You said “salaries are much more stable than business values” above but for your conclusion to go through you need salaries not only to be more stable, but more ex-ante predictable. If business values fluctuate more than salaries, but the fluctuation is ex-ante predictable, then there is no element of luck in founding a startup (and to the extent the ex-ante variance is small, the role of luck is small).
On the other hand, the ex-ante variance being large is exactly what you’re trying to prove in the rest of the post, so it would be circular to assume it there and then use this to support your subsequent arguments in favor of it.
Huh, interesting point! I will have to reread my copy of The Economics of Entrepreneurship; I wonder if they addressed that or just said “adverse selection” and left it at that.
You said “salaries are much more stable than business values” above but for your conclusion to go through you need salaries not only to be more stable, but more ex-ante predictable. If business values fluctuate more than salaries, but the fluctuation is ex-ante predictable, then there is no element of luck in founding a startup (and to the extent the ex-ante variance is small, the role of luck is small).
On the other hand, the ex-ante variance being large is exactly what you’re trying to prove in the rest of the post, so it would be circular to assume it there and then use this to support your subsequent arguments in favor of it.
Huh, interesting point! I will have to reread my copy of The Economics of Entrepreneurship; I wonder if they addressed that or just said “adverse selection” and left it at that.