A Factor in the Bizarre “Great Resignation” & “Labor Shortage” Phenomenon: The Huge Surge of Americans Starting Businesses

Another testimony of the massive changes in society and the economy. But losing some of the enormous steam.

By Wolf Richter for WOLF STREET.

New business formations in December, based on applications for an Employer Identification Number (EIN) with the IRS, jumped another 20% from the already high December last year, and by 34% from December 2019, according to the Census Bureau.

The explosion of business applications began in June 2020 when stimulus checks, extra unemployment benefits, PPP loans, and other government moneys washed over the land – and when millions of jobs just vanished. And it continued through December 2021. But the spike has been losing some steam in recent months:

These huge numbers of new business formations every month since June 2020 are a piece of the bizarre puzzle of labor shortages, combined with huge record numbers of people who quit their jobs – a record  4.31 million workers “quit” in the private sector in November, up 30.6% from November 2019 – mostly to take a job with better pay as companies got aggressive in recruiting by offering higher compensation and better working conditions.

But some of them quit for other reasons, including because they’ve had it, and they’ve come up with a plan, and they’ve got the resources, and they struck out on their own and started a new business – not some gig, for which they can just use their Social Security  number, but a new business for which they filed an EIN application with the IRS.

For the whole year, 5.39 million EIN applications were filed with the IRS, up by 42% from the last “normal” year, 2019, after a record 4.35 million EIN applications were already filed in 2020. The pandemic years are shown in red:

In other words, 5.39 million businesses were started in 2021 by people, many of whom quit their jobs to do so, and some of them might have gotten started while working from home for their employer, and when they were ready to make the jump, they quit their job and became their own boss.

Between 2020 and 2021, nearly 10 million businesses were started. This is a huge number and a testimony of a massive change in the economy and society – and it explains a portion of the record high “quits” in 2021.

EIN applications that were unrelated to typical business formations, such as for tax liens, estates, trusts, etc., were removed from the data by the Census Bureau.

These business applications are split into categories, based on what the probabilities are of major job creation. Most new businesses will create a job for the owner and maybe for a few other people and never become large employers.

This ranges from an online retailer headquartered in dude’s and dudette’s garage to a mergers-and-acquisitions shop by two lawyers that decided to combine their brains and rake in the big bucks out of their home offices. These small businesses can be exciting and rewarding, and being your own worst boss is a great way to go. But most of these businesses will not become big job creators.

Businesses with “High-Propensity of Planned Wages”: The job creators.

The Census Bureau categorizes businesses with a high likelihood of creating a significant payroll as “High-Propensity of Planned Wages” business applications (HBA), based on the information in the EIN application.

In December, there were 137,254 EIN applications that the Census Bureau classified as HBAs, up by 21% from December last year and by 18% from December 2019. For the whole year, 1.77 million HBAs were filed, up by 24% from 2019.

Businesses with “Planned Wages”: They’re scarce.

Within the HBAs is the subgroup of real job creators, those with a planned date for their first payroll indicated in their EIN application. These “Business Applications with Planned Wages” (WBA) have funding and they’re ready to hire and pay wages. These are the businesses that are most likely to grow their payroll and become significant employers.

In December, there were 48,483 WBAs, up 19.6% from a year ago, and up 22.5% from two years ago. For the whole year, 637,669 WBAs were filed, up by 24% from 2019. But this is far lower than in the years 2006 and before:

Where the action is: New businesses with a low propensity to create jobs.

The number of EIN applications by businesses with a low propensity to become significant job creators rose 20% in December from a year ago, and by 43% from December 2019, to 281,126 applications.

For the whole year 2021, compared to 2019, applications jumped by 53%, to 3.6 million.

The number of EIN applications for these types of businesses roughly doubled from 91,000 per month on average in 2007 to 183,000 per month on average in 2019. In 2021, they reached 301,000 on average per month.

In other words, 3.6 million businesses were started in 2021 by people who might never hire anyone else, but many of those entrepreneurs quit jobs to chase after their dream, and be their own boss. That’s where the majority of the massive shift in American society and economy is concentrated – not big well-funded startups:

The surge in applications by these small businesses with a low propensity to create jobs was already on fire in the years before the pandemic. But it exploded during the pandemic (red line in the chart below).

But applications by businesses with planned wages (WBAs) have languished for years far below their levels before the Financial Crisis, and even during the pandemic didn’t return to those levels. Compared to the other categories, they remain small (green line).

Even the HBAs while up sharply during the pandemic, remain roughly even with their levels before the Financial Crisis (purple line).

Applications by retail/ecommerce businesses dominate but are losing some steam. Obviously, the huge spike in applications during the pandemic lockdowns weren’t by brick-and-mortar shops, but by ecommerce operations, using the internet as a global market place, and using platforms such as Amazon, eBay, and others to ply their trade.

In December, there were still 70,827 applications by retail businesses, up 7.1% from a year ago, and up by 52% from two years ago.

Mostly tiny retailers: 78% were businesses with a low propensity to create a significant number of jobs.

For the year 2021, applications nearly doubled from 2019 to 764,000. While still historically high in December, you can see that applications by retail businesses have been tapering on a month-to-month basis since April 2021 (red line).

Professional services – lawyers, IT specialists, architects, engineers, etc. – the second largest category, continue to be red-hot (light blue line), with 51,191 applications in December, up 23.9% year-over-year. In 2021, applications jumped by 40% from 2019, to 474,000.

Among the other largest categories of EIN applications, there too has been some loss of steam on a month-to-month basis though they too remain historically high:

  • Transportation & warehousing (green): 40,716 in December, +64% from 2019; +106% for the whole year from 2019. Think ecommerce boom.
  • Construction (black): 39,384 in December, +24% from 2019; +30% for the whole year from 2019.
  • Administration and support (yellow): 28,582 in December, +35% from 2019; +60% for the whole year from 2019.
  • Accommodation and food services (gray): 22,516 in December, +39% from 2019; +75% for the whole year from 2019.
  • Health Care and Social Assistance (brown): 23,390 in December, +18% from 2019, +37% for the whole year from 2019.

Striking out on their own was still hot but lost some steam. This comes as entire industries are going through wild gyrations to hire people amid the labor shortages, and companies are using aggressive offers to fill vacant jobs.

But these millions of entrepreneurs now have a business that they need to get off the ground, and they’re passionate about it, and they will be difficult to pull back into the corporate rat-race unless the business doesn’t get properly off the ground – and there will be some of those too.

But this historic surge in new businesses – nearly 10 million in two years – and the millions of entrepreneurs involved explain in part the huge number of “quits” and the labor shortages.

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  140 comments for “A Factor in the Bizarre “Great Resignation” & “Labor Shortage” Phenomenon: The Huge Surge of Americans Starting Businesses

  1. Bob Hoye says:

    Amazing volatility.
    In the final year of London’s spectacular South Sea Bubble that climaxed in June 1720, there some 450 new companies floated.

    • Augustus Frost says:

      The current mania is far worse than the South Sea Bubble, not even close. Most have never heard of the best-known prior bubbles or believe “it’s different this time”.

