Entrepreneurs Don't Have Special Gene, They Have Money

[summer]

qz.com/455109/entrepreneurs-dont-have-a-special-gene-for-risk-they-come-from-families-with-money/?utm_source=parCM


We’re in an era of the cult of the entrepreneur. We analyze the Tory Burches and Evan Spiegels of the world looking for a magic formula or set of personality traits that lead to success.Entrepreneurship is on the rise, and more students coming out of business schools are choosing startup life over Wall Street.

But what often gets lost in these conversations is that the most common shared trait among entrepreneurs isaccess to financial capital—family money, an inheritance, or a pedigree and connections that allow for access to financial stability. While it seems that entrepreneurs tend to have an admirable penchant for risk, it’s usually that access to money which allows them to take risks.

And this is a key advantage: When basic needs are met, it’s easier to be creative; when you know you have a safety net, you are more willing to take risks. “Many other researchers have replicated the finding that entrepreneurship is more about cash than dash,” University of Warwick professor Andrew Oswald tells Quartz. “Genes probably matter, as in most things in life, but not much.”

University of California, Berkeley economists Ross Levine and Rona Rubenstein analyzed the shared traits of entrepreneurs in a 2013 paper, and found that most were white, male, and highly educated. “If one does not have money in the form of a family with money, the chances of becoming an entrepreneur drop quite a bit,” Levine tells Quartz.

New research out this week from the National Bureau of Economic Research (paywall) looked at risk-taking in the stock market and found that environmental factors (not genetic) most influenced behavior, pointing to the fact that risk tolerance is conditioned over time (dispelling the myth of an elusive “entrepreneurship gene“).

Resilience is undoubtably a necessary trait for success; many notable entrepreneurs experienced success only after leading failed ventures. But the barrier to entry is very high.

For creative professions, starting a new venture is the ultimate privilege. Many startup founders do not take a salary for some time. The average cost to launch a startup is around $30,000, according to the Kauffman Foundation. Data from the Global Entrepreneurship Monitor show that more than 80% of funding for new businesses comes from personal savings and friends and family.

“Following your dreams is dangerous,” a 31-year-old woman who runs in social entrepreneurship circles in New York, and asked not to be named, told Quartz. “This whole bulk of the population is being seduced into thinking that they can just go out and pursue their dream anytime, but it’s not true.”

So while yes, there’s certainly a lot of hard work that goes into building something, there’s also a lot of privilege involved—a factor that is often underestimated.

[penguingrrl]

That doesn't surprise me in the least. Starting a business is very expensive. You need capital to start it and money to live on until you turn a profit, which often takes some time. It's not like you hang your shingle and make enough the first week to cover the expenses of opening and pay yourself a salary and benefits.

[downtoearth]

A gene for entrepreneurship?! Well aren't you special to think that your leg-up comes from being born that way?!

When my DH started his business, we had to take a huge hit and eventually that $15k in tools/materials and the no salary didn't really pan out. We maybe made $5k off the whole deal after 3 years and he was able to get his name out there. I think if he had about $30k to start, it would have taken off, but we couldn't invest that type of money AND no salary return for a year or two.

[heyjude]

I thought this was a given?

[pixy0stix]

Jul 20, 2015 12:27:39 GMT -5 heyjude said:

I thought this was a given?

Right? The old saying, "It takes money to make money" had to come from somewhere.

[elleblue]

This seems obvious, no?

[sfy]

Lol. For years, I wasn't sure whether Tory Burch had actually made more money from her company than she was born into (now I'm pretty sure she has). I know a few entrepreneurs and only one I'd truly call "self-made."

This reminds me of a conversation I had with DS yesterday. I told him I was going to go for the gusto and purchase a property to flip next year. I've been wanting to do it, but I'm such a miser. Anyway he said, "I think that's a good idea. Fortune favors the bold, I would totally do it if I were you." I was like, "Right, but you're 19 with no responsibilities. I'm a grown lady with a child in college." Like, wtf? It's easy to be entrepreneurial when failing doesn't mean financial ruin. I'm not saying it's easy to be a success, but taking the initial leap is a step most people cannot take.

