Who becomes an entrepreneur? Insights from research studies

I left a 6 figure engineering job to build my own startup with my wife. For the past 5 years, we spent 2/3rds of our savings on it and almost didn’t take vacation. This year we finally reached ramen profitability.

When I look at where we would be if I had kept the job, we would be homeowners, be able to buy new clothes regularly, go to restaurants and take awesome vacations a few times a year.

But the missing thing would be autonomy. The reason why I’m willing to sacrifice so much is because i fundamentally don’t like having to follow orders from a boss or manager. I’m arrogant enough to think i know better, and want to prove it by actually building my own thing.

Regardless of how silly it sounds on a financial level, the calculation makes sense once we look at the sense of ownership and autonomy over our own work. It’s worth more to me than any money I could make.

Ps: if you’re curious, the startup is logology.co

It’s an interesting article. In my view, Non-conformists start companies. Possibly aggressive non-conformists most of all.

In my personal case, I made many questionable choices, including turning down a job at Microsoft in the nineties (would have been better financially) and leaving multiple great jobs (one of which afforded me corporate apartments in Honolulu and London) to risk everything multiple times to start multiple companies.

So there’s risk-seeking behavior there as well as a refusal to accept “good enough” even when it was almost definitely a better choice from a financial and physical health perspective.

I can still see my dad shaking his head about turning down Microsoft…

It sort of worked out. I had a good exit but nothing like kicking it at M$ for 30 years would have been.

I’m not sure we why we glamorize this. But in the end I wouldn’t change it. I did it my way. I’m now trying to do it again.

This is why I can’t play any games which require grinding (looking at you Eve) because I know it’s more fun IRL. ¯\_(ツ)_/¯

My experience: Psychological orphans with a basic income.

"Psychological orphans" i.e. kids who had shitty parents and learned to adapt to survive. Then this behavior became a habit and a game.

"Basic income" i.e. kids from middle and upper middle class backgrounds so there was no food poverty in the family and long term thinking was possible by the kid, even in the context of the dysfunctional setting.

The above is true for me and all of the high growth tech founders I know on a very personal level (could be selection bias in who I connect deeply with though).

Another correlation, very unusual and interesting, is that past infection with Toxoplasmosis (a parasite that grows in cat poop) increases the chances of becoming an entrepreneur by a factor of 1.27 to 2

https://hbr.org/2022/07/a-common-parasite-can-make-people-mo...

> they discovered that those infected with the parasite Toxoplasma gondii were, on average, 29% more likely than others to have founded a start-up, 27% more likely to have founded multiple ventures, and more than twice as likely to have founded their businesses alone

Along with an increased risk of death via car accidents, having contracted Toxoplasmosis seems to precipitate risk seeking behaviors, similar to its intended evolutionary prerogative: the infection makes rats sexually aroused by the smell of cat urine, so they seek the smell, where cats are more likely to be around, are eaten by cats, and the cycle continues.

Working on my second startup. I have clinical depression, ADHD and OCD.

The depression is an endless battle through a muddy swamp. I have to endlessly game it with exercise, sleep, supplements. I would give anything to not be held back by that.

I somewhat envy the manic benefits of Bipolar! That sounds so much better than just regular depression! /h

But my ADHD is high functioning. My mind constantly jumps from topic to topic, every aspect of a problem, or any problem in my life, or anticipated future life. And my brain tracks all these puzzle pieces well. It is my counter-point to focusing!

And OCD works for me too. I think it is what makes my ADHD work for me. Always fixing, improving, smoothing, organizing. I can get distracted rearranging books on a shelf, but even then its like meditation, my zen, in that even small positive changes to my environment motivate me out of depression.

Also, the constant ADHD/OCD iterations over the smallest things, leads me to fluency with my projects that invariably lead to the bigger novel insights that make all the difference.

You can't run around the base of a huge mountain like a madman, testing every possible crevice, accumulating every possible strategy, practicing every kind of traversal, and acquiring every piece of equipment, without finding a way up! Even if I can't describe to anyone whether I am making any progress at all until I do!

