Entrepreneurs are the backbone of America. They produce jobs, incredible ideas, and push the boundaries of possibility. They are what makes this country great. In my business, I choose to predominantly work with entrepreneurs and business owners. I understand that their path to success isn’t linear, mine wasn’t. My business is built to make their financial lives easier, so they can go change the world. This morning I read an article from the Washington Post called “America’s 1 million missing entrepreneurs.” In this article Mr. Tankersley states,
“At the start of the 1970s, about 3 percent of U.S. households started a new business every year. By the end of the 80s, that rate had increased by a third. By the end of the 90s, it had risen again, by almost a fifth, and stood near 5 percent. Then, quite abruptly, the growth stalled — and after the Great Recession, the rate fell. If the trends of the previous 30 years had continued, the nation would have seen 1 million more entrepreneurs over the last decade than it actually did. For some reason it did not.”
The reason he thinks this is happening is the faltering health of america’s middle class. As the chart below shows, higher income and entrepreneurship have a high correlation.
As an entrepreneur myself, this stat is heartbreaking. That begs the question, is it more difficult for an entrepreneur to make it today than it was 20 years ago? On one hand, technology has evolved drastically over that 20 year period and has created opportunity like no other. Technology has, in many cases, provided individuals with a lower barrier to entry into a certain market. So, why are we running a deficit of entrepreneurs?
Well, even though the above stats indicate that being in a higher income category correlates to a higher percentage of entrepreneurs, I don’t think money is the root cause of the decreasing percentage of entrepreneurs. It doesn’t always take money to make money, although in many cases it helps. Funding startups is easier than ever with crowdfunding, but that’s a separate subject for a different blog post.
Technology is a double edged sword. On one hand it provides companies with efficiency, global reach, automation, etc. On the other hand, the rapid pace at which technology evolves creates the difficult task for companies of evolving with it.
Today, companies have to be creative and flexible. If they aren’t, they perish. Today’s competition, in any business, is fierce. Not only is the competition fierce, but successful companies have extraordinary individuals leading them. This provides for an extremely intimidating environment for any entrepreneur. You need guts to take that step. 2008 created wounds that are still fresh in everyone’s mind and there’s no question it’s a cause of concern for any person with the thought of launching a business. 2008 taught us that even the largest companies can be wiped out in the blink of an eye. An entrepreneur needs guts, an edge, intelligence, perseverance, discipline, risk tolerance, and belief in self.
Is income inequality a factor in the lowered rate of entrepreneurship? Possibly. But, in my opinion, the main cause of the decrease is lack of individuals that possess these qualities and are willing to take on, historically, the fiercest competition knowing that it’s the most difficult path to success. Many of the most successful entrepreneurs were able to buck the typical long path to success. These folks are accelerating success and pushing the boundaries at a breakneck pace. For example, Airbnb vs. Marriot and Uber vs. Yellow Cab. These examples show leadership, belief in an idea, and leverage of technology to create an edge. There’s a ton of opportunity out there, but you have to be willing to take the risk.