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The myth of the young entrepreneur

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Jeffrey Tucker wrote a good piece at The American Institute for Economic Research. It is an important reminder about how hard business is and how the idea that most entrepreneurs are young is a myth.

When I mention to people that the average of age of entrepreneurs is not the twenties, but around forty, they are at first surprised. After all, is Mark Zuckerberg young? Yes, but he was the outlier. Of course, once we think about it, it makes sense that people with experience, business skills, and insight would be more likely to start a business than a twenty-something with few skills and minimal experience. There are examples of young people with a great idea, but this is much more rare than an experienced businessman starting a new venture. As Tucker puts it: 

The legend of the twenty-something business wunderkind is everywhere in pop culture. Here’s the problem. The data are in. It turns out that the whole thing is a gigantic myth. Young founders of businesses fail, almost certainly, and at a much greater rate that people who are much older, wiser, more skilled, and more knowledgeable about the industry. It turns out that succeeding in business is extremely difficult. It takes maturity above all else to achieve it.

Tucker refers to a new study by Javier Miranda, principal economist at the U.S. Census Bureau; Benjamin Jones, professor at the Kellogg School of Management at Northwestern University; and Pierre Azoulay, professor at MIT’s Sloan School of Management and research associate at the National Bureau of Economic Research.

They conclude that the average age for a successful entrepreneur is 45 years old—even higher than I thought.

As Tucker explains, the study shows:

Younger founders appear strongly disadvantaged in their tendency to produce the highest-growth companies. Below age 25, founders appear to do badly (or rather, do well extremely rarely), but there is a sharp increase in performance at age 25. Between ages 25 and 35, performance seems fairly flat. Starting after age 35, there is increased success probabilities. Another large surge in performance comes at age 46 and is sustained toward age 60.

Tucker argues that the myth of young entrepreneurs has created false hopes for young people who don’t realize how difficult business is. As I explain to people, in most cases it tends to be older people with experience and insight that have the ideas and skills to start a new business. This doesn’t mean young people don’t occasionally do it—and more power to them,  but it is not the norm, and Tucker is right that perpetuating this myth can end up hurting the young more than it helps them.

The Boomer-Millennial Problem

I also think that this is a manifestation of the Boomer-Millennial problem. Both Boomers and Millennials are large generations and they are both highly self-referential and narcissistic. As Tucker notes, Zuckerberg is reported to have once said, “young people are smarter.” Of course he was young and it is not unusual for young people to lack wisdom even if they have technical or business skills. But it is not all their fault. They have been groomed to be self-congratulatory by their baby-boomer mentors and parents.

Boomers self-indulge in their affirmation of young people and how they can change world, etc. But this false affirmation sets up young people for disappointment when they come into contact with reality. This is only part of a larger problem with millennials and work. I have worked with a number of millennials and generally like working with them—I have not found them lazy as some claim. My experience is rather that they have been indoctrinated to think too highly of themselves. They think they are ready to take positions of leadership too early. They don’t know what they don’t know; and since they don’t know it, they just assume it doesn’t exist. Part of their confidence comes from the fact that they are digital natives, so when they first got to work, all the older people from Boomers to Gen X complimented them on their tech skills. Egged on, especially by their Boomer mentors and parents, they equated dexterity with software with wisdom and business insight.

Encouragement is important and it can go a long way in helping people succeed in business and in life. But it has to be grounded in reality and not myth. Life is difficult. So is work. So is building a business. Failures are inevitable. We need to encourage persistence and help ourselves and others develop prudence—seeing the world as it is—and what Aristotle called phronesisgood judgement and wisdom. This is essential for good business, and more important, a good life.

As Aristotle wrote almost 2,500 years ago in the Nicomachean Ethics: 

although the young may be experts in geometry and mathematics and similar branches of knowledge, we do not consider that a young man can have Prudence. The reason is that Prudence includes a knowledge of particular facts, and this is derived from experience, which a young man does not a possess; [6] for experience is the fruit of years.(One might indeed further enquire why it is that, though a boy may be a mathematician, he cannot be a metaphysician or a natural philosopher. Perhaps the answer is that Mathematics deals with abstractions, whereas the first principles of Metaphysics and Natural Philosophy are derived from experience: the young can only repeat them without conviction of their truth, whereas the formal concepts of Mathematics are easily understood.   (1142a)

As Tucker notes, ultimately it is a disservice to encourage young people to become entrepreneurs. He writes:

The bigger problem with urging young people to start businesses is that this advice feeds disgruntlement with an actual path to success, which is not running a cool startup but doing the very thing that entrepreneurship chic implicitly puts down: getting a skill, obeying the boss, gaining wisdom, and developing a solid career bit by bit.

We should stop lying to young people about commerce and tell the truth that business is hard. Work is hard. Saving money is hard. Serving customers is hard. For some people, just showing up is hard. These are all learned skills. The fun comes once you master them…

Start a business when you are young? Sure. Just don’t quit your day job yet.

You can read the whole piece and learn more about the study here.

 

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Michael Matheson Miller Michael Matheson Miller is a Senior Research Fellow at the Acton Institute

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