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Why Entrepreneurs Start Companies Rather Than Join Them

419 points by thesumofall 9y ago

cvaidya1986 9y ago
Ah this makes so much sense. Interesting perspective on hiring metrics! I’d put a premium on entrepreneurial initiatives completed as a solid metric.
otalp 9y ago
This does not consider the fact that only a small segment of the population is capable of being entrepreneurs - at least in tech, in the first place. In order to leave a cushy job and start a startup you must: 1)Be born in a country that's rich with local talent that you can hire. Or have the ability to move to such a country. 2)Be free of debt, either from student loans or mortgage 3)Have affluent friends or families(the paper rightly notes that most early funding comes from friends and family) - so affluent that they are willing to invest in something they know will possibly fail, as most startups do. 4)Be the right age - if you're starting a family or paying off a mortgage, it would be completely irrational to abandon a stable job. When you consider all this, there are perhaps a few hundred thousand people for whom it would be wise to become an entrepreneur - and by this I don't mean a local store, but with ambitions to scale up. All these factors could explain the charecteristics: Immigrants from Asia and Europe tend to be richer than the average population there much more educated. They are young and largely free of undergraduate debt. Similarly, people who grow up in affluent families(relative to the median family) probably already have seed money, fall-back options and security that failure doesn't mean homelessness. Not everyone has that luxury. Looking at the most popular entrepreneurs in the world - Bill Gates, Zuckerberg and Spiegel all grew up in very rich homes, while Jobs grew up right in the heart of Silicon Valley. Kalncik lived 3 years without a salary and moved into his parents house for a long time.
- poulsbohemian 9y ago
  I agree with everything you are saying... but sometimes you try and do it anyway.
- verelo 9y ago
  Yeah sadly true. 1) Australia, but we started it in Canada. 2) Again true, lots of friends opted to buy houses etc, but i felt it was going to limit me so i avoided this form of debt, and thankfully so as servicing it would have probably prevented me from starting the company. 3) Affluent co-founders in my case. 4) I was 24. Just old enough to know enough, young enough to be dumb enough to try + have the freedom to try. I'd also add a 5th) You need a solid chunk of savings (Ideally a year or two worth). I dropped my income by 76% to work on the startup and saw no increase from pre-startup income for a while thereafter. But 6 years later my salary income (forget the buyout portion of money) was up 1191% from where it was before i left my job.
  - charlesdm 9y ago
    Buying a house in your early 20s is very common in Europe. It's also the most stupid thing one can do, in my view. You will get an infinitely higher return on reinvesting money in yourself than putting up a deposit to purchase a pile of bricks. $50k in the bank might give you 5 shots at starting a $100-200-300k a year business.
    - verelo 9y ago
      Yeah, that is how I saw it too. But honestly, not everyone thinks the same or wants to start a company...for some people not buying right away could just cost them more in the long run i suppose. Personally I feel even in that case the life experience of renting and moving around is probably healthy, but each to their own!
      - charlesdm 9y ago
        Add to that: once you've had one "hit" (even if it's a small one off $100k exit) then you're basically hooked for life. You'll realise it's almost always easier to make money from a successful business (no potential constraint on earnings if you solve a large enough problem) than it is working a job (time limited, limited opportunities for promotion based on age or company, etc) But I agree, not everyone is made to be an entrepreneur.
- arkis22 9y ago
  I think your list is mostly correct, but I don't think there's any reason it needs to stay that way. Technology is about lowering barriers to entry, and digital goods and services have high margins and very little (if any) marginal cost. Maybe in the next 10-15 years we can convince high schoolers that if they spent their free time programming they could be capable of creating a revenue generating asset at 18. The combined power of a nation of kids that could create rails SaaS sites or reusable 3D models would be an awesome sight to behold. It's a skill they would keep and even pass on. Tech is largely new, and we really haven't bothered to teach it yet.
  - Alex3917 9y ago
    > I don't think there's any reason it needs to stay that way There is actually a very good reason, namely that acquiring knowledge, skills, wisdom, etc. is at odds with acquiring assessment signals. The only way to become a good entrepreneur is to basically become unemployable.
    - arkis22 9y ago
      I don't think they're at odds. They are definitely not 100% overlapping though. I would disagree that the only way to become a good entrepreneur is to become unemployable. The best way is, as you say, to have knowledge and skill to create a useful product. Then, having a market that allows you to easily get paid for your work helps. I mentioned high school specifically because I know that I would have loved something interesting to work on. It's a perfect time to work on skills rather than assessment signals. Lots of kids don't even bother with the assessment signals...
      - Alex3917 9y ago
        > The best way is, as you say, to have knowledge and skill to create a useful product. Sure. Once you've actually created a product that's useful, or at least impressive from a technical and/or design perspective, then you're easily employable at that point. But for most people there is still going to be a several year gap between when they start focusing on acquiring those skills and when they've actually built something impressive enough to function as its own signal.
- philfrasty 9y ago
  I don't really see how you separate tech from other entrepreneurs? Entrepreneurship is vast and mostly outside of tech and high-paying organic-vegan-glutenfree-catering tech-startups. If you run a hair salon your education level will most likely be much worse than most tech founders and your "seed money" is a high-interest rate from your local bank. Your margins are so slim that at the end of the month you are indeed an entrepreneur but paid under minimum wage on an hourly basis. To me tech founders seem to be in a much better position to start a company - all things equal - contrary to your description.
- petercooper 9y ago
  5) Not start a 'startup' that requires funding or hotshot coders to grow at 10x every month, but instead start a regular tech-oriented business that doesn't require any of the 4 other points. Tech entrepreneurs do not necessarily have to start 'startups' in the HN sense of the word and I know there are plenty on HN who have taken the slower, bootstrapped path without rich friends, lack of debt, or even being based in ideal countries.
- guiomie 9y ago
  "Be free of debt, either from student loans or mortgage" ... if the price of your mortgage is the same as renting, why is your statement true? If you run out of money, mortgage or rent, you've got a problem.
  - vkou 9y ago
    When you run out of rent money, your landlord kicks you out, and you move in with your parents, or couch-surf until you get your shit in order, or become homeless. The net hit to your finances is maybe a thousand dollars, or however much a moving truck or a plane ticket costs. When you run out of mortgage money, your home is seized and sold, you will piss away tens of thousands of dollars of equity in foreclosure, realtor, and legal fees. Hundreds of thousands of dollars if you're in a down market, and you go underwater. You'll get to enjoy a ruined credit score... And, on top of that, all the other problems that you face when you can't pay rent. I'd much rather be locked into a $1000/month rent for 30 years, then a $1000/month interest-mortgage for 30 years.
    - krashidov 9y ago
      You can rent out the home/condo you own
      - vkou 9y ago
        Which carries other costs. The average tenant is a decent person, but a bad tenant will be a complete nightmare to deal with.
    - laythea 9y ago
      Another reason is that the housing market is grossly inflated (UK). I would get a better house to rent for £1000/month rent than a house for £1000/month interest-mortgage, in addition to the professional "flexibility" off not having the mortgage "to loose". I am a contractor, so I move around with the work, and certainly earn more income doing so also. The long term, is that I make it big, and then outright buy a house. All or nothing! And in the meantime, I pick up the phone when the house needs maintenance :)
- lalos 9y ago
  I agree with your points, but is it realistic or are those excuses? Has anybody quantified actual entrepreneurship? Yes, your example are complete home runs but most entrepreneurs would end up with a small business and not unicorns.
- shareometry 9y ago
  I strongly disagree with your second point. There are quite a few very successful entrepreneurs who have started companies while being mired in terrible financial circumstances. In fact, it's very common for these circumstances to be the stimulus that gets people moving in the direction of their own company. There are many, many stories of this, to the point that it's a cliché. I myself started my first business at a time when I had virtually no money in the bank, and my car was literally repossessed one month before my business became profitable. If I had stopped and said "I can't afford this" and just given up and gone to get a job, I would have never seen the success that came later. Also, you point out particular entrepreneurs who came from rich families. You completely leave out the wide array of entrepreneurs who did not. John Paul DeJoria, for example, was living on a friend's property because he was homeless and had almost no money. He started his business in those circumstances. He's estimated at somewhere in the ballpark of 3 billion net worth presently. There are quite a few stories of people with virtually no money building empires out of the rubble. While I agree that there are a number of factors that feed into whether a startup is successful or not, I would kindly submit to you that one's attitude towards whether or not it can be accomplished is a very massive part of the picture. It takes focus and determination to get most businesses off the ground. Once you begin listing the reasons you can't accomplish it, you've begun setting up the circumstances such that you won't.