      The South Sea Bubble, Mississippi River Scheme, and Dutch Tulip mania are profiled in “Extraordinary Popular Delusions and the Madness of Crowds”; probably the best known after the US Roaring 20’s, 1989 Japan, and 2000 dot.com bubble, which is actually the same mania we are in now as it never ended.

      All three were localized, as opposed to the current version which is global (though not universal) crossing multiple asset classes, any of which can (and eventually will) implode bringing the whole house of cards crashing down with it.

  2. Bubba says:

    And most of the startups with a “high propensity for job creation” will go bust in the coming downturn, laying off everyone and declaring bankruptcy. The 2000 tech bubble bust will repeat, but be even worse this time. So many of these outfits have no revenues, much less profits, and subsist on the idiocy of venture capital. The small independent business with a couple employees is a much more secure livelihood than working for one of those clown shows.

    • ivanislav says:

      Not at all. What everyone learned is that you need an existing business to take advantage of PPP loans (grants; they were all forgiven). In the next downturn, everyone who started a new business will be flush with cash (no matter whether the business itself loses money or only exists on paper) and we will have the next phase of the crack-up boom.

      • Petunia says:

        Just start a utube channel and apply for a loan. They got up to 6 figures, a write-off for their new truck, and everything they buy is deductible if you use it in a video. Plus they can live off the “loan” for years, if they handle money well, and don’t have to ever pay any of it back.

        The people who didn’t do this are the real suckers, me. It doesn’t pay to do the right thing anymore.

        • VintageVNvet says:

          Agree with most of what you comment on Wolf’s Wonderful, but not your last paragraph above.
          While my sole proprietor biz, in biz since the early 1980s, was totally eligible for the PPP,,,
          I did not take it,,, and now, in spite of the fact WE have all of our ”needs” firmly in hand at least until some sort of GUV MINT sanctioned and encouraged ”hyper” inflation,,, WE rest easy and sleep well every night.
          IMHO, the ”rest easy and sleep well” is all that counts,,, the rest mere speculation…
          MAYBE WE were lucky, or MAYBE we were ”blessed,” but again IMHO, we were at least somewhat ”prepared” for the last crash,,,
          and I can at least ”hope” that WE are prepared for the next one due to our very thrifty life style — as often mention by others on here —
          making us able to exist on only my SS, while my significant other banks hers in anticipation of at least the 30 year and hopefully the 10 year going to a ”decent” return…

        • Anthony A. says:

          I actually know several people who have real businesses and got those loans. They really needed them to continue with their business.

          Granted, there were a lot of scams, but there were a lot of businesses that are still viable today that may have lost it all during the shutdown.

        • Depth Charge says:

          “The people who didn’t do this are the real suckers, me. It doesn’t pay to do the right thing anymore.”

          Count me in. I was taught as a child to only take what you needed. My morals and ethics don’t square with this filthy country we used to call the USA.

        • Lawefa says:

          Need is unfortunately becoming more and more of a relevant term for society. The reality is many needed it but more abused it and took advantage of it.

        • RH says:

          That is the super-rich, parasitic US banksters’ lesson for Americans: it does not pay to do the right thing anymore; they never do, as shown by their getting richer while defrauding Americans and funneling more and more of Americans’ savings via their “Federal” Reserve. The sleeping giant, which is the silent majority of American people and EU people (who have gotten the same kind of stealing by the super rich banksters in the EU, which are mostly from the same families), is slowly waking up.

          I just saw a DW program about a 99% tax on the super rich, which the presenters though numbered only ten people. I imagined the outraged and angry faces of the usually arrogant and haughty members of the trillionaire families, who live without paying income taxes and rarely, any property taxes, and laughed loudly for ten minutes straight.

        • Eugene says:

          Do not tell this BS.One my friend ,a docgot i ly 35k.Another one,a pharmacy owner,got only 50k.NYC.I still can not get my Enemployment benefits.

      • random guy 62 says:

        We used PPP twice, as did a few other local companies that I know well. We spent the funds as intended, and probably 80% of the cash was incinerated on employment costs that exceeded what the business could support with sales levels at the time. The rest helped bolster the balance sheet.

        Without PPP, we would have survived, but the employee cuts would have been DEEP. We would have lost some good employees and that talent is not replaced overnight. That kind of cost cutting feeds on itself when widespread, and the country would have seen massive unemployment.

        Some local companies I know did not need them at all because business was fine and there were no shutdowns. For them, at least 75% of the cash went straight to the owners. Maybe 100%.

        In my informed opinion, the program worked as intended, but was incredibly wasteful. Feds could have easily added more strict provisions regarding true need. What else do you expect from government folks making decisions at an extremely fast pace?

        • ivanislav says:

          I disagree. We need to stop socializing risks and if that means businesses have to keep greater cash buffers, so be it. For those that want to run an over-optimized just-in-time business, let them. By giving free money to businesses, you act as a moral arbiter, judging the circumstances of the business and consequences on all parties (those forced to pay and those receiving the money). For example, I could have used an equal amount of free money to start a business and hire employees, but they didn’t allow it. Instead, everyone that didn’t receive the loans had to subsidize existing businesses to our own detriment (loss of purchasing power, national debt). The only fair thing to do would be everyone gets it (if you insist on stimulus to avoid a cascading spiral), or no one gets it.

          Furthermore, if you want a real-life example of misuse: My neighbors are a married couple and one does auto-detailing and the other does hair. They bought a new Mercedes SUV while neither is working. We are all paying for that car. I’m not happy about it.

    • The Real Tony says:

      In Canada the number must be north of 90 percent of all new businesses fail within the first year. In good times decades and decades ago the number was 80 percent.

    • TinyTim says:

      That’s not always the case. I started my business back in 2003 and i’m still in business. I decided not to hire any employees (why train my competition) and I never borrowed a cent from anyone.

    • Jay says:

      Probably 50% of these EINs are meant to create cover to dodge taxes.

      • c smith says:

        Exactly. Every trust created to dodge estate taxes has an EIN. I did 5 of them for my grandkids in December myself. Given the potential tax changes coming in 2022, there was a land rush for these numbers:

        “An Employer Identification Number (EIN) is also known as a federal tax identification number, and is used to identify a business entity. It is also used by estates and trusts which have income which is required to be reported on Form 1041, U.S. Income Tax Return for Estates and Trusts.”

  3. OutWest says:

    I didn’t see any age data. Are boomers striking out on their own toward the end of their career? I’m seeing some of that among people I know.

    • Wolf Richter says:

      I’m seeing a little of it among my boomer friends, I’m seeing more of it with younger people. But that’s just anecdotal.

      • Jay says:

        Off topic again, sorry, but I saw where some big wig was calling for a “shock & awe” first rate increase of 50 basis points. IMO, a 100 basis point first hike sounds a little more like shock & awe. The FED funds rate should be around 3.5% right now, heading towards at least 5% by midyear.

        • nick kelly says:

          Hartnett, Chief Investment Advisor BofA
          says FED ‘should’ raise .5.

          There is a theory that this is to create a relief rally when it’s only .25.

