An episode about the
financial risks and rewards of entrepreneurship and what they mean
for your motivation in starting a business. Here's some harsh data
about the financial risks and rewards:
More than half of startups cease trading within the
first five years.
Entrepreneurs on average earn significantly less income over 10
years than they would have earned in paid employment. There are
debates about the numbers but one study (Hamilton) suggests a 35%
earnings differential.
Entrepreneurs on average don’t earn a better return on their
investment by founding startups than they would have by investing
in publicly traded
stocks (in fact they earn less from a risk return
perspective).
Nevertheless, the majority of affluent people are
self-made entrepreneurs. Entrepreneurs make-up less than 20% of the
workforce in America, but account for 66% of the millionaires. Of
the millionaire entrepreneurs, 80% of them are self-made: they are
first generation wealth holders (Stanley).
What are we to make of such statistics? I argue that the high
financial risk (and potentially high reward) make it even more
important to do entrepreneurship for intrinsic motivations:
Purpose: building a business because you want to make a dent on
the universe and you believe that what you are doing will make
peoples' lives better.
Autonomy: being an entrepreneur because it gives you freedom to
live and work as you want to (not as someone else thinks you
should)
Mastery: overcoming the challenges of learning how to build a
business is rewarding in itself.
The episode ends with a discussion of the difference between
extrinsic and intrinsic motivations for making money itself. The
intrinsic motivation to make money is for the freedom (financial
freedom) that it gives you.
A podcast about living a life of your choosing. Topics covered include financial independence, productivity, entrepreneurship, peaceful parenting, minimalism, and rational thinking.