  - simonebrunozzi 9y ago
    Truth is, the list is very personal. For me (formerly well-paid executive at IT companies in the US, originally from Italy), #2 (plus, some reserve money) was absolutely necessary to convince myself to leave my last job and start a company, last year.
    - laythea 9y ago
      It seems that you were fortunate that the burden of your decision was light, but this would not be the case, generally I would have thought.
  - enraged_camel 9y ago
    >>I strongly disagree with your second point. There are quite a few very successful entrepreneurs who have started companies while being mired in terrible financial circumstances Textbook example of self-selection bias and survivorship bias. Even if you compiled a list, it would tell you nothing about the number of people who would have started companies had they not been mired in terrible financial circumstances.
- allthenews 9y ago
  Nonsense. I have a mortgage, student debt, and do not know anyone particularly well off, I quit a very stable job, and am in the middle of launching a tech startup. People get so hung up on privilege these days that they lose sight of the power of merit and strategy. I think it is a dangerous mindset.
- austenallred 9y ago
  I think your first point is the only one that bears truth. There are huge numbers of tech founders for whom 2, 3, and 4 are not true - sometimes all at once.
  - sharemywin 9y ago
    I think if you have access to capital from 1 then 2,3,4 fall away as issues.
- adventured 9y ago
  Your points about family are largely correct. If you make that choice, your responsibilities are quite set, until you either have enough savings (or raise investment) to take a risk or your children become adults. You do not have to be free of debt. Your monthly debt payments have to be reasonable, something you can pay as part of routine monthly bills. You absolutely do not need affluent friends or family. That's the least of all requirements anyone needs to start a tech company. First of all, it often doesn't take much capital to get started with tech companies these days. Second, your premise precludes someone having even a modest amount of savings (your theoretical person must be from a rich country, but they must have no money saved despite working a cushy job, odd combination). You do not have to be a particular age. You're assuming everyone has children or a big mortgage. Birth rates in the developed world are at all-time lows, a lot of people are forgoing children or pushing it off until much later. You don't need a big mortgage, you can rent; most of the US does not look like NYC, SF, LA, Seattle in terms of cost of living. You most certainly do not need to own a home. Multiple of your points put the theoretical person into that position. > Looking at the most popular entrepreneurs in the world Popularity is a pretty terrible reference point (why would that matter?). There's this group: Larry Ellison grew up in a very broken home, his family didn't have much money. Paul Allen comes from an entirely ordinary middle-class background. Michael Dell's success required no special setup for what he did other than his own effort (assembling & selling custom PCs out of his bedroom, paid for out of his own savings), he grew up in an upper-middle class family. Elon Musk boot-strapped everything he did after moving to Canada, lived poorly and on a shoe-string budget after moving to the US. Jensen Huang of nVidia, was a first generation immigrant from Taiwan, with the deck stacked against him if anything; got his first degree from Oregon State University. Mark Cuban, who is more famous than Spiegel, grew up in an entirely middle-class background in Pittsburgh, and entirely boot-strapped his first success (MicroSolutions), which then paid for him to found Broadcast.com. Mark Andreessen grew up in farm country in both Iowa and a tiny town of 2,000 people in Wisconsin, his family had no special financial position. Ev Williams grew up on a farm in Nebraska, his family had no special financial position. Jack Dorsey grew up in a middle-class family in St. Louis, his family had no special financial position.
- doubleocherry 9y ago
  I've been an entrepreneur for years, and when I got started, I wasn't free of debt, and I wasn't "the right" age. However, I don't disagree that a certain amount of affluence and particular set of circumstances are huge contributors to entrepreneurial success.
- dv_dt 9y ago
  This version of 2,3,4 are one set of possibilities focusing on younger entrepreneurs. As was noted recently https://news.ycombinator.com/item?id=1679422 https://news.ycombinator.com/item?id=1679422 "Our primary finding is that successful entrepreneurs are middle-aged, not young. The mean founder age for the 1 in 1,000 fastest growing new ventures is 45.0." 2,3,4 can be more generalized to be: "have access to sufficient capital to address the opportunity". Which in general I would guess that there are more 45-year olds with access to entrepreneurial capital in some form than there are younger entrepreneurs in the original stipulation of 2,3,4. You can look even further ahead. Because the past few decades have been so strongly concentrating wealth upwards, one might predict that there will be fewer individuals with the personally owned capital to start businesses so the number and the 'risk level' of ventures to be shifting downward over time. The risk level would go down because the commitments of capital become more committee based the more people need to approve of it - and so you get fewer Elon Musk type investments, and more safe-looking investments in better paperclips (or the next social network ad app...).
- wslh 9y ago
  You see everything from a US centric perspective, I have a contrarian view: 1) Not clear what you call a rich country but Argentina has a lot of entrepreneurs and it is considered an underdeveloped country. 2) Best universities here are free and everyone in the world can study here. The average student study and work at the same time. 3) Lots of bootstrapped companies, limited access to capital. 4) Obviously age and family matter but you don't need to be the first founder who take all the risks. It is possible to join an existing company as a cofounder starting part time if you have critical skills to contribute. Not saying that starting a company is easy, just saying that the world offers many different perspectives to the same problem.
  - ekianjo 9y ago
    Argentina is not an underdeveloped country. It used the be the richest country in south America. It became poor again but thats nothing comparable to a country that never knew development.
    - wslh 9y ago
      Argentina has 70 years of economical decadence. You can check this article [1] (in Spanish). [1] https://www.infobae.com/opinion/2018/04/18/siete-decadas-de-deterioro-economico/ https://www.infobae.com/opinion/2018/04/18/siete-decadas-de-...
  - eeZah7Ux 9y ago
    > Not saying that starting a company is easy, just saying that the world offers many different perspectives to the same problem. The number of famous and wildly successful startups outside of the US says otherwise :(
    - wslh 9y ago
      > The number of famous and wildly successful startups outside of the US says otherwise :( You are not understanding this thread. The discussion was about the difficulties people find starting a company that are mainly connected to economical issues. If you look at the successful companies, the major part had access to capital that eliminates this line of reasoning.
- ausjke 9y ago
  Maybe that's why most startup founders are at 45 years on average, by that age kids are maturing, family finance should be relatively stable, you might be reaching on your career ceiling, and you're getting older but yet not too old -- so you want to give it a shot. All combined the 45-average-founder-age makes sense to me.
  - StaticRedux 9y ago
    Not to mention the most important part in my opinion, having the experience in your field to create a successful startup. Having a light bulb idea when you're young is all well and good, but without the experience I would imagine your odds of failing are much higher.
  - raarts 9y ago
    About being 'not too old': 45 is an average, meaning there will be more or less just as many around 60 as there will be 30. At ~55 the kids will be gone, giving you even more time to start up something.
- lsllc 9y ago
  Don't forget: 1) Healthcare costs (especially for a family) 2) Non-compete & IP assignment agreements (unless you are in CA)
- a13n 9y ago
  This is plain wrong. You don't need to create a billion dollar company to be a successful entrepreneur, even though that's what investors want you to think. By Steve's definition, you just need to make more than you would at your corporate gig. 1) The world is moving towards remote work. You don't need to be in a rich country with talent. So long as there's good Wi-Fi. 2) If you have debt then you'll have to raise money and take a salary. 3) You don't need to do a friends and family round, or raise at all. We're bootstrapped, never raised a dollar. 4) I've met many entrepreneurs with young children or wanting to start families. Certain startups (eg. SaaS) can have very reliable income once you get your first several customers.
  - walshemj 9y ago
    No remote work allows you to outsource "bog standard" work you aint going to get to the c suite that way
- mrnobody_67 9y ago
  I started with less than $100 18 years ago, now Im in the 0.1%. Also not born in a first-world country (though immigrated to one at a very young age). Also nobody funded me until much later in my life, by which time I was already a millionaire.
mathattack 9y ago
Interesting. The converse may also be true. People with shiny resumes may also have more incentive to stay at banks/consulting/largecos.
- sjg007 9y ago
  What is a shiny resume really?
  - BillyParadise 9y ago
    one that's printed on high gloss photo paper.
  - sah2ed 9y ago
    Someone with an Ivy league education I'm guessing.
    - walshemj 9y ago
      The right Private/Public Schools then Harvard / Oxbridge (PPE) playing the right sort of sports Polo, Rowing , Rugger.
  - temporalparts 9y ago
    Well the opposite of someone whose resume doesn't sufficiently reflect their value is someone whose resume makes the candidate seem more valuable than they are.
  - mathattack 9y ago
    Big name schools and companies.
mattsfrey 9y ago
This takes a very heavy analytical approach to the reasons for seeking an entrepreneurship path. I think it misses the larger point - most people go into it for highly personal subjective reasons. Mine, and most I feel like are simply choosing to chase after the dream of making real money, enough to buy our freedom from the rat race and live life on our own terms.
