December 03, 2014

business in action

Are we in an entrepreneurial golden age? Credit: Sebastiaan ter Burg / Flickr Creative Commons

Almost every day, you hear about the latest wunderkind entrepreneur and his flashy startup. Venture capitalist Roger McNamee recently pointed out that he's seen many more startups in the last few years than at any time during his 30-plus years in Silicon Valley.
 
Could we be in a golden age for the entrepreneur?
 
Unfortunately, the economic data doesn’t paint such a rosy picture. The U.S. has actually experienced a 30-year decline in entrepreneurship, which isn't limited to one or two sectors.
 
“One of the things that is most remarkable about this decline is how broad-based it is. It cuts across every major industrial sector, it cuts across every state, and virtually every city,” says Ben Casselman, chief economics writer for FiveThirtyEight, who covers the subject.

graph showing declining entrepreneur numbers

Data from the U.S. Census Bureau shows a marked decline in entrepreneurship. Credit: FiveThirtyEight / http://goo.gl/hBVH6e

Despite three decades of falling numbers, the general public seems unaware that there’s a potential dearth of entrepreneurs. One reason? People hear about the startups that happen, not the would-be entrepreneurs who never break out on their own.
 
“We end up in this sort of myopic view of just the things that we hear about,” observes Casselman.

There’s an argument that venture capital is actually contributing to this by focusing on just a very isolated couple of sectors. If you’re in the hot sector today, you get venture funding, but if you’re outside of that very narrow sector, then you really don’t.

 

People also see companies acting like startups even when they’re not real entrepreneurial ventures. Casselman uses the website he works for, FiveThirtyEight, as an example. “We feel like a start up. We’re a small team; we all work together in an office that looks kind of startup-y. But we’re owned by ESPN, which is owned by Disney, which is one of the largest corporations in the world.”

Entrepreneurship can also be a hard thing to track, and common tools to measure its growth can be inaccurate or fail to measure the right things.

For example, the Census only covers broad industries and doesn’t necessarily reflect the changing nature of business. Someone who develops apps won’t show up as an entrepreneur because “app developer” isn’t even an option on current census forms.

Casselman also sees a new entrepreneurial spirit embodied by a growing number of freelance workers, “even if that doesn’t always translate into starting a stand-alone company.”

Business, Ben Casselman, economics

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