          Possible, but he makes some pretty dire predictions if the Fed doesn’t get on top of inflation. e.g., ‘dollar debasement’

  4. Prince Gbanga says:

    Are you sure this isn’t just an artifact of the Paycheck Protection Program?

    Free money (forgiveable “loans”) to any small business. But you need a bank account for that, which in turn needs an EIN.

    • Wolf Richter says:

      Prince Gbanga,

      “Are you sure this isn’t just an artifact of the Paycheck Protection Program?”

      Yes, I’m sure.

      1. PPP expired on May 31, 2021. No more applications accepted after that. From June 1 forward, the EIN applications had nothing to do with PPP.

      2. Even while the PPP was still going on, you didn’t need an EIN. Your SS# was good enough to apply for PPP.

      3. For the PPP application, your business had to be in existence before March 2020. Applying retroactively for a PPP wouldn’t help. And since you didn’t need an EIN in the first place…

      4. You don’t need an EIN for a bank account. All you need is a SS#. Lots of small businesses don’t get EINs. I didn’t get one either for the first few years. Didn’t need to. SS#is good enough. I got an EIN when I incorporated the business.

      • Michael Engel says:

        Preempt the next recession. An insurance policy if the gov will offer new PPP loans in the next recession. Politicians will cry : our small business is dying, PPP loans.

      • Jay says:

        Slightly off topic, but is anyone surprise that recent analysis shows that 75% of the PPP funds stayed in the owner’s pockets and didn’t go into the employees’?

        Imagine that!

        • Wolf Richter says:


          Lots of Teslas were bought with the PPP funds. Everyone and their dog got PPP loans. They didn’t even need to commit fraud. They didn’t need an EIN. The rules were so loosey-goosey that practically anyone with a Schedule C (self employed at least part-time) qualified.

        • Depth Charge says:

          And the PPP loans totaled almost a TRILLION dollars. That’s what’s been driving and hyperinflating land, house, boat, plane, RV and truck sales.

          Like always, the rich people who least needed the money got the most. The PPP loan program is and was, by and large, an absolute disgrace – just another disgusting display of a rigged system.

      • RockHard says:

        Hey Wolf – regarding point 4 I know that’s your experience and I won’t dispute that. However, when I formed my LLC in 2019, the advice I got was that most banks require an EIN to open an account for the business. There were some other benefits like privacy (for example, if your ID gets stolen, it affects your business too), but I do remember specifically hearing that I’d need one for a bank account. Probably ZenBusiness overplayed that to get me to spend the extra money, but at the time I was in a hurry as I had contract work on the table. No matter, I’ve made that money again many times over. I’ve since learned that most of this stuff is free or low-cost and I do my annual filings myself, the state takes $10 straight from my corporate credit card.

        Forming an LLC is probably one of my best financial decisions ever. Yeah, I overpaid to start it, but I don’t even think about it, Just lessons you learn along the way. If I had to do it again, I’d DIY the whole thing.

        • Wolf Richter says:


          “when I formed my LLC…”

          An LLC is a corporation. That’s an entirely new legal entity. It needs an EIN.

          But you don’t need an LLC to run a business. You didn’t need an LLC to apply for a PPP loan. You didn’t need an EIN for a PPP loan. You didn’t need an EIN for a bank account. Just a SS# and you file a Schedule C with your tax return. That’s the topic of my comment regarding the requirements of PPP Loans. You changed the topic.

          But yes, setting an LLC or a C-corp, if you have a functioning business, is a good idea for a host of reasons, including tax reasons and legal protections. But that’s a separate topic.

  5. MarketMissing says:

    There are a lot of changes due to Covid. A lot of big corporations use burn and churn to run fewer employees until they burn out and are replaced. That is only possible if there is a line of new applicants waiting to replace the low wage burnouts on a fast revolving basis. I suspect this doesn’t work when employees constantly have to call in waiting for test results or to recover. These corps saved tons of money running skeleton crews into the ground rather than staffing extra people to cover hours during surges. Businesses used to keep part timers on who could take up extra shifts when a crunch hit. Those part timers had to be given enough hours to keep them around and that meant working with their schedules around school or family or over staffing shifts. I was young when some of these patterns still existed in the bottom levels of the job pyrimid. We likely had a big labor glut after shipping most of our manufacturing overseas so businesses didn’t need to consider employee needs since they could just hire the next unemployed person waiting in line for scarce jobs. Now there is no line of folks waiting to take these positions when the old employees burn out or call in sick. That gave the big corps a massive competitive advantage for labor costs over mom and pop that don’t have a well oiled revolving door, a huge footprint or monopsony power in certain locations. If big corps can’t deliver reliability, quality, extended hours or decent service then mom and pop have a more level playing field.
    Throw in some of the shady practices popping up like AT&T sending out 3rd party debit cards with limits and fees instead of refund checks or folks finding themselves paying for ‘subscriptions’ they never signed up for and then can’t even get to a customer service person to correct it and a small local business starts to look better than a David and Goliath situation a lone customer is bound to lose against a big company. If they can even get ahold of them.

    • Petunia says:

      I got one of those scam refund cards from AT&T. Complained to my state AG and got my refund check within a month. It was only a few dollars, but the boldness of the scam really pissed me off.

  6. Prophet says:

    Intel is running a television commercial looking for workers.

    • General Strike says:

      Bearing in mind the plural of anecdote is not data, I would like to relate a recent event concerning the labor situation in the U$A. The General received a 3% raise in September, unacceptable under current historic conditions. After applying for a transfer to another division within the company I contacted my department boss and asked for another raise, expecting perhaps another 2 or 3%. I received a 15% raise on top of the 3% given in September. Labor has the advantage and I encourage all wage slaves to DEMAND large raises, organized or yet to be organized. The capitalists are making a “ killing “ ( literally ) right now and it is time to demand our fair share.

      • VintageVNvet says:

        Please look very carefully into the basis of epidemiology GS:
        While before the HUGE and continuing use of the statistical manipulations of epidemiology, what you say would have been correct, far shore..
        Since the HUGE ”scandal” regarding asbestosis and similar, most popularly described in a series of articles in THE NEW YORKER in 1977, has been clear that the plural and aggregated anecdotal information WAS,,, INDEED ”statistically VALID” ,,,
        The PLURAL of anecdotal IS indeed considered valid…

    • Flea says:

      Biggest problem is people see what corporate boards take and give themselves in compensation,tired of 93 $ million leaders ,whole peons get 15$ a hour ,great reset may not be what schwab has planned

    • Apple says:

      Intel is trying to fool people into thinking all of that government money they are getting will result in lots of high paying jobs.

      How many people are working for Foxcon in Wisconsin these days anyhow??

  7. MonkeyBusiness says:

    Young people? They have everything worked out. They are all starting their own Youtube channels and then they’ll watch each other’s content. Easy peasy.

  8. Catxman says:

    I see that America’s spirit of independence hasn’t been completely stamped out.

    I wonder how much of this is due to the existence of Human Resources. Their mind-control projects are getting deeper and more extensive as time goes by, and their assimilation programming — and conditioning — runs more and more against the grain of normal Americans.

