The Cure To Our Economic Problems

I would hate to be the winning Presidential candidate. Both candidates are delusional  in thinking  their economic policies will drag us out of a recession or even improve the economy.  The reality is that the solutions offered by both are the equivalent of shuffling the deck chairs on the Titanic. They are meaningless.

You can cut taxes for 95pct of Americans and raise taxes for the rest. You can cut taxes for businesses and retain the Bush Tax Cuts. You can increase or decrease the capital gains tax 5 or 10pct either way.  Under both programs the deficit for the country will increase,  we will borrow and print more money.  5 or 10pct variance either way, given the big hole  our economy is in wont matter.

The cure for what ails is us the Entrepreneurial Spirit of this country.  We are a nation of people who encourage , support and invest in those of any and all age, race and gender who will use their ingenuity and come up with a new idea.

Its always the new idea that re energizes this country.  Industry, manufacturing, transportation, technology, digital communications, etc, each changed how we lived and ignited our economy and standard of living. Tax policy has never done that.  The American People have.

Entrepreneurs who create something out of nothing don’t care what tax rates are. Bill Gates didn’t monitor the marginal tax rate when he dropped out of Harvard and started MicroSoft (btw, it was a ton higher than it is today). Michael Dell didn’t wonder what the capital gains tax was when he started PC’s Limited, and then grew it into Dell Computer.  I doubt that any great business or invention started with a discussion or even a consideration of what the current or projected income or capital gains tax was or would be.

The impact of tax rates on productivity and development is something economists masterbate about,  enterpreneurs don’t waste their time thinking about it. We have business to do.

Entrepreneurs live to be entrepreneurs. I have never had a discussion with anyone about starting a business that included tax rates. Ever. If anyone that wanted an investment from me made a point of discussing tax rates as an impact on their business, I wouldnt invest in them. Ever.

Entrepreneurs live for the juice of making their dreams come true. Of having a vision and fighting to see it come true. The joy of mission accomplished and the scoreboard of the financial rewards.

We are in an economic mess right now. It doesn’t matter who caused it. It’s here. It doesn’t matter what our Presidential candidates and their economic advisors come up with. Its meaningless.

The cure to our economic problems is the Entrepreneurial  Spirit of All Americans. Instead of bitching at each other, could one Presidential  candidate please show even the least bit of leadership and character and stand up for and encourage the entrepreneurs in this country ?

i dont care who is friends with whom, who preached when you went to church, whether you know the actual role of the Vice President, whether you voted with President Bush. I dont care about any of the mudslinging going back and forth. All it does is waste the time of every potential voter.  All of that is meaningless.

What we need is our candidates to stop yelling at each other and starting looking at the American people and encouraging the best of who we are.  That is who I want to get behind. That is what I would like to see for our country. That is what will energize and motivate people to create companies and invent products that will  turn the economy.

The best time for little guys to start a business  is when the big guys are worrying about surviving in theirs. You dont need to raise money. You need to be smart and be focused.  I had no idea until this current financial crisis that when I started MicroSolutions, my first company, it was in the middle of a very bad recession. I had no idea whatsoever. I didnt know what the tax rates were, and I didnt care. I had an idea, a floor to sleep on and a lot of motivation.

Now is the time for Entrepreneurs to step up and do our part for our country. Its up to us to start businesses and create jobs. That is the cure to this country’s economic problems.

To stick with this theme, I want to republish, again, one of my favorite previous blog posts:

The Best Equity is Sweat Equity

The Rules of Success

As MicroSolutions became more and more successful, and as I paid attention to the common traits of businesses that I saw succeed and those I saw fail, I came to realize that there are “Rules of Success” that I saw in companies that excelled. Where companies failed to follow those rules, inevitably, they failed. I found myself checking with “My Rules” before I made decisions. When I traded stocks or considered investments in companies, I applied The Rules to their business before I made a decision.

The Rules are not infallible. They have their limits. I’m an entrepreneur. My businesses have had hundreds and now more than a thousand employees. My world has been limited to starting, building, growing and running businesses that are never going to make the Fortune 500. My dreams were never to build the biggest corporation in the world. So, if you are a middle level manager in a Fortune 500 company, these rules may not help you manage your department. If you are the CEO of a Fortune 500 company with tens of thousands of employees, some rules will apply, some won’t, but where they will help you is to know how little guys coming out of nowhere are going to disrupt your business.

Where The Rules will help you is if you are considering starting, or currently run your own business. There are always exceptions to any rules, but I can assure you that those exceptions will be rare. Entrepreneurs that don’t follow the rules are far more likely to fail. There is no doubt about it.

So let’s start at the beginning.

Rule #1: Sweat Equity is the best start up capital.

