To make boatloads of money?
To satisfy their souls by pursuing their lifework?
Maybe they long to create organizations that will change the world or improve a community. Maybe it’s part of a grand pursuit to understand reality.
Or does the decision result from a flash of inspiration into an unmet market need? The ambition to solve a gnawing workplace problem?
Do aspiring entrepreneurs yearn for wealth? For fame? Are they psychologically driven to embrace risk? To lead others?
Maybe the reasons are more prosaic: a corporate layoff, the desire to exercise new skills, a pressing need to make more money.
None of these scenarios, as it turns out, explain why most people become entrepreneurs (remember, I’m using the definition of entrepreneurship from my previous post “3 Things Every Professional Should Understand About Entrepreneurship”).
According to a still-timely study of entrepreneurship published years ago by Scott A. Shane, a professor at Case Western Reserve University, most people start businesses in order to avoid working for others. Writes Shane:
The real reason that most people start businesses, however, has nothing to do with wanting to make money, to become famous, to better their own communities, to seek adventure, or even to improve the world. Most people start businesses simply because they just don’t like working for someone else.
Shane’s study, titled The Illusions of Entrepreneurship: The Costly Myths That Entrepreneurs, Investors, and Policy Makers Live By, contains findings that contradict most entrepreneurship folk wisdom you’ll encounter online. The results are compiled in an extremely readable book with the same title.
People who believe entrepreneurs invent marvelous technologies, create heretofore unimagined markets, or launch heroic quests to do social good will find Shane’s conclusions counterintuitive.
The key to understanding his conclusions lies in Shane’s definition of entrepreneur: anyone who starts a new business.
That’s a definition I agree with. But it’s at odds with popular perception, because most people think of new businesses as high-tech, high-growth companies.
If you read my earlier post, you know that nothing could be further from the truth. The majority of new businesses are sole proprietorships: one-person, undifferentiated, work-at-home enterprises without employees, started on a shoestring, in mature, low-growth industries (not biotechnology or software), managed by a principal without ambition (or plans) to expand.
It is these tiny enterprises — not the Googles of the world — that account for 90% or more of all new businesses.
The hard-hitting facts of Illusions, though, should only encourage aspiring entrepreneurs. The world needs more genuine characters, more original souls determined to trod their own path and no other.
More power to those who strike out on their own — whatever the reason — and damn the odds.
(This essay originally appeared in