The downside of ADHD is very real for me: "less skilled at necessary tasks like accounting and bookkeeping" is an understatement. I can keep my regular life on rails, or get work done. Unfortunately, not both.

"In pursuit of that subject, we’ve studied companies from around the world, across industries, and at different stages of maturation, hopping from Starbucks to Stripe, Y Combinator to Flexport, Rappi to Kaspi, and DST to TSMC."

A curious sample. Unfortunately these types of "studies" omit the bulk of entrepreneurs that keep an economy running. Small businesses, 5-50 employees, that tick on without the glory and fame that outliers capture are more interesting and more likely to be achieved. Would be curious to see more studies about the types of entrepreneurs that build them.

A better question is "Who becomes [a successful] entrepreneur?"

There are many folks with side businesses that compliment their incomes, but primarily it is a tax strategy driven investment decision process.

I think most successful "entrepreneurs" clue into the pejorative connotation of the word sooner. =)

The nice thing about this article is it blows some ageist assumptions out of the water. I wasn’t expecting the average founders age to be over 40 in SV.

I tell you what its not, being a great engineer. That can help in someways in understanding the technical aspects, but the amount of startups I know who have written incredible clean code with beautiful architecture who have run out of funding compared to the folks who wrote a janky frankensteins monster which they sold to customers, is very high.

I'd like to have seen more on the socio-economic background of entrepreneurs - does YC collate this diversity data?

The stuff about the Chinese famine is interesting but I don't think can be generalised beyond China.

My sense is that there are two socio-economic backgrounds that become entrepreneurs - those who are (not to put too fine a point on it) "poor" and so have no assets to risk in starting a company, and those that are "rich" that are also not risking much because their family or others could support them if the company failed.

My primary motivation to start a business was freedom. Having no boss and a ton of spare time. I got lucky and have something almost running on auto pilot. I'm not eager to start another business, I rather enjoy chilling at the pool and browsing HN. I guess this is the opposite of most VC funded YC startups eager to take over the world.

I've also read a line of thinking that negatively correlates home ownership with entrepreneurship - or sometimes this is operationalised as a high proportion of net worth being accounted for by home ownership rather than other assets.

This paper explores the idea in the UK over time, but I've seen studies out there that examine the idea comparing the UK to other European countries where home ownership is less of an embedded norm: https://conference.iza.org/conference_files/ESSLE_2012/brack...

Anyhow, very interesting to think that there are human traits at play as in the original article as well as structural/socio-economic factors.

Being a tech entrepreneur seemed so cool in the early 2000s. Tech salaries have exploded so much since then that you're better off with an office job in terms of risk vs. reward, or maybe youtube or substack for those who want to be more entrepreneurial but without owning a business. The whole LLC/business plan route is not as important as it used to be unless you actually think you can create the next Square, Stripe, or Coinbase and can get the VC to write a big check. It does not help either that costs have really surged, such as coding, advertising, fees and regulations (such as Apple App store rules and fees, which are so high and restrictive), and complexity (like coding) compared to the early 2000s, and markets seem more saturated too.

It seems the first reason is root of all the other reasons. If one cannot find a job that pays what they believe they deserve, they are much more likely to start their own business.

The employee market does penalize generalists, those who lack political savvy (ADHD, OCD), and/or those who do not come from well off families and connections.

In the US, inventors (not the same as entrepreneur, but often related) are also disproportionately likely to be immigrants

> We find immigrants represent 16 percent of all US inventors, but produced 23 percent of total innovation output, as measured by number of patents, patent citations, and the economic value of these patents. Immigrant inventors are more likely to rely on foreign technologies, to collaborate with foreign inventors, and to be cited in foreign markets, thus contributing to the importation and diffusion of ideas across borders.

https://www.nber.org/papers/w30797

>Research studies

The author looks at a survey of knitters who sell their patterns online to conclude that "hard workers are more likely to become entrepreneurs". Even more comically, they grab a study about Chinese companies founded by the generation born around the time of the Great Famine, to conclude... that childhood adversity makes for better entrepreneurs! Need I say more?

Unsurprisingly, they miss the prime correlation: parental income and access to wealth.