[ttt]

I also hate this idea that anyone can and should be an entrepreneur. No, not everyone can. It's tremendously difficult at times and it takes a very particular personality. It's not something that everyone can or wants to or should do. Not everyone can be an engineer, not everyone can be a concert pianist, not everyone can be an entrepreneur.

[Elsa]

I used to do advising for a business college, and I always felt like a scammer telling students about our Entrepreneurship degree.

I mean, yes the knowledge is helpful if you are one of the small percentage of people who end up being an entrepreneur. But the majority of the kids that went to the college I worked at didn't have a ton of money, and wouldn't have had the capital to start their own business. They would have been better off with a different degree.

[irishbride2]

Jul 20, 2015 13:29:11 GMT -5 ttt said:

I also hate this idea that anyone can and should be an entrepreneur. No, not everyone can. It's tremendously difficult at times and it takes a very particular personality. It's not something that everyone can or wants to or should do. Not everyone can be an engineer, not everyone can be a concert pianist, not everyone can be an entrepreneur.

Yep.

I couldn't do it. 

[zoegirltx]

ditto most of the PP

I also think there's a wide range of businesses you can start- from the many immigrant families who open small shops (gas stations, dry cleaners, nail salons), to those professionals who have a degree (doctor, vet), to the trade crafts where somebody may work 10-20 years for somebody else collecting knowledge/tools/clients (think construction or plumbers or electricians) to those with a ton of $ to dump into a franchise. From businesses that need a ton of capital (physical, financial, knowledge based ) to get started to those that need none- I think there can be a huge variation in what it means to start a business or become self-employed.

[tacosforlife]

When I was having trouble finding a job and/or miserable in my last job, way too many people suggested I just start a solo law practice. I was like, "WITH WHAT?!" I had $100k in student loans and no savings to speak of, not to mention no family or alumni connections in the area where I live. Oh, sure, let me just hang out my shingle and I'm sure the masses are just going to beat down the door of the Tacos Law Office!

[sfy]

Jul 20, 2015 13:59:39 GMT -5 tacosforlife said:

When I was having trouble finding a job and/or miserable in my last job, way too many people suggested I just start a solo law practice. I was like, "WITH WHAT?!" I had $100k in student loans and no savings to speak of, not to mention no family or alumni connections in the area where I live. Oh, sure, let me just hang out my shingle and I'm sure the masses are just going to beat down the door of the Tacos Law Office!

I could start a rant about this that would rival anything you have to say about lasagna.  Don't get me started.  But yes, people need to stop saying this, and moreover, the people they're talking to need to stop doing it (especially since most of the people saying it have no knowledge about what it takes).

[saz]

I was raised by an entrepreneur, so due to that and the people he spent time with, I think I know an unusual number of entrepreneurs. It is definitely NOT glamorous, NOT easy, and NOT for everyone. The absolute wealthiest person I know grew up in poverty though, so I sort of hate these articles that might discourage someone from even trying.

[saz]

Jul 20, 2015 13:59:39 GMT -5 tacosforlife said:

When I was having trouble finding a job and/or miserable in my last job, way too many people suggested I just start a solo law practice. I was like, "WITH WHAT?!" I had $100k in student loans and no savings to speak of, not to mention no family or alumni connections in the area where I live. Oh, sure, let me just hang out my shingle and I'm sure the masses are just going to beat down the door of the Tacos Law Office!

To be fair, Tacos Law Office sounds pretty amazing and delicious.

[saz]

Jul 20, 2015 14:35:53 GMT -5 1234FIF! said:

Jul 20, 2015 14:17:28 GMT -5 saz said:

I was raised by an entrepreneur, so due to that and the people he spent time with, I think I know an unusual number of entrepreneurs. It is definitely NOT glamorous, NOT easy, and NOT for everyone. The absolute wealthiest person I know grew up in poverty though, so I sort of hate these articles that might discourage someone from even trying.

This is the third? or fourth? thing, I can't remember how long my list got now. I come from a family of entrepreneurs and them folks work hard, work all the time, never get a break etc. Yes, they made money but the trade off is not worth it to me. I am not made for that. I want to wear soft clothes and work four hours a day, three days a week. 

