Entrepreneurship is often hailed as a cornerstone of American society. From Mom & Pop stores to Silicon Valley start-ups, it has been held up as the key to self-reliance and social mobility. Unfortunately, as American society has become more stratified and social mobility has stalled, these narratives have taken on an increasingly mythological character.
For instance, today only 21 percent of America’s wealthiest families earned their income through entrepreneurship–about half the worldwide average. As compared to the rest of the world, Americans are far more likely to have achieved success by rising to the top of a large and established enterprise than by starting their own. In fact, entrepreneurship is actually on the decline in America.
In a similar manner, politicians frequently assert that small businesses are responsible for most new jobs in America. While technically true, the claim is misleading: Businesses with less than 50 employees only employ about a third of the labor force. And not only is the quantity of small business jobs overstated, so is the quality of these jobs. As compared to their large corporate competitors, jobs created by small businesses tend to be relatively low-paying, have smaller benefits packages and little room for advancement. Moreover, they often prove temporary as only 1 out of every 3 business ventures survives for five years or more, and even fewer manage to “scale up” into large, expansive enterprises (which is how new businesses really add energy to the economy).
Perhaps most troubling is that rather than being a ladder for social mobility, it turns out most successful entrepreneurial enterprises are headed up by people who hail from wealthy families. In other words, entrepreneurship is generally not a means by which low or middle-income earners can improve their station in life—it is primarily a path for the next generation of social elites to maintain or grow their wealth. However, by exploring why it is that the already-wealthy are so much better at launching viable business concepts, it may be possible to glean insight into how to extend these advantages to a broader swath of American society.