    I wish the new employers the best of luck. Hopefully with any luck they’ll take some of their former comrades-in-the-workplace with them in their new endeavors.

    • JeffD says:

      HR departments have detroyed the effectiveness of American businesses over the last 40 years. It’s a much larger problem than anyone acknowledges.

      • Khowdung Flunghi says:

        A lot of HR was simply responding to government-imposed mandates, mostly trying to defuse potential legal hassles. Yes, it led to some pretty squirrely activities, but these are the times we live in. “Employment-at-will” is long dead and buried. Terminate a “protected” employee and sit back and wait for the legal blowback. Have your checkbook ready…

        • Apple says:

          Covid was used to get rid of a lot of those ‘protected class people’. Now companies are having trouble hiring back the ‘right’ people.

  9. The Bob who cried Wolf says:

    I wonder how many of these folks started a business as a direct result of a difference of opinion on the vaccine mandates? I’m sure there are all sorts of reasons, but this is probably a big one.

    • Wolf Richter says:

      The Bob who cried Wolf,

      “there are all sorts of reasons, but this is probably a big one.”

      No, it’s not. Look at the charts!! Look at the timing. Those vaccine mandates didn’t go into effect until late 2021. But EIN applications spiked the most in mid-2020 (15 months earlier) while the FUTURE vaccines were still being touted by Trump himself. EIN applications started to taper mid-2021 before the mandates became effective and have since tapered quite a bit.

      • The Bob who cried Wolf says:

        Agreed, most of this had to be frustrated folks who just wanted to work and wanted some control in their life. I’m not saying that the mandates are the biggest reason, but they are a big one. I know a lot of business owners who are grateful they owned a business through all of this and have no intention of forcing their employees to follow mandates. The mandates weren’t pushed into effect early on, but many of us saw the handwriting on the wall early on.

        • Wolf Richter says:

          The Bob who cried Wolf,

          Everyone their thing. How many people quit jobs because they were elbow to elbow with some anti-vaxxer anti-masker? I’d be outa there in a New York minute, and practically everyone I know personally would too. If a company cannot provide a safe environment, or if a store cannot provide a safe environment, I’m outa there. It’s a choice the company makes. Fine with me.

      • DawnsEarlyLight says:

        True, but the nation wide lock downs started in early 2020, and many locked out or ex-employees needed income. Look at the charts. The mandates were not the only reason people were forced to find/start employment.

        • The Bob who cried Wolf says:

          Wrong interpretations of me saying “a big one”. No where did is say the biggest reason or the only reason. Do we think maybe it could be at least part of the reason for new businesses?

        • Wolf Richter says:

          Yes, that was the case in mid-2020 (as I pointed out in the article). But now there is a labor shortages, and wages are rising, and a huge number of people are still starting businesses. That was the point of the article.

        • DawnsEarlyLight says:

          The Bob who cried Wolf, I wasn’t replying to you, but yes, it definitely was part of the problem.

          Wolf, your article and comments have made many valid reasons.

  10. AdamSmith says:

    The reality is most will not survive and it will not be pretty when it ends.
    Have started different small businesses over the years and even excellent ideas that brought in good money all have a life to them. Adam Smith back in the 1776 commented on small shops on commercial rows that come and go. It is much more rapid for those who do not have a store front. No point in wasting time convincing…. At the outset of my business degree the statistics were make known as in 80% of all business fail by year 5 and at the end of year 10 only 1 of the 2 left still exist. It is no different today except that I think maybe 90% are gone by year 5 now. To believe otherwise is wishful positive talk.

    • phleep says:

      Network effects (crowds, winner take all) in the digital + covid era are super-magnified, meaning small fish will have a hard time. Watch how attention (revenue) shifts to and from “influencers” of the young flashy sort. Many have volatile personal lives, as they ratchet up attention-grabbing behaviors. The switching costs are zero, and the audience is inclined to switch attention rapidly. Having thin relationships that are digitally attenuated has its upsides and down. Old school loyalty is a thick and variable kind of stream of value.

      • Beardawg says:


        I think you meant to say Old School loyalty is a thick and INvariable stream of value ??

    • Everyone needs to read The Wealth of Nations by Adam Smith; particularly his; Introduction and Plan of the Work, where he sets out, in just two pages, a wonderful description of the difference between savage nations of hunters and fishers, and civilised and thriving nations. Within which introduction, he goes on to make what I believe to be the most profound statement:

      “Whatever be the actual state of the skill, dexterity and judgement, with which labour is applied in any nation, the abundance or scantiness of its annual supply must depend, during the continuance of that state, upon the proportion between the number of those who are annually employed in useful labour, and that of those who are not so employed. The number of useful and productive labourers, it will hereinafter appear, is everywhere in proportion to the quantity of capital stock which is employed in setting them to work, and to the particular way in which it is so employed.”

      Then look at his last paragraph ending with these, to me quite profound remarks: ” . . . and lastly, what are the reasons and causes which have induced almost all modern governments to mortgage some part of this revenue, or to contract debts; and what have been the effects of those debts upon the real wealth, the annual produce of the land and the labour of the society.”

      Reading that Introduction was in large part responsible for my doing my best to set out a set of rules for such investment of capital stock in The Road Ahead from a Grass Roots Perspective. Which in turn led to my paper: Recapitalisation of the Grass Roots Economy.

      Wolf, did you also note, as I have; that there is no listing for any “Manufacturing” EIN businesses?

      • historicus says:

        “upon the proportion between the number of those who are annually employed in useful labour, and that of those who are not so employed”

        In a service economy of restaurants, bars, and sporting events…..
        the definition of “useful labor” is difficult to apply. These all involve indulgences rather than production of useful items and potential exports. Shipping containers being sent back empty to China shouts the loss of our useful manufacturing base.

        • Augustus Frost says:

          I infer the definition of “useful labor” as predominantly actual production, not paper shuffling. In large organizations, most white-collar jobs don’t actually produce (much of) anything.

          Agriculture and manufacturing are (or seem to be) more efficient than ever. but that doesn’t mean that either or both can sustain an endless number of non-productive “consumers” and especially the increasing number of dependents reliant on government social programs.

          Much of the service economy only exists because of credit and debt. Or today among the more affluent, because of an asset mania.

          A more affluent economy can afford luxuries a less affluent one cannot, but many of these jobs only exist because of fake wealth from an asset mania.

          What exactly is “useful” is up for debate, but going down the list of jobs, products, and services in this country, I’d probably come up with a much longer list of not-very-useful in all three versus most others. Even where it is “useful”, definitely a surplus due to artificial distortions from excess debt and inflated asset values.

        • Augustus Frost says:

          I infer the definition of “useful labor” as predominantly actual production, not paper shuffling. In large organizations, most white-collar jobs don’t actually produce (much of) anything.

          Agriculture and manufacturing are (or seem to be) more efficient than ever. but that doesn’t mean that either or both can sustain an endless number of non-productive “consumers” and especially the increasing number of dependents reliant on government social programs.

          Much of the service economy only exists because of credit and debt. Or today among the more affluent, because of an asset mania.