- pryelluw 9y ago
  Mine is similar, but defined as having enough money to buy my freedom to survive. A job will not give me that. Or at least the jobs that are available to me.
- paulsutter 9y ago
  You're echoing Steve's explanation exactly: > the dream of making real money, enough to buy our freedom from the rat race and live life on our own terms Quoting Steve quoting the paper's conclusion: > The authors’ conclusion — Entrepreneurs think they are better than their resumes show and realize they can make more money by going it alone. And in most cases, they are right.
- adrianN 9y ago
  There are a lot of software engineering jobs that provide enough income for you to retire before you're fifty.
  - davidjnelson 9y ago
    Outside of an equity event or very, very special circumstances, I don’t see that being true in the Bay Area. Managers at Google/Facebook, no problem.
osrec 9y ago
In my experience, being an entrepreneur is all about taking on and managing risk well. An entrepreneurial spirit almost enjoys risk. At a firm, you usually don't get much material risk exposure to manage, so entrepreneurial individuals end up seeking out opportunities that can give them a more direct handle on their risk exposure (and any subsequent rewards). More often than not, this means starting a company where you largely decide which risks you're comfortable accepting, and which risks you prefer to avoid. The thrill is in navigating those risks using your guile to deliver value much above the expected risk premia for your domain. I worked in an investment bank for a few years, but the risk environment was too restrictive for me to really make a mark (from a job security perspective also, I'd often see lifers get the boot, so never really felt comfortable, even though on paper I should have been). Thus I quit, started my own company, took on a great deal more risk, but still experienced more work satisfaction. I think what I like most is the ability to take your professional future by the horns without any artificial constraints holding me back. For me, what it comes down to is this: entrepreneurs despise restrictions, and modern companies can't seem to exist without them.
- mlevental 9y ago
  you're equivocating. first you say it's about risk seeking/management and then you say it's about agency/independence. personally I strongly believe it's the latter. if you derisked my startup for me but let me stay in control I would be much happier. eating the risk is the premium /I'm/ paying for the agency - it's that opportunity that you don't have in a large company (trading risk for freedom).
  - psyc 9y ago
    There's overlap. The herd instinct reduces risk.
  - osrec 9y ago
    Perhaps, but what I was trying to convey is that your own company gives you the freedom to choose your risks without restriction. Working for someone doesn't usually allow you to do that (as your boss decides your risk environment).
dmritard96 9y ago
article aside, for the most part, this title is a tautology right?
- thaumasiotes 9y ago
  "Entrepreneurs start companies" would be a tautology. "Why entrepeneurs become entrepreneurs" is a question that can be answered (to some degree). If more than one answer is possible, as here, it doesn't really make sense to complain that the question is a "tautology".
alephnan 9y ago
I knew some “entrepreneurs” from college who couldn’t land a job upon graduation. They’re prideful, so they sugarcoat their situation and justify why it is meaningful, when really the opportunity cost was zero. This isn’t a knock against all entrepreneurs. It’s the difference between “billionaires are dropouts” vs “dropouts are billionaires”. Ironically, one of those “entrepreneurs” said “I’m a C student, therefore all of you will end up working for me.” Last I heard, they were smuggling medicine in the legal-grayarea across borders.
m3kw9 9y ago
Probably because they have already strong convictions about something and having a boss is not much different for them than a bigger company
dustingetz 9y ago
technology is changing the balance of power nontech led companies are dying, no growth to be had there why would i work for that
- nugi 9y ago
  Even the best tech needs foundations, buildings and services to function. Get off your high horse. Money is where friction is, not nessarrily, or even usually, advancement in tech. Not to mention non tech companies are dying at a much slower rate than tech ones if you plotted them all.
prewett 9y ago
The most interesting point of the article to me is that fact that taxes above $100k were 70% - 90% until 1970. That seems like it nicely explains why income inequality and CEO salaries have increase since 1970. With a tax rate like that, you pretty much can't have much income inequality.
- patio11 9y ago
  The tax code simultaneously strongly encouraged you to not consume goods/services but rather have a company consume them on your behalf. This is still pretty de rigeur in Japan, which results in situations like this regarding executive perks: Bob lives in an extremely desirable house, which he rents for hundreds of dollars per month. It is owned by the real estate arm of BigCo, where Bob is CEO. Bob doesn't own a car; BigCo has issued him a $250k company car. Bob's children attend private schools, receiving a scholarship from BigCo for emerging leaders like themselves. Bob is in reasonably good health, given his frequent use of a gym and country club (dues billed to BigCo), and his wife's cancer situation is entirely managed by their gold-plated health insurance policy. Bob is socially assured of a sinecure post-retirement like e.g. being on the board of directors of a company socially close to BigCo. Bob's salary is $90k a year. Phew; income inequality, solved. (The current standard in the United States is that most of the above fringe benefits would result in taxable income to the employee. This is close to the current formal rule in Japan, which adopted guidance very similar to the US' on about a 25 year lag, but the substantial give-and-take between tax authorities and employers/taxpayers makes the actual practice in Japan substantially more varied than in the US, including among firms which would consider themselves enthusiastically complying with the rules.)
  - telchar 9y ago
    That's why replacing corporate income tax with personal income tax, which many here advocate, won't work. However that issue can be mitigated by taxing companies on the value of perks
    - z3t4 9y ago
      In Sweden, both the individual and the corp is taxed the value of the perks.
boostropio997 9y ago
Article is right on. A lot of entrepreneurs are simultaneously the most and least employable people you'll ever meet.
terminado 9y ago
“More often than not, she relies on charts, graphs and quantitative analysis as a foundation for a decision, particularly when it comes to evaluating people … At a recent personnel meeting, she homes in on grade-point averages and SAT scores to narrow a list of candidates, many having graduated from Ivy League schools, … One candidate got a C in macroeconomics. “That’s troubling to me,” Ms. Mayer says. “Good students are good at all things.” Kind of a stunning misconception right there. A person only needs to look in the mirror, to invalidate such an idea.
- sova 9y ago
  Especially with an education system that's effective on only 2 out of 12 different brain arrangements [see Timothy Leary's "your brain is god"], it's hard to say that school marks are any predictor of how beneficial one will be to Humanity or the Planet.
  - icelancer 9y ago
    >> it's hard to say that school marks are any predictor of how beneficial one will be to Humanity or the Planet I've mostly found them to be negative signals. I blind applications for education now.
- psyc 9y ago
  The phrasing is unfortunate. It's reasonable in that context, in that very high GPAs aren't that uncommon at her level. "All academic things." Naturally "all things" is much too broad.
  - terminado 9y ago
    To frame an assessment of an individual like that, risks throwing the baby out with the bath water. It leaves no room for externalities and circumstance, and assumes the individual had all needs met, perfectly, at all times. Facts are facts, even if someone came up short once or twice. Maybe blame is irrelevant, and excuses aren't a substitute for productivity, but simply put, that's not how you measure humans, and any human knows that.
kevindong 9y ago
Is that (starting a company) not literally the definition of an entrepreneur? https://www.google.com/search?q=define+entrepreneur https://www.google.com/search?q=define+entrepreneur > a person who organizes and operates a business or businesses, taking on greater than normal financial risks in order to do so.
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billsix 9y ago
The title is tautological. Tell me about "the entrepreneur who never started a company".
- hsljekskfh 9y ago
  it took me a bit to understand too. i think it means why people who started companies did so instead of joining them
- ak39 9y ago
  Blank is using the word "entrepreneur" more in the skill sense, the mindset sense - an identity. Someone who is given a wider canvas to express creative ideas and to solve problems than the narrow surface areas offered by traditional employers (employers who mostly only seek cookie-cut identities to execute already established company ideas).
phkahler 9y ago
"In this case the entrepreneurs know something potential employers don’t – that nowhere on their resume does it show resiliency, curiosity, agility, resourcefulness, pattern recognition, tenacity and having a passion for products." Those aren't really signaled by asking coding questions either.
tonyedgecombe 9y ago
Venture capital flourished when the tax rates plummeted in the late 1970s. Yet business formation in the US is near a forty year low: http://money.cnn.com/2016/09/08/news/economy/us-startups-near-40-year-low/index.html http://money.cnn.com/2016/09/08/news/economy/us-startups-nea...
- walshemj 9y ago
  cough Fairchild cough Intel - and the other fairchildren
deleted 9y ago
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jogjayr 9y ago
> No wonder the most successful Google products, other than search, have been acquisitions of startups not internal products: YouTube, Android, DoubleClick, Keyhole (Google Maps), Waze were started and run by entrepreneurs. What about Gmail and Chrome?
- rorykoehler 9y ago
  Neither Gmail or Chrome were exceptionally innovative ideas. More iterative technical executions which Google are exceptionally good at imo.
  - jogjayr 9y ago
