Archive for October 16, 2012

Subsidizing Startups Does Not Produce Entrepreneurs

Written by Sean Murphy. Posted in Rules of Thumb, skmurphy

“Subsidizing the markers of status doesn’t produce the character traits that result in that status; it undermines them.”
Reynold’s Law

In the same way that free range animals are healthier than those that are caged, people learn how to become effective entrepreneurs when the have the freedom to experiment and they are focused on pleasing customers(as measured by revenue) instead of pleasing grant agencies (as measured by a plan crafted when they had the least amount of information).

There is a role for grants from both government and private agencies but there is a real risk is that the startup team loses focus on revenue from paying customers and instead invests in getter better at competing for grants.

“The government decides to try to increase the middle class by subsidizing things that middle class people have: If middle-class people go to college and own homes, then surely if more people go to college and own homes, we’ll have more middle-class people. But home ownership and college aren’t causes of middle-class status, they’re markers for possessing the kinds of traits—self-discipline, the ability to defer gratification, etc. — that let you enter, and stay, in the middle class. Subsidizing the markers doesn’t produce the traits; if anything, it undermines them.”
Glenn Reynolds, Instapundit Sep-23-2010

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