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Well, some would argue that you should wait until you have the money before you go that route, not saying I necessarily agree though.
Well, I would argue...
Investors are free to do whatever they want with their own money, even loaning it to risky startups on risky loan terms.
Business start-ups need access to working funds to operate effectively and plan for growth.
Small business can compete better against intl mega-corporation when they have access to funding, allowing them to make timely market decisions (e.g. in purchasing, R&D, marketing).
Small business is the largest form of U.S. employment and the backbone of our economy, and loans pay salaries/benefits.
The working middle class may use small business ownership as a stepping stone into the upper reaches of the 1%.
Investors are free to do whatever they want with their own money, even loaning it to risky startups on risky loan terms.
Business start-ups need access to working funds to operate effectively and plan for growth.
Small business can compete better against intl mega-corporation when they have access to funding, allowing them to make timely market decisions (e.g. in purchasing, R&D, marketing).
Small business is the largest form of U.S. employment and the backbone of our economy, and loans pay salaries/benefits.
The working middle class may use small business ownership as a stepping stone into the upper reaches of the 1%.
There's a lot of issues and oversimplifications there, but what it boils down to is that while the risk should be taken by some, it is still a risk, and it does not go away if you start with nothing - in fact, quite the opposite due to the higher debt/equity ratio. This is not to say whether or not the macroeconomy does or does not need individuals to take certain types of financial risks over other types. I could argue that large amounts of debt financing are unnecessary for a healthy economy in principle, however when one is trying to attract investors, only the current economy matters rather than what is possible in principle.
We got where we are by living under our means, which has already been mentioned countless times in this thread.
It didn't even seem like sacrifice since we didn't really cut out much, we started out with me working and wife still in school, then just avoided lifestyle creep as my career took off and hers started then grew. By the time we retied (early and mid 40s) we were saving about 70% of our income without much effort to watch out spending.
My niece's husband owns a very profitable business, but for whatever reason, she still managed to get a full ride merit scholarship into a medical school located in another state. She's extremely bright, but I know absolutely nothing about the particulars. I think she has about a year left before getting her MD.
All of the other MD's in my extended family, and among friends, took out loans. Oh, I do think that two of them had their medical schooling paid for since they agreed to work in rural areas, but I'm not sure.
There's a lot of issues and oversimplifications there, but what it boils down to is that while the risk should be taken by some, it is still a risk, and it does not go away if you start with nothing - in fact, quite the opposite due to the higher debt/equity ratio.
This is not to say whether or not the macroeconomy does or does not need individuals to take certain types of financial risks over other types.
I could argue that large amounts of debt financing are unnecessary for a healthy economy in principle, however when one is trying to attract investors, only the current economy matters rather than what is possible in principle.
Are you risk adverse? Also, you are defining risk only in short-term financial rewards IMO. Think about the risk the early Amazon investors took, and then the ultimate economic and technological rewards. Would you have agreed with their philosophy?
I believe the macroeconomy needs risk and competition in order to spur on innovation.
Your third paragraph is a valid economics concern...
P.s. I went back and read through this thread and saw that you're a grad student... Hard to make $ that way. When I was one, I started consulting on the side and ultimately left grad school to chase the dot.com market opportunities. Had even completed my research with very positive feedback, but never published it because I started chasing something else - oh well.
I've had some good mentors over the years and one line always stuck with me:
"The hardest part of making it is having the balls to do it."
It is so true.
At the time it was in reference to investing and startups. Investing is a lot like approaching women. That first rejection, that first lose of money ruins many. Eventually, the sting of failure becomes lesser and the drive for reward becomes greater. Oh, you'll still lose money, and sure you'll get rejected again and again, but you'll always leave with the knowledge of how to do it better next time.
Personally, taking the emotion out of money has been my greatest overcoming hurdle for me. I'd lose on an investment and I'd immediate correlate it to my regular work "I just worked the last two months for nothing. OMG what did I do?" You can't let that correlation get you down. The less a person makes, the more emotion they have to their money and the less risk they take. In many ways this is good, but to become wealthy, not so much.
It is a mindset.
"I just lost so much money today..."
Lets go to the bar and get drunk
"I just made so much money today..."
Lets go to the bar and get drunk
Finally found a philosophy on this thread I thoroughly agree with... Thank you Hans
Are you risk adverse? Also, you are defining risk only in short-term financial rewards IMO. Think about the risk the early Amazon investors took, and then the ultimate economic and technological rewards. Would you have agreed with their philosophy?
I don't know enough about what they did to comment ...
Quote:
Originally Posted by GoCUBS1
I believe the macroeconomy needs risk and competition in order to spur on innovation.
Your third paragraph is a valid economics concern...
P.s. I went back and read through this thread and saw that you're a grad student... Hard to make $ that way. When I was one, I started consulting on the side and ultimately left grad school to chase the dot.com market opportunities. Had even completed my research with very positive feedback, but never published it because I started chasing something else - oh well.
Individual talents are quite relevant. Not everyone fits every career. I can only speak for myself - but for me, science is far more fascinating than anything I would do if I had a business degree. The thrill that I get with doing calculations and making discoveries has no parallel.
You know Cubs/Cole...even if you have the money to start a business, getting someone to loan you the money isn't a bad idea. It validates that someone else doesn't think you're nuts, and paying x% in interest is cheaper than xx% in taxes.
People will do that as long as you have personal collateral in the game. Principle homes generally rank as #1.
It's not unethical unless you spend the money loaned/invested doing something different than what you said you were going to do.
You know Cubs/Cole...even if you have the money to start a business, getting someone to loan you the money isn't a bad idea. It validates that someone else doesn't think you're nuts, and paying x% in interest is cheaper than xx% in taxes.
People will do that as long as you have personal collateral in the game. Principle homes generally rank as #1.
It's not unethical unless you spend the money loaned/invested doing something different than what you said you were going to do.
Good points... It is validating when I meet with the bankers to review P&L, plans, etc. and they confirm we are on the right track... Their eyes light up when they tell us we are a healthy company, etc., which, according to them, was rare during the economic timeframe when I was building the business. I am one of the few people who has nothing against bankers, it has always been a pleasant experience.
My story is pretty boring. Parents divorced, no money for college, so I worked all during college and paid my own way through 2 advanced degrees. No inheritence, no nearby family, so learned to be self-reliant and independent (perhaps too much so, that's another story). Took in and cared for one elderly parent for 5 yrs. After all schooling I got a career job, stuck with it through all the mergers and acquisitions, and retired at 63, financially stable. Sounds pretty dull doesn't it? But what I got from my parents was an environment of kindness, good nutrition, the ethic of living without debt (except for house and car), a desire to please. I continued to want to please my teachers all through school and college, which led to them supporting and mentoring me. In my profession I continually wanted to learn the newest and greatest things, so I kept up with the times and was flexible when it was needed.
As far as investments, I did not start investing until I was about 35 or 40, but then maximized all the programs available to me (matching 401K, catch-ups, etc). For housing I only bought bargains, then improved them, all within my means. All were profitable. After I got out of college, and could afford it, I owned horses. That took all my spare time, kept me healthy, and allowed me to meet lots of wonderful people. By the time I retired I owned my own horse farm and was living a satisfying lifestyle.
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Why do I poke sleeping bears...
