
Entrepreneurs don’t have a gene for risk–they come from families with money - cup
http://qz.com/455109/entrepreneurs-dont-have-a-special-gene-for-risk-they-come-from-families-with-money
======
Gustomaximus
From my view it seems factors 'families with money' bring are;

\- Finance: As per article family financial support can get people over one of
the biggest hurdles of getting a business off the ground. Also coming from an
upper income family odds are you have a higher income and more savings to
invest/risk.

\- People they grew up around: If you grow up around people owning/running
companies you are more likely to see this as a reality for yourself. You also
have personalities to emulate in chasing this goal.

\- History of tech: Wealthier families has more access to tech in the past,
although changing today. In my school age most kids didn't have access to
their own computer, even at uni. This would be a barrier to leaning about IT
that could build future behavior.

\- Connections: Growing up in a privileged environment you develop connections
that can be useful. Also learn how to behave among people who are in a
position of power to help you and develop the 'we are similar people' bond.

\- Sense of Entitlement: A great line from Rory Sutherlands TED talk was
Oxford/Cambridge doesn't buy you a great education, it buys you a great sense
of entitlement. This give you confidence to go achieve great things. In my
small world I have clearly seen this difference from people who grew up on
different side of the tracks though it seems to be changing a bit now.

\- Expectations: People growing up in a more privileged world have higher
expectations placed on them. To a degree this can push people to try harder to
build something significant rather than just reach a reasonable level of
comfort a more general job will offer.

\- Fallback Option: I imagine this is one of the more important, people from a
comfortable family know if their venture goes south they wont be homeless.
Their family/friends will make sure they have board, food and an ability to
restart. This puts them in a position to risk all with out the same downside.

~~~
neoveller
The last one likely matters the most, at least in my case. Ambitious ideas
take more time than just product development/implementation. Marketing and
business development run on much lengthier schedules. At half a year in on
savings, I'm being pulled away from full-time on my startup back into contract
work, where I'm constantly encouraged to just go full-time instead with these
companies (mostly founding-stage startups with funding). Meanwhile, my
entrepreneur friends who come from exceptionally wealthy backgrounds have no
such constraints or risk of going homeless if their startup doesn't get
funding or start making revenue. I'm not sure if I'll be able to make rent
next month, short of a loan, unless I get a contract invoice paid in full
within two weeks. I'll be just fine, but that fear of not making it on the
basics is not weightless. I suspect I'll be looked at differently when it
shows that it took me N months to get to X revenue, instead of 0.25N, as a
result of just needing to survive.

~~~
a_bonobo
The "fallback option" matters in so much and is something that's, IMHO,
extremely underdiscussed in society. I see politicians rail about how poor
people don't risk anything without themselves realizing that they come from
middle-class/rich backgrounds and could risk more in their lives.

In my case, I've moved from Germany to Australia without many prospects and
still managed to land on my feet. Friends with less money always asked me
"aren't you scared?", after a while the realization hit me - I wasn't
particularly scared because if things wouldn't have worked out, I could've
just used my parents' credit card for a $2000 flight back, no need to worry.
My "poorer" friends don't have that option so they're naturally scared of
something I didn't even consider, an "unknown unknown" for me.

------
vessenes
I have found the opposite for 'vanilla' entrepreneurs; for a few years, I was
part of the Young Entrepreneurs Organization (YEO), which collected under-40
founders of businesses with over $1mm in revenue.

The Boston chapter had over 100 people in it, maybe closer to 250? Of those,
almost none had 'top tier' degrees. Almost none had business school degrees.
In fact, for a community of fairly wealthy Bostonians, it was notable how few
had come through top-tier schools or advanced degree programs of any sort.

Startup entrepreneurs might be different, and I've only read the article about
the paper, but I just don't see this in my own entrepreneurial experience;
most entrepreneurs I have known outside of Silicon Valley were motivated hard
working types; some were visionaries, some were operations geniuses, some
accidentally bought out their partners or bosses and got left with a business,
most were from blue collar or middle class families.

