Saturday, October 03, 2009

A corollary to the 'those who can, can, those who can't, teach, those who can't teach, teach gym' is the 'never take business advice from someone who's never been in business'.

And an example of that is Obama's claim that his health care reform will lead to job growth because entrepreneurs with "... a good idea and the expertise and determination to build it into a thriving business" but "can't take that leap because they can't afford to lose the health insurance they have at their current job".

Sounds reasonable, right? Wrong!

Let's look at Joe Entrepreneur, who has a great idea and is about to quit his existing job (that provides him with health care benefits) to devote his attention to starting this new business.

First of all, Joe doesn't have to 'lose' his health insurance when he quits, he can keep his insurance under COBRA. Yes, Joe will pay more for COBRA coverage than he likely did while employed but he doesn't have to go uncovered. Surely Obama knows this, right?

Second, Joe can buy an individual heath insurance policy while he gets his business up and off the ground. Yes, it is also likely more expensive than his current plan but if having health insurance is that important to him, he doesn't have to go without.

Third, given that very few start up businesses are profitable from Day One, Joe is likely to need to have some money saved up to cover several months of living expenses - including the premiums for health insurance - until the business gets going and gets to the point where they can take a full salary. If anything, saving money to cover health insurance premiums only somewhat delays the day they head off on their own, it doesn't prevent them from ever doing so.

Or perhaps Joe doesn't need to have saved up money as he is fortunate enough to have a wife who makes enough money to cover expenses during the start up phase... and if she does, it's likely her employer offers health insurance and she and Joe can switch coverage to her employer's plan (no data to back this up, but it's my belief that most employees lacking employer provided health care tend to have lower paid jobs). And while switching plans might involved complications involving pre-existing conditions, I doubt there are many would be entrepreneurs falling into this category.

But the biggest reason I don't believe Obama is in the nature of would-be entrepreneurs, who fall into one of two categories: those who so believe in themselves and their ideas that they pretty much ignore the long odds against success, and those who aren't so confident and are never going to take the leap. The first group isn't about to let something like health insurance stop them from heading off on their own, to them it's only a matter of time until their new business is bigger than Microsoft and they'll have plenty of money to pay for health insurance and the new boat and vacation house. And the second group wasn't going to give up their safe job and is only using the potential loss of health insurance coverage as a topical excuse to justify doing what they were going to do anyway. Put another way, even if you gave them health insurance, they weren't going anywhere. To them, starting a business is something they talk and dream about... but never do.

So when I hear someone complain that the lack of health insurance is stopping them from quitting their job to start a wonderful new business that is going to hire lots of people... I know which group the complainer falls into. And Obama, not ever having started a business and not understanding those who do, can't tell the real entrepreneurs from the posers.