          What exactly is “useful” is up for debate, but going down the list of jobs, products, and services in this country, I’d probably come up with a much longer list of not-very-useful in all three versus most others. Even where it is “useful”, definitely a surplus due to artificial distortions from excess debt and inflated asset values.

        • Seneca’s Cliff says:

          I like to think about this change away from “usefull labor” by comparing people I knew ( and their families) back in high school in the 70’s to those I know now. Back then the parents of everyone I knew were bakers, farmers, loggers, assembly plant workers, owners of small stores, cops, dentists and engineers. Now it seems that everyone is a crypto investor, a financial advisor, an HR consultant or some kind of marketer. Seems to me it is like going on a long ocean voyage in a glass boat. Works good right up until it doesn’t.

        • Marcus Aurelius says:


          If you can put “it” into a shipping contained and send it to somebody who paid your for it.

        • Lawefa says:

          Yes, the “useful labor” is what qualifies, creates, and produces real economic growth. NFTs, Cybercoin, virtual world value, overinflated stock, etc. just distract from the real economic growth needed to sustain our nation in a healthy, vibrant way. There is no shortcuts to real growth economically. All this infusion of money sloshing around did absolutely NOTHING to help our economic growth.

        • Apple says:

          Useful labor back in Smiths day was 12 hours a day, 6 1/2 a week.

          Letter to him survive complaining about how hard it is to convince peasants to take these factory jobs.

        • Sheila Washington says:


      • MiTurn says:

        “Wolf, did you also note, as I have; that there is no listing for any “Manufacturing” EIN businesses?”

        My question too.

      • Wolf Richter says:

        Chris Coles FRSA,

        “did you also note, as I have; that there is no listing for any “Manufacturing” EIN businesses?”

        There are lots of categories, based on NAICS codes. I only picked the largest ones.

        There is a category for manufacturing, but it’s small. It’s tough to start a manufacturing business. You need lots of capital, in addition to lots of other resources, and you need a supply chain and instant customers. So not many people start a manufacturing business, and those that are being started are fairly big, already have payroll dates, and are included in the WBAs.

        In December, 6,021 EIN applications for manufacturing businesses were filed. This was way below my cutoff (20,000).

        • Wolf,
          what we are witnessing is failure. When we make use of a bridge, we enjoy a structure that was built to succeed, under a set of rules, worked out over many decades; Ergo!

          “As a Professional Engineer I dedicate my professional knowledge and skill to the advancement and betterment of human welfare. I pledge:

          To give the utmost of performance;
          To participate in none but honest enterprise;
          To live and work according to the laws of man and the highest standards of professional conduct;
          To place service before profit, the honor and standing of the profession before personal advantage, and the public welfare above all other considerations.
          In humility and with need for Divine Guidance, I make this pledge.” Courtesy: National Society of Professional Engineers (NSPE)

          Yet, when it comes to the construction of the finances of a start up business; particularly a small business . . . the financial structure is regularly built to fail. Everyone here today knows full well, that the vast majority of new start ups fail. Moreover, the failure is substantially due to being grossly under capitalised. That today, there is no acceptance of the need to ensure that the capital structure for such a new start up, needs to be sufficient to ensure a reasonable chance of surviving until it is capable of paying its basic costs.

          All I have done is my best to design a financial structure for a new small start up businesses . . . that under reasonable circumstances; will not fail. That what is wrong today is a refusal to recognise the long term advantages of setting out to employ others within well capitalised new start ups; rather than as today; where failure is built in from the outset.

    • VintageVNvet says:

      Small biz may indeed go through some of the similar challenges/changes of BIG BIZ:
      Been there, done that, as my original small biz change over the decades from late 1970s, through the 80s and until 2019!!!
      While I was clearly in front of things, incorporating to begin with and with an EIN, at first,,,
      After learning the ropes and tropes, including a couple interviews with polite but determined IRS folks,,, after the first few years I became a ”sole proprietor” and that lasted for many decades, and many many satisfied clients…
      I encourage every one thinking of an independent biz to study carefully the IRS rules and regulations BECAUSE they are all about ENCOURGING small biz start ups and continuing…
      SMALL BIZ has always been the keystone of USA,,, and certainly seems to this old guy to be so today…

  11. Modalita says:

    It’s amazing that many people think that less than $20K of stimulus is enough to go start a business.

    • Degobah Smith says:

      One might be very surprised what a creative mind and a good work ethic can do with $20,000 given today’s web-based economy.

      • Anthony A. says:

        One can use that $20K to buy a 1/2 shipping container of Chinese goods thru Alibaba and sell the stuff on eBay or Amazon. All one needs is an empty room and a few cardboard boxes. Easy!

        • Marcus Aurelius says:

          Until the contents are stolen from an idle train sitting on the tracks in LA.

          We have a serious, and growing, problem with Shipping Container content theft.

          The gang thieves are presently attacking stopped trains, but are moving up to robbing slow moving trains.

    • Depth Charge says:

      Some hundred millionaires started off with less.

  12. Old school says:

    My take is there is still excessive stimulus out in the market creating all kinds of behavior by people. Business profit margins still inflated by the stimulus as Hussman shows in his January letter.

    I think it will become clear that the biggest mistake Fed has made is blowing the pandemic response asset bubble so that all asset valuations to income are in never before seen territory.

    They really goofed up this time I believe and I think the smart money is going to short the market down so fast once the policy mistake is acknowledged.

    • Augustus Frost says:

      Policy mistake implies there is a correct policy when there isn’t.

      • Old school says:

        I get your point, but by policy mistake I mean instead of using a rule based system for setting Fed funds rate they are making it up as they go and have let inflation overshoot even their crooked 2% target.

    • Depth Charge says:

      “They really goofed up this time I believe and I think the smart money is going to short the market down so fast once the policy mistake is acknowledged.”

      A lot of the “smart money” missed the run-up. People like Warren Buffett were heavy in cash and avoided any “meme stocks,” crypto, etc. And while they still benefited as dunderheads like Cathie Wood made up silly narratives while buying stocks the “smart money” already owned, at prices no fundamentals could ever dream of supporting, some are whining about things and trying to influence the FED’s future policies so they can financially benefit.

      Bill Ackman is trying jawbone the FED into doing what Bill Ackman’s portfolio wants. A lot of these guys, like you said, are waiting to short the market into oblivion. I don’t like any of them. In fact, you can take the entirety of the FED, all of these pigmen “investors,” and the entire system of swine and throw them into a boiling cauldron.

    • fajensen says:

      They really goofed up this time I believe and I think the smart money is going to short the market down

      I think the smart money already borrowed against their bloated portfolios, put the proceeds into energy futures, then tasked their representatives in Washington DC with starting some shit with Russia, which they duly did, with the aligned political goal of eventually cutting off “sanction proof” gas supplies to Europe and cause an energy crisis like back in the 1970’s.

  13. MiTurn says:

    Noticed a new sign posted along the county road where I live. I looked it up and it was a husband/wife team starting a business offering cleaning and handyman services. Had a website address and everything.

