An Indian Civilizational Perspective

Do you need Money in Pocket to start business?

One of my Prof’s had once said that:

Money never goes to a person who has more money; It always goes to one who knows how to use it. For, that is exactly what the Financial Institutions do – the take money from those who dont know how to use and give to people who know how to use it!

This article actually brings that out!

It takes money to make money, right?

The old adage may hold in the financial markets, but when it comes to starting a business, it rings hollow, says Erik Hurst, a 33-year-old associate professor of economics at quant haven University of Chicago’s Graduate School of Business. In a recent paper, Hurst, along with colleague Annamaria Lusardi of Dartmouth, splashed cold water on the purported correlation between wealth and entrepreneurship. And the two have plenty of numbers to back up their claims.

Despite years of low interest rates and increasing competition among banks (which keeps rates low), budding entrepreneurs and policy wonks still lament a lack of access to capital. The easier the money, they say, the greater the number of entrepreneurs, which in turn, creates jobs and drives the overall economy. Some of those buds might even bloom into the next Microsoft (nasdaq: MSFT – news – people ), eBay (nasdaq: EBAY – news – people ) or Google (nasdaq: GOOG – news – people ).

Clearly, entrepreneurs who have a few bucks have an edge on those who don’t. But after plowing through reams of data on some 8,500 small businesses compiled by the Federal Reserve and the University of Michigan in the late ’80s and early ’90s, Hurst rejects the notion that, for the most part, limited access to capital is constraining would-be entrepreneurs.

“People who have money aren’t any more likely to start businesses than those who don’t have it,” he says. Put another way, people who have a compelling reason or drive to start a business will do so.

By Hurst’s calculations, people with $2 in their pockets are just as likely to start a business as those with $200,000–that is, about 3% of nonbusiness owners. As household wealth climbs to $500,000, the probability ramps up to 7%.

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