Starting your own company is, on average, economically irrational. If you work for a big enterprise you have access to their capital and their brand. If you become a dentist or physician (or have sex in Massachusetts, New York, or Wisconsin with a couple of dentists or physicians), you’ll probably make more money than the typical entrepreneur and with a lot less risk.
The Wall Street Journal piece “Why Some Entrepreneurs Feel Fulfilled—but Others Don’t” contains a hidden gem:
When it comes to schooling, for instance, more of it doesn’t always lead to greater satisfaction. Researchers in the Netherlands have found that entrepreneurs with high levels of general education—say, from an Ivy League university—actually end up less satisfied with the income their startups generate than those who had more practical, specific professional and educational experiences.
The reason: Many Ivy Leaguers overestimate their abilities, only to end up disappointed when they don’t find quick success or earn what they think they deserve. “People tend to have high expectations when they are highly educated,” says Ingrid Verheul, an assistant professor of entrepreneurship at the Rotterdam School of Management, who co-wrote the 2011 Netherlands study. “They expect to be good at things. They have higher opportunity costs, and often expect to be working higher-level jobs.” …
It isn’t that Ivy League types do any better or worse than people with more specific educational experiences, says Ms. Verheul. Rather, she says, income satisfaction is in many ways tied to how people think they stack up to their peers. In the Ivy League, peers may go on to earn huge salaries in high-level management, which could make the typical entrepreneur’s salary seem small. People educated in more specific fields see their peers go into similar businesses, so they set more realistic expectations.
A similar dynamic is at work with people who started businesses with lots of initial capital, Ms. Verheul says. According to the study, those who begin with a lot of money are likely to expect high financial returns. When their returns aren’t as high as expected, they aren’t satisfied.
Related:
- Tips for Startup Companies
- this post about Ellen Pao with a former co-worker’s comment: “… employers have continued to hire her for jobs with increasing responsibility, wrongly hoping that she will one day live up to the promise shown at Princeton and Harvard, only to be disappointed; and, Ellen still can’t accept that she can’t repeat her academic success in the business world, …”
Some people are always dissatisfied. They may escape the Dilbert world of huge corporations, when thy’re starting their own company. But then they’re in another kind of hell, working with crazy, incompetent programmers and other spoilt kids
http://gizmodo.com/31-flavors-of-bullshit-your-horror-stories-of-working-1714986653
http://qz.com/455109/entrepreneurs-dont-have-a-special-gene-for-risk-they-come-from-families-with-money/
Eventually they regret whatever they did.
Inspired by your recent post on the portion of the US economy (GDP) that’s moral hazard, I submit that we should refer to such a number as The Hazard, in blatant homage to Galbraith’s The Bezzle.
Having started a very small e-commerce company, my experience is that it was a lot of work for not much money. That is the fate of most small businesses. That said, I have another friend who started a company, built it up and sold it, very successfully. It depends very much on what sort of business you start. Some are profitable, many are not. A very few sorts of businesses are quite likely to succeed, but in many fields, the chance of success is very slim. It’s also almost always very stressful, which means you might trade your health for riches.