Very interesting chart in this article that shows more educated people (masters, bachelor's, some college) are less entrepreneurial than they were 25 years ago. On the flip side, less educated folks (high school graduates and non-high school graduates) have seen an increase in entrepreneurship.
"In 1992, 4% of 25-54 year olds with a master’s degree or PhD owned a small company with at least 10 employees. In 2017, this was true of only 2.2%."
Could it be that the cost barrier is lower today than in the past, but there is much more money to be made as an educated employee today than 25 years ago?
A big difference is that modern kids are conditioned to do what they're told, work hard and choose a safe path in life.
To get into a good school now you have to spend your time studying hard to pass the standardized tests.
Previously kids playing around, got bored, chasing girls/boys, leaving home as soon as possible, maybe joined the army, married young. So a 25 year old already had a lot of life experience. Able to take the responsibility to follow dreams and start up a new firm.
Today's kids at 25 are just leaving school and still dont really know much about the real world. Great candidates to get a safe job in a company, not so great at starting a firm.
I can attest to this. I'm currently working my way through the college application pipeline, and my peers are laser focused on what it takes to get into a good college. Rather than pursuing what interests them, many choose challenging courses just to have a favorable transcript, and standardized test stress is an epidemic. Anxiety about "getting in" to a good school supersedes any dreams of starting a venture or pursuing an option that isn't a 4-year prestigious university.
The disappearance of new ventures can be attributed in some way to this new way of thinking. I've been told that college anxiety didn't exist 20 years ago -- maybe it's time to go back to those days. High school, in my mind, is a time to experiment and find what actually interests you: not to manifest into a homework bot that's dominated by stress.
This isn't always the case, though. The 25-year-old with life experience and a past of experimentation still exists, it's just not the norm anymore.
I've done some serious reflecting on exactly what you've said. I'm on that "safe" route. I went through the college anxiety, the GPA worries -- all of that was my mantra. To this day, I still admit to being a "resume" builder. I want things on a paper for a sense of achievement.
This scares me, though. I'm starting to realize that is not what it's about. It's about making a difference. Sure, you can indeed make a difference doing what you and I have described. A company needs people like that. But I always wonder, could I have made an even bigger difference doing something else? I'm not even talking about my education. I've even thought about this for sports.
For instance, I grew up playing baseball religiously because I had already invested a lot of my time with it. I didn't want to adhere to anything else for the fear of wasting my time. Here I am, years later, realizing I would've been an even better tennis player had I actually been open to trying something that would've given me more success, but potentially been less safe (starting a new sport in the middle of being so devoted to one already). Here I am, hitting with racquet on every volley, wishing that I had bought into the sport earlier because I know I could've been better at it than I was baseball.
What matters in addition to grades is personality and people you know. Things stay anonymous in university during undergrad for the most part, but if you are really good professors will start to notice you and then you get invited to join seminars, do internships etc. Especially in intellectually very competitive fields like math and physics everyone recognizes that tests do not really matter, they are nescessarily trivial or test only a small subset of skills you need to do research.
I've been told that college anxiety didn't exist 20 years ago
As the parent of a HS senior in the fall, I long for those old days (like it was when I was in HS). It's insane what we put kids through. Unintended side effects are a real thing, and they are very, very hard to know in advance.
It doesn't help that our major cities are currently set up in a way that people have to work crazy hours and have high-performing jobs to get ahead ( or just to survive in some cases ).
What if we built more housing? Brought down the cost of rent.
Not to mention the criminal price of healthcare and education.
I strongly disagree with this idea. And the romanticizing of of the "maybe joined the army, married young" path. For one, the world is a little different now than when this path was normal - things are mass produced and menial jobs are outsourced to third-world countries, work that doesn't require specialized training is being automated. You can't open a mom and pop retail store around the corner and expect to survive in the age of Amazon and Walmart. It's also more expensive than ever to start a business - healthcare costs are through the roof, and big businesses have managed to finagle tax breaks that you won't get. Also since OPs comment was referring to the businesses started by those with master's degrees and higher, factor in student loans which have skyrocketed (increasing the risk you're taking on). Also, factor in housing costs in cities, which is where you need to be if you want to start something niche and technical. The fact is economic incentives are set up so that it's just way way more beneficial for a 25 year old to join a big company than to start their own (and definitely more so than joining someone else's startup...which makes hiring for startups harder - and round and round it goes).
You can reply with polemics about the joys of working for yourself etc., but clearly there must be a point where the financial beating you take from doing so makes it not worth it. To me, this data indicates that we have reached that point.