    You're moving the goalposts. The blog post just spoke about "most successful products". And "innovative" is subjective. Moreover there was nothing like Gmail at the time it debuted (AJAX, huge storage, powerful search). Chrome was technically very innovative and also popularized UI things that have become standard - tabs at the top, omnibar.
    - AmericanChopper 9y ago
      Maybe I’m just misremembering, but I’m pretty sure Gmail had much better spam detection than anything else when it launched. Back when it was in beta, that was one of the main features I remember talking about when I ditched Hotmail.
    - Rexxar 9y ago
      You're moving the goalposts too in your first comment: The original article never say there wasn't any very successful and innovative internally developed products. Arguably, YouTube, Android, Maps and Double Clicks have much more impressive market shares and revenue impact than Chrome and Gmail.
    - temporalparts 9y ago
      Regardless of how innovative Gmail and Chrome were (and I agree they were), more of Google's "innovative" products are a result of acquisition. This supports the article's hypothesis that Google's internal product innovation is not as great. Some examples of failed innovation at Google are Wave, Allo, Chat, Plus, etc. Having worked at Google, I can count way more product failures than successes that originated internally.
grosjona 9y ago
>> that explains a new theory of why some people choose to be entrepreneurs. People don't 'choose' to be entrepreneurs - Choosing to be an entrepreneur is usually the first step but it doesn't make you an entrepreneur. It can take decades to reach the point where you can become one. I've been trying for 10 years and I'm now only partially an entrepreneur in the sense that I earn a decent amount of passive income from a side business but I'm still also an 'employee' because I still have a day job too. It takes a long time to build up the network that you need to become an entrepreneur.
- ithinkinstereo 9y ago
  You don't need a "network" to start a business. In fact, many founders start businesses in industries and niches that, at first, they might have little, to no, connection to. If you think a network is critical, probably the most effective (time-wise, maybe not so much cost-wise) way to acquire one is to go get an MBA or gain employment in a professional services firm (consulting, banking, accounting, law, etc.) that works in that industry.
  - justherefortart 9y ago
    You can open a Subway inexpensively, then work in it for yourself. Everyone around me has a bunch of rent houses while they work normal jobs to pay everything off. Hell, my neighbor has 15 or so homes and lives in Europe most the year and has since the early 1990s. Lots of different types of entrepreneurs and avenues to success. Capital is the key in my experience.
- herbst 9y ago
  I don't see the need for a network either. In fact I would assume a big network is way more important when you look for a good job. People buy my things because I fill a need. I don't know a single person in real life who uses my products or has similar needs.
dalbasal 9y ago
This blog and the paper it's about remind me a lot of PG's "After Credentials." http://paulgraham.com/credentials.html http://paulgraham.com/credentials.html . He uses "credentials" the way "resume" is used here. Large companies allocate compensation & power based on credentials, including those you get in-company like seniority and job title. Startups let you succeed and fail based on performance instead of this poxy proxy for it. He goes in depth into the "grades problem" that Mayer seems to exemplify and several commenters here brought up. I think pg was optimistic about this topic in 2008, and this article relates to his larger vision of a "high-resolution" economy where un-credentialed entrepreneurship plays a larger role, and corporate-bureaucratic credentialism plays a smaller one. We'll soon have 3-5 trillion dollar companies (unicorn-eating dragons, technically). They're less "old fashioned" in their credentialism, but they're credentialist nonetheless. I'm with Paul though, we need to figure out ways of having the economy that is less abstract.
- sjg007 9y ago
  Thanks for posting this. I think some people can become so specialized that they fit into specific roles and that some products rely on a group of professionals from different disciplines working together.
hellofunk 9y ago
> At a recent personnel meeting, she homes in on grade-point averages and SAT scores to narrow a list of candidates, many having graduated from Ivy League schools, …One candidate got a C in macroeconomics. “That’s troubling to me,” Ms. Mayer says. “Good students are good at all things.” No wonder Yahoo failed.
- bhickey 9y ago
  I disagree with her leadership style, but it's unfair to blame Yahoo!'s collapse on her. The company was doomed with or without her. She took on an untenable role in exchange for a big pay package.
  - nojvek 9y ago
    Well technically, they were paying her the big pay package to turn around the company, anyone could have burnt yahoo to the ground. Law of entropy.
jk2323 9y ago
Many entrepreneurs are terrible employees.
NPMaxwell 9y ago
Having been entrepreneurial itself becomes a signal that opens doors at companies -- even if the business fails. I don't know about hiring on and doing what you're told, but being the person who made sure it all happened -- including doing everything you haven't yet hired someone for. I've seen several folks who stepped out, failed at a business idea, and then stepped back into corporate at a higher level. Starting up a new company is like starting a new division. It signals that you can handle the complexity and diversity of responsibility. https://www.nytimes.com/2016/09/11/upshot/how-to-become-a-ceo-the-quickest-path-is-a-winding-one.html https://www.nytimes.com/2016/09/11/upshot/how-to-become-a-ce...
- justherefortart 9y ago
  My experience was the exact opposite. They'd all ask, "Why would I hire you if you're just going to leave and do another startup?". Even in San Francisco, which was more surprising than in the midwest.
  - NPMaxwell 9y ago
    You got me thinking it over. It's a question (like "what are your three biggest weaknesses?") that you need to have an answer for. In my case, I said that, while I could do sales, I didn't like sales.
IncRnd 9y ago
“I want to be my own boss.” “I love risk.” “I want flexible work hours.” “I want to work on tough problems that matter.” “I have a vision and want to see it through.” “I saw a better opportunity and grabbed it. …” I've started several companies, and the reason was the same each time, I believed there was a market for an idea from which I could make money. Those other reasons never came into play. I suppose that starting a bussiness has different reasons for people who are already unhappy with their lives, but starting a business really shouldn't be undertaken to minimize stress and the number of working hours.
ian0 9y ago
Obviously it varies but personally the major reason I tend towards working outside organisations is the "quality" of my endeavour. Within an established organisation, even great ones, getting things done involves often involves internal machinations - "buy in" etc. The best people at large companies are experts at this. As an entrepreneur, this skill helps make a sale, or raise funds. But its directly linked to the problem you are solving. Its "how do I make a thing that does X" VS "how do I make this thing do X". Its purer. Its more interesting. Its easier to romanticise - and easier to pass that feeling on. Its also liberating to have complete freedom (for awhile!) and no-one to blame but yourself.
kelvin0 9y ago
I have come to a conclusion: There are deductive style thinkers and there are inductive type thinkers. The deductive works from the abstract theory towards a proof of his reasoning. The inductive works from facts, and backwards to a theory or model. The deductive 'type' can usually be a very good student and academic, but not so great as a practitioner. They can be very reliable within a very structured environment. The inductive 'type' is usually better at doing things and learning from these and getting an intuition for how they work. They are not good at 'following' ideas and usual make horrible students and employees. They are pretty good at adapting in a more chaotic environment. So the problem in tech (interviews)seems to me that the 'deductive types' get the best scores and signal themselves as being the 'brightest'. However in reality what you want in industry are 'doers' such as the 'inductive' type people ... but they are the ones failing at your ridiculous tests/puzzle questions. Ideally a person should balance between the 2 modes (inductive and deductive) and be a master at almost everything.
xivzgrev 9y ago
There are plenty of highly talwnted people who work for existing companies vs start their own thing. The fact that big companies often acquire startups I think has less to do with caliber of talent and more the focus of that energy. You are asked to move some KPI OKR whatever. And you are evaluated on how much you move it on at least an annual basis. Successful startups often take many years to become valuable or product revenue. It's too risky for most companies to hold off evaluating for that long.
- xivzgrev 9y ago
  Also the notion that only great products besides search for google came from acqusition is false. Top of my head: gmail.
temporalparts 9y ago
One additional thing I would add to the article is that large companies have a harder time leveraging someone with multifaceted strengths, which the entrepreneurial route can better leverage. Large companies are about specialization and efficiency at scale for employees; their structure inherently has a harder time to get the most out of the the multiple strengths an entrepreneurial person likely possesses. Conversely, someone who is amazing at only one thing, eg software engineering, but lacks in leadership, sales, marketing, design, etc could have an amazing career in a large company but might have a harder time starting a company where there aren't already teams of people to compensate for his/her weaknesses.
1290cc 9y ago
My own career is an example of this, by all accounts and measurements used in HR in the US I shouldn't be earning as much as I do or as successful or sort after in my field. Its always a shock to colleagues when they ask where I went to college and my response is that I'm still on my gap year that started 15 years ago. When I go into the details of what happened throughout that period the bias towards college education disappears. And the paper is correct, I fully understand that my skills on offer are on par or better than what any C-level or senior exec can offer, but I only realized this after a few years of interacting and working with these people.