Put another way, Thurston Howell doesn't start a summer painting business
staffed by college students, or a recruiting business which demands 90 hour
weeks for the first ten years of life; instead Frank from Gloucester does
because he can't stomach the thought of working for someone else for the next
40 years.

~~~
dsfyu404ed
I'd venture a guess that most of those entrepreneurs aren't taking large risks
or going far from the beaten path with their business model. Instead they're
setting out to make a living by running a successful HVAC business or
restaurant.

Another thing I've observed as a (soon to be former, thank f##king god) MA
resident and which has not contradicted what I've observed in VT, NH ME as
well as other parts of the Boston/NYC/DC urban+suburban area is that the blue
collar business owners (and to a much lesser extent, their employees) directly
benefit from serving a wealthy area. Wealthy people hire landscapers, plumbers
and mechanics much more readily than less wealthy. The owners of businesses
that serve them milk it for every penny of profit (and rightly so).

Don't believe me? Look at the trucks they drive and equipment they use. If
it's all on it's last legs then times are tough. With all the people with the
money to pay professionals for services times are anything but tough in most
of MA

Anyway, my point is that if one plays their cards right, they can do very well
(comparable to white collar professionals outside of
tech/engineering/financial) by owning a small business. Desire to be an
entrepreneur has nothing to do with it, for someone who isn't wealthy in a
wealthy area more possible situations where the risk/reward makes
owning/starting a business a great strategic decision.

~~~
vessenes
Right, and this is precisely what entrepreneurship means in the general case.

Doing a 'startup' is a different thing entirely, and has a far more bimodal
outcome curve than what you or I describe.

I think language is helpful, especially because younger HN readers may not
know to distinguish the two, and think that advice or statistics about
entrepreneurs applies to them when they are aiming at a fast-growth startup.

------
vonklaus
> We’re in an era of the cult of the entrepreneur. We analyze the Tory Burches
> and Evan Spiegels of the world looking for a magic formula or set of
> personality traits that lead to success.

No, pop mags like Quartz do. Some entrepreneurs go to trade school and are
electricians, deli owners and carpenters. Something like 7%[0] of Americans
are self-employed, difficult to believe that many people come from massive
wealth.

[0][http://www.careerbuilder.com/share/aboutus/pressreleasesdeta...](http://www.careerbuilder.com/share/aboutus/pressreleasesdetail.aspx?sd=2%2F6%2F2014&id=pr802&ed=12%2F31%2F2014)

~~~
notacoward
It's not necessarily about _massive_ wealth. One theory I've heard is that
entrepreneurs tend to come from the second wealth tier, not the first. They
have resources and fallbacks, but also a strong work ethic and something to
strive for. The already rich are less likely to have that particular
combination. There are certainly enough people in that "not so massively
wealthy" group to support a 7% self-employment rate.

------
adventured
The title is misleading in the extreme: family money is merely one of the
available options. You don't have to come from money, you can make your own
opportunities by networking, finding investors, and so on.

The 1870 - 1920 industrial revolution era of the US disproves this
'entrepreneurs come from families with money' premise. Most people starting
businesses at that time came from relative poverty. That includes JD
Rockefeller.

China's boom of the last 30 years also disproves the family money premise. The
radical majority of their millions of entrepreneurs over that time did not
come from families with money.

------
someear
Click bait title imo - article is much softer. Key takeaway is that people are
more willing to take risks if they have something to fall back on, which when
said out loud, is pretty much a no brainer.

------
seibelj
Some people quit their jobs and throw everything into a new, risky venture.
This is pretty dangerous, especially for those without wealth. More realistic
people work 40-50 hours a week at work and another 40 on their own passions.
The smartest find a do-nothing job where they could cash a check for showing
up at the office and surfing the net all day (IT, help desk at large
organizations) and devote their work time to their own passions.

~~~
geomark
"The smartest find a do-nothing job where they could cash a check for showing
up at the office and surfing the net all day (IT, help desk at large
organizations) and devote their work time to their own passions."

I guess you can call that smart. But it is also dishonest. They are
effectively stealing from their employer. Many people seem fine with that,
justifying it with the notion that their employer doesn't adquately utilize
their skills, or is stupid to trust them so deserves to be taken advantage of,
or didn't know how valuable their IP was so it was ok to take it and start a
company around it.

