Entrepreneurs don't have a special gene for risk, they come from families with m (2015)

https://qz.com/455109/entrepreneurs-dont-have-a-special-gene-for-risk-they-come-from-families-with-money

by fanf2 • 8 months ago

25 53 8 months ago

JohnFen6• 8 months ago

While I don't think that entrepreneurs have a "special gene for risk", this article is extremely misleading. It's looking just at the moneyed class of entrepreneurs and declaring that "entrepreneurs come from backgrounds that provide a lot of resources".

But there's another, much larger, group of entrepreneurs that don't come from such a background at all. I've had the good fortune to get to know and work with quite a lot of successful entrepreneurs and I'd say about 25% of them came from a "moneyed" background. The rest were just regular people with regular backgrounds who were obsessive about starting businesses.

amundskm2• 8 months ago

I wonder what you consider regular, not because I disagree with you, but because I wonder if the term "moneyed" means something different to you than the author.

I am always fascinated by the normal human bias to assume that a single person's experience is that "average" experience.

To me "moneyed" in terms of being an entrepreneur would mean that if everything failed catastrophically I would have somewhere to go to have a roof over my head and food to eat while I got back on my feet.

My personal bias would lead me to believe that most people have less of a support system then the wonderful people on HN. Most of us have degrees and/or well paying STEM type jobs.

JohnFen6• 8 months ago

I wonder if the term "moneyed" means something different to you than the author.

I think the author was using the term to mean people who have enough resources available to them (through family or other support networks) that they don't have to worry too much about survival and have relatively easy access to capital.

I think that you and I define it similarly.

But most entrepreneurs I've known over the decades have had neither of those advantages. Although, I'm thinking of "entrepreneur" in its basic sense, not in terms of just starting tech businesses, and not in terms of people starting business with the goal of becoming anything like unicorns.

My personal bias would lead me to believe that most people have less of a support system then the wonderful people on HN.

I agree completely. The HN crowd is, generally speaking (there are exceptions), a fairly privileged bunch.

forinti• 8 months ago

There's actually a third group: many folks in poor countries have no option but to start some sort of business as jobs pay very little.

There's a supermarket chain in Uruguay that started from selling vegetables on a street corner.

There's this guy near my house that sells electronics at a traffic light. I've been witnessing his business grow and grow and now he has a car full of stuff parked nearby.

JohnFen6• 8 months ago

That third group exists in the US, too. They're a large part of who I was thinking of.

lapcat6• 8 months ago

It's looking just at the moneyed class of entrepreneurs and declaring that "entrepreneurs come from backgrounds that provide a lot of resources".

This is incorrect. For example, here's one of the links in the article:

"We study a sample of individuals who choose either to be employees or to run their own businesses." "we find that the probability of self-employment depends markedly upon whether the individual ever received an inheritance or gift." https://www.andrewoswald.com/docs/entrepre.pdf

Also: “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.

I've had the good fortune to get to know and work with quite a lot of successful entrepreneurs

But this is survivorship bias. You also need to consider the people who never became entrepreneurs, or who failed as entrepreneurs due to lack of money.

Note that my quote above says the chances of becoming an entrepreneur drop quite a bit, but it doesn't say the chances drop to zero. So of course the number of non-privileged entrepreneurs will be greater than zero. It's all about the odds.

I'm personally an entrepreneur, not wealthy, but currently doing better than the majority of people. It took me 5 years to establish a sustainable business, and I nearly went broke, burning through my entire life savings (now restored). This never would have been possible if I didn't already have a substantial life savings before I quit my job.

JohnFen6• 8 months ago

Yes, I read the supporting links but remain unconvinced. My impression is that they're talking about a rather specific kind of entrepreneur and not entrepreneurs in general.

claudiulodro• 8 months ago

I'd say about 25% of them came from a "moneyed" background. The rest were just regular people with regular backgrounds who were obsessive about starting businesses.

This is a very similar point to the article though -- the moneyed class is much smaller than 25% of the population, so they are disproportionately represented in even your anecdotal sample. To be clear, that doesn't mean that regular people can't make it though!

Jsebast242• 8 months ago

Another piece that tries to promote the idea that "following your dreams is dangerous" and that success has to do with privilege and not really with hard work. Beware of all these political ideologues trying to convince you that you are a born loser and there's nothing you can do about it.

naIak• 8 months ago

They want you depending on megacorporations or, even better, the government.

John238322• 8 months ago

That's orthogonal to the idea of the piece.

Success can come from working hard at something. Whether you're comfortable working hard at something depends on the risk of doing so.

Lebron James works hard, spends all day getting better at basketball. He also has a cooking staff, training staff, and house keepers.

If I took the same amount of time playing basketball, the same effort, I'd be broke and homeless.

