No shit, Sherlock:
United States’ new business formation rate continues dropping steadily
More and more people are waking up to reality that small business is for suckers and that there are far easier ways to make money such as real estate, a traditional job, or buying and holding stocks. We wrote about this as far back as 2011 and it’s yet another example of one of our predictions coming true.
Think about it like this: you can start a business for $100k which has an 80% chance of failing or you can buy the S&P 500 which has an 80% chance of doubling in that same period. $200k versus $0. Even if the market crashes you may still have at least half of your money and if you wait awhile the market will recover while, on the other hand, your business losses are irreparable if you go out of business. A small business is like a lottery ticket- albeit a really expensive one with a lot more work and a lower expected value. If this is an economic boom lead by large caps like Google and Facebook, why not just take the low hanging fruit? Why create unnecessary risk and struggle?
If you do want to start a small business, take Mark Cuban’s advice and use as little money as possible and, most importantly, without using a loan. Start with just $1k and get the rest through a VC. Failure is fine if you’re using other people’s money and or you can keep the costs very low. If you keep costs low you can afford to fail. Hell, even I became a self-made millionaire and probably never spent more than $3,000 in a three-year period – my major expenses being coding, dedicated web hosting, and an accountant. There’s many other examples such as the creator of Angry Birds, What’s App, and Snapchat of people making vast fortunes in business with very little investment.