I havent read it all but it doesnt seem to be about entrepreneurs but about innovators. Big difference. If I had to guess, innovators must be misfits whereas entrepreneurs must rather be fiting. So they dont make bombs in kindergarten, they win the class elections.

I ran a large, somewhat infamous hacker house, and watched the beginning of a few unicorn founders. My observation is that everybody talks about being an entrepreneur, but the only people that actually do are the people with no other options. They'll never admit those painful and repeated failures at normal employment, or other areas of normal life. For instance, I have rarely seen men in relationships succeed. Their partner loses respect for them very quickly, and they will spend all their time job hunting until they either take a job or get dumped in horrible embarrassing ways. Partnered women usually end up quitting in disgust or dumping their partners to gain the benefits of being single when soliciting potential investors. Everybody that made it had some kind of family support or side hustle that supported them through it. This is not about money to survive, but some kind of consistent positive affirmation.

One category that I didn't see a lot of is the fully-employed side-hustler, so that may also exist with a completely different set of characteristics.

Incidentally, according to the article, I should be a prototypical entrepreneur, and I've certainly always known this, but, wow, the level of misery I experienced from everybody close to me has been overwhelming every time I've started anything. I've been 'lucky' in the sense of finding some kind of a way into a job when it got to be too much. I've been homeless, I've been to war, I've done ultramarathons, but this is nothing compared to the more normal types of people problems that nobody ever talks about. My plan had always been to make only enough money to survive for a few years of freedom. It turns out that this was easy, but didn't solve the right problem.

As a non-success, I still consider myself one of the lucky ones. I've seen people, who seemed to have it much better than I, get into much worse situations, and several didn't survive it. Steve jobs said you can't connect the dots to success looking forward, and this is obviously also true of disaster. It's easy to forget about these people, or only remember the bad dots.

I think about what to tell my son about all of this. I want him to never feel forced into anything. If he feels good about a job or a relationship, he should feel happy to continue it. But he should know that those things may change to hurt him, and he should never get into a situation where he feels stuck. One important thing about this is that I believe that the law and the culture is strongly against him, and seems to be getting worse. He should not expect success in this environment, and I'd advise that it may be wise to go somewhere less hostile, even at the expense of financial opportunity. Most young people don't realize that the majority of middle-aged men in this country are legally barred from leaving their state of residence without permission.

So the conditions for success seem simple, and the people that win big often don't seem very impressive, but the failure conditions are often larger and more hidden than most people understand early in life. You're not competing just with your mind, but your entire life situation to support your ideas.

Which just goes to show that all the studies in the world don't mean a whole lot :)

I guess it depends on your definition of "entrepreneur" - does it count if you only found 1 company?

But from where I stand I pretty much fail all the "high probability" criteria, no troubled past, no mental health issues, no previous employment history, no bad-childhood, and do on. Arguably I'm "well rounded" (for some definition of that. Yay!)

So to aspiring entrepreneurs let me say, indicators don't really matter to _you_ as an individual. These are not _requirements_, they are indicators.

Starting a business is not for the faint hearted though. You'll work more hours, probably for less money, possibly for no money, and you'll likely fail.

You need more than just desire, you need a product people want, that they can afford, and you need a way to reach that market. And some luck. Did I mention you'll likely fail?

Success isn't bei g a billionaire, success is keeping the doors open, drawing a salary, employing others in a non-exploitive way, not grinding away every second. Success is taking time off to spend with family, or playing sport, or whatever, just because you can.

To those just starting out I say, welcome to the biggest adventure of all.

Lost me on "9 year olds"

Since many big tech companies were start-ups once I will add psychopaths to the list.

If you study 10 entrepreneurs you will find 11 different paths they took in their journey. While this is a good read, the advice to everyone looking for the "secret sauce" to starting a successful venture remains the same – there is none. You can try to emulate Steve Jobs or Mark Zuckerberg or whoever else all you want. The moment you idea meets the real world you will be in completely unfamiliar territory with no operating manual and have to just...figure it out.

It’s easy to choose a career in entrepreneurship when you either have enough inheritance wealth to not need to work OR living in poverty where there’s not much lower you could drop. For those in the middle, entrepreneurship comes with likely too great a risk to be worthwhile.