The Startup Visa and David Ricardo

I’ve been reading Fred Wilson’s numerous posts on the startup visa andthought I’d chime in with some context that’s currently relevant to me.  I fully share Fred’s views on this topic,  and I think it’s important to discuss the relevance this has on the future growth of our economy.

I’m currently taking a global markets class at Stern where we’re reviewing and analyzing Ricardo’s theory of comparative advantage. This is an economic theory that’s often used to support globalization, because it generally lowers the cost of goods for all consumers.   I’m not going to get into the theory on this post, because the information on the theory is well written in Wikipedia (above link).  I do want to mention it in the context of the startup visa, because I think this theory and the current startup visa debate tied together.

Remember when NAFTA was under debate and everyone was talking about that giant vacuum sucking manufacturing jobs into Mexico? Well, that didn’t happen.  What did happen is that some manufacturing business went south of the border (where labor was less expensive), and other industries in the U.S., like corn  production, thrived in the new marketplace.  Additionally, goods became less expensive for both Mexicans and Americans.

I mention this because I believe globalization is inevitable.  I also believe it’s a generally good thing for the world, but only if our country is strategic in its approach to maintaining competitive advantages in industries that are important and relevant.  Allowing entrepreneurs into our country to start new businesses is good for everyone and it doesn’t threaten anyone.  It’s only a net-positive benefit to GDP to have new value-generating firms in our country;  I simply do not understand the counter argument.

I heard David Rose speak last month about angel investing.  He told a story about a group of Stanford MBAs who were pitching him a website that would allow angels to bid and compete on investing in startup ideas.  David’s problem with the product was that, in all of his years investing in startups, he had never once competed to invest in an idea.   It’s easy to understand why.  The likelihood of a startup succeeding is so low that it’s not logical to invest one as an angel because the economics are simply too daunting.  In a market where good ideas are in short supply, and success in startups is a (qualified) numbers game, why would we create legislation to block the flow of new ideas in our country?
Considering our increasing dependence on service businesses for U.S.  GDP growth, and considering the fact that we are a mature country and not generating new jobs outside of the new business environment,  we are taking huge risks every time we turn an entrepreneur away.
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One thought on “The Startup Visa and David Ricardo

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