I have no idea if the data support this, but it intuitively rings true for me.
My background - I failed out of college in 2003 due to clinical depression, and spent a few years getting my life together and learning how to function. I'd met my wife at 14 years old and we've been together since, which has been a huge factor in my life. Both she and I describe ourselves as "hustlers" - meaning that we pretty much always have at least one side hustle going on to generate income, and usually have several.
It as 2007 before I was really able to function as an adult and got a "real job" with an actual career path. By that time I'd been: an electrician, a photographer, a photo technician, an assistant on a dairy farm, a web designer, a PC technician, and a retail clerk. My wife had been a hair and makeup artist, a dance teacher, a graphic designer, a videographer... you get the idea.
A couple of years ago my wife was doing volunteer work as a member of our local Junior League, and the discussion turned toward career plans. Her peers in her age group (late 20s/early 30s) were in many cases either just graduating school after having achieved an advanced degree or were "paying their dues" working their first real jobs. Most of them were single and many had never had a serious relationship. That struck her as very odd - by 30, we had gone through a number of milestones for which her peers felt they still weren't prepared: careers, marriage, children, moving across the country, etc. By and large, they seemed to feel like they were finally wrapping up their education and "young adulthood", and were about to embark on their life.
I figure a lot of this was because of our backgrounds - my wife and I grew up in a poor area in Arkansas where it was extremely common to be married with children by twenty, and at the time we were living in central Virginia where the median family income was over 300% higher than where we grew up.
I do wonder though how much of it is simply generational. It seems like a lot of people I know in their twenties not only aren't yet fully responsible for themselves (financially and socially), but don't feel like they are expected to be yet. That's completely foreign to me, but it appears to be a common perspective.
Similar situation with my wife and I: I was working in IT directly out of high school (late 80s), and met my wife at the same company. Fast-forward a bit, and I'm married with my first kid at age 22, we started our first company when I was 26, and then started our current company when I was 28 (by then we had two kids and a new house). I see "kids" today that are 30-32 and just getting married, getting a house, and say "what took you so long ?". :-)
Edit: downvoters, it's a joke, okay ? I have many close friends that are in that situation (I'm not that old), and I understand the forces that are conspiring against people to prevent them from "starting" their lives earlier.
Hmm in my community it’s very odd to get married before your late twenties. Children and house come several years later (if at all). Looking at the parent and grandparent comments I think there are two main reasons for this:
(1) If you grow up around educated people, college is the obvious way to kick off a financially stable life. That means school until 22+ followed by working for as much money as possible to dig out of student debt. By the time you can breathe a bit, you’re 30.
(2) Marriage is moving from a foundation to a capstone. In my social circle, virtually nobody got married in their early 20s. They didn’t feel they could before figuring out their careers, choosing a city, having some independent adventures. Sure there was romance, but not the long term commitment and financial integration.
I think The common thread between these two issues is “hunger.” If you’re like GP and grew up in a poor area, you’re willing to take risks to get out. It makes sense to marry the best partner you can find locally and climb out together. You’re not “discovering myself before settling down” you’re pair-climbing a mountain, recognizing it’s safer with help. Hopefully when you reach the summit the shared experience will keep you together against the pressure of expansive options available there.
One key question: does marrying reduce or increase your geographic flexibility? For college-first people, you have to move around while single to build your career, then marry wherever you wind up. If you marry first, it’s harder to find a place that optimizes earning potential for both partners.
I think a lot about what this means for my own children. I want them to take more risks, but I don’t want them to fall short of what I have achieved. I want them to support themselves as early as possible, but I know education is generally a more profitable use of time. (Should they be working minimum wage jobs or studying or school nights?) There are many reasons why the youth unemployment rate is so high.
I think the general answer here is that some people don't treat relationships and marriage as something else to check off at the appropriate time. My wife and I shared the same values, loved each other very much, and just "went with our guts" and started a life together. We've now had two kids, have moved thousands of miles, lived in many places and worked many different jobs, and just celebrated our 25th anniversary this year.
Life can be very interesting and fulfilling, if you let it be that way. It doesn't always have to be 1), then 2), then 3)...
Yeah, this is the path that we saw a lot of people following in central Virginia. It's worth noting that the social circles we cultivated there were very different from the ones we had (and now have again) in Arkansas, so it's seems very likely that at least some of this is economic in nature.
> (2)
Marriage was absolutely a foundational thing for me. Without my wife, I'm not sure I would have ever had the motivation to dig myself out of the hole I found myself in after failing out of college. We married at 21, and at that point we'd been together for seven years. We knew each other about as well we knew ourselves.