I've known quite a few people who did this, even a couple who went on to found
billion dollar companies while on the payroll and using company resources.

~~~
skatenerd
The employer and employee have an _antagonistic_ relationship.

It's expected that the employer is going to fuck over the employee when it's
convenient (you're naive to think otherwise).

You're putting yourself in an unfair (one-sided) position by deciding that you
have to behave nicely towards the company.

~~~
tbrownaw
One-sided != antagonistic.

Also, the relationship has at leaast 3 parties: employer, employee, boss.

The employer doesn't know or care about individual employees, but may have a
disposition towards or against bulk layoffs in various circumstances.

The boss does know the individual employee, and may personally like or dislike
them (in addition to having some impression of their performance level).

The employee just needs to not piss off the boss, and not appear as deadweight
(and optionally, impress the boss enough for protection from semi-
discretionary layoffs).

Employers will not fuck over employees "just because". They're mostly rational
enough to be predictable.

------
yummyfajitas
This article makes little sense. It claims that the average cost to launch a
startup is $30k - approximately 1 year of savings for a software engineer
working frugally.

The article doesn't even begin to support it's claim that family with money is
necessary - at most, it seems one needs a frugal lifestyle and a middle class
job.

~~~
unprepare
You're forgetting opportunity cost here, which is by far the largest factor.

Say you worked a 9-5 for two years saving up $30k. You reach the end of two
years and youre going to quit your job, losing all of your income, and then
also spend 100% of your savings right away on beginning some new business that
could fail at any point?

You are thinking from the perspective of someone from wealth, missing the
realities that would be faced by someone actually considering starting a
business without a history of even middle class wealth.

Most businesses are not the kind you can start on your off time, as a side
project. You cannot keep your salary, you have no investment income, or
passive income of any kind.

What happens when you fail? you've spent every last cent of your savings, you
have no job, you have a sizeable gap in your resume, and going back to your
old career means youll have to take a pay cut compared to what you were making
before you left to start the business.

This is a real fear that keeps many people from going out on their own.

If you are from wealth on the other hand, having no savings might not be as
big of a deal. You wont become homeless if you have family and friends that
have the means to take you in. You wont go hungry, you can even take a few
weeks to reevaluate your decisions and decide if you want to start another
business with your lessons learned, or if you should return to the job market
and get yourself back on your feet.

~~~
yummyfajitas
_You are thinking from the perspective of someone from wealth..._

That's quite a feat, given that I'm not from wealth at all. I've probably got
more money than anyone else in my family and I've earned it mainly from
salaried employment and personal investments.

The opportunity costs you've described apply equally well to someone who came
from wealth - resume gap, time spent not working, no job, etc.

I'm not disputing that startup capital from family would be helpful. I'm
disputing the article's implication that the amounts of capital needed are
unavailable to regular people, or that only people from wealth _can_ start a
business.

~~~
unprepare
>I've earned it mainly from salaried employment and personal investments

If investment income is a relevant part of your income stream, then
congratulations - you are among the wealthiest and most financially literate
of all americans.

You are now someone who speaks from a position of wealth because of this.

>opportunity costs you've described apply equally well to someone who came
from wealth

Oh really?

Because when youre poor and your parents live in a one bedroom apartment and
cant afford food for an extra person, maybe youve even been sending them money
because they have problems keeping up with their bills and being able to eat
everyday.

Thats the same as a stanford grad, whose parents live nearby in a 4 bedroom
plus house, can easily afford to send their children money when they need it,
let alone allowing them to move back home with free room and board at any
time.

If you honestly dont see a difference, from the perspective of starting a
business, between these two people, then we have nothing further to discuss.

> or that only people from wealth can start a business.

I have yet to see the article or a single commenter make this claim.

------
dschiptsov
The key concept here is diversification - having more than one source of
income. The more of these you have - the less you are affected by risks and
market volatility. You have much lower loss-aversion, you could even afford to
fail-fast, abandon and start again or just delegate.

The simplest example is a landlord having a running businesses in his
basements instead of just collecting a rent. These businesses could be
seasonal, habit/passion-driven, barely profitable, etc.

Btw, a rich family doesn't mean lots-of-money-in-the-bank, it usually means
many diversified sources of income.

------
jotm
I think it's more about education - being taught from a young age that
entrepreneurship is a possibility and how to manage and make money leads to
those people having a higher chance of starting a business.

And of course, families that are relatively well off and don't have to worry
about basic needs can afford to teach their children that, while poor parents
will most likely teach them to be frugal and that having a safe job and not
taking big risks is of upmost importance (or not teach them anything -
children will notice anyway).

