A clean machine

On the costs of being an entrepreneur in the US and in Europe

I don't know how I came across an excellent post by Martin Varsavsky, about the burdens of starting a company in the US versus Europe. His argument is that, for all the goodness that one can find in the Valley (great talent, a culture of innovation, a hub of collaboration and new ideas), the US actually makes it much harder for startups than Europe does. He cites three reasons: the crazy legal costs (lawyer fees and the litigious culture), the lack of public health insurance (which adds approximately $10K per employee in costs which in Europe don't exist), and the "defense tax" (the fact that such a large percentage of the tax revenue goes to the military that other services like education and public transportation cannot be offered as they are in Europe, and therefore employers must directly or indirectly pay for them for their employees). 

I think that the situation is in fact much worse for VERY small companies (one or two people) than he describes: the cost of health care and education here is so prohibitive that embarking on a new small venture is a tremendously risky proposition, with real chances of ending up in bankruptcy and lack of access to proper health care. In order words, you are pretty much risking your life and your family’s. Countries with public health care and education are not only providing better standards of living for their people; they are in fact also encouraging entrepreneurship and innovation (by mitigating the inherent risks of the small entrepreneur) in a way that the US, who prides itself in its entrepreneurial spirit, cannot even dream of offering.

In this context, it is no surprise that such a large percentage of entrepreneurs in Silicon Valley are in their 20s; they are precisely those for whom, because of their age, living without health insurance is a reasonable calculated risk (and they normally don’t have children and so they are not risking their kids’ futures either). Regretfully, this also prevents older and more mature people from starting new small businesses, and I think that in particular in the tech world, a lot of potential gets lost right there: we overvalue the energies of young entrepreneurs, and are giving up the potential that comes from the maturity and the experience of tech people with more years on the field.