    • Swamp Creature says:

      I know a dude who quit his high paying government job to start a cleaning business. He then fired all of his employees because he was too cheap to pay them. Then he started doing all the work himself. Bottom line: he traded a high paying cushy desk job for a minimum wage job cleaning toilets. Now he calls himself a brilliant entrprenuer.

      • Marcus Aurelius says:

        I would imagine he is happy, and getting into great shape, getting out-doors, meeting real people, and has no “Diversity Training” to go to.

      • Anthony A. says:

        He needs to get that business tied into a SPAC and go public.

  14. Flea says:

    Great reset = great resignation lol

    • Old school says:

      Maybe inflated asset values have people checking out of corporate life. Asset values have inflated by roughly 3X because of Zirp. Let 401ks overshoot on the downside and people will change behavior.

  15. BuySome says:

    I won’t predict what will happen, because these shell game masters have been able to get away with insanity for far too long with no consequences. Let’s go with the years 1969 and 2018, eliminating all that has now transpired. The house my parents bought (on mortgage) around 23.5k last sold in 2018 for a reported 777K…..more than 30 times what it started at.
    Now, basic food items are actually only at about a multiple of 3 times (eggs, milk, bread, sausages, margerine, etc.)…the stuff that keeps people alive, not the crapload of condiments in your overbloated fridge. Further, a 16K sedan from 2018 is nothing better than an equilvalent 1.6K car from 1969, so a blowout factor of 10x. Obviously people are getting paid to cover a mortgage on that house somehow. But the planet is full of people who can actually do that work. So, reality says that in a best case scenario, what you earn or get paid is probably 3 times higher than it should be. And in the worst case, its’ fully 10x where it should settle. No doubt the folks starting these businesses think they’re the shit and should be able to rake it in. But if this mess begins to unravel, it is gonna be one hell of a slide back down to where it all should be. And yes, in my opinion that 777K house should only be worth a total of 75K and change (no where near the outrageous 1.1M being estimated by some dumb ass internet jackoffs). This has been 70 years of the world’s biggest lies ever concieved. Not a single damn person in this country is worth what they seem to think, and there’s a world of hungry workers out there who are going to come after this opportunity if they can.

    • Augustus Frost says:

      This site periodically reports on the US trade balance. Last one showed the decline in the “services” account which I think was down to a $16B surplus, with the merchandise trade and current account in massive deficit.

      Eventually, the rest of the world is going to have enough people who can perform the tasks covered by these services at equal quality, at much lower cost, and where cultural differences will be less of an obstacle since the center of economic gravity is shifting away from the US and Western culture.

      I expect this unprecedented asset mania to end before what I just described, but if it doesn’t, what does everyone think is going to happen to US living standards when this country has to buy so much produced elsewhere but has much less to offer in return? Do they really think the rest of the world will endlessly accept fiat USD especially when the US loses its current geopolitical position in a multipolar world?

      • 91B20 1stCav (AUS) says:

        AF-“…but, but, ‘American Exceptionalism’!…”.

        may we all find a better day.

      • Beardawg says:


        Yes, the rest of the world will continue to accept our fiat currency for a long time. The American “job” has been to consume, and very little else, for a long time already.

    • Old school says:

      With the rocket ship of house prices it looks like gold to median existing house price is back to its mean of about 218 oz. to buy a house since dollar was decoupled from gold.

    • Marcus Aurelius says:

      The house has a “worth” it does due to the restraints in building more. Back in the 1960’s, land developers, here in Florida, could clear land fast, no EPA, etc. Building codes were “lower” and simpler, etc. Every time to you turn around? A Fee.

      Today? Forget that. It takes years to get a development off the ground and dozens of Government agencies have their hands in it, slowing it all down and raising costs.

      That is one reason homes costs “more than they should”. Allow Developers to clear cut, slash and burn, lower all fees, get code enforcement to move faster, etc.

      But this will never be done.

      • BuySome says:

        So from 1969 the housing stock never grew, but the population increased by a factor of 30x putting upward pressure on prices? That’s a load of it and everyone knows the truth but denies it. This has been outright manipulation by all the parties who stood to gain from destroying the manufacturing base, devaluing dollars to pump up so called “assets”, making general debt slaves of the American public, and wage slaves of every foreign worker they could drag into this mess. We don’t need a bunch of crap shacks around the casino pool for the future of housing…we need policy driven goals to get beyond this stupid mess. The private market can get things done, but not as a daisy chain of one ass clenching the tail of the one in front as they march straight toward a cliff.

    • Depth Charge says:

      House prices make absolutely no sense whatsoever, from a fundamentals standpoint. MOST long time owners, when asked, will readily admit in no way could they afford their home at today’s prices. That right there is enough to know we are in the most massive bubble in history.

      You will see people show up on this blog to defend the prices because, SHOCKER, they overpaid grotesquely for one of these stucco sh!tboxes and won’t even hear of the idea that prices could fall. But unless wages magically catch up, there is no way in hell that prices aren’t going to crash hard. 50% off doesn’t even bring back affordability. In many areas, you’d need to see an 80% correction for the median household income to afford the house by traditional standards.

      I see Elizabeth Warren is flapping her jaws again, blaming some imaginary bogeyman instead of turning the finger on herself and CONgress. The reality is that the FED and politicians have created the housing bubble, not “evil investors.” Sure, some of these corporate landlords are exacerbating things, but the government has been juicing the market for the past 25 years.

      • DawnsEarlyLight says:

        “You will see people show up on this blog to defend the prices because”…

        Many, oddly enough, are in RE or landlords. 🤣😋😎

  16. Publius says:

    It will be interesting to see how these new businesses will deal with the following:
    1) Taxes: Yes, you do have to pay taxes on stock/crypto/business gains. How many new business owners have not paid quarterly or budgeted adequately?
    2) Health care: Very expensive if fully paid without employer contributions.
    3) Retirement planning: How much is being set aside for retirement, especially without employer match?
    4) Fraud consequences: If new business owners underreport income to avoid/minimize taxes and obtain free/heavily subsidized health care, how will they obtain a house or car loan without enough reported income? And if paying cash, how long can they live a good lifestyle without being caught by the IRS, etc.?

    • Wolf Richter says:


      If you have a small business, you have HUGE tax advantages, including SEP IRAs (contribution limit is now over $45K), QSEHRA (qualified small employer health reimbursement arrangement), all kinds of deductions and things that the company now pays for and deducts from its operating expenses that you used to have to pay for yourself without being able to deduct it. All perfectly legal and according to the tax code.

      The US tax code is incredibly unfair to W-2 earners. If you have a complicated financial life, such as owning a small business, you come out way ahead. People who don’t own a small business have no idea!

  17. David Hall says:

    The baby boomers are getting old physically and mentally. UPS used to tell the drivers they hired about the UPS mandatory retirement age of 55 years old. People with rental properties or stocks may have retired early, especially when they feared COVID death or hospitalization bills. I read 10% of Americans get decent inheritances. I heard a widow crying her Social Security check was not enough. An elderly couple in a Facebook group wrote they sold their home and were moving to a rental as their monthly expenses were too high. The 2020 Academy Award winning film Nomadland was about seniors buying vans during the Great Recession and looking for cheap RV park lots to rent, or moving to BLM land to camp for free.