The best businesses in recent entrepreneurial history are those that have been started with little or no money. Dell Computer, MicroSoft, Apple, HP and tens of thousands of others started in dorm rooms, tiny offices or garages. There weren’t 100 page long business plans. In all of my businesses, I started by putting together spreadsheets of my expenses, which allowed me to calculate how much revenue I needed to break even and keep the lights on in my office and my apartment. I wrote overviews of what I was selling, why I thought the business made sense, an overview of my competition and why my product and/or service would be important to my customers, and why they should buy or use it. All of it on a piece of yellow paper or in a word processing file, and none of it cost me more than the diet soda I was drinking while I was writing it up.

I remember the foundation for each of my businesses. MicroSolutions was very simple. To use microcomputers and software to help our customers become more productive, profitable and gain a competitive advantage. AudioNet, which became broadcast.com was simple as well: use the internet to enable real-time, worldwide communications of entertainment and business applications. HDNet is to create great entertainment, originated in High Definition format to allow our distributors to compete for the highest margin customers.

Once I could put the idea on paper, I gave the company a name. From there, I took the most important steps: I tried to find people to shoot holes in it. When we started AudioNet, I remember getting an appointment with Drew Marcus of Alex Brown (it could have been Larry, but I think it was drew :), an investment banking company. Drew followed the radio industry and I wanted to see if there was anything he saw from his experience that would blow up the concept. He loved the idea. We took it to Dan Halliburton of Susquehanna Radio. He was an executive in charge of several Dallas area radio stations. We discussed how he could broadcast his stations over the Internet using AudioNet and reach the in office market where there weren’t many radios on desks, and few of those could pick up the AM signal of his stations. He loved it. I took it to Tim and Eric Crown, who ran a newly public company called Insight Enterprises. I asked them if it made sense to broadcast their quarterly earning conference calls over the internet so their investors and the research analysts who followed them could easily listen to the calls and get up to date information, or listen to an archive of the call if they missed it. They thought it would help them reach their Investor Relation goals less expensively.

Each step cost me next to nothing to get great feedback. Each enabled me to check the foundation of my business idea to see if it was easy to shoot holes in it, and most importantly, they all served as sales calls. Each company eventually became a customer of ours.

I went through this in each of my businesses. The step gave me confidence that my business idea was valid. That there was a chance of success. At this point, many entrepreneurs think the next step is to take all this feedback, update their 100 page business plans and go out and raise money. It’s as if the missing link for success in a business is cash to get started. It’s not. Far more often than not, raising cash is the biggest mistake you can make.

Most entrepreneurs tend to think in terms of what raising money means to them. How it can get them started? How many people they can hire? How much they can spend on office space? How much they can pay themselves? They forget to put themselves in the position of the person or company they are asking for money from. They think they are considering that person’s position by making up numbers and calling them expected returns for the investor. If you only give me X dollars, you will get X pct back in X years. You will double or triple your money in X years. Any investor worth anything knows you are just making these numbers up. They are meaningless. Worse, if you tell a savvy investor that the market is X billions of dollars and you just need one or some low percent to make zillions, you are immediately kicked to the curb.

These investors, including myself, know what you don’t, and they are not telling you. The minute you ask for money, you are playing in their game, they aren’t playing in yours. You are at a huge disadvantage, and it’s only going to get worse if you take their money. The minute you take money, the leverage completely flips to the investor. They control the destiny of your dreams, not you.

Investors don’t care about your dreams and goals. They love that you have them. They love that they motivate you. Investors care about how they are going to get their money back and then some. Family cares about your dreams. Investors care about money. There is a reason why venture capitalists are often referred to as Vulture Capitalists. The minute you slide off course from the promises you made to get the money, your dreams fall in jeopardy. You will find yourself making promises to keep investors at bay. You will find yourself avoiding your investors. Then you will find yourself on the outside looking in. The reality of taking money from non family members is that they are doing it for only one reason, to make more money. If you can’t deliver on that promise, you are out. You will be removed from the company you started. You will find someone else running your dream company. If this sounds like a scene out of the Sopranos or an episode you would watch on TV about a loan shark, you are right. The only difference is that it’s all legal.

There are only two reasonable sources of capital for startup entrepreneurs, your own pocket and your customers pockets. I personally would never even take money from a family member. Could you imagine the eternal grief and guilt from your mom, dad, uncle or aunt because you blew your nephews college money or the money for grandmas last vacation… I cant.

You shouldn’t have to take money from anyone. Businesses don’t have to start big. The best ones start small enough to suit the circumstances of their founders. I started MicroSolutions by getting an advance from my first customer of $500. The business didn’t grow quickly in the first couple years. We didn’t grow past 4 people in the first couple years, and we all worked dirt cheap.

So what’s wrong with that? It’s OK to start slow. It’s ok to grow slow. As much as you want to think that all things would change if you only had more cash available, they probably won’t.

The reality is that for most businesses, they don’t need more cash, they need more brains.