If I come from money, sure I can spend all day working on the nuances of my startup, to the exclusion of all else. My ability to exist is taken care of.

FloorEgg10• 8 months ago

What does "come from money" mean to you?

E.g. is a 26 year old still living with parents (firefighter and nurse) with no seed capital but all living expenses covered "coming from money"?

lapcat6• 8 months ago

This is a misinterpretation of the article and perhaps more of an indication of your own political ideology. Here's the same author with a different article: "A UBI would free Americans to shift from scarcity to abundance mode, which would enable more people to take risks and engage in a greater, more expansive vision for their future. Yang’s freedom dividend would give Americans greater agency to leave codependent relationships, professional or otherwise, and operate as the CEO or entrepreneur of their own lives." https://qz.com/1687957/the-case-for-andrew-yangs-ubi-plan

kittikitti• 8 months ago

Thank you for this article, it's insightful and a much needed reality check for a community like YCombinator. I still think there are exceptions to this like Jensen Huang, to the best of my knowledge. However, it's difficult to think of other examples.

never_inline• 8 months ago

It's fine man. If rich folks can build $1B business, I can surely build something worth $10M.

That was a bit of tongue in cheek reaction but I think we all know this already.

What helps is to know that initial advantages compound A LOT : http://web.archive.org/web/20181224131908/https://ofdollarsa...

tengbretson2• 8 months ago

This reads like it was written by someone that has no children and/or has very little interaction with children.

weard_beard• 8 months ago

I'm curious about this take and what you think of https://www.metroparent.com/parenting/tweens-teens/how-to-be...

While it may be true that entrepreneurship means being overly absent in your child's life I think MOST parents are TOO present in their child's life.

tengbretson2• 8 months ago

What I meant was not so much a statement about a parent's influence on a child's entrepreneurial ambitions, but more so that the author's dismissal of a person's inherent qualities would seem laughable to someone that has experience interacting with young children.

I have no way of knowing or proving what is or isn't "genetic". However, there are absolutely proto-entrepreneurial traits, a sort of hustler mentality that is blindingly obvious to see that some kids seem just "have it" and others don't. I would argue that this disposition is identifiable as early as two years old. Does that come from money? I would need much more evidence than the referenced study to believe that.

I think my major gripe comes from the way the article attempts to base this conclusion on the NBER paper. The paper measures material outcomes and rightfully correlates them with the financial opportunities of the participants. This says nothing about the personality traits that make someone an entrepreneur.

FloorEgg10• 8 months ago

I don't buy this.

I've been building startups for 15 years, volunteered at two accelerators, angel invested and networked a lot. Anecdotally, the majority of the founders that I have gotten to know and lasted more than a year (actually building product and selling it) are middle class, comfortable being frugal, and don't act privileged at all. The few that I know for a fact come from exceptional money do act privileged, kind of egocentric and wasted a lot of money on things that were performative.

I don't doubt lots of people from money go into entrepreneurship, and I'm sure some of them are successful, but from my experience privilege in this way often seems like a disadvantage. The vast majority of success I've seen comes from middle class.

It's anecdotal, but it's in the dozens.

It's very possible to bootstrap a successful business with very little resources. What matters is that you can empathize with people well and at scale and then solve problems pragmatically. Test your hypothesis constantly and don't be afraid of being wrong. Success doesn't come from money spent on good ideas, it comes from understanding other people's actual wants and then focusing on serving what is important and unsatisfied and creating practical economic feedback loops. It involves schlepping, hard work, sacrifice and resourcefulness. Timing matters a lot for startups (technology has developed enough to actually satisfy customers). Seed capital is optional if the founders learn how to build the company themselves. The vast majority of seed capital is wasted, and people from money waste more.

BoiledCabbage2• 8 months ago

The few that I know for a fact come from exceptional money

The article is not about people "coming from exceptional money". And I bet a lot of the people you are assuming are "middle class" aren't actually middle class.

There is a really bad habit in this country of assuming that you can have money, but unless you are "movie star rich" then you are middle class. That's not the case.

A lot of people work for a living but are not middle class (nor are they CEOs of fortune 500 companies).

More specifically a lot of the people reading HN right now likely fall into the category the researchers talk about. If you work in tech there is a very, very good chance you are not middle class. Just because you don't think of yourself as rich doesn't make you middle class.

It's something that being in an echo chamber of tech that people easily forget.

Someone can go look up a more precise definition, but if middle class were the middle 50th of household incomes, then if you have a household income (not individual, but combined AGI) that is > $100k you are not in the middle-class.[1] That doesn't mean you have multiple yachts, or act privileged or have exceptional money. It simple means (by that definition) you aren't middle class.

