The specific relationship that they find is that startup creation is associated with home prices. This makes sense in the US, as home prices are a good proxy for middle class wealth. Here's a quick not fully vetted interpretation of this finding: When the middle class is relatively rich, they start businesses. When it is relatively poor, they don't. The aspirational income inequality that Graham posits doesn't immediately jump out when looking at year by year new startup numbers on a graph. I'm currently analyzing these numbers, but it's pretty clear that they don't support Graham's assumptions.He addresses this line of logic in a separate essay: http://paulgraham.com/wealth.html
"A surprising number of people retain from childhood the idea that there is a fixed amount of wealth in the world. There is, in any normal family, a fixed amount of money at any moment. But that's not the same thing.
When wealth is talked about in this context, it is often described as a pie. "You can't make the pie larger," say politicians. When you're talking about the amount of money in one family's bank account, or the amount available to a government from one year's tax revenue, this is true. If one person gets more, someone else has to get less.
I can remember believing, as a child, that if a few rich people had all the money, it left less for everyone else. Many people seem to continue to believe something like this well into adulthood. This fallacy is usually there in the background when you hear someone talking about how x percent of the population have y percent of the wealth. If you plan to start a startup, then whether you realize it or not, you're planning to disprove the Pie Fallacy."