78 thoughts on “The Cure To Our Economic Problems

  1. the economic is the policy of our life n we hope da great things not from da obama but from worldwide leaders

    Comment by faraz -

  2. u gotta be kiddin me its so funny. ok , #1 if who ever told cuban not to say anything bout any thing. wouldnt one think that the one thats sayin dont say anything would be the one more at fault an not playin with clean hands ? as u would think for them to be doin something so sneaky to say shhhhhh dont say nothing but lol ok now #2 as thy boldly stated,>>>(( the Commission will aggressively pursue illegal insider trading whenever it occurs.”}}} well please slow down omg u move so fast whats it been 2 yrs now lmao such a joke . if if u want more news news go back to bring base ball player to the congress an askin them questions bout what kinda pills thy might of taken now theres money well spent with our country havein so much money thy can throw around . lol well hmmmmmmmmmmmm maybe if u dont have nothing to do u might put ur thoughts an eyes on the 700 billion bail out an wheres the moneys goin im not satin its not a good thing but im sure with that kinda money there wont be every thing done as it should be done but law should of done ur self a fav an if u done want ur pride hurt u should of talked to cuban first an u never no u just might of gotten a kinda ple bargin from him him not sayin or admittin to any guilt but the money he has its a joke that u would be goin after him with ur awsome { the Commission will aggressively pursue illegal insider trading whenever it occurs.”] for 2 yrs now heck u prob could gotten cuban to help or donate to a needed charady think about it cuban spendt that on his basketball locker room if u was to take the corsae i just said u might of got a win win one for helping out the needed as im sure cubin wouldnt have no problem doin for he has al ready so much 2nd u wouldnt of wasted the money that u hace to invetergate this thing for 2 yrs makes one think who should be invetagated maybe swifty lol just food for thought

    Comment by tomma -

  3. I hope you get ass raped you greedy son of a bitch!!!! I used to think you were cool as hell….GO TO HELL YOU SON OF A BITCH…….Where there is smoke there is FIRE ASSHOLE!@!!!!

    Comment by Dan Parrow -

  4. Hey I’m wondering if this is the MARC that use to come out to HEAR ME SING with “ROBERT LEE KOLB the and THE LOCAL HEROES” I was the blonde back up singer!

    Comment by pamela stevens -

  5. Dear Mark,
    Thank you for writing this post. Like some of the other commenters, I am
    a young entrepreneur. I started a few years ago and so far, the road has been
    full of tough lessons and slow growth. Hearing that you experienced this when
    you started really means a lot to guys like me. It always sounds as if guys like
    you went from 0 to zillions over night. Thank you for the entrepreneurial advice.
    It means a lot to us.

    Cheers,
    AU

    Comment by AU -

  6. I don’t know whether it’s the same for the US as it is over here in the UK, but my personal observation is that it’s our obsession with gathering data, statistics, and legislation (some of which hasn’t even worked clearly!) that is making us all lose our common sense and our ability to think innovatively. We are too ‘taken care of’ by the state, and forgetting that we have skills at our fingertips that can change all this. We’re all asleep! Yes all those entrepreneurs out there – your planet needs you, so whoever takes the reigns should keep this in mind….

    Comment by Wendy Dashwood-Quick -

  7. Advocating responsibility, hard work and belief in both needs to become popular again. Excerpt from this article: http://proudtoliveinamerica.com/forms/main/default.aspx?l=en-us&p=editorials12

    “In order to solve the world’s problems we need to address our own issues first. Back in the 1970’s, George Clinton of the Funkadelics sang, “Free your mind and your ass will follow.” in the song “Good Thoughts, Bad Thoughts”. Maybe its time we did that and started focusing on the Change We Really Need. The events that take place on November 4th when we select our next president won’t change anything and history will only repeat itself if we don’t “change” ourselves first.”

    This type of change is what our elected officals should be talking about rather than how government will regulate our own stupidity.

    Comment by Philip Eller -

  8. Pingback: The Time is Now - Adam McFarland

  9. Whoever wins the election should hire Mr Cuban as an economic advisor.
    What the US needs now is innovation and problem solving. We don’t need
    high faluting wall street types who fiddle while Rome burns.

    Comment by Praveen -

  10. Unfortunately, America is increasingly LAZY! Trying to stimulate the entrepreurs to vote for you is only speaking to a small group of people. Instead we have one candidate that is essentially bribing the LAZY MAJORITY of our country into voting for him. We have another candidate who is ignoring that fact.

    Comment by Zach Weisman -

  11. “What we need is our candidates to stop yelling at each other and starting looking at the American people and encouraging the best of who we are. That is who I want to get behind. That is what I would like to see for our country.”

    uhhhh….one of the candidates has been doing this for the entire election!

    Comment by Daniel -

  12. Pingback: dispatches from TJICistan » Blog Archive » plan B

  13. This is a great article. I agree, the entrepreneurial spirit can thrive
    during a struggling economy… I founded a company that trains
    entrepreneurs on how to start their own business. My team of mentors takes
    the entrepreneur through the initial steps starting a business
    from choosing a business name to creating a website. These budding
    entrepreneurs are always so excited to see their dream transform from a
    back of the napkin idea to an actual money making company.