    • Young says:

      BLM land = BLaMeistan ?

    • Depth Charge says:

      I haven’t seen Nomadland. I didn’t know it was about seniors. I had thought it was about all ages of people who could no longer afford housing, a lot of them the working poor. That being said, living in an RV is difficult at best for long periods of time. Living in a car with no plumbing and no way to even stand up or have any floor space is cruelty beyond words.

      It’s a very, very sick system that these evil politicians have created. But Nancy P., Speaker of the House, and her $50,000 freezer full of $15 per pint ice cream “understands” the struggles. I heard she just bought some more Tesla stock, among other things, because “there’s a floor under the stock market.” Too bad there’s not a floor under the feet of a large percentage of the working class and the poor. Shelter is now a luxury reserved for the lucky.

      • Cashboy says:

        I actually was thinking that if I was young and wanted to save money to accumulate capital; I would buy a van and throw a mattress in it and sleep in the van and join a chain of gyms 24/7 to use the showers and wireless internet and some even have lockers so one could keep your work clothes in their.

        • Apple says:

          There is an entire movement doing exactly that.

        • Aussie Andy says:

          Reminds me of Matt Foley motivational expert, you just need a river to park the van at, not really cool but kudos for trying to beat the system

  18. Swamp Creature says:

    Looks like Sports betting has really taken off here in the Swamp. Its become mainstream. They may not be able to control crime but they sure like weed shops and gambling. Forget the stock market. That’s for suckers. I’ve joined in on the sports betting. Picked the 49s over Dallas in the playoffs last night and am laughing all the way to the bank. They have a much better coached team than Dallas. I even beat the point spread. I cleaned up.

    • Seneca’s Cliff says:

      Does anyone remember the “back to the future” movie where Marty travels to an alternate reality ruled by Biff Tannen? What you are describing is our new reality. An economy dominated by gambling, drugs, mindless amusement and scheming.

      • BuySome says:

        B2B2B2TF……”Eat lead….Slackers!”

        • KML says:

          10 million new businesses means lots of computers and other electronic goodies and the use of the cloud so as this growth tails off you’re going to see a tailing off /reversal of sales/profits for tech companies … the pull forward of growth from future years is similar to the Dotcom dynamics…. revenues and profit growth of Apple, Microsoft, Amazon, Google, and Facebook etc. will slow dramatically and then quickly decline…these big stocks where people think they’re going to grow forever are in for a rude awakening…No growth means PEs will decline dramatically… = these stocks are going to crash and burn just like the.com ….they’ll go down 75% from the peak

      • ivanislav says:

        “An economy dominated by gambling, drugs, mindless amusement and scheming.”

        You are describing the present day, yet I swear you said something about an alternate reality.

        • Swamp Creature says:

          I’m surprised Wolf didn’t put some some big bucks on the 49s. That’s his home team. They are headed all the way to the super bowl. They will kill the Packers next week. I’m doubling down on my bet for next week. I’m trying to find some suckers to take the Packers.

      • Marcus Aurelius says:

        Same with “It’s a Wonderful Life”, the Movie, with Jimmy Stewart.

        But this was 1946.

        One can make a list of all that has gone WRONG with America. Not every change is good. Perhaps most were bad?

        In my life time alone, I have seen America go to worse, and I have plenty of reasons why.

        Sadly, it won’t get better and the list of bad changes is far too long.

    • Depth Charge says:

      As long as you plan on losing everything you gamble, it’s fine. Gambling never pays off except for the casinos. Go look at Vegas and all of those billion dollar casino/hotels. All were paid for multiple times by the losses of the suckers.

  19. Ron says:

    I don’t know why anyone is surprised there is a labor shortage in the early 20’s. The demographics and policies have been taking us to it for decades. The baby boom peak year was 1957. Add to that social security and medicare age settings, and COBRA. It should be no surprise that people retire in their early to mid 60s, which would peak just about now.

    What did we do recently in anticipation? We reduced immigration, increased tariffs and yes, printed money.

    That said, I still won’t be completely convinced this labor “shortage” exists until I can’t get an Instacart order fulfilled within an hour. Until that happens a part of me will always consider the current situation to be a compensation and work conditions issue.

    • Flea says:

      Retired work part time seasonal,trick driver, can only make 19,560$ a year social security rule, overabindance of cdl drivers but social security won’t raise income levels even contacted my congressman,they are too dumb to fix labor shortage,while they still collect taxes on my earnings and 25% social security tax

  20. RockyCreek says:

    “Between 2020 and 2021, nearly 10 million businesses were started. This is a huge number and a testimony of a massive change in the economy and society”

    This is very exciting. Maybe this is the vulnerable point for the big corporations as we turn away from them and instead turn our support to these new small businesses in our towns, states and nation. Maybe I’ll start my own bank.

  21. cas127 says:


    Thanks for putting in the work and finding out about the various EIN subcategories…I think they provide a lot of very useful info.

    Ditto on the NAICS breakouts…very useful.

    Could you provide a link to where exactly you are getting all this EIN application data? I see Census and/or IRS, but I imagine some tiny subunit is doing the compilations.

    • Wolf Richter says:

      The link is included in the article. First paragraph. You need to download the data. So you need to choose what data you want, what format you want it in, and then download it.

      • VintageVNvet says:

        That does it!!
        Gonna hafta send in a THIRD annual contribution due to that Wolf…
        Cannot thank you any better for keeping me out of trouble with my intent to invest…

      • cas127 says:


        Thanks…somehow I managed to blow right through it.

        I guess in addition to internet “ad banner blindness” there is “link blindness”

  22. nick kelly says:

    US Secret Service estimates 100 billion in Covid relief money was stolen. Perps created chains of companies. SS also figures a lot of the $ are no longer in the US.

    • Wolf Richter says:

      Only $100 billion??? For the entire US??? Hahahaha…

      • nick kelly says:

        Was that a sarc lol. I think that 100B is pure fraud, not all the dicey stuff where a guy with an actual pre-existing biz gets a biz loan and buys a Tesla to ‘use’ in biz or RE etc.

        I think the 100B is maybe thousands of computer generated apps to create a co #, then the loan and maybe a govt computer just auto paid.

      • Depth Charge says:

        “Only $100 billion??? For the entire US???”

        That’s a huge amount of money, Wolf.

  23. Greg says:

    50% of business start ups fail within 5 years.

    • Wolf Richter says:


      Sheesh. That 50% keeps getting regurgitated. But the term “Fail” is BS. All these stats by the BLS count is if a business with that same NAICS code is still there after five years. This is established by survey. But if the business with that NAICS code is not there, it’s not necessarily a “fail.”

      So if the owner sells the business, and the buying company absorbs it, the original entity with the original NAICS code disappears. But it’s a success, not a fail.

      If the owner retires after making enough money, and sells the assets and shuts down the business, the business disappears too. But it’s not a fail. It’s a success.

      If the owner changes the NAICS code to something slightly different, the original business disappears, but the new business is in the same location, same owner, and doing well, and it’s not a fail.

