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Is the Reward of Entrepreneurship Still Worth the Risk?

I’ve been self employed for the majority of my adult life.  Being an entrepreneur is glorified in America.  It’s the whole “rugged individual” thing.  It’s what America was made out of and all that stuff.  But while you generally hear lots of happy success stories the reality is that being an entrepreneur is really difficult.  There were times in my working life where I worked as many hours a week as an Ibanker in NYC and made the equivalent of less than minimum wage.  There were times when I questioned my path forward and thought about dusting off the old resume.  There were times when I considered going to friends and family for short-term loans to make things work.  Sleepless nights, endless anxiety, etc.  It’s not easy.  You get the message.  But this shouldn’t surprise anyone.  After all, 70% of small businesses fail within their first 10 years.  Entrepreneurship is usually a losing endeavor.  

In the USA entrepreneurship is on the decline.  This prompted Noah Smith to ask if the USA is no longer the “land of the brave”.   But why is this happening?  Megan McArdle attributes it to the structured and regimented way in which we steer our children away from failure.   I think that’s mostly right.  And while it might seem somewhat misguided I do have to wonder whether it isn’t the wisest path in most cases.  Yes, we glorify entrepreneurs and hold them on pedestals, but being an entrepreneur is hard.  And the pay off isn’t always a billion dollar Facebook buyout (although, it does seem like they’re on course to buyout everyone and everything).

In my experience, it seems that many of the people in my generation make calculated bets based on better overall information.  They aim high, but not so high that they can fall too far.  After all, becoming a doctor, lawyer, consultant or some other high paying job is still glorified.  These types of jobs pay well, provide a sense of security and give the employee an overall sense of purpose.  Sure, it’s not like starting the next big thing, but it’s not like flipping burgers either.

And that’s what’s so interesting about the decline in entrepreneurship.  To me, it looks like the result of a calculated move by parents to steer their children in the direction of a position in life that sets the bar high, but doesn’t set it so high that you can get severely hurt by the fall.  In other words, it looks to me like more and more people are simply making a more calculated bet where they can still achieve great financial reward, but without taking the great financial risk.  Of course, you’re sacrificing some of the potential upside by not taking the entrepreneur route, but it’s arguably the better risk adjusted return for most people.

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