothing of the sort, it churns existing jobs over and over again. Let normal competition sort out the wheat from the chaff and not grants. The same applies to training why is InvestNI providing subsidised training courses when there are private training organisations? I got a leaflet today with whole day courses for £50 or two days for £75 (probably including coffee and lunch)how is that possible?

    This gravy train should be stopped and a new one created, starting from scratch, that concentrates on the real creation of additional exports and innovation and as a consequence more employment.

  • Mack

    Kensei –

    I think here we find our fundamental difference. You are focused on an individuals. Fine. But I would focus on the system

    I am focused on the system, it’s more abstract than saying we will raise X in taxes and make Y available to companies we deem suitable. The government still creates and manages the system, it’s just more hands off. I’m not focused on the individual – I think with the incentives there they will respond, some will fail, some won’t. If it doesn’t work, we can always have the government try. (Pragmatism not idealogy).

    Outside of monetary policy, where new money (but not wealth) can be created, there’s a finite amount of money in the economy. You can tax it, and redistribute it in grants or subsidises – or perhaps you can leave it with the successful companies and allow them to reinvest it (which Ireland does with incredible success with the low corporation tax), or encourage people with the skills to reinvest and support new businesses (and cut out the middle man).

    There are state bodies in Ireland (Enterprise Ireland) that make grants available to business. It isn’t a disaster, but it’s not been anywhere near as successful as the IDA / corpo tax combo. Until last year in Ireland the Business Expansion Scheme (which allowed tax-free investment in small business / startup) was capped at a desirory amount – 20k or so.

    BTW, to me anyway it’s not rhetoric – it’s doing what works well for society, wealth creation (rather than money creation, or even just raw employement – we could employ people to move Lough Neagh to Kerry, but it wouldn’t improve our lot) is what drives living standards up all round. The guys who start businesses – especially those who risk everything to do so – deserve some degree of respect for taking that risk especially if they fail…

  • kensei

    Mack

    I am focused on the system, it’s more abstract than saying we will raise X in taxes and make Y available to companies we deem suitable.

    Where the fuck did I suggest that?

    The guys who start businesses – especially those who risk everything to do so – deserve some degree of respect for taking that risk especially if they fail…

    I don’t disagree. I just don’t think they need worshipped.