      That’s how it works with small businesses. Lots of flexibility. Lots of opportunity to change. If it served its purpose and allowed the owner to make decent money for a certain time, it’s not a fail.

      But yes, being an entrepreneur isn’t for everyone. For people like you – who worry about how many businesses fail, rather than how many succeed – I guess it would be the wrong thing. Starting your own business requires gumption and guts, and it’s not for the faint-hearted. And to run it successfully, requires brains and luck and all kinds of things. That’s why lots of people are better off in their desk farm.

      Here on this site, there are lots of owners of small businesses — and this includes me. And they (and I) can tell you that running a small business is tough and risky but very rewarding.

      • Publius says:

        A few of the “failed” businesses are like mine: I obtained an EIN, filed my business with the state, then got a better “real” job and became too busy and less interested in my business idea, ending it without having had any income. Maybe I’ll get back to it.

  24. joe2 says:

    “The explosion of business applications”

    Let’s just hope there is an explosion in small business profits. But I’ve been involved in 4. 2 of which were just before their time. Timing is everything and i don’t think timing is good now.

    Starting or running a small business is tough enough without being caught in the middle of 6-10% inflation and government regulations up the wazoo.

  25. silverdog says:

    Jan 17, 2022 at 12:48 pm
    “I disagree. We need to stop socializing risks and if that means businesses have to keep greater cash buffers, so be it. For those that want to run an over-optimized just-in-time business, let them. By giving free money to businesses, you act as a moral arbiter, judging the circumstances of the business and consequences on all parties (those forced to pay and those receiving the money)”

    The above nailed it, we have crossed the rubicon and there is no going back. Some can attempt to rationalize it all they want but the “help” that was given in reality was “theft” in the form of gov induced inflation. So those employees that got to stay on the payroll are going to pay even more at some point.

    One of the lessons I marvel at as an adult, is that there is no free lunch or permanent shortcut, everything will be paid off in full in the end. That is a lesson we will have to learn the hard way as a nation and culture. We will be better for it, but it’s going to be a hell of a lesson.

    • Depth Charge says:

      “…there is no free lunch or permanent shortcut, everything will be paid off in full in the end.”

      Enter 1099s for the poor people selling trinkets on Ebay to keep the lights on, because “billionaires are going to pay their fair share.” We know who’s really paying/going to pay for this.

  26. dishonest says:

    More power to the little guy, but we all know the survival rate of small businesses.

    • Wolf Richter says:

      Who is “we all?” That 50% number that “we all know” is BS, as I pointed out in my comment above. So check it out.

      • joe2 says:

        Wolf – I’m one of the “we” and you are the one BSing.

        My personal experience is 25%. two ahead of their time that were proven viable and mainstream later – after we went bankrupt due to economic conditions. One that I took offline after the 2008 financial collapse. And one that survived government mandated shutdown.

        You must be thinking about new-wave frauds that operate off sucker finance. Not true small businesses that get killed by regulations, licensing, and taxes.

        And don’t use your business as an example as it is a charity and not a business as it relies on donations. Put it behind a paywall and see how well you do.

        • Wolf Richter says:


          Yes, you get it, and I get it: small businesses are tough and risky. No one said otherwise. But that’s also why they’re appealing. It sounds like you did fairly well overall. And I’m sorry that not all of your businesses worked out. Yes, many small businesses end in a way that isn’t a success for the owner, from being a drag that gets shut down to outright bankruptcy.

          But people with W-2 jobs at big companies lost their jobs and ended up going broke. And others lost their jobs, were without a job for a while, and then got another job. There is risk everywhere.

          People are not considered “failures” just because they lose their jobs, and then get a new job.

          Three good friends of mine have successful small businesses. My little business is successful. Four small businesses, 4 successes, 0 failures.

          My personal observation = 0% failures. So there. Which is obviously nonsense too. That’s why generalizing anecdotal observations leads to nonsense.

          “And don’t use your business as an example as it is a charity and not a business as it relies on donations. Put it behind a paywall and see how well you do.”

          Yes, thank you for your generous donations and for your free business advice. Donations are a voluntary subscription. But there are also ads, and they provide about 2/3 of the revenues.

          I would likely make a lot more money behind a paywall – I put a pencil to that every year – but would have a lot fewer readers, and that’s a tradeoff I’m not willing to make.

          I love being able to contribute to the debate in a broad manner; I love for my articles to be read by everyone; and I don’t want to run a marketing organization that has to advertise to sell subscriptions. I explained all this many times.

          I have been approached by potential buyers over the years, including last fall by a well-known PE firm doing a roll-up. I have said no each time because I love what I’m doing, I love being in control, and the business is making money. It’s the best thing I’ve ever done.

          So I don’t consider my business a failure but a success, and yes, I’m using it as an example, and I will continue to use it as an example, because I work 7 days a week on it, often from early morning till late at night, and no one said it was going to be easy. And the first few years were really tough, for very little pay. But that’s all part of running a small business. And I’m proud of having gotten it off the ground and gone this far.

        • joe2 says:

          Well now Wolf, thanks for the insight and I’m just a little jealous. Congratulations on your success, you have obviously earned every bit of it. And I’m glad you enjoy it.

          But in a way you make my point. Frankly there is no one thing I would do 7 days a week from morning to evening, although for some periods I have done that when I had to. I think more people are like me. Some variety in work mixed with some relaxing and exploring of new things.

          So I think it’s hard for many to follow your iron discipline business model and realize the success you have had. And hard to overcome the soul grinding petty bureaucracies you have to deal with. That was always my problem.

          Right now I like being retired. Do mostly whatever I want and follow any distraction. Fits my character better. I guess I was never really designed for big business success. OK, I can live with that.

          Thanks for the effort you put in the response.

        • Wolf Richter says:


          I spent 4 years traveling around the world 20 years ago. That was enough time off to last me a while :-]

          Fact is, I love what I’m doing. I’m looking forward to it in the morning when I wake up. Most of it is not even work because I enjoy it (though some of it is work, and I’d rather not do it, such as messing with the server).

        • tom15 says:

          One business almost 30yrs old & doing great, the other was very profitable, and we sold after 10yrs. When it becomes only about the $$$, then it’s time to sell.

          I wish all the new business owners’ success.

    • BuySome says:

      Won’t etirely disagree with Wolf’s blind enthusiam for the entrepreneurial spirit of individuals, but it takes something more than willingness to suceed. In the depts of the great depression, a burger flipper went into an existing tiny shop in Glendale with very little to go on. But he ended up with a one shot improvement in the menu by creating a double burger. On that one item, he built the empire of Bob’s Big Boy and all the other franchised Big Boy’s. Great while it lasted, but it took only one corporation in charge and a mixer salesman turned rip off artist to bring it all tumbling down in time. He got out from his frustrations with that corporation and moved to SoCal Jim’s own favorite spot, Newport Beach, but his calling card still read “RETIRED FRYCOOK” as he new exactly who he was through all of it. Without one fat kid bothering him for something wholly special, Robert C. “Bob” Wian would not be a mark in history. There’s got to be something there to that horse trading more than standing in a pile of shit!

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