QUOTE OF THE DAY
"I think the biggest myth entrepreneurs have is that the growth and performance of their startups depends more on their entrepreneurial talent than on the businesses they choose." Scott Shane
SUMMARY
Politicians often like to talk about the impact of small businesses on economic outcomes such as jobs, unemployment, and growth in income. Internet gurus offer "proven" techniques that can quickly make you rich with just a few hours of work a week (for a small $1000 fee). But what does the typical startup look like? After 2 years? After ten years?
How likely are you to fail if you start your own venture? How much money are you likely to make relative to having a regular job? Are you likely to work more or fewer hours? Experience more or less stress? Have more or less time to spend with your family? And how impactful is your business likely to be -- e.g., how many jobs is your startup likely to create?
Actually, what is entrepreneurship? Is America the land of opportunity? What makes some places more entrepreneurial than others? And, why do people start businesses in the first place?
What does the entrepreneurial journey look like? Are entrepreneurs extreme risk-takers? Do they live glamorous lives? Are most entrepreneurs changing the world -- one Tesla at a time?
Do you need to drop everything you are doing right now if you want to start a business? Should you focus on a completely new idea or do something that already exists better?
In this section, we will examine who are the entrepreneurs, why they start new businesses, how many jobs they typically create, how they finance their startups, and many other questions. In the process, we will also look at and dispel some of the most common myths about entrepreneurship.
QUESTIONS TO THINK ABOUT AS YOU DO THE READINGS
1. What is entrepreneurship (according to Shane)? How common is entrepreneurship? How would you define entrepreneurship? How does this view contrasts with the idea of Schumpeterian entrepreneurship (the Economist article). Which type of entrepreneurship is more important and we should focus on.
2. Why does it matter if people believe the myths of entrepreneurship? (give three reasons).
3. List ten surprising facts about entrepreneurship (according to Shane). Did you find these facts surprising yourself?
4. According to Shane, is the US the land of entrepreneurship? Do you agree with him? What about innovation? (You can use the link below to check some more recent statistics)
Global Innovation Index [explore here]
BLS: Self-employment in the US [read here]
5. According to Shane, the key factor that drives new business formation is wealth. Give three reasons why people in richer countries are less likely to work for themselves.
6. Why are places such as the Silicon Valley or North Carolina Research Triangle less entrepreneurial than places such as Bozman, Montana? What is relationship between unemployment and entrepreneurship? Are places with more capital more likely to have higher rates of entrepreneurship?
7. In what industries are entrepreneurs more likely to start a business? Why is that?
8. Who are the people that come to mind when you think of entrepreneurship? Does the typical entrepreneur look like these people? What factors determine the likelihood of starting a business? Are entrepreneurs more educated? Younger? Previously worked for somebody else?
9. What does the typical new start-up look like? How do businesses come up with and evaluate their ideas?
10. How well does the typical entrepreneur do?
11. How important is luck for your success? What about hard work?
REQUIRED READINGS/VIDEOS
- Shane, S. (2010). The Illusions of Entrepreneurship: The Costly Myths That Entrepreneurs, Investors, and Policy Makers Live By [amazon.com] Read only Ch. 1, 2, 3, 4, and 6
Note: If you haven't received Shane's book already, you can read the short chapter (below) that summarizes some of the main points from the book. This is not a complete substitute, but it will cover many of the ideas that we will discuss this week (you can skip the last chapter on the Enablers of Entrepreneurship if you want).
- Nikolaev, B (2020). The Economics of Entrepreneurship. Bridwell Institute for Economic Freedom [read here]
- What exactly is an entrepreneur? The Economist [read here]
- (4:20min) Entrepreneur: Motivational Video [watch here]
- The “self-made” myth: Why hard work isn’t enough to reach the top [read here]
OPTIONAL MATERIALS
- Dellot, Benedict (2014). Salvation in a start-up? The origins and nature of the self-employment boom. [read here] Read only p. 39-51 (The Six Tribes of Entrepreneurship)
- Interview with Scott Shane [read here]
- How Instagram Grew From Foursquare Knock-Off to $1 Billion Photo Empire [read here]
- Kirzner on Entrepreneurship [watch here]
- How Beyond Meat became a $550 million brand, winning over meat-eaters with a vegan burger that ‘bleeds’ [read here]
- Myths of Entrepreneurship, TED talk by Tim Folta [watch here]
- The REAL Meaning of "Entrepreneur" [watch here]
- The 10 Myths of Entrepreneurship [watch here]
- How People Describe Working for the Most Powerful Leaders on Earth [read here]
- Depression Among Entrepreneurs is an Epidemic Nobody is Talking About [read here]
- My Salary for the First 2 Years of My Startup [read here]
- How video is changing global innovation [watch here]
ASSIGNMENTS:
1. Take Quiz 1: Myths of Entrepreneurship (due Aug 30 at noon on Canvas).
2. Classroom Discussion: Myths of Entrepreneurship (come to class prepared to discuss the following questions)
When we think of entrepreneurship, the people that come to mind are often breakthrough innovators such as Steve Jobs, Bill Gates, Oprah, and Elon Musk, many of which dropped from college and ended up revolutionizing the world around us. At the same time, the internet is full of (fake?) gurus such as Tai Lopez, who promise quick success (lots of "Benjamins") with little effort if you follow their "proven techniques." What are the realities of entrepreneurship--is it really that easy to start and run a business and is there a bulletproof blueprint for success?
In his book, Scott Shane challenges many of our preconceived notions about entrepreneurship, arguing that the typical entrepreneur is very different than what most people imagine. For example, entrepreneurs make less money and work far more hours every week than people who are employed. Very few people achieve a notable success while the vast majority of entrepreneurs fail, which leads not only to monetary losses but also significant psychological pain.
For this weeks discussion, answer the following questions:
1. List one myth of entrepreneurship from each chapter you had to read (five total) that you found surprising. What were your preconceived ideas in relation to these myths before reading the book?
2. What is the most important lesson you learned from reading Shane's book? How did it change your perception of entrepreneurship? And how do you think it could be helpful as you engage in your own entrepreneurial journey?
3. How important is luck for your success as an entrepreneur? Do you agree with Robert Frank that luck plays an equal (even more important) role in your journey for success?