~~~
bksenior
I can't stress this enough. I was a lower middle class kid who grew up with
rich kids and seeing HOW other parents made a life made it so I had no
question what I wanted to do. I learned from an early age what I could just
apologize for and I developed a very high risk tolerance with proper research.
I never took a dollar but always found a way to make it work. 2cents

------
WalterBright
Counterpoint: 85% of Millionaires are self-made. See the book "The Millionaire
Next Door."

~~~
6t6t6
85% of the 1500 millionaires interviewed by Fidelity Millionaire Outlook
"said" that they where self made.

Still, I would like to know how many of this "self made" millionaires are not
white, men, and don't come from a, let's say top 15% tier, wealthy family.

~~~
WalterBright
The book is by Stanley and Danko, who are not affiliated with Fidelity
according to their bio. I would recommend at least skimming the book - it
details how it is done. Wealthy parents are not required.

The book is going for $2.48 on Amazon. Anyone can afford it. Why not give it a
try before dismissing it?

~~~
monstruoso
Well, that was an unnecessary snide remark.

------
colinmegill
My two favorite go to's on the psychology of founders:

[https://www.harrisonmetal.com/](https://www.harrisonmetal.com/)

&&

[http://blakemasters.com/post/24578683805/peter-thiels-
cs183-...](http://blakemasters.com/post/24578683805/peter-thiels-
cs183-startup-class-18-notes)

------
lumberjack
So people are not risking homelessness and being destitute to setup startups
after all? That's a good thing.

I think the smartest path for people without financial capital is to spend a
decade getting industry experience and getting to know people in whatever
field they aspire to disrupt.

------
unabst
This was truer in the past when entrepreneurs had to build physical products
or lobby for their business through established family connections of power.
Today wealth is less required as long as a proper education can be paid for.
Entrepreneurs thrive at Harvard, MIT, Caltec, Berkley, and the like... And
software has been the social ladder super express. If Microsoft, google,
virgin, facebook, instagram, uber, and apple weren't all started by wealthy
entreprenuers then this article is refuted, since those are all the companies
we emulate.

~~~
Daishiman
Well, for starters, Microsoft, Google, Facebook, Instagram, Uber and Apple
were effectively founded by white, highly educated men. As far as I know, in
none of these cases were their families actually poor. Gates came from a
straight up wealthy family; Zuckerberg's family is one of doctors and other
highly-paid professionals too.

~~~
adventured
Apple's founders came from a middle class background. Paul Allen came from a
middle class background. Sergey Brin and Larry Page were also middle class.
Larry Ellison was semi-poor. Evan Williams, Jack Dorsey, Mark Cuban and Marc
Andreessen were middle class. Jan Koum was poor. Gordon Moore was middle
class. Leonard Bosack and Sandy Lerner were middle class.

The majority of Americans fall into the same (or better) economic category as
those people.

~~~
Daishiman
Wait. So Paul Allen was friends with a friend from a wealthy family who sent
their son to Harvard. He himself attended a private school.

Sergey Brin and Larry Page were PhD students at Stanford...

Marc Cuban was middle class... in an affluent neighborhood known for the
quality of its school district. And the dude was a beast of an intellect and
was pushed by his family to be entrepreneurial from age 12. Koum got
_extremely_ lucky in being in the right place at the right time in what was
essentially the app store lottery, not to mention that he seems like an
incredibly bright guy.

