MattMaroon.com

Interesting thought experiment by Paul Graham today about the Founder Visa. After a good deal of thought though I decided though that it’s not a good idea. It’s fraught with problems that I can’t see good ways to reconcile.

For one, it assumes that startups (in the Paul Graham sense) are more worthy of economic favoritism than other forms of business. Is there any evidence that if we let in 2,500 people, and one of them founded another Google, that is any better than them starting 2,500 small businesses? Or than giving the already existing Googles, Wal-Marts, Fords, and McDonaldses of the world 2,500 more highly-educated employees? There was almost certainly a point in Google’s history where giving them 2,500 extra H1-Bs would have created more value than letting the same number of people start startups, so what about letting the immigrants work for 2,500 startups they didn’t found?

There’s a fallacy, I think, in the idea that since they started their own companies, they’re not taking away American jobs. A lot of times startups lead to overall wealth and job destruction. Take a look at what’s happening in the newspaper industry right now. Nobody’s really sure where that industry is going to end up, but it does seem like a lot of jobs, from reporters on down to guys who chop down the trees that end up made into paper, to be replaced by some low-paying jobs at blog networks.

Startups often make money primarily by reducing costs, and cost reduction nearly always means job reduction. And please don’t take that as an argument against immigration, as I think on the net it works out in our favor, I’m simply pointing out that four guys working for themselves isn’t always the same as creating four jobs.

And even if it were, if the logic for giving those extra H1-Bs only to people who start their own company is that they aren’t taking American jobs, that implies that jobs are zero sum. They’re not, in fact to a large extent it’s the opposite. If a company hires an employee whose efforts earn the company three times their salary, that gives said company the cash flow to hire two more people. Hiring good non-Americans can still improve the overall job market for the rest of us.

Also there’s the semantics problem (which leads to legal problems) of defining a startup in terms of eligibility. How do you define a startup? Someone who gets invested in by startup investors. (No room for bootstrapped companies here.) How do you define a startup investor? Someone who invests in startups. How do you know who that is? Ask them.

Even excluding the circular logic, that’s asking for trouble. It puts too much power in the hands of the startup investors you ask. It also puts too much power in the hands of the person who defines a startup. At what point is a company no longer a startup and therefore eligible for these special H1-Bs? Is number of employees a good metric? Or will companies then start finding loopholes like contracting/outsourcing rather than hiring, or dividing into smaller corporations, or any other number of unforeseen legal loopholes as they approach the limit? Is revenue a good metric? That might cause shady accounting, and be detrimental to high-volume, low margin business like retail (if they even count as a startup in the first place, which they probably wouldn’t since startup investors don’t invest in them). Will “startup investors” discover a lucrative black market in selling H1-Bs? Rich foreigners could pay them $200k under the table to invest $100k in their new startups, thus buying citizenship.

Love it or hate it, what we need now isn’t another Google, it’s another Wal-Mart. The people hurting for jobs aren’t the ones with computer science degrees, they’re the ones with high school diplomas. It’s the bottom half of our society, who won’t be working at these new Googles regardless, who need help and whose current woes are dragging down the entire economy.

I just see the Startup Visa as too focused on one segment of the economy. I greatly prefer the same idea I’ve heard bandied about since Obama was making his move in the primaries, which is attaching H1-B visas to every graduate (and possibly even undergrad) degree. Our nation has most of the world’s top universities, which are currently educating lots of bright people from other countries and then sending them right back home.

Let’s fix that. Rather than worry about where they’ll work or who gets to pick them, just let every intelligent, educated, highly-motivated person come on in. Some will improve current corporations. Some will start small businesses. Some will start the next Google. We’ll get a broad boost across every industry, which is what we really need at the moment and going forward.

This entry was posted on April 11, 2009 at 10:04 pm and is filed under Pointless Words of Wisdom . You can follow any responses to this entry through the RSS 2.0 feed Both comments and pings are currently closed.