As Generation Y slowly joins into the work force and Generation X workers find themselves being unsatisfied with their current jobs as middle-managers, more members of this impatient bunch dream of having their own company and becoming a multi-millionaire…soon. But how soon is that?
Most people just fascinate themselves in such thoughts, but never have the energy or risk-taking behavior to actually start one. After all, most businesses fail. Isn’t it smarter to wait until one has more business experiences working for someone else and have saved enough money? Some students, on the other hand, commit to action and start their own small businesses early in their career, as working for someone else truly isn’t for them.
And finally, there are the few who simply have the passion of entrepreneurship and commit themselves to their own business long before they are eligible to consume alcohol. These student entrepreneurs are not as interested in school and its social life, but they feel an insurmountable need to seek out opportunities in society and to see their visions become reality. Being a student entrepreneur myself, I will attempt to share the mindset of these people in comparison to others, as well as the actual actions and paths of becoming a young entrepreneur.
The odds against success
Conformity in society invites students to study, get good grades, find a good job, and rise up the corporate ladder. Once you do that, you can complete your dream of starting your own business. People’s risk-averse tendency works well with this system too. Statistics show that about a third of all business fail within a year, and 89% of small businesses shut down within five years. That sounds pretty scary.
The problem in this, at least to the entrepreneur, is that the start of fulfilling one’s dream happens after age 45. Do people truly learn what it takes to be an entrepreneur before that, or merely a good manager? Could the first ten years be more efficient in one’s growth than working at the bottom of the ladder? At age 45, the person might only have the chance to try one or two startups. Then you face the prospect of either retiring as a multi-millionaire or losing much of your life savings.
To the young entrepreneur, a whole life is spent going after his/her dream and failure simply means learning and moving on to something that works. They’d rather fail early in life and be successful later on then the other way around. True, there are many who simply want to work for a couple years, and then go into entrepreneurship, but that presents a problem of its own: the reality trap.
When you are working full-time and have a stable income, it is incredibly hard to suddenly quit your job and start a business. "How am I going to pay the bills? How do I feed my family?" Most people stay in their unhappy jobs and await their mid-life crisis. Even when one gets older, he/she starts to worry about retirement money, making it hard to commit either.
I’ve talked to many highly respected professionals who constantly plan in starting their businesses, but once they think about the first step, they suddenly decide to wait for their financial situations to be more stable. A few years down the road, nothing has happened yet. There is nothing wrong with getting a stable job in the corporate world, but if you dream of starting your own business, it only becomes harder and harder when you have more to lose.
It’s true that some people do manage to break away from the reality trap and start a business in relative young age. However, many of them lack the entrepreneurial spirit and passion, but simply have a fantasy of being their own boss and becoming rich.
In his book "The E-Myth Revisited," bestselling author Michael Gerber claims that it is a myth that individuals who start businesses are actually entrepreneurs. He argues that in reality they are mostly technicians who had an "entrepreneurial seizure." What these people often fail to realize, is that when starting a business, especially in the first few years, the founder often needs to put in a lot more hours while making very minimal money.
After a year or two of such grinding, the founder asks himself, "Why would I be doing this when I can work half the time and make thrice as much if I get hired in a company?" A simple no-brainer, the business gets closed down. Without the passion itself of running a business, it is hard to stay in it.
In a summer entrepreneurship program at UCLA’s Anderson School of Business, professor George Abe pointed out to undergraduates the common analogy of entrepreneurship being like jumping off a plane. Before the jump, the person is given the tools and materials to build a parachute, and he needs to build it in midair before hitting the ground. In order to do so, the person must be extremely good at building parachutes. The plane must also be flying at a high altitude to buy enough time for the builder.
Needless to say, the rewards of safely landing must be very large for one to attempt such a task. Using this appropriate analogy, it is important to realize that other than the skills, altitude and rewards, the stress of building a parachute while falling is also tremendous. To the risk-averse population, that isn’t precisely a fun process.
A stressful job
From my personal experiences, building a business can be one of the most stressful activities one can engage in, far surpassing the stress that "smoothers" during finals week (of course, it’s worse when you have to deal with both). In business, too many things can go wrong. Things might be different than planned, employees might be slow or make some mistakes, IT systems may fail. Even if the company does everything perfectly, since it usually relies on many other vendors for its supplies, logistics and communications, and as these companies also deal with budget problems and meeting tight deadlines, things could easily go wrong.
And when in business, when one thing goes wrong, a chain of others go wrong too: you can’t produce the demanded quantity and quality, you can’t deliver your goods on time, customers become angry and refuse to pay, this floods your customer service and hampers your cash flow, which makes you unable to pay your employees and suppliers…the list goes on. All this accumulates to the grind of running a business, which in a short time obliterates peoples’ false fantasy of being their own boss.
On the other hand, Bill Gates, like many other billionaires who didn’t have a college degree, quit his Harvard education to start a business. For Gates, the desire to follow his dream made him proactively grab a great opportunity at the right time. But at the same time, it also put him on the spot. Gates had no choice but to keep moving forward, as he did not have a good steady income to fall back on. When you have no other alternative, you cannot fall into the reality trap, and that pressure will give you the drive to develop your business until you succeed. As your income and opportunity costs build, it becomes more and more difficult to become an entrepreneur.
As we can see, running a business might not always be fun. If you don’t have the passion and drive to bring you through the hard times, you can easily fall into the majority of businesses that close down. I am not discouraging people in getting into entrepreneurship. If anything, people need to be encouraged.
I’m simply asking people to have the right mind-set and expectations when getting into such fields. The entrepreneurship spirit can be developed, but it has to be sought after. Being an entrepreneur is an exciting lifestyle. Your entrepreneurial vision can make a positive change in society through your creative adventures.
For more information, please contact Yu-kai Chou at Chou_yukai@yahoo.com.
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