    This gives them hope in a disparing time that seems to be looming
    over our heads.

    Thanks again for this great post… keep up the good work!

    http://entrepreneur.northstarthinktank.com

    Comment by Jeff Chavez -

  14. Pingback: The Cure to Our Economic Problems « Abundant Wealth

  15. Stimulating post – thanks. Agree with the points about entrepreneurship
    being a good way to improve the economy.

    – Vasudev

    Comment by Vasudev Ram -

  16. You should give a talk to these chump silicon valley entrepreneurs who think that if they don’t achieve 1m+ user registration on their web site by year 1, they failed. You da man.

    Comment by TaeWoo Kim -

  17. Let me spell out the Economic Crises to those of you who don’t understand the mess the average American is in.

    I have a client who bought a newly built home in Dec 2004 for $403,500. Today that house is worth $191,160. For the 1st three years his mortgage payment was an affordable $1,666.67/m payment (3yr ARM @ 5% Int. only) and today the payment is $3,268/m. His income of $65,000/yr, despite a 3% annual raise, this person’s net take home income has actually dropped. Why? This is due to over a $5,000 annual fuel increase for his good ‘old American Chevy Camaro.

    December of 2004 the average price per gallon on gas was $1.93 in San Diego and on July of this year it had reached a high of $4.58, this equals a 137% increase!

    On top of all of all this, his retirement savings is down by nearly 40%.

    Housing and Gasoline now consumes 116% of his net take home where as it use to be only 55%. 45% of discretional income will no longer be spent on consumption which means a further drop in the overall market!

    This Country is running on empty, and the solution is not, buying a foreign hybrid and getting a new job with a shorter commute. By the way, this guy is a Police Officer trained to protect and serve; -whose protecting him?

    In hopes of HR3221 coming to the rescue, we are disgusted to find that the banks aren’t obligated to honor the “Hope for Homeowners” bill, so what good is it?

    Solution
    Let me propose a solution that is a true win win, for Main Street, Wall Street, and the Banks. This proposal includes a new investment vehicle which I call the ‘Smart Asset Management’ or S.A.M. account. It also helps reduce a homeowners monthly payment by restructuring existing debt into an attractive program where as he would have to be more stupid to foreclose on it than he was to take out that subprime mortgage in the 1st place.

    The traditional loan takes a portion of each payment and applies a portion to principle and a portion to the investors within the bank (called interest). The propose program will work a little differently and could help the homeowner get out of being upside down within a fraction of the time and in even the ability to pay off that loan much faster than traditionally. Let’s take my good old average American client as an example.

    If he would be given the opportunity to refinance his loan of $400,000 (209% Loan to Value) at a rate equal to Prime (currently 4.5%) a 30 year mortgage would cost him $2,019.17/m. Assuming a 4% growth rate in real-estate prices it would take at least 11 years before he has any equity.

    However, if instead of his principle payment going directly into the equity of his home (real-estate) it went into a ‘Smart Asset Management’ or S.A.M account, an interest baring account tied to the market where as the lender has a collateral assignment on it, he would start building equity faster helping him get out from being upside down much faster.

    Assuming the same restructure previously described and the SAM account growing at a rate of return of just 6% he will have equity again within 8 years and his home paid for within 16 years!

    In this example he could refinance within 8 years. Should the real-estate market or the stock market rebound faster or if additional principle payments were made into the S.A.M account the debt could be dissolved much quicker.

    The S.A.M. account should have tax preference in that it grows tax deferred and if the home is sold any equity growth within the S.A.M. account would be taxed at a preferred capital gains rate which would be included in the homes valuation.

    Conclusion
    The house should consider the use of the bailout funds as a loan to help qualified homeowners who are upside down in their mortgages. This program provides the opportunity for these individuals to contribute to the markets. Banks would be able to unwind the subprimes and foreclosures prevented. Faith would be reestablished in Wall Street instead deserted by Main Street.

    Let’s establish a new way to manage debt and be show innovation by introducing the SAM account (Smart Asset Management).

    This Idea is presented by Brian E. Samuels, LUTCF, a financial advisor whose career is devoted to helping individuals take advantage of the American Dream and finding a cure to Financial Illiteracy.

    Comment by Brian Samuels -

  18. Mark,
    I’m a first time reader but I guess I’ve been unknowingly following your advice. I started my own product design & engineering consultancy this summer and I’m going to stick with it despite the economic gloom. The core of my business is designing innovative products for manufacture. I suppose if your ‘recovery plan’ is accurate, I should be in the heart of it all… And since Sweat Equity is pretty much my entire overhead as a consultant, I’m in a position where I don’t require much investment to get rolling.

    Thanks for the words of encouragement, they’re hard to come by these days!
    -Ryan

    Comment by Ryan Braunstein -

  19. Brilliant! You’re article reinforced why I’ve decided to go out on my own and start a consulting business.

    Comment by Jennifer -

  20. Great post. Definitely reinforces my view that you can excel in
    the technology space starting with very few resources as long as you
    have a carefully crafted gameplan and the foresight to execute it.