Honestly, your arguments are not helping. All these people, aside from being
white, working on tech and being extremely talented, were in the right place
at the right time. I don't doubt that they would have been succesful in other
fields since the common theme is that they're also incredibly smart.

But from all these examples I just can't help thinking that if these guys had
decided to, for example, go into medicine, civil engineering, or other
traditional paths, or if they had been of a different gender things would have
been different.

Also, dude, what part of being a PhD student at Stanford doesn't scream a
tremendous amount of privilege? Wealth and class are not just a question of
the amount of money in the bank, but also being raised in families from highly
educated backgrounds, a culture of hard work, a selection of professions that
promote entrepreneurial and technical values, the sheer luck of having chosen
a field that's expanded exponentially, and also not having to deal with shit
like, say, malnutrition, which is a _not uncommon_ theme in the US, where a
significant child population lives on food deserts.

Rest assured, I really, really think that if Brin and Page had been to any
other university with a not-so-stellar track record of professors being
intimately involved in Silicon Valley corporations, they would have been
"merely" very good researchers. There's a _ton_ of people who have the skills
to study in Stanford, yet for monetary issues, difficult childhoods, and the
plain fact that a lot kids have no idea what CS education is about, they never
get the chance to be exposed to the people, and most importantly, the money
there.

~~~
unabst
All the parent is saying is they were not upper or elite class. You're saying
that much of the middle class in the US is privileged enough, and that these
people had more going for them than money in the bank, which is the exact
opposite of what the article was saying. It was basically saying you had to be
rich to be risk-adverse. You don't. You just need enough of a cushion and a
support system.

> but also being raised in families from highly educated backgrounds, a
> culture of hard work, a selection of professions that promote
> entrepreneurial and technical values, the sheer luck of having chosen a
> field that's expanded exponentially

None are the result of plain wealth.

~~~
Daishiman
> None are the result of plain wealth.

But they _are_ a result of class.

You can have people hitting up wealth from very specific opportunities. But
the knowledge that comes from being raised from class is how to maintain and
further that wealth.

My parents are from the professional middle class, but they never taught me
the value of networking, self-promotion, and corporate speak because they
never found a use for it. I had to learn it from friends of mine from far more
affluent backgrounds, who told me exactly what recruiters look for, what
investors look for, how to dress the part and how to talk the part.

That knowledge, concentrated in just two years of meeting these people, has
easily made a different of 50% in my income, if not more. And my ceiling is
now essentially unlimited because of the access that has given me.

If I hadn't gone to an expensive private school I would have never acquired
those social codes which are key to getting funding and interest in the larger
public sphere. I am forever grateful for that knowledge, but I'd be naive to
say it's something anyone can learn by themselves without prior exposure.

~~~
unabst
Your emphasis is on intellect, not wealth class. Middle class is enough to
have access to intellect and nurture it with a top tier education. Obama and
Dave Chappelle are also products of middle class intellects raising (dare i
say) unicorn children. The original article is bs and your points are not
about wealth. Most of the rich are not entrepreneurial. There is no causation
let alone correlation. What you are citing is intellect.

As for how to dress and behave, they are far easier to pick up than what makes
anyone intrinsically smart. Yourself included, you did not need to be rich for
a little "class" to rub off on you. It's like learning proper English. At
places like Harvard, it truly does rub off (often along with the Haaavd-ness
or MIT-ness etc etc).

------
saryant
Counterpoints: Rockefeller. Carnegie. Jobs. Several of my entrepreneur
friends.

~~~
rosser
"The plural of anecdote is not 'data'."

~~~
colinmegill
Best comment response ever. It is sad this will languish here rather than be
etched into a stele.

~~~
contingencies
[http://blog.revolutionanalytics.com/2011/04/the-plural-of-
an...](http://blog.revolutionanalytics.com/2011/04/the-plural-of-anecdote-is-
data-after-all.html)

------
mkempe
It's not nature (genes), it's not nurture (family), and it's not class
(inherited wealth). The entrepreneurial spirit is rooted in free-will and
individual creativity. Anybody can do it, if and when they want to.

~~~
rawTruthHurts
Yep; that's the line pretty much taught by Disney movies. And true it is, but
much truer when you have the backup and the contacts that the average wealthy
family (not Scrooge McDuck-wealthy, just wealthy) has, just like the real
world teaches us every day.

