Innovation Hub: Are Entrepreneurs a Dying Breed?

It feels like every day, we hear another story of a 22-year-old who sold his app for millions. But the truth about entrepreneurs may be very different. In fact, if you look at the official data, entrepreneurship in the U.S. has been in decline for over thirty years.

We talked to Ben Casselman, the chief economics writer for FiveThirtyEight, about how to reconcile the swelling of entrepreneurial spirit with the apparent decline of actual startups across the country.

[This interview has been edited and condensed. For the full conversation, visit innovationhub.org.]

Kara Miller: Give me a sense of sectors here. Is this decline mostly happening in the retail area, where people can’t compete with the big guys, like Walmart?

Ben Casselman: That was my first thought—that it was a decline in small business and mom-and-pops. Once you look at the data, though, it turns out that’s not really true. One of the things that’s most remarkable about this decline is how broad-based it is. Even the technology sector has been in decline since 2000. It’s not just a question of this being isolated to a couple of sectors or a couple of parts of the country.

KM: That’s hard for me to believe. We’ve had people on our show who have said they’ve never seen this number of startups before.

BC: We’re looking at companies that have at least one employee, so if you program an app in your basement in your free time, you may think of yourself as an entrepreneur, but you’re not going to show up in census data. There’s also an argument that venture capital is contributing to this, by focusing only on a very isolated couple of sectors. If you’re in the hot sector today, you get venture funding, but if you’re outside of that very narrow sector, you don’t.

KM: Americans have bought the idea of the entrepreneurship economy enough for a TV program about startups like “Shark Tank” to earn a place in prime time. But it sounds like you’re saying we shouldn’t be deluded by this kind of hype.

BC: Sometimes people will think of entrepreneurial activity in a way that doesn’t actually turn out to be a genuine startup. An example is FiveThirtyEight.com. We feel like a startup—we’re a small team, we all work together in an office that looks “startup-y”—but we’re owned by ESPN, which is owned by Disney, one of the largest corporations in the world. We are entrepreneurial, but we are not an entrepreneurial venture, in this sense.

KM: It seems like the tools are in place to allow people to be their own bosses pretty quickly. Is that going to change things at all?

BC: Until recently, a lot of the biggest gains from technology actually accrued to the largest companies. That could be starting to change. A friend of mine in Baltimore has a little 3D printer that he can use to mock up prototypes for things he’s thinking about making. And you can go and start a website for nothing, or rent exactly as much server space as you need on Amazon at a minute’s notice. I think we could be getting to the point where it isn’t just the big companies that are able to benefit from technology, it’s the little guys, too. But we haven’t seen the evidence of that yet. We have to hope, but the jury is still out.

Mikaela Lefrak contributed to this write-up.

Kara Miller is the host of “Innovation Hub,” a national radio program that features the thinkers, researchers, and visionaries who are crafting the future. She is based at WGBH Radio in Boston. Follow @IHubRadio

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  • Christopher Noble

    Interesting article. “Entrepreneurship” is in the news, but I suspect partially because socially-prominent constituencies (the media, academics) have taken an interest in it, rather than because of a sea-change in entrepreneurship itself. The attention can only be beneficial, but many articles on this subject rely on anecdotal rather than reliably broad data, and the definition of “entrepreneurship” itself varies broadly.

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  • in a 12 month period incuding Jan 2000, over $100B was invested by VCs. After bottoming out at about $13B in 2003, the number today is what, about $40B annually? So the opportunity for decline is right there to see. But, the cost of getting an early stage company off the ground is much less because of cloud services, experience, and lean practices, so that should balance things out to zeroth order.