> I think The common thread between these two issues is “hunger.” If you’re like GP and grew up in a poor area, you’re willing to take risks to get out.
Perhaps. One thing I didn't mention is that while we grew up in a poor area, I wasn't really ever "poor". My mom in particular was climbing the corporate ladder while I was in elementary and high school. By the time I graduated we were comfortable enough that we were beginning to be able to take yearly family vacations. My wife's family wasn't as well-off financially, but while she is an only child, she has a very large and established extended family. When we ran into issues early in our life together, I could call my parents and usually get enough money to keep us out of serious financial distress; my wife could get a dozen people to show up and contribute to whatever we needed to get done. I won't say those advantages are interchangeable, but they've both been very valuable.
> you’re pair-climbing a mountain, recognizing it’s safer with help.
Yep, 100%. My wife saved me from despair - and objectively speaking, probably suicide eventually. In return, I was able to build a career with an income in excess of anyone in our high school class that I know of - by several multiples, on average. I realize that statement can seem pompous, but I cannot stress enough that I never would have been able to realize even a fraction of my latent aptitude without her by my side.
> If you marry first, it’s harder to find a place that optimizes earning potential for both partners.
Ah, here's another cultural issue. While my wife carried both of us for a while after high school, once we had children at 25 she has primarily been a homemaker. Yeah, there's been the aforementioned "hustling" - we've owned a small retail shop and dance studio - but nothing that has taken her away from the home for the majority of the day, and nothing that we expected or needed to bring in enough income to keep the family afloat. The way we've built our life, I am solely responsible for ensuring we have enough income to meet our needs and desires. My wife is solely responsible for keeping the home together and educating our children (we homeschool).
As a result, we are extremely flexible geographically. We moved to Virginia in the first place because I'd reached the point in my career that I wouldn't be able to increase my income locally. After five years in Virginia I had enough experience and a large enough professional network that I was able to transition into a remote position. Between my remote work and my wife's homeschooling, we were able to move back to where we grew up and buy a decent home for a fraction of what it would have cost in Virginia, without worrying about how I'd be able to find a job here or about the quality of the local schools.
We're an extreme case w/r/t flexibility there, but the vast majority of families around me have a primary income earner whose career prospects take precedence.
> I think a lot about what this means for my own children. I want them to take more risks, but I don’t want them to fall short of what I have achieved. I want them to support themselves as early as possible, but I know education is generally a more profitable use of time. (Should they be working minimum wage jobs or studying or school nights?) There are many reasons why the youth unemployment rate is so high.
Yeah, kids are an all-consuming topic in and of themselves. Our general plan is to provide them with an entrepreneur's education: by the time they're in the late teens, we plan for them to have at least a minimally profitable online business and the skills necessary to grow it. If they want to go on college, then they're going to be responsible for figuring out a way to make that happen. That doesn't mean we won't help, but it does mean that they cannot assume that we'll pay for them to attend.
My nine-year-old made a comment a few months ago that she "had more money" than one of her peers. I corrected her: "No, you don't. Your mom and I have money. You have nothing yet."
We're not planning on buying our kids cars, paying for their college, or providing them living expenses once they're out of the house. We don't want to "give" them anything, we want them to work for it and value what they have. For a car, I drive a Jeep and already have my daughters outside working on it whenever I can. My oldest says she wants a Jeep when she's old enough; if that remains the case then I'll put a bunch of money into parts and have her upgrade pretty much all of it when she's 13-15. I'll then offer to sell it to her at a very subsidized price - it'll cost her just enough that she'll have to spend most of her income on saving for it for six months or so.
In short - we'll always be there to help them and will do everything we can to make sure they're secure and not facing abject poverty, but it must be absolutely clear that they are responsible for building a life for themselves. To some extent they've inherited economic stability, but we feel it's very important that they not feel like they've inherited success. For my wife and I the hard times that we went through together cemented our character and our relationship. More than anything else we want to make sure that we don't deprive our children of that experience.
This is an excellent point at the lower end of this age range. I do still think there is something in the fact that today's tech companies have very high profit-per-employee numbers. This allows them to pay higher skilled workers more money and those people become less likely to leave and start something on their own (a financially risky choice). It's possible that golden handcuffs (equity, etc.) are pushing this number down as well.
Yes, it is probably, "modern kids," who are conditioned to do what they're told. I think you've solved it. Also, they're immature and haven't even lived in the real world until at least 28.