419 points by thesumofall 9y ago

cvaidya1986 9y ago

Ah this makes so much sense. Interesting perspective on hiring metrics! I’d put a premium on entrepreneurial initiatives completed as a solid metric.

otalp 9y ago

This does not consider the fact that only a small segment of the population is capable of being entrepreneurs - at least in tech, in the first place. In order to leave a cushy job and start a startup you must: 1)Be born in a country that's rich with local talent that you can hire. Or have the ability to move to such a country. 2)Be free of debt, either from student loans or mortgage 3)Have affluent friends or families(the paper rightly notes that most early funding comes from friends and family) - so affluent that they are willing to invest in something they know will possibly fail, as most startups do. 4)Be the right age - if you're starting a family or paying off a mortgage, it would be completely irrational to abandon a stable job. When you consider all this, there are perhaps a few hundred thousand people for whom it would be wise to become an entrepreneur - and by this I don't mean a local store, but with ambitions to scale up. All these factors could explain the charecteristics: Immigrants from Asia and Europe tend to be richer than the average population there much more educated. They are young and largely free of undergraduate debt. Similarly, people who grow up in affluent families(relative to the median family) probably already have seed money, fall-back options and security that failure doesn't mean homelessness. Not everyone has that luxury. Looking at the most popular entrepreneurs in the world - Bill Gates, Zuckerberg and Spiegel all grew up in very rich homes, while Jobs grew up right in the heart of Silicon Valley. Kalncik lived 3 years without a salary and moved into his parents house for a long time.

