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Econ Grapher currently publishes the Econ Grapher blog. He previously worked in markets, trading, investment management, and corporate strategy. He has also set up two internet research businesses in stock research and economic research.
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  • An Answer to the Unemployment Challenge? 2 comments
    Jan 22, 2010 2:29 AM

    I was pondering the other day about the economy, unemployment, recession-recovery, and it got me thinking about a topic I think is very important. This post takes a very different track from the usual analysis – in fact I will issue you a challenge.

    In this time of high unemployment I think it is important to focus on the foundations of the economy, i.e. businesses. It is in these times that it is more important than ever for people to embrace the entrepreneurial spirit.

    Especially for youth unemployment, where the rate is particularly high, those just out of college/university are particularly well placed to get into business. They will have built up knowledge and picked up skills, they would have made a lot of contacts, and probably have an extra affinity for new trends and mediums. It’s basically this; if you can’t find a job out of college, then make one.

    The case is equally compelling for those that have been in the workforce for some time. They will have built up skills and talents, specialized knowledge, industry contacts, and have an awareness of businesses and opportunities.

    In both cases you start from your strengths, and think about what sorts of opportunities can be created or exploited with your unique set of skills, knowledge, contacts, and experience. Then you look at your resources, your own labour, family/friends who can help, your own capital, and then that of others. You identify your weaknesses – maybe you don’t know much about how to run a business; but you probably know someone who does… or know someone who knows someone…

    I don’t want to make it sound easier than it is, starting a business from scratch is one of the hardest, yet most rewarding things you can do. I have done it twice, and accomplished a lot, learnt a lot, and gained a lot in terms of character and fulfillment.

    You might not succeed on the first try, but you will learn a lot, and you will take your destiny into your own hands. Of course you could also end up making a lot of money, or at least setting yourself up with a steady income stream and building a valuable asset.

    Now here’s the challenge for you the reader (and no it’s not to get out there and start a business – but maybe that is a good idea for you?). Most of you reading this will probably have some knowledge and experience about running a business, or have capital or connections…

    I call upon you to do what you can to help out an entrepreneur:
    -Give someone who’s thinking about starting a business some encouragement
    -Suggest starting a business to someone who’s out of a job and doesn’t know what to do
    -Offer someone starting in business some advice and ideas
    -Provide capital backing to those with sound business ideas
    -Use your connections to introduce them to the right people
    -Give them some business

    You can do a lot or a little, it may have no impact but then it could make a huge difference. It could even payoff financially. You may not agree with all that I’ve written but your help could help someone help themselves. So why not give it a shot?

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    Disclosure: "No positions"

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  • Andrew Butter
    , contributor
    Comments (1680) | Send Message
    Dangerous subject be careful.


    I've started lots of businesses, both for myself and other people over thirty years in both "The West" and in the "Developing World". I've noticed that kids and people in The West have become less and less entrepreneurial, it's like if you can't have a JOB, that's it, you are garbage.


    Kids from fucked-up countries are very entrepreneurial, they will think of anything, all sorts of weird things, just to scratch by.


    I think there are three reasons for that, in USA and UK your credit score is (or used to be) your lifeline, forget about the Liar Loans, to get onto the housing bubble where you could make money out of nothing borrowing at a rate less than the inflation in house prices, basically, you had to have a JOB. So the risks of doing it on your own were made much more.


    The other thing is things like franchising, the basic idea there is that if you buy a franchise you have a 500% better chance of getting a loan to finance the investment, than if you are doing it on your own, so people give up on trying to figure stuff out on their own, buy the manual, paint by numbers, and that's safe, figure it out yourself, rely on your own energy and creativity - that's dangerous.


    Even companies can't trust themselves to do anything on their own, as soon as there is a problem, there a consultant. My brother works of AIG, he told me that after the blow-up, you couldn't move for fear of tripping over a consultant.


    Governments like everything to be "orderly" that's "happy workers" in JOBS, they hate entrepreneurs who prove them wrong, look at the revenge they are taking on bankers who managed to figure out how to game the system, the message they are sending there is that RISK is bad, central planning is good. The point there is if the bankers diid something against the Law, sue them, if not, piss off.


    Also from a tax perspective starting up on your own is harder, you spend ten years working basically for free, at risk, for a big reward (you hope), but the tax system (unless you can game it) is basically set up for a constant wage, OK you can carry forward investments to write off in the future, but the time you spent living on beans in a garage, that does not get a tax credit.


    The problem with the US and other modern governments is that they are too good at getting into every aspect of peoples lives, look at the forms that you have to fill in to do anything, after a while that gets too much for an individual.


    Want to increase the entrepreneurial spirit, sack 50% of all Government Workers, and reduce the numbers of forms people have to fill in by 75%.
    24 Jan 2010, 02:44 AM Reply Like
  • Econ Grapher
    , contributor
    Comments (232) | Send Message
    Author’s reply » Thanks for the comment Andrew. I agree with you about entitlement mindsets - in my country I have always been annoyed by the fact that if you lose your job you can go on the unemployment benefit and be helped into a job; but if you instead want to start a business there is no assistance. The incentive structure is weighted towards easy risk free employment.


    I've also experienced similar findings with people from "fucked-up countries" tending to be more entrepreneurial and particularly resourceful, and tough basically.


    But I both agree and disagree about the government standing in the road - there will always be idiots trying to run the country that will get in your road. Compliance (tax/resource consents/corporate admin) is just a fact of life for businesses - and it's the whole story of if you don't know how to navigate through the bureaucracy, then either learn or find someone who knows... and ultimately it provides business opportunities for those who've figured out the system and how to most efficiently comply.


    To that end, you can always reduce government, and fix up distortions in incentives, but I believe it's ultimately going to be partially a cultural thing, a heart & mind thing. To some extent it needs to be driven by education (education that makes people aware of all the things they need to know/be aware that they don't know...)


    [Also not sure about the tax side of things elsewhere, but here you can carry forward tax losses in companies, you just need to be witty about what counts as a deductible expense... though you'd only get a tax refund if you had paid tax in the first place]


    In summary... imo it's a heart and mind thing (of course some basic competencies help).
    24 Jan 2010, 02:29 PM Reply Like
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