No. I think it's more that the mythos of the startup has been busted. Most of us probably know someone (or had it happen to them) that joined a startup, and got completely fucked on equity while getting paid peanuts and being worked 80-90 hours a week. Why would they want to go work for a startup, or give most of their startup to VCs, when they can work in a much lower stress environment for far more money, and actually get to go home at the end of the day?
I thought we had been dogging millenials for ages for bring dynamism to the workplace through not wanting to do what they are told? These kids can not do right, no matter what.
I would love to mount the Mr. Holland’s Opus defense here. Maybe the problem is not that kids are rule-followers / lemmings, but maybe through removing free time, attacking the arts, etc., we have raised one of the smartest generations without giving them opportunities to become impassioned about what they could make in this world.
But the sample is US-based. 25 years ago you might get by with a small student loan to complete your education. Nowadays the debt load is pretty much off the charts [1].
IMHO a better study would be to check out what's happening in continental Europe, where higher education is either free or nearly so for all practical intents. As a local, I'd put forward that youngsters are as entrepreneurial as they were a generation ago, if not more.
At any rate, I would expect the real issue in the US has more to do with the skyrocketing education costs (and later, mortgage costs) than it does with lack of desire or drive to create a business.
I'll attest to that, at least anecdotally: we sell primarily to small software companies and have a lot of customers in the EU that tend to run the gamut in terms of makeup, whereas in the US almost all of the small companies are being tended to by older developers that started them in the 90s.
I've also noticed that in the EU (and other places outside of the US), developers are more likely to use non-mainstream languages and tools and aren't so hung up on the current trends.
But, again, this is all anecdotal and subject to my own biases.
> I've also noticed that in the EU (and other places outside of the US), developers are more likely to use non-mainstream languages and tools and aren't so hung up on the current trends.
I can confirm that at least for Germany outside of Berlin (Germany's SV). Nobody wants to sit in the office until 10pm because some new trendy language or one of its alpha-grade libraries decided to shit the bed in an edge-case. We rather go home to our families. Companies stick to C#, Java, and sometimes Python. C/C++ for embedded, obviously.
>Could it be that the cost barrier is lower today than in the past, but there is much more money to be made as an educated employee today than 25 years ago?
This is likely a component. Purely anecdotal, but in connecting with entrepreneurs in Portland, OR vs. Seattle, WA, the contrast is clear. In Seattle there are more high-paying employers (Microsoft, Google, Amazon, Facebook, for example), and thus the startup meet ups have relatively few attendees. Compare to Portland where outside of the significant apparel focus (Nike, Adidas, Columbia) the number of household name brands drops significantly. Yes there are Puppet and NewRelic, but they aren't the scale of Amazon, for example. So, you end up with more people willing to take a risk and strike out on their own as entrepreneurs.
that does sound like US companies that contract out their cleaning services to an independent company. here the motives are a bit different (reduce employee headcount and thereby eliminate unemployment insurance and benefit costs and reduce other liabilities. possible other advantages depending upon workforce eligibility to work legally in the US.)
It's same in Ukraine, I'd even say tax rate differences are less ridiculous in Poland. In Ukraine personal income is taxed at flat 20% and another 22% of income goes to social security, while sole proprietorship income is taxed at 5% plus 22% of minimal monthly wage (which is something around 150 USD. yes, monthly) to social security. Everybody from IT people to supermarket chains and restaurants abuse this.
Also, since you don't hire people, but contract some other company it's de-facto at-will employment in country with Soviet-era Labor Code still in place.
The criteria is "a small company with at least 10 employees." Uber drivers would not count, neither would other independent contractors who run their own design or development businesses.
"examines trends in entrepreneurship—defined here as self-employment with at least 10 employees"
"Start-up" is such an abused term. I used to think of it as an endeavor searching for a way to monetize and fund a new idea, but it seems that it is used now to refer to any new entrepreneurial (thank you spell check) endeavor.
Change in demographics. A 25-25yo in 1990 was living in a very different place. The boomers were still working. Now they are retired. Lots of upper middle-class family money that in 1990 might have been used by kids, to do stuff like found companies, is now locked up in retirement planning to maintain the boomers as they age. People today generally don't get access to the family money until their parents die, something that happens long after the kids turn 54.
Remember too that this is about people owning a company with 10+ employees before age 54. That is an unusual situation. A large number of those actually owning their company, rather than have outside investors, would have gotten started with family money. Seed money today rarely comes not as outright gifts from mom and dad, but from formal investors who then take a share of the company. Mom and dad today are also more likely to take a large interest in the business than gift money outright.