poulsbohemian 9y ago
I agree with everything you are saying... but sometimes you try and do it anyway.
verelo 9y ago
Yeah sadly true. 1) Australia, but we started it in Canada. 2) Again true, lots of friends opted to buy houses etc, but i felt it was going to limit me so i avoided this form of debt, and thankfully so as servicing it would have probably prevented me from starting the company. 3) Affluent co-founders in my case. 4) I was 24. Just old enough to know enough, young enough to be dumb enough to try + have the freedom to try. I'd also add a 5th) You need a solid chunk of savings (Ideally a year or two worth). I dropped my income by 76% to work on the startup and saw no increase from pre-startup income for a while thereafter. But 6 years later my salary income (forget the buyout portion of money) was up 1191% from where it was before i left my job.
- charlesdm 9y ago
  Buying a house in your early 20s is very common in Europe. It's also the most stupid thing one can do, in my view. You will get an infinitely higher return on reinvesting money in yourself than putting up a deposit to purchase a pile of bricks. $50k in the bank might give you 5 shots at starting a $100-200-300k a year business.
  - verelo 9y ago
    Yeah, that is how I saw it too. But honestly, not everyone thinks the same or wants to start a company...for some people not buying right away could just cost them more in the long run i suppose. Personally I feel even in that case the life experience of renting and moving around is probably healthy, but each to their own!
    - charlesdm 9y ago
      Add to that: once you've had one "hit" (even if it's a small one off $100k exit) then you're basically hooked for life. You'll realise it's almost always easier to make money from a successful business (no potential constraint on earnings if you solve a large enough problem) than it is working a job (time limited, limited opportunities for promotion based on age or company, etc) But I agree, not everyone is made to be an entrepreneur.
arkis22 9y ago
I think your list is mostly correct, but I don't think there's any reason it needs to stay that way. Technology is about lowering barriers to entry, and digital goods and services have high margins and very little (if any) marginal cost. Maybe in the next 10-15 years we can convince high schoolers that if they spent their free time programming they could be capable of creating a revenue generating asset at 18. The combined power of a nation of kids that could create rails SaaS sites or reusable 3D models would be an awesome sight to behold. It's a skill they would keep and even pass on. Tech is largely new, and we really haven't bothered to teach it yet.
- Alex3917 9y ago
  > I don't think there's any reason it needs to stay that way There is actually a very good reason, namely that acquiring knowledge, skills, wisdom, etc. is at odds with acquiring assessment signals. The only way to become a good entrepreneur is to basically become unemployable.
  - arkis22 9y ago
    I don't think they're at odds. They are definitely not 100% overlapping though. I would disagree that the only way to become a good entrepreneur is to become unemployable. The best way is, as you say, to have knowledge and skill to create a useful product. Then, having a market that allows you to easily get paid for your work helps. I mentioned high school specifically because I know that I would have loved something interesting to work on. It's a perfect time to work on skills rather than assessment signals. Lots of kids don't even bother with the assessment signals...
    - Alex3917 9y ago
      > The best way is, as you say, to have knowledge and skill to create a useful product. Sure. Once you've actually created a product that's useful, or at least impressive from a technical and/or design perspective, then you're easily employable at that point. But for most people there is still going to be a several year gap between when they start focusing on acquiring those skills and when they've actually built something impressive enough to function as its own signal.
philfrasty 9y ago
I don't really see how you separate tech from other entrepreneurs? Entrepreneurship is vast and mostly outside of tech and high-paying organic-vegan-glutenfree-catering tech-startups. If you run a hair salon your education level will most likely be much worse than most tech founders and your "seed money" is a high-interest rate from your local bank. Your margins are so slim that at the end of the month you are indeed an entrepreneur but paid under minimum wage on an hourly basis. To me tech founders seem to be in a much better position to start a company - all things equal - contrary to your description.
petercooper 9y ago
5) Not start a 'startup' that requires funding or hotshot coders to grow at 10x every month, but instead start a regular tech-oriented business that doesn't require any of the 4 other points. Tech entrepreneurs do not necessarily have to start 'startups' in the HN sense of the word and I know there are plenty on HN who have taken the slower, bootstrapped path without rich friends, lack of debt, or even being based in ideal countries.
guiomie 9y ago
"Be free of debt, either from student loans or mortgage" ... if the price of your mortgage is the same as renting, why is your statement true? If you run out of money, mortgage or rent, you've got a problem.
- vkou 9y ago
  When you run out of rent money, your landlord kicks you out, and you move in with your parents, or couch-surf until you get your shit in order, or become homeless. The net hit to your finances is maybe a thousand dollars, or however much a moving truck or a plane ticket costs. When you run out of mortgage money, your home is seized and sold, you will piss away tens of thousands of dollars of equity in foreclosure, realtor, and legal fees. Hundreds of thousands of dollars if you're in a down market, and you go underwater. You'll get to enjoy a ruined credit score... And, on top of that, all the other problems that you face when you can't pay rent. I'd much rather be locked into a $1000/month rent for 30 years, then a $1000/month interest-mortgage for 30 years.
  - krashidov 9y ago
    You can rent out the home/condo you own
    - vkou 9y ago
      Which carries other costs. The average tenant is a decent person, but a bad tenant will be a complete nightmare to deal with.
  - laythea 9y ago
    Another reason is that the housing market is grossly inflated (UK). I would get a better house to rent for £1000/month rent than a house for £1000/month interest-mortgage, in addition to the professional "flexibility" off not having the mortgage "to loose". I am a contractor, so I move around with the work, and certainly earn more income doing so also. The long term, is that I make it big, and then outright buy a house. All or nothing! And in the meantime, I pick up the phone when the house needs maintenance :)
lalos 9y ago
I agree with your points, but is it realistic or are those excuses? Has anybody quantified actual entrepreneurship? Yes, your example are complete home runs but most entrepreneurs would end up with a small business and not unicorns.
shareometry 9y ago
I strongly disagree with your second point. There are quite a few very successful entrepreneurs who have started companies while being mired in terrible financial circumstances. In fact, it's very common for these circumstances to be the stimulus that gets people moving in the direction of their own company. There are many, many stories of this, to the point that it's a cliché. I myself started my first business at a time when I had virtually no money in the bank, and my car was literally repossessed one month before my business became profitable. If I had stopped and said "I can't afford this" and just given up and gone to get a job, I would have never seen the success that came later. Also, you point out particular entrepreneurs who came from rich families. You completely leave out the wide array of entrepreneurs who did not. John Paul DeJoria, for example, was living on a friend's property because he was homeless and had almost no money. He started his business in those circumstances. He's estimated at somewhere in the ballpark of 3 billion net worth presently. There are quite a few stories of people with virtually no money building empires out of the rubble. While I agree that there are a number of factors that feed into whether a startup is successful or not, I would kindly submit to you that one's attitude towards whether or not it can be accomplished is a very massive part of the picture. It takes focus and determination to get most businesses off the ground. Once you begin listing the reasons you can't accomplish it, you've begun setting up the circumstances such that you won't.
- simonebrunozzi 9y ago
  Truth is, the list is very personal. For me (formerly well-paid executive at IT companies in the US, originally from Italy), #2 (plus, some reserve money) was absolutely necessary to convince myself to leave my last job and start a company, last year.
  - laythea 9y ago
    It seems that you were fortunate that the burden of your decision was light, but this would not be the case, generally I would have thought.
- enraged_camel 9y ago
  >>I strongly disagree with your second point. There are quite a few very successful entrepreneurs who have started companies while being mired in terrible financial circumstances Textbook example of self-selection bias and survivorship bias. Even if you compiled a list, it would tell you nothing about the number of people who would have started companies had they not been mired in terrible financial circumstances.
allthenews 9y ago
Nonsense. I have a mortgage, student debt, and do not know anyone particularly well off, I quit a very stable job, and am in the middle of launching a tech startup. People get so hung up on privilege these days that they lose sight of the power of merit and strategy. I think it is a dangerous mindset.
austenallred 9y ago
I think your first point is the only one that bears truth. There are huge numbers of tech founders for whom 2, 3, and 4 are not true - sometimes all at once.
- sharemywin 9y ago
  I think if you have access to capital from 1 then 2,3,4 fall away as issues.
adventured 9y ago
Your points about family are largely correct. If you make that choice, your responsibilities are quite set, until you either have enough savings (or raise investment) to take a risk or your children become adults. You do not have to be free of debt. Your monthly debt payments have to be reasonable, something you can pay as part of routine monthly bills. You absolutely do not need affluent friends or family. That's the least of all requirements anyone needs to start a tech company. First of all, it often doesn't take much capital to get started with tech companies these days. Second, your premise precludes someone having even a modest amount of savings (your theoretical person must be from a rich country, but they must have no money saved despite working a cushy job, odd combination). You do not have to be a particular age. You're assuming everyone has children or a big mortgage. Birth rates in the developed world are at all-time lows, a lot of people are forgoing children or pushing it off until much later. You don't need a big mortgage, you can rent; most of the US does not look like NYC, SF, LA, Seattle in terms of cost of living. You most certainly do not need to own a home. Multiple of your points put the theoretical person into that position. > Looking at the most popular entrepreneurs in the world Popularity is a pretty terrible reference point (why would that matter?). There's this group: Larry Ellison grew up in a very broken home, his family didn't have much money. Paul Allen comes from an entirely ordinary middle-class background. Michael Dell's success required no special setup for what he did other than his own effort (assembling & selling custom PCs out of his bedroom, paid for out of his own savings), he grew up in an upper-middle class family. Elon Musk boot-strapped everything he did after moving to Canada, lived poorly and on a shoe-string budget after moving to the US. Jensen Huang of nVidia, was a first generation immigrant from Taiwan, with the deck stacked against him if anything; got his first degree from Oregon State University. Mark Cuban, who is more famous than Spiegel, grew up in an entirely middle-class background in Pittsburgh, and entirely boot-strapped his first success (MicroSolutions), which then paid for him to found Broadcast.com. Mark Andreessen grew up in farm country in both Iowa and a tiny town of 2,000 people in Wisconsin, his family had no special financial position. Ev Williams grew up on a farm in Nebraska, his family had no special financial position. Jack Dorsey grew up in a middle-class family in St. Louis, his family had no special financial position.
doubleocherry 9y ago
I've been an entrepreneur for years, and when I got started, I wasn't free of debt, and I wasn't "the right" age. However, I don't disagree that a certain amount of affluence and particular set of circumstances are huge contributors to entrepreneurial success.
dv_dt 9y ago
This version of 2,3,4 are one set of possibilities focusing on younger entrepreneurs. As was noted recently https://news.ycombinator.com/item?id=1679422 https://news.ycombinator.com/item?id=1679422 "Our primary finding is that successful entrepreneurs are middle-aged, not young. The mean founder age for the 1 in 1,000 fastest growing new ventures is 45.0." 2,3,4 can be more generalized to be: "have access to sufficient capital to address the opportunity". Which in general I would guess that there are more 45-year olds with access to entrepreneurial capital in some form than there are younger entrepreneurs in the original stipulation of 2,3,4. You can look even further ahead. Because the past few decades have been so strongly concentrating wealth upwards, one might predict that there will be fewer individuals with the personally owned capital to start businesses so the number and the 'risk level' of ventures to be shifting downward over time. The risk level would go down because the commitments of capital become more committee based the more people need to approve of it - and so you get fewer Elon Musk type investments, and more safe-looking investments in better paperclips (or the next social network ad app...).
wslh 9y ago
You see everything from a US centric perspective, I have a contrarian view: 1) Not clear what you call a rich country but Argentina has a lot of entrepreneurs and it is considered an underdeveloped country. 2) Best universities here are free and everyone in the world can study here. The average student study and work at the same time. 3) Lots of bootstrapped companies, limited access to capital. 4) Obviously age and family matter but you don't need to be the first founder who take all the risks. It is possible to join an existing company as a cofounder starting part time if you have critical skills to contribute. Not saying that starting a company is easy, just saying that the world offers many different perspectives to the same problem.
- ekianjo 9y ago
  Argentina is not an underdeveloped country. It used the be the richest country in south America. It became poor again but thats nothing comparable to a country that never knew development.
  - wslh 9y ago
    Argentina has 70 years of economical decadence. You can check this article [1] (in Spanish). [1] https://www.infobae.com/opinion/2018/04/18/siete-decadas-de-deterioro-economico/ https://www.infobae.com/opinion/2018/04/18/siete-decadas-de-...
- eeZah7Ux 9y ago
  > Not saying that starting a company is easy, just saying that the world offers many different perspectives to the same problem. The number of famous and wildly successful startups outside of the US says otherwise :(
  - wslh 9y ago
    > The number of famous and wildly successful startups outside of the US says otherwise :( You are not understanding this thread. The discussion was about the difficulties people find starting a company that are mainly connected to economical issues. If you look at the successful companies, the major part had access to capital that eliminates this line of reasoning.
ausjke 9y ago
Maybe that's why most startup founders are at 45 years on average, by that age kids are maturing, family finance should be relatively stable, you might be reaching on your career ceiling, and you're getting older but yet not too old -- so you want to give it a shot. All combined the 45-average-founder-age makes sense to me.
- StaticRedux 9y ago
  Not to mention the most important part in my opinion, having the experience in your field to create a successful startup. Having a light bulb idea when you're young is all well and good, but without the experience I would imagine your odds of failing are much higher.
- raarts 9y ago
  About being 'not too old': 45 is an average, meaning there will be more or less just as many around 60 as there will be 30. At ~55 the kids will be gone, giving you even more time to start up something.
lsllc 9y ago
Don't forget: 1) Healthcare costs (especially for a family) 2) Non-compete & IP assignment agreements (unless you are in CA)
a13n 9y ago
This is plain wrong. You don't need to create a billion dollar company to be a successful entrepreneur, even though that's what investors want you to think. By Steve's definition, you just need to make more than you would at your corporate gig. 1) The world is moving towards remote work. You don't need to be in a rich country with talent. So long as there's good Wi-Fi. 2) If you have debt then you'll have to raise money and take a salary. 3) You don't need to do a friends and family round, or raise at all. We're bootstrapped, never raised a dollar. 4) I've met many entrepreneurs with young children or wanting to start families. Certain startups (eg. SaaS) can have very reliable income once you get your first several customers.
- walshemj 9y ago
  No remote work allows you to outsource "bog standard" work you aint going to get to the c suite that way
mrnobody_67 9y ago
I started with less than $100 18 years ago, now Im in the 0.1%. Also not born in a first-world country (though immigrated to one at a very young age). Also nobody funded me until much later in my life, by which time I was already a millionaire.

mathattack 9y ago

Interesting. The converse may also be true. People with shiny resumes may also have more incentive to stay at banks/consulting/largecos.

sjg007 9y ago
What is a shiny resume really?
- BillyParadise 9y ago
  one that's printed on high gloss photo paper.
- sah2ed 9y ago
  Someone with an Ivy league education I'm guessing.
  - walshemj 9y ago
    The right Private/Public Schools then Harvard / Oxbridge (PPE) playing the right sort of sports Polo, Rowing , Rugger.
- temporalparts 9y ago
  Well the opposite of someone whose resume doesn't sufficiently reflect their value is someone whose resume makes the candidate seem more valuable than they are.
- mathattack 9y ago
  Big name schools and companies.

mattsfrey 9y ago

This takes a very heavy analytical approach to the reasons for seeking an entrepreneurship path. I think it misses the larger point - most people go into it for highly personal subjective reasons. Mine, and most I feel like are simply choosing to chase after the dream of making real money, enough to buy our freedom from the rat race and live life on our own terms.