    Comment by jvdigitalmedia -

  21. Great post. Definitely reinforces my view that you can excel in
    the technology space starting with very few resources as long as you
    have a carefully crafted gameplan and the foresight to execute it.

    Comment by jvdigitalmedia -

  22. Pingback: Blog Maverick on the Power of the US Economy « Campus Entrepreneurship

  23. I don’t want the president to stand up and do anything. I want him to get the helll out of my way.

    I’m growing a business right now, and my clients are worried about the
    availability of credit. Let’s get government out of the lending business
    and get some sensible regulation in place.

    Also, tax policy is much more than mastubation. It has a real effect.
    If you tax me more, you make it harder for me to hire more people and
    to grow my business.

    The best thing the government can do is lower taxes and get out of my way.

    The government creates barriers for businesses through taxes and the
    lower they are the better.

    That said, I didn’t look at tax rates before starting my business. I
    looked for a need that we can fill better than anyone else. We’ll
    continue to succeed, but more people will have a better chance to succeed
    with less government interference and lower taxes.

    Comment by tk -

  24. Excellent, Excellent, Excellent. At last, there is someone out there who think the exactly same way that I do! I think the whole worlds been asleep or something. We just need to think positively and start taking action rather than listening to how dreary it all is.

    Vivre le Revolution!

    Comment by Wendy Dashwood-Quick -

  25. Glad to be an Entrepreneur at this time. Innovation will thrive and new products and a way of life will be set. Keep our heads up.

    Comment by Stephanie -

  26. Fabulous post. I emailed bits and pieces to my husband to help confirm that we are starting a business at a good time regardless of what the media says. It’s inspiring to read other’s posts, esp the young entrepreneur with a vision. My hubby and I are both in our early 20’s and it’s awesome to see others our age with big goals and dreams.

    Comment by Sarah Taylor -

  27. Pingback: Entrepreneurs don’t worry about the economy. We have busines to do…

  28. I’m amazed at how inspirational a single blog post
    can be.

    I feel so inspired after reading that.

    Thank you.

    Comment by YS -

  29. awesome post!

    it’s all about the entrepreneurial spirit in this country. that’s what will lead us out of this economic abyss. our greatness as a country has always been our spirit of innovation. that’s our core competence as a country and it’s the greatest strength of any nation in the world. And because that spirit is ingrained in our collective psyche as a people it will never be defeated. it will take time for the spirt to re=generate and find the next innovations that will re-shape entire industries and create new ones… but the process is never ending and the people putting in the endless hours of time developing those ideas couldn’t give a rat’s a– about the tax rates!

    Comment by paul -

  30. Right on the money Mark- pardon the pun. What you say is true, however, the most important entrepreneurial project that we MUST WORK ON AS A COUNTRY TOGETHER is ENERGY INDEPENDENCE!!

    Once our dependance on foreign energy is dissolved through innovative, enterpreneurial genious, backed up by our citizens and political leaders, we will be on our knees as a whole. The ONLY way to stand up and be STRONG AND WEALTHY again as a country is to SOLVE THIS PROBLEM.

    If our next president, whichever it turns out to be would invest the first 10-12 months of his presidency in ENERGY INDEPENDENCE. ALL of our other problems would be solved. Health Care, National Debt, Education Priorities, etc. etc. WHY??? Because we would be a wealthy country again, we would not be entering into wars based on oil issues, we would regain our sense of National pride (not Nationalism, but pride in the American “Can Do” ethic), go vote!!!!!

    Comment by pammyb -

  31. Hey Mark,

    Amen to that! You are 100% right!

    xx Alisa

    Comment by Alisa Apps -

  32. It does seem like the overall economy is slumping and that many home
    owners are not getting their financing with near perfect credit.
    However rates are looking pretty good as of late which if cash is not
    the issue is beneficial for strong buyers getting great buys.
    We do long range budget planning and reserve budgeting for resorts,
    AOAO’s, IOA’s and such properties. We are also downsizing our offices
    though busier than last year with next year booked out.
    It is always good in my opinion to keep a look out for potential
    opportunities one which I have recently been introduced to.
    I have seen several people build themselves from practically nothing
    with a lot of hard work and commitment within the last year.
    Take a look at the attached weblink and see for yourself and yes it
    is a network marketing company built around an amazing product if your
    not interested in a great opportunity please don’t waste your time.

    Comment by Finn A -

  33. Mark, excellent comments as always. I see that we think alike.

    I hope to be a successful business owner myself and am not afraid of
    working long hours to build my business. I have been at it just over
    a year now and things are looking better all of the time.

    It’s comments like this that get me re-focused and keep me going.

    Thanks.

    Comment by PC Doctor -

  34. It seems like some industries today lend themselves more to “start-ups on a shoe-string” and others require lots of capital and expertise (eg, new drug). Some idnustries like high capital requirements because it may be a barrier to entry and preserve advantage for incumbents.

