You're taking a very inside-view approach to analyzing something that you have no direct experience with. (Assuming you don't.) This isn't a winning approach. Outside view predicts that 90% of startups will fail.
Startups' high reward is associated with high risk. But most people are risk averse, and insurance schemes create moral hazard.
I suspect the better someone's self assessment skills are the less likely they are to assume they are better than 90% of people (reduced succeptibility to Dunning Kruger etc.). So you would expect less rationalists to start start-ups due to reduced self delusion.
My motivation behind this post stems from Aumann's agreement theorem. It seems that my opinions on startups differ from most of the rationality community, so I want to share my thoughts, and hear your thoughts, so we could reach a better conclusion.
I think that if you're smart and hard working, there's a pretty good chance that you achieve financial independence within a decade of the beginning of your journey to start a startup. And that's my conservative estimate.
"Achieve financial independence" only scratches the surface of the benefits of succeeding with a startup. If you're an altruist, you'll get to help a lot of other people too. And making millions of dollars will also allow you the leverage you need to make riskier investments with much higher expected values, allowing you to grow your money quickly so you could do more good.
A lot of this is predicated on my belief that you have a good chance at succeeding if you're smart and hardworking, so let me explain why I think this.
Along the lines of reductionism, "success with a startup" is an outcome (I guess we could define success as a $5-10M exit in under 10 years). And outcomes consist of their components. My argument consists of breaking the main outcome into it's components, and then arguing that the components are all likely enough for the main outcome to be likely.
I think that the 4 components are:
The Idea
Your idea has to be for a product or service (I'll just say product to keep things simple) that creates demand, and can be met profitably. In other words, make something people want (this article spells it out pretty well).
What could go wrong?