pryelluw 9y ago
Mine is similar, but defined as having enough money to buy my freedom to survive. A job will not give me that. Or at least the jobs that are available to me.
paulsutter 9y ago
You're echoing Steve's explanation exactly: > the dream of making real money, enough to buy our freedom from the rat race and live life on our own terms Quoting Steve quoting the paper's conclusion: > The authors’ conclusion — Entrepreneurs think they are better than their resumes show and realize they can make more money by going it alone. And in most cases, they are right.
adrianN 9y ago
There are a lot of software engineering jobs that provide enough income for you to retire before you're fifty.
- davidjnelson 9y ago
  Outside of an equity event or very, very special circumstances, I don’t see that being true in the Bay Area. Managers at Google/Facebook, no problem.

osrec 9y ago

In my experience, being an entrepreneur is all about taking on and managing risk well. An entrepreneurial spirit almost enjoys risk. At a firm, you usually don't get much material risk exposure to manage, so entrepreneurial individuals end up seeking out opportunities that can give them a more direct handle on their risk exposure (and any subsequent rewards). More often than not, this means starting a company where you largely decide which risks you're comfortable accepting, and which risks you prefer to avoid. The thrill is in navigating those risks using your guile to deliver value much above the expected risk premia for your domain. I worked in an investment bank for a few years, but the risk environment was too restrictive for me to really make a mark (from a job security perspective also, I'd often see lifers get the boot, so never really felt comfortable, even though on paper I should have been). Thus I quit, started my own company, took on a great deal more risk, but still experienced more work satisfaction. I think what I like most is the ability to take your professional future by the horns without any artificial constraints holding me back. For me, what it comes down to is this: entrepreneurs despise restrictions, and modern companies can't seem to exist without them.

mlevental 9y ago
you're equivocating. first you say it's about risk seeking/management and then you say it's about agency/independence. personally I strongly believe it's the latter. if you derisked my startup for me but let me stay in control I would be much happier. eating the risk is the premium /I'm/ paying for the agency - it's that opportunity that you don't have in a large company (trading risk for freedom).
- psyc 9y ago
  There's overlap. The herd instinct reduces risk.
- osrec 9y ago
  Perhaps, but what I was trying to convey is that your own company gives you the freedom to choose your risks without restriction. Working for someone doesn't usually allow you to do that (as your boss decides your risk environment).

dmritard96 9y ago

article aside, for the most part, this title is a tautology right?

thaumasiotes 9y ago
"Entrepreneurs start companies" would be a tautology. "Why entrepeneurs become entrepreneurs" is a question that can be answered (to some degree). If more than one answer is possible, as here, it doesn't really make sense to complain that the question is a "tautology".

alephnan 9y ago

I knew some “entrepreneurs” from college who couldn’t land a job upon graduation. They’re prideful, so they sugarcoat their situation and justify why it is meaningful, when really the opportunity cost was zero. This isn’t a knock against all entrepreneurs. It’s the difference between “billionaires are dropouts” vs “dropouts are billionaires”. Ironically, one of those “entrepreneurs” said “I’m a C student, therefore all of you will end up working for me.” Last I heard, they were smuggling medicine in the legal-grayarea across borders.

m3kw9 9y ago

Probably because they have already strong convictions about something and having a boss is not much different for them than a bigger company

dustingetz 9y ago

technology is changing the balance of power nontech led companies are dying, no growth to be had there why would i work for that

nugi 9y ago
Even the best tech needs foundations, buildings and services to function. Get off your high horse. Money is where friction is, not nessarrily, or even usually, advancement in tech. Not to mention non tech companies are dying at a much slower rate than tech ones if you plotted them all.

prewett 9y ago

The most interesting point of the article to me is that fact that taxes above $100k were 70% - 90% until 1970. That seems like it nicely explains why income inequality and CEO salaries have increase since 1970. With a tax rate like that, you pretty much can't have much income inequality.

patio11 9y ago
The tax code simultaneously strongly encouraged you to not consume goods/services but rather have a company consume them on your behalf. This is still pretty de rigeur in Japan, which results in situations like this regarding executive perks: Bob lives in an extremely desirable house, which he rents for hundreds of dollars per month. It is owned by the real estate arm of BigCo, where Bob is CEO. Bob doesn't own a car; BigCo has issued him a $250k company car. Bob's children attend private schools, receiving a scholarship from BigCo for emerging leaders like themselves. Bob is in reasonably good health, given his frequent use of a gym and country club (dues billed to BigCo), and his wife's cancer situation is entirely managed by their gold-plated health insurance policy. Bob is socially assured of a sinecure post-retirement like e.g. being on the board of directors of a company socially close to BigCo. Bob's salary is $90k a year. Phew; income inequality, solved. (The current standard in the United States is that most of the above fringe benefits would result in taxable income to the employee. This is close to the current formal rule in Japan, which adopted guidance very similar to the US' on about a 25 year lag, but the substantial give-and-take between tax authorities and employers/taxpayers makes the actual practice in Japan substantially more varied than in the US, including among firms which would consider themselves enthusiastically complying with the rules.)
- telchar 9y ago
  That's why replacing corporate income tax with personal income tax, which many here advocate, won't work. However that issue can be mitigated by taxing companies on the value of perks
  - z3t4 9y ago
    In Sweden, both the individual and the corp is taxed the value of the perks.

boostropio997 9y ago

Article is right on. A lot of entrepreneurs are simultaneously the most and least employable people you'll ever meet.

terminado 9y ago

“More often than not, she relies on charts, graphs and quantitative analysis as a foundation for a decision, particularly when it comes to evaluating people … At a recent personnel meeting, she homes in on grade-point averages and SAT scores to narrow a list of candidates, many having graduated from Ivy League schools, … One candidate got a C in macroeconomics. “That’s troubling to me,” Ms. Mayer says. “Good students are good at all things.” Kind of a stunning misconception right there. A person only needs to look in the mirror, to invalidate such an idea.

sova 9y ago
Especially with an education system that's effective on only 2 out of 12 different brain arrangements [see Timothy Leary's "your brain is god"], it's hard to say that school marks are any predictor of how beneficial one will be to Humanity or the Planet.
- icelancer 9y ago
  >> it's hard to say that school marks are any predictor of how beneficial one will be to Humanity or the Planet I've mostly found them to be negative signals. I blind applications for education now.
psyc 9y ago
The phrasing is unfortunate. It's reasonable in that context, in that very high GPAs aren't that uncommon at her level. "All academic things." Naturally "all things" is much too broad.
- terminado 9y ago
  To frame an assessment of an individual like that, risks throwing the baby out with the bath water. It leaves no room for externalities and circumstance, and assumes the individual had all needs met, perfectly, at all times. Facts are facts, even if someone came up short once or twice. Maybe blame is irrelevant, and excuses aren't a substitute for productivity, but simply put, that's not how you measure humans, and any human knows that.

kevindong 9y ago

Is that (starting a company) not literally the definition of an entrepreneur? https://www.google.com/search?q=define+entrepreneur https://www.google.com/search?q=define+entrepreneur > a person who organizes and operates a business or businesses, taking on greater than normal financial risks in order to do so.

deleted 9y ago

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billsix 9y ago

The title is tautological. Tell me about "the entrepreneur who never started a company".

hsljekskfh 9y ago
it took me a bit to understand too. i think it means why people who started companies did so instead of joining them
ak39 9y ago
Blank is using the word "entrepreneur" more in the skill sense, the mindset sense - an identity. Someone who is given a wider canvas to express creative ideas and to solve problems than the narrow surface areas offered by traditional employers (employers who mostly only seek cookie-cut identities to execute already established company ideas).

phkahler 9y ago

"In this case the entrepreneurs know something potential employers don’t – that nowhere on their resume does it show resiliency, curiosity, agility, resourcefulness, pattern recognition, tenacity and having a passion for products." Those aren't really signaled by asking coding questions either.

tonyedgecombe 9y ago

Venture capital flourished when the tax rates plummeted in the late 1970s. Yet business formation in the US is near a forty year low: http://money.cnn.com/2016/09/08/news/economy/us-startups-near-40-year-low/index.html http://money.cnn.com/2016/09/08/news/economy/us-startups-nea...

walshemj 9y ago
cough Fairchild cough Intel - and the other fairchildren

deleted 9y ago

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jogjayr 9y ago

> No wonder the most successful Google products, other than search, have been acquisitions of startups not internal products: YouTube, Android, DoubleClick, Keyhole (Google Maps), Waze were started and run by entrepreneurs. What about Gmail and Chrome?