~~~
mkempe
Jean-Baptiste Say coined the term. I do believe he predates Walt Disney by
quite a bit.

The entrepreneur ventures with a plan to use money in such a way that he will
make a profit from his activity. It's simple. It requires an adventurous
character, some perceptive understanding of market prices, notions on how to
make a profit from productive activity, and the will to act accordingly. The
concept was needed because countless people were doing it in the 18th century,
under the eyes of those now known as classical economists.

~~~
rawTruthHurts
Yep; that's the line pretty much taught by Jean-Baptiste Say. And true it is,
but much truer when you have the backup and the contacts that the average
wealthy family (not Scrooge McDuck-wealthy, just wealthy) has, just like the
real world teaches us every day.

------
shin_lao
On top of my mind, I don't think Steve Jobs and Larry Ellison came from
families with money.

Give me two billionaires I and you will see they don't have much in common
except tenacity, willpower and seeing the world as something they can
influence.

I don't think you can learn a lot in analyzing successes, because there are so
many different paths to success and chance plays a huge part.

Also, IMHO success is more about what you _don 't_ do than what you do.

But sure helps write articles which drive traffic.

~~~
burnte
> I don't think Steve Jobs and Larry Ellison came from families with money.

Doesn't mean anything. Most bombs aren't nuclear bombs, that doesn't mean
there are no nuclear bombs. The fact that a handful of billionaires who were
in the IT industry during its formative moments and getting a ground floor
opportunity doesn't mean lots on entrepreneurs aren't coming from wealthy
families.

~~~
adventured
Forbes has found US billionaires are increasingly coming from middle to lower-
upper classes, and are not inheriting their wealth. [1] [2]

It's trivially easy to come up with dozens of examples of people that came
from average or poor backgrounds and became billionaires in the last 50 years.
Soros, Oprah, Spielberg, Harold Simmons, Howard Schultz, George Lucas, Carl
Icahn, Do Won Chang, Bob Parsons, Stephen Bisciotti, Henry Samueli, Jan Koum,
J.R. Simplot, Kirk Kerkorian, Sergey Brin, Larry Page, Paul Allen, Leon
Charney, Mark Cuban, Carl Lindner, Steve Jobs, Larry Ellison, Jeff Bezos,
Shahid Khan, George Joseph, Jack Dorsey, Michael Bloomberg, Sheldon Adelson,
Phil Knight, Ken Langone, Jack Dangermond, Elon Musk, Ken Langone, Harold
Hamm, David Murdock, John Malone, Gordon Moore, Thomas Peterffy, Marc
Andreessen, Michael Jordan, Alec Gores, Ralph Lauren, John Paul DeJoria, Kenny
Troutt, Alan Gerry, Evan Williams - this list keeps going.

[http://www.forbes.com/sites/afontevecchia/2014/10/03/there-a...](http://www.forbes.com/sites/afontevecchia/2014/10/03/there-
are-more-self-made-billionaires-in-the-forbes-400-than-ever-before/)

"We crunched the data from our most recent Forbes 400 and discovered that more
than 94% of the tech billionaires created their fortunes themselves."

40% of those tech billionaires came from a lower class background. In real
estate it's nearly 50%.

[2] [http://www.forbes.com/sites/afontevecchia/2014/10/06/self-
ma...](http://www.forbes.com/sites/afontevecchia/2014/10/06/self-made-
billionaires-thrive-in-silicon-valley-and-wall-street-as-manufacturing-
suffers/)

~~~
burnte
> It's trivially easy to come up with dozens of examples

It's always easy to come up with small numbers of examples that don't fit a
rule, that doesn't disprove a rule, especially when the rule is a
generalization and not an absolute. However, if the data says it's actually
well over half, THAT disproves the rule, and is a much better way of stating
the rule is untrue.

~~~
shin_lao
Actually one single counter-example can be enough to disprove a rule.

What doesn't work is using an example to prove a rule.