The youngest boomers are currently 54. Perhaps they are starting to think about retirement now, but what money did they have in 1990 (when they were 26 years old) to invest in a 25 year old?
I couldn't find exact numbers, but extrapolating from the one that I did find [1], it seems plausible that the # of PhD/Masters students starting businesses has stayed flat while the actual # of degrees awarded has doubled (US population in that time has only increased by ~30%).
To me this indicates that while there are increased barriers to starting a business, the trend is more reflective of a mix shift in the types of people who get higher degrees.
> Could it be that the cost barrier is lower today than in the past, but there is much more money to be made as an educated employee today than 25 years ago?
One big confounding factor could be the cost of student debt. You can't tell your student loan company to defer payments until your business gets off the ground.
Also, I think in general, enthusiasm for capitalism (and with it, entrepreneurship) is waning.
That's why loans can be a trap; you have to pay them back eventually regardless of outcome. I remember Mark Cuban saying it's foolish to take out a loan to start a business, and while I do think there's a time and a place to do that, there's a nugget of truth to what he said.
A lot of people such as myself have nothing to lose in starting a business, that is besides the debt which has become further and further normalized in our society.
Loans are great and I've used them for a variety of things, but it's fascinating when there are unintended and perhaps unintuitive consequences.
Wouldn't the loan be under the business, and not you personally? In that case, wouldn't it be better to take the business loan than give up part of your company to VCs who also demand that their money get paid back?
I feel like he is more pointing out the clear mismatch of priorities. As soon as you have the mortgage requirement that bill is there and asking for money every month forever and you getting paid RIGHT NOW when that bill's over your head starts to become a dominating factor in business decisions. A lot of the arguments in the comments here have to do with this kind of problem- we keep trapping ourselves in financial instruments that require more regularity than any early business or even early-mid business can provide. Student loans are one, but so are home mortgages and so on.
I know I am trapped by this right now- the clock that takes a good chunk of my monthly net makes you risk adverse.
Business loans generally require at least one personal signature, exactly for that reason - if the business tanks and can't make payments itself, then someone is on the line to repay the loan.
A business likely needs a reputation and such to get a loan on its own. In this case if it’s a new-ish startup, no one will be giving the company a loan without someone backing the loan. Which would likely be you.
> One big confounding factor could be the cost of student debt. You can't tell your student loan company to defer payments until your business gets off the ground.
But how many prospective tech start-up founders are saddled with student debt?
Granted I went to school (public university) 10 years ago, but in my experience the majority of the students in the CS program all come from the following cohorts:
* professional parents paying for school
* Students receiving massive amounts of grant money, with minimal loans needed
* Students able to get top internships/TA positions during the school year, which more than offset school cost.
I agree loan debt is a problem in general, but among the population that has produced VC-funded startups, it feels minimal.
(The actual "problem" I see is that opportunity cost of a start-up is now higher for these would-be founders because large companies pay so much.)
According to this site, 71% of graduates in 2012 had some kind of student loan debt [1].
I think it's probably more accurate to assume that the number of CS students is pretty close to that number, instead of assuming that your anecdotal remembrance from 10 years ago is universal.
I don't see why it is reasonable to treat CS students the same.
The average debt for graduates per your citation is about $30k. Two programming internships will more than offset that and very few other students can command even $10k in a summer, let alone $20k.
Well, if you don't want to use those aggregate numbers, then you are going to need numbers of your own. What percentage of CS students have paid internships? What's the average pay of those internships? That sort of thing.
There is a declining intersection of people with the capital with the the people who have the inclination to make a start on a venture. Both in the trait within s single individuals, and as social mixing.
The number of plain small business starts have also been on a long decline for much the same reasons.
E.g. Collegeboard has the average debt per graduate being $12,300 in 2000-01, whereas your source has it as being $22,500ish the same year. Maybe your numbers are including for-profit colleges? (Which isn't really appropriate, since they were very uncommon in 1990.)
Huge numbers of people don’t graduate, and the people who don’t graduate are more likely to struggle to pay down their debts, so they might have higher debt burdens.
Also, why in the world would one want to exclude for-profit colleges? Kids get told to go to college, and the least qualified kids go to for-profit colleges. Excluding this group of students seems like cherry picking, and it really doesn’t seem reflective of the national story.
"In 1992, 4% of 25-54 year olds with a master’s degree or PhD owned a small company with at least 10 employees. In 2017, this was true of only 2.2%."
Could it be that the cost barrier is lower today than in the past, but there is much more money to be made as an educated employee today than 25 years ago?