rorykoehler 9y ago
Neither Gmail or Chrome were exceptionally innovative ideas. More iterative technical executions which Google are exceptionally good at imo.
- jogjayr 9y ago
  You're moving the goalposts. The blog post just spoke about "most successful products". And "innovative" is subjective. Moreover there was nothing like Gmail at the time it debuted (AJAX, huge storage, powerful search). Chrome was technically very innovative and also popularized UI things that have become standard - tabs at the top, omnibar.
  - AmericanChopper 9y ago
    Maybe I’m just misremembering, but I’m pretty sure Gmail had much better spam detection than anything else when it launched. Back when it was in beta, that was one of the main features I remember talking about when I ditched Hotmail.
  - Rexxar 9y ago
    You're moving the goalposts too in your first comment: The original article never say there wasn't any very successful and innovative internally developed products. Arguably, YouTube, Android, Maps and Double Clicks have much more impressive market shares and revenue impact than Chrome and Gmail.
  - temporalparts 9y ago
    Regardless of how innovative Gmail and Chrome were (and I agree they were), more of Google's "innovative" products are a result of acquisition. This supports the article's hypothesis that Google's internal product innovation is not as great. Some examples of failed innovation at Google are Wave, Allo, Chat, Plus, etc. Having worked at Google, I can count way more product failures than successes that originated internally.

grosjona 9y ago

>> that explains a new theory of why some people choose to be entrepreneurs. People don't 'choose' to be entrepreneurs - Choosing to be an entrepreneur is usually the first step but it doesn't make you an entrepreneur. It can take decades to reach the point where you can become one. I've been trying for 10 years and I'm now only partially an entrepreneur in the sense that I earn a decent amount of passive income from a side business but I'm still also an 'employee' because I still have a day job too. It takes a long time to build up the network that you need to become an entrepreneur.

ithinkinstereo 9y ago
You don't need a "network" to start a business. In fact, many founders start businesses in industries and niches that, at first, they might have little, to no, connection to. If you think a network is critical, probably the most effective (time-wise, maybe not so much cost-wise) way to acquire one is to go get an MBA or gain employment in a professional services firm (consulting, banking, accounting, law, etc.) that works in that industry.
- justherefortart 9y ago
  You can open a Subway inexpensively, then work in it for yourself. Everyone around me has a bunch of rent houses while they work normal jobs to pay everything off. Hell, my neighbor has 15 or so homes and lives in Europe most the year and has since the early 1990s. Lots of different types of entrepreneurs and avenues to success. Capital is the key in my experience.
herbst 9y ago
I don't see the need for a network either. In fact I would assume a big network is way more important when you look for a good job. People buy my things because I fill a need. I don't know a single person in real life who uses my products or has similar needs.

dalbasal 9y ago

This blog and the paper it's about remind me a lot of PG's "After Credentials." http://paulgraham.com/credentials.html http://paulgraham.com/credentials.html . He uses "credentials" the way "resume" is used here. Large companies allocate compensation & power based on credentials, including those you get in-company like seniority and job title. Startups let you succeed and fail based on performance instead of this poxy proxy for it. He goes in depth into the "grades problem" that Mayer seems to exemplify and several commenters here brought up. I think pg was optimistic about this topic in 2008, and this article relates to his larger vision of a "high-resolution" economy where un-credentialed entrepreneurship plays a larger role, and corporate-bureaucratic credentialism plays a smaller one. We'll soon have 3-5 trillion dollar companies (unicorn-eating dragons, technically). They're less "old fashioned" in their credentialism, but they're credentialist nonetheless. I'm with Paul though, we need to figure out ways of having the economy that is less abstract.

sjg007 9y ago
Thanks for posting this. I think some people can become so specialized that they fit into specific roles and that some products rely on a group of professionals from different disciplines working together.

hellofunk 9y ago

> At a recent personnel meeting, she homes in on grade-point averages and SAT scores to narrow a list of candidates, many having graduated from Ivy League schools, …One candidate got a C in macroeconomics. “That’s troubling to me,” Ms. Mayer says. “Good students are good at all things.” No wonder Yahoo failed.

bhickey 9y ago
I disagree with her leadership style, but it's unfair to blame Yahoo!'s collapse on her. The company was doomed with or without her. She took on an untenable role in exchange for a big pay package.
- nojvek 9y ago
  Well technically, they were paying her the big pay package to turn around the company, anyone could have burnt yahoo to the ground. Law of entropy.

jk2323 9y ago

Many entrepreneurs are terrible employees.

NPMaxwell 9y ago

Having been entrepreneurial itself becomes a signal that opens doors at companies -- even if the business fails. I don't know about hiring on and doing what you're told, but being the person who made sure it all happened -- including doing everything you haven't yet hired someone for. I've seen several folks who stepped out, failed at a business idea, and then stepped back into corporate at a higher level. Starting up a new company is like starting a new division. It signals that you can handle the complexity and diversity of responsibility. https://www.nytimes.com/2016/09/11/upshot/how-to-become-a-ceo-the-quickest-path-is-a-winding-one.html https://www.nytimes.com/2016/09/11/upshot/how-to-become-a-ce...

justherefortart 9y ago
My experience was the exact opposite. They'd all ask, "Why would I hire you if you're just going to leave and do another startup?". Even in San Francisco, which was more surprising than in the midwest.
- NPMaxwell 9y ago
  You got me thinking it over. It's a question (like "what are your three biggest weaknesses?") that you need to have an answer for. In my case, I said that, while I could do sales, I didn't like sales.

IncRnd 9y ago

“I want to be my own boss.” “I love risk.” “I want flexible work hours.” “I want to work on tough problems that matter.” “I have a vision and want to see it through.” “I saw a better opportunity and grabbed it. …” I've started several companies, and the reason was the same each time, I believed there was a market for an idea from which I could make money. Those other reasons never came into play. I suppose that starting a bussiness has different reasons for people who are already unhappy with their lives, but starting a business really shouldn't be undertaken to minimize stress and the number of working hours.

ian0 9y ago

Obviously it varies but personally the major reason I tend towards working outside organisations is the "quality" of my endeavour. Within an established organisation, even great ones, getting things done involves often involves internal machinations - "buy in" etc. The best people at large companies are experts at this. As an entrepreneur, this skill helps make a sale, or raise funds. But its directly linked to the problem you are solving. Its "how do I make a thing that does X" VS "how do I make this thing do X". Its purer. Its more interesting. Its easier to romanticise - and easier to pass that feeling on. Its also liberating to have complete freedom (for awhile!) and no-one to blame but yourself.

kelvin0 9y ago

I have come to a conclusion: There are deductive style thinkers and there are inductive type thinkers. The deductive works from the abstract theory towards a proof of his reasoning. The inductive works from facts, and backwards to a theory or model. The deductive 'type' can usually be a very good student and academic, but not so great as a practitioner. They can be very reliable within a very structured environment. The inductive 'type' is usually better at doing things and learning from these and getting an intuition for how they work. They are not good at 'following' ideas and usual make horrible students and employees. They are pretty good at adapting in a more chaotic environment. So the problem in tech (interviews)seems to me that the 'deductive types' get the best scores and signal themselves as being the 'brightest'. However in reality what you want in industry are 'doers' such as the 'inductive' type people ... but they are the ones failing at your ridiculous tests/puzzle questions. Ideally a person should balance between the 2 modes (inductive and deductive) and be a master at almost everything.

xivzgrev 9y ago

There are plenty of highly talwnted people who work for existing companies vs start their own thing. The fact that big companies often acquire startups I think has less to do with caliber of talent and more the focus of that energy. You are asked to move some KPI OKR whatever. And you are evaluated on how much you move it on at least an annual basis. Successful startups often take many years to become valuable or product revenue. It's too risky for most companies to hold off evaluating for that long.

xivzgrev 9y ago
Also the notion that only great products besides search for google came from acqusition is false. Top of my head: gmail.

temporalparts 9y ago

One additional thing I would add to the article is that large companies have a harder time leveraging someone with multifaceted strengths, which the entrepreneurial route can better leverage. Large companies are about specialization and efficiency at scale for employees; their structure inherently has a harder time to get the most out of the the multiple strengths an entrepreneurial person likely possesses. Conversely, someone who is amazing at only one thing, eg software engineering, but lacks in leadership, sales, marketing, design, etc could have an amazing career in a large company but might have a harder time starting a company where there aren't already teams of people to compensate for his/her weaknesses.

1290cc 9y ago

My own career is an example of this, by all accounts and measurements used in HR in the US I shouldn't be earning as much as I do or as successful or sort after in my field. Its always a shock to colleagues when they ask where I went to college and my response is that I'm still on my gap year that started 15 years ago. When I go into the details of what happened throughout that period the bias towards college education disappears. And the paper is correct, I fully understand that my skills on offer are on par or better than what any C-level or senior exec can offer, but I only realized this after a few years of interacting and working with these people.