Jun 5, 2013
An episode about the
financial risks and rewards of entrepreneurship and what they mean
for your motivation in starting a business. Here's some harsh data
about the financial risks and rewards:
Show Notes:
- More than half of startups cease trading within the first five years.
- Entrepreneurs on average earn significantly less income over 10 years than they would have earned in paid employment. There are debates about the numbers but one study (Hamilton) suggests a 35% earnings differential.
- Entrepreneurs on average don’t earn a better return on their investment by founding startups than they would have by investing in publicly traded stocks (in fact they earn less from a risk return perspective).
- Nevertheless, the majority of affluent people are self-made entrepreneurs. Entrepreneurs make-up less than 20% of the workforce in America, but account for 66% of the millionaires. Of the millionaire entrepreneurs, 80% of them are self-made: they are first generation wealth holders (Stanley).
- Purpose: building a business because you want to make a dent on the universe and you believe that what you are doing will make peoples' lives better.
- Autonomy: being an entrepreneur because it gives you freedom to live and work as you want to (not as someone else thinks you should)
- Mastery: overcoming the challenges of learning how to build a business is rewarding in itself.
Show Notes:
- "Start Up Failure Rates: The Definitive Numbers" By Scott Shane
- “What Do Small Businesses Do?” Erik Hurst and Benjamin Wild Pugsley
- "Does Entrepreneurship Pay? An Empirical Analysis of the Returns of Self-Employment" by Barton H. Hamilton, 2000
- "The Returns to Entrepreneurial Investment: A Private Equity Premium Puzzle?" By Tobias J. Moskowitz and Annette Vissing Jørgense
- The Millionaire Next Door by Thomas Stanley