    Comment by nathan -

  35. Great post. Entrepreneurship has a great role to play in fixing the economy, but its not the only way. I’m a big fan of entrepreneurship that gets us off oil and gets us on green technologies.

    theodalisque.wordpress.com

    Comment by christaanne -

  36. Pingback: A political rant worth noting « Ink-Drained Kvetch

  37. Mark, you should publish your favorite blog posts and some comments in a hard bound book along with some behind the scenes photos of your life as the World’s Most Accessible Billionaire. Should be an immediate Amazon bestseller!

    Comment by econ365 -

  38. Pingback: MattMaroon.com » Blog Archive » Amen Brother Cuban

  39. Pingback: Marc Cuban: “The Cure To Our Economic Problem Is The Entrpreneurial Spirit Of Americans” : tinyComb

  40. As Josh points out tax rates do make a difference. Clearly, almost no one would care to do work (entrepreneurial or otherwise) if the tax rates were 100%. Similarly at 99%, etc. Everyone intuitively trades off the benefits they get from working vs. those from not working. If you tax working or entrepreneurship you’ll find people doing less of each. Different people make this decision at different tax rates. For most the difference between a tax rate of 34% and 35% makes no difference, but for a few it does. When the effects of those choices are aggregated you find that as the tax rate goes up, the aggregate hours worked declines. This is the “macro” level effect that Josh was referring to.

    This principle works no differently for entrepreneurs than for workers at McDonald’s. Just because people don’t talk about it, doesn’t mean the effect isn’t real!

    Comment by DWAnderson -

  41. Nailed it! I won’t even elaborate as you simply NAILED IT! I own a small business, and after years of debating it…I did it…don’t even know what my tax rates are, don’t care!

    The media is helping to create this mess…If you’re told you’re ugly and fat every day, guess what you’ll become?

    A year ago, I started http://www.positiveeconomicnews.com And today if you Google positive economic news, you’ll find my little blog staring you in the eyes at #1.

    Give er a look… War Mavs bringing down the house!

    Clone

    Comment by Barry Lauterwasser -

  42. Mark Cuban For President!!

    Thanks, I always enjoy your well-thought, insightful posts.

    Comment by Jeff -

  43. “could one Presidential candidate please show even the least bit of leadership and character and stand up for and encourage the entrepreneurs in this country?”

    Can you offer some tangible ways that the Prez or government could do this?
    What abilities do they have to spur the populace… are you talking about their education platforms?

    Comment by Neal -

  44. Hey did anyone miss that Obama announced he would appoint a Chief Technology
    officer to his Cabinet??! I`m surprised the US does not already have one.

    Comment by Gregory R -

  45. Pingback: Joe the Plumber = Fraud? - Page 3 - Cincinnati Sports Forums - Reds, Bengals, UC Bearcats and Xavier

  46. Love “The Cure” piece. As someone who also grew up in Pittsburgh, I’m proud. As a 23 year old, who just graduated college last year and is now sorting through the financial turmoil and deciding which presidential candidate tells the fewest “sorta truths”, I’m excited. As the son of a hard-nosed entrepreneur eho made it all happen from the basement, I’m inspired. Thanks for the kick in the ass to remember what it’s all about. Fuck the economy, the race, all of it. A great idea is a great idea.

    Comment by Adam Miller -

  47. I agree that tax rates are not the solution or even the problem for this financial crisis. The President-elect must assume control of the county at the worst time in the past 50 years. He must be able to grasp the changes in technology and correctly place bets on how to use that technology and other resources to lift the spirits of American workers in every blue and red state nationwide. Government handouts are not going to reboot this economy or sustain growth for any length of time.

    The American people must become more productive in their efforts to keep American Number One. This means that we must give 100% at our jobs everyday even if we hate our boss because we know that if revenue slips then headcount will be soon to follow. If you get laid off, now is the best time to become and entrepreneur. However, the same “me too” business will not be successful in this market. You must think of a transformational business or product that will deliver exactly what your customer needs, exactly when they need it. Don’t be afraid of ripping up business plans (and models) to get the optimal design. Whatever you do; don’t wait to start your business. If you can’t get funded without a proper business plan then create a demo on a shoestring or look for a partner. Don’t wait for the economy to improve or you get your severance check. To succeed you need to push aside your depression and pursue your dreams.

    Comment by econ365 -

  48. “Entrepreneurs who create something out of nothing don’t care what tax rates are.”

    What a load of BS. Currently, nearly 50% of my income is taken by force: income taxes, social security, medicare, sales taxes, gas taxes, etc.

    Why should I even bother when they increase that number to 75%? Why should I be innovative and start a company when I can get a check from the government to sit at home and play guitar?

    I look forward to Socialism…free money for everyone and no one has to work. Obama will just wave his magic wand.

