The Surprising Truth About Why People Become Entrepreneurs
Why do most people become entrepreneurs?
Maybe they seek to satisfy their souls by pursuing their lifework. Maybe they long to create lasting organizations that will change the world, or better a community. Maybe it’s part of a grand pursuit to understand reality.
Or does the decision result from a flash of inspiration into an unmet market need? The ambition to solve a gnawing workplace problem? Involvement with technical breakthroughs unappreciated by employers?
Do aspiring entrepreneurs yearn for wealth? For fame? Are they psychologically driven to embrace risk? To lead others?
Maybe the reasons are more prosaic: a corporate layoff, the desire to exercise new skills, a pressing need to make more money.
None of these scenarios, as it turns out, underpin the single reason why most people become entrepreneurs.
According to a comprehensive study of entrepreneurship published earlier this year by Scott A. Shane, a professor at Case Western Reserve University, most people start businesses in order to avoid working for others. Writes Shane:
The real reason that most people start businesses, however, has nothing to do with wanting to make money, to become famous, to better their own communities, to seek adventure, or even to improve the world. Most people start businesses simply because they just don’t like working for someone else.
Shane’s study, entitled The Illusions of Entrepreneurship: The Costly Myths That Entrepreneurs, Investors, and Policy Makers Live By, contains surprising findings that contradict almost every bit of entrepreneurship folk wisdom you’ll encounter online. The results are compiled in an extremely readable book of the same title.
Lay readers will certainly find Shane’s conclusions counterintuitive. Everyone knows that great entrepreneurs invent marvelous technologies, create heretofore unimagined markets, launch heroic quests to do social good.
The key to understanding Shane’s findings lies in his definition of entrepreneur: anyone who starts a new business.
That’s a definition I agree with. But it’s at odds with popular perception, because most people think of new businesses as high-tech, high growth companies.
Nothing could be further from the truth. The vast majority of new businesses are sole proprietorships: one-person, undifferentiated, work-at-home enterprises without employees, started on a shoestring, in mature, low-growth industries (not biotechnology or software), managed by a principal without ambition (or plans) to expand. It is these tiny enterprises—not the Googles of the world—that account for 80% or more of all new businesses.
Few of Shane’s findings will surprise those who’ve formally studied entrepreneurship. But I admit that for me, it was an eye opener to see “don’t like working for someone else” as Reason Number One for starting a business.
The hard-hitting facts of Illusions, though, should only encourage aspiring entrepreneurs. The world needs more genuine characters, more original souls determined to trod their own path, and no other.
More power to those who strike out on their own—damn the odds, and whatever the reason.
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