Yep, I think this is something people don't really talk about. I think most people expect to work hard and long hours at the beginning, but then assume entrepreneur = you will eventually have piles of cash and unlimited free time. Like I said, I know a lot of them, and I can't think of one who is living that lifestyle haha. They all pretty much have insane schedules and never sleep.

[IIOY]

Jul 20, 2015 14:43:30 GMT -5 saz said:

Jul 20, 2015 14:35:53 GMT -5 1234FIF! said:

This is the third? or fourth? thing, I can't remember how long my list got now. I come from a family of entrepreneurs and them folks work hard, work all the time, never get a break etc. Yes, they made money but the trade off is not worth it to me. I am not made for that. I want to wear soft clothes and work four hours a day, three days a week. 

Yep, I think this is something people don't really talk about. I think most people expect to work hard and long hours at the beginning, but then assume entrepreneur = you will eventually have piles of cash and unlimited free time. Like I said, I know a lot of them, and I can't think of one who is living that lifestyle haha. They all pretty much have insane schedules and never sleep.

My father worked 18-20 hour days for 25 years. He enjoyed the thrill of the hunt but I don't know how much of that time was spent as an actual, legitimately happy person. It can be (and was) brutal work. That said, he was raised in poverty and was all but broke when he started his business from scratch, so he defies the CW in that regard.

[ttt]

To start any business, you need to have either stuff to sell or a service to offer. If you're selling stuff, you need capital to buy the stuff or stuff ingredients as well as a place or mechanism to sell it. If you're selling a service, you likely need to invest some money in developing that skill (unless you are naturally talented at something, in which case you are very lucky). There are very few ways of becoming an entrepreneur that don't require significant investment of money and/or time before you even get off the ground.

[aurora]

Jul 20, 2015 15:22:13 GMT -5 ttt said:

To start any business, you need to have either stuff to sell or a service to offer. If you're selling stuff, you need capital to buy the stuff or stuff ingredients as well as a place or mechanism to sell it. If you're selling a service, you likely need to invest some money in developing that skill (unless you are naturally talented at something, in which case you are very lucky). There are very few ways of becoming an entrepreneur that don't require significant investment of money and/or time before you even get off the ground.

Definitely this! My H and his business partner started their knowledge service-oriented company with a "small" amount of $ ~5 years ago. $40k total got them into business, so they only paid $20k each (saved for specifically in their last year of working for another employer when they knew they were planning to quit), which is certainly $ but doesn't sound ridiculously out of reach. Here's what they spent to get there:

-$ for engineering degrees for each of them, paid for though a combination of student loans, summer/part time work, and gifts from parents
-8-10 years in their industry each, developing skills and making contacts while paying off the aforementioned student loans
-high-earning spouses willing to support them for the 12-18 months it would take to really start earning $
-spouses jobs providing their health insurance (both cases)

I'd be hard pressed to put numbers to all of these, but I'm sure the true cost is more in the $300k+ range. I'm proud of my H and he works hard and is great at what he does, but there's no way he could have gotten where he is entirely on his own by his mid-30s.

[maddysmum]

I actually don't think this is said enough.

I mean, the archetypal entrepreneurship story is one of rags to riches. It's some one who grew up in poverty, followed their passion at all costs and became wealthy and amazing, possibly with a slight golden glow around them when they speak of their beginnings with great humility.

One thing I heard a lot of was "find your passion". Do what you love. As though that's all it takes to be a success - being passionate about something. It was the underlying theme in most discussions of entrepreneurship. (The general discussions, that is. Not the one on one, no-holds-barred ones from true entrepreneurs in the thick of it.) That the most critical part of entrepreneurship is doing what you love. That if you're doing what you love, you're guaranteed to be a success (or...like, it'll be worth it somehow anyway?).

Passion is great. If you can afford it.

But the reality is that if you don't have a service to offer, goods people need, a niche that hasn't been filled, you can have all of the passion in the world about your thing...and you could lose your shirt. Entrepreneurship isn't a job. It's not glossy and glamourous. It's 24/7 nonstop work. And you're it. You're the accountant and janitor and HR and customer service agent. When things go wrong, everyone looks to you. You might be responsible for the livelihoods of others, or integral to some part of your customer or client's life. You live and breathe that bloody business.

Passion doesn't see you through that. Capital does. And hard fucking work.