And before someone replies with it, "Cost Of Living" arguments do not change this substantially at all. Look at the AGI tables below, many people who think of themselves as middle class, are not. And if you're on HN reading that post, with a US job in tech, there is a good chance that includes you.

[1] Income in the United States - https://en.wikipedia.org/wiki/Income_in_the_United_States

FloorEgg10• 8 months ago

Okay how about this then to cut through the ambiguity of terms.

1) Someone in their 20s who can live with their parent(s) while they get a startup off the ground has an advantage. It doesn't matter if they are below or above median household income so long as they can allocate majority of their time to it.

2) Someone who has capital and connections because their family is wealthy has other advantages, but many people coming from this situation also have other disadvantages, because they have often been shielded from discomfort and struggle and a lot of entrepreneurship is being tolerant (and even seeking) discomfort and struggle.

3) Someone in their 40s who has been frugal and saved by living within their means and has a spouse who works can allocate either part time or full time and be successful.

In the examples above I consider 1&3 as not coming from money but are the most common paths to entrepreneurial success that I have seen anecdotally. My 2nd example I would consider coming from money in the context of the article (a good concrete indicator is access to family seed capital), and this doesn't seem to me to be the most common path to success.

fragmede3• 8 months ago

Rich and wealthy and middle class and poor aren't rigorously scientifically defined terms, the only one that is, is that the US Department of Health and Human Services (HHS) has a definition for poverty wages, but even that isn't simply a number.

People that live at the luxury don't necessarily have the money for it. To bring cars into the picture, an older model Mercedes Benz that's a falling apart money pit costs less than a brand new Honda Civic.

In my mind, the line for middle class is how long you can pay your bills at without working. If you've got enough money that the answer is a while, then you're rich. If you have so much that you're able to fund other people's dreams, then you're wealthy. If you're a short order cook at a diner that saved up enough money to have a go at running a food truck, you're scrupulous.

There's all sorts of caveats, and we can be super judgey about how other people are spending their money (and time) on bad/wrong/frivolous things, but I'd bet that most people here still have to work for a living and to me, that's middle class, even if the cars are flashier and vacations are to a different continent rather than a road trip and staying in motels, for those in the upper middle class.

sevensor• 8 months ago

I don’t know about entrepreneurship, but I remember meeting this delightful bohemian set of students in college. Fearless, carefree, they listened to interesting music, they visited interesting countries, and they threw fabulous parties. It took a while for it to dawn on me that they all had rich dads.

m0llusk• 8 months ago

This idea that there is only one story and one path is pernicious. Paul Orfalea flunked out of school and couldn't hold a job, so instead he built a business that he later sold for around five billion. His book Copy This! is loaded with interesting and potentially useful stories. His is not the most common story but is an example of great business success being unrelated to either identified genes or familial wealth.

toss12• 8 months ago

This is one of the best arguments for Universal Basic Income there is.

If your basic needs are met, you don't need to worry that your startup failing will land you hungry in the streets. Startup life is living mostly at work and without frills anyway, but for people with money (or if it existed, UBI), if it fails, they at least will have the basics of housing, food, and healthcare and can continue on with life.

Having UBI for everyone would unleash the talents of the entire range of the populous, not only the prosperous few. Conceivably, the expansion (Cambrian explosion) of new advances could pay for itself in economic growth for society.

FloorEgg10• 8 months ago

In theory, I agree with this wholeheartedly.

I have no idea if it's true in practice.

toss12• 8 months ago

Seems like we should run the experiment

Worst case, everyone ends up with the means to be housed, fed, and have healthcare

fragmede3• 8 months ago

Same goes for communism, theoretically.

bitbasher• 8 months ago

What exactly is the point of this article? If you're not a white male and from a wealthy family, you should fall in line and work for someone else because freedom isn't in your cards.

lapcat6• 8 months ago

No. Here's the same author with a different article: "A UBI would free Americans to shift from scarcity to abundance mode, which would enable more people to take risks and engage in a greater, more expansive vision for their future. Yang’s freedom dividend would give Americans greater agency to leave codependent relationships, professional or otherwise, and operate as the CEO or entrepreneur of their own lives." https://qz.com/1687957/the-case-for-andrew-yangs-ubi-plan

Jsebast242• 8 months ago

looks like lapcat is a bot.

Pete-Codes• 8 months ago

There's a grain of truth to this but I won't take any lessons on social mobility from the media.

In the UK, at least, most are privately educated, did unpaid internships and a lot are sons or daughters of other journalists.

I'd take entrepreneurship over getting a job in the media any day.

thedudeabides5• 8 months ago

things they didn't teach me at business school

ChrisArchitect• 8 months ago

(2015)! "updated in 2022"

Some previous discussions:

2021 https://news.ycombinator.com/item?id=27701218