    Comment by JB -

  49. Mark,

    Inspiring! Thank you for reminding us that the best source of finance
    is to offer something of value and show prospective customers the
    benefit of your product or service.

    Slow and steady always wins the race.

    Comment by David Ciccarelli -

  50. YES! Economists need to stop masturbating!

    Comment by Jeff -

  51. Sorry, “There’s very little we can do”

    Comment by Amy S -

  52. We consider “growing” our business all the time. For every economic condition, there is an answer in our industry (restaurants), and while it might seem counterintuitive to risk what we currently have in a shaky economy, as entrepreneurs we realize that you must change or go broke, so get started with something new today. I see it happening in my neighborhood, with mini-restaurants like Woodlands Grill, and modified service places like Snappy Salads and Prego Express.

    That having been said, we just choked down a $15K increase in 2007 property taxes on our location and $7K in new state franchise taxes. There’s very we can do to raise our prices in this economy. Does it make me want to continue or walk away? I’m still chewing on that.

    Comment by Amy S -

  53. Amen. And you know what these people can do to help entrepreneurs ? Cheaper health care. I’m being forced to fold up my business and look for a cog-in-the-wheel job because I can’t afford health insurance, even if I am ready to live with a huge deductible. All I want is an affordable policy that covers me for unforseen, catastrophic cases. But I can’t even get that because the insurance mafia has the “leaders” of this country in their pocket.

    Comment by BeatenByTheSystem -

  54. You and I both know that this crisis was caused by the CDS market gone out of control. Working harder is not going to solve anything. That’s like using pails of water on a forest fire. Regulation is the the fire hose we need to shut down credit default swaps once and for all to make sure this never happens again.

    Comment by Vezquex -

  55. MC,

    I forgot to add in my initial comment above that my business will
    succeed and that one day I will buy the Dallas Mavericks from you!

    Thanks again!

    James

    Comment by James -

  56. I’m with you Mark. Only problem is the pols will say they’re
    ‘catering to the rich’ by helping businesses. What the morons don’t
    realize is a few people getting rich is a byproduct of a healthy
    economy and if that doesn’t happen, an awful lot of people are going
    to be hurting because jobs aren’t a devine right.
    They need to be created.

    There are no answers forthcoming from either of these two
    stiffs — and where the economy is concerned, they’re both clueless —
    and given the fact that Congress is made up of mainly lawyers, I have
    trouble being optimistic about any help coming from Washington
    anytime soon.

    This should be a prime example to the liberals out there who think
    Government is the answer to everything. It’s not and it never will
    be.

    Comment by scotbo -

  57. MC,

    As a struggling Entrepreneur myself it is awesome to hear this from someone like
    yourself – who has been through though “whole process”. I have my
    dream/idea and a lot of motivation and I thank you for your blog
    and encouragement to keep moving forward and not giving up even though
    all we are hearing about is the recession.

    Thanks for all that you do!

    James

    Comment by James -

  58. MC,

    As a struggling Entrepreneur myself it is awesome to hear this from someone like
    yourself – who has been through though “whole process”. I have my
    dream/idea and a lot of motivation and I thank you for your blog
    and encouragement to keep moving forward and not giving up even though
    all we are hearing about is the recession.

    Thanks for all that you do!

    James

    Comment by James -

  59. Pingback: The IT economy is sailing into unknown waters | Tech Sanity Check | TechRepublic.com

  60. Sounds like you’re voting for Obama then. Nothing new will be said, and you know that.

    You’re voting for the smarter, cooler more decisive man.

    You’re voting for the guy who’s worked for everything in his life.

    You’re voting for the guy who the richest man on the planet is voting for.

    You’re voting for the guy who the greatest war General since Patton is voting for.

    What are you waiting for Cube??

    Comment by Frank Vu -

  61. Totally agree Mark. Considering where we are, however, curious which of the two evils we have in front of us on November 4th is most likely to be cajoled, persuaded or petitioned into being that champion of entrepreneurial spirit. My business relies on the emerging Gates, Dells and Cubans of thworld, so I’m game to help make this happen at a public level if necessary (hell, if a PR guy can’t ring the bell on this who can),

    Thanks for the post.

    Comment by Scott Bauman -

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  64. Mark,

    Look back at the companies that started in the Great Depression…or
    at least survived the Great Depression. Their business fundamentals
    were sound and “timeless” if you will. If new companies and small
    businesses provide their service better and than their rival,
    they will succeed. Or if they create and dominate a new niche, they
    will succeed.

    People get sidetracked with forecasts and ROI…
    when the basic premise of the business is all you need.

    It’s pretty simple really…thanks for the posts.

    Ryan

    Comment by Ryan Crysler -

  65. Your recent posts are of tremendous value to us. Thanks for sharing your wisdom … we look forward to the next instalment.

    Jason and the startup team
    Sydney, Australia

    Comment by Jason -

  66. Pingback: The Cure To Our Economic Problems « blog maverick « The Indignation

  67. Pingback: Denny Mundell’s Fertigation Company Blog » The Cure For Our Economic Problems

  68. Excellent topic! So, I was thinking it would be very nice if we could provide better incubator programs that are readily available to help entrepreneurs build, fund, and compete in our global market place? So, very similar to the France model where the government will invest up front with seed money for innovative businesses startup programs. As it stands, we do more on investing with meaning less ear marks attached to every bill, than we ever do with funding for entrepreneurs in ways of incubation programs!

    Comment by Mitchell -

  69. Mark,

    While I agree that the American entrepreneurial spirit is, and will always be, our strength against the rest of the world I would still like to take issue with something you said.

    “The impact of tax rates on productivity and development is something economists masterbate about, enterpreneurs don’t waste their time thinking about it. We have business to do.”

    This is actually proven wrong time and time again…in the aggregate. At the micro level, sure, if someone has a dream then they will follow it no matter what is in their way. However, tax rates act as a disincentive to perform work and make money. The actual rate determines how large that disincentive is. The other funny thing about the Bush tax cuts is that never before has the federal treasury taken in more money. This is for a number of reasons, but it disproves those who say the only way to raise govnt revenues is to raise taxes.

    I agree with you that both candidates have wrong economic policies. They both have gigantic spending plans. I do think McCain is less bad given his statement that he will eliminate earmarks (a monumental task) and keep taxes low. I just don’t think Obama has any experience whatsoever and therefore precludes me from even considering him as a candidate.

    Good post.

    Comment by Josh -

  70. Great post – entrepreneurship is the only solution.

    The entrepreneurship dimension may have changed. i.e. earlier entrepreneurs often thought about satisfying the local (US markets) first and global markets were second gussed.

    Now the first world will have to develop entrepreneurship to service demand in savings rich thrid world and developed asia.

    Its going to be competitive but not impossible.

    Comment by Rahul Deodhar -

  71. I agree that it will take many years to dig out from under the current crisis, and the mountains of trouble created in the last 8 years. However one candidate is offering plans that continue in the same path we have been traveling, and I am sure everyone know the definition of crazy (Repeating an action expecting a different outcome….). The other candidate is at least offering something that has worked in the past.
    I also agree that the successful entrepreneurs of the world (while factoring things like taxes) don’t generally let that stand in their way of pursuing their passions. And yes the economy grows from the small business up, not trickle down from the top.

    Comment by GrizDave -

  72. Hey Mark, Hows this for a new idea I have not heard of yet. Anyone that owes money(credit card, mortagage,loan,insurance bills etc.)to the various companies that have been bailed out by taxpayers money and can substantiate it through mortgage notes, cc records etc. get a calculated credit ala “stimulus check” for a percentage of what they owe these companies from thier dealings with them. That money would then find its way back into the economy,maybe lowering mortgages,cc debts or just general cash flow. The government in turn can give tax credits to these companies for the money returned to individuals who have debt to the respective companies. Its complicated but Im sure they can figure something along those lines out . I’m surprised no one with mortgages to Wamu,debt to AIG and debt to other companies involved didnt asked why they are paying taxes to bail these companies out but still have to pay every cent they owe also. Thanks for the thoughts

    Comment by Frankie from Lawnside -

  73. Oh, and thanx Mark for bringing back that post again… it’s always good to get a 2nd or 3rd read to help ingrain it in my mind; it’s such valuable advice for a future entrepreneur.

    Comment by James Stevens -

  74. I’m only 20 years old, but I have a goal building a business that provides
    highspeed internet (WISP) to the Last Mile. There’s so much potential here in my
    area so that’s where I’m gonna start. Right now, I’m simply working hard,
    talking to my colleagues about their business, attempting to learn everything there is to know about
    radio communications, and saving money so I can get a great start. The potential is there, so it’s up to me to go for it and get my customers. I’m also in the 4th year of myBachelor of Biz Mgmt as I’m trying to get a good grasp on business do’s and don’ts.

    I’m just a kid now, but my dream is to help contribute to America by creating jobs, happy customers, and be a part of this resilient economy; I wanna be in the midst of the comeback that this country will complete in due time.

    Comment by James Stevens -

  75. GREAT TWO BLOGS –BUT IS’S SCARY FOR OLDER FOLKS

    Comment by DON CASEY -

  76. Insightful and inspiring advice. Thank you.

    Comment by Tamira Cason -

  77. “Now is the time for Entrepreneurs to step up and do our part for our country. Its up to us to start businesses and create jobs. That is the cure to this country’s economic problems.”
    I couldn’t have said it better myself! Great point!

    Comment by Dalibor Dimovski -

  78. This is a great time to start a business!

    Everyone else is puking over their 401/201/101k’s,
    whereas my contact at my biggest client told me
    today he considered me one of the “A Team!”

    Even better, one of my subcontractors is going to
    put some sweat equity into a shared proposal for
    pitching to this client.

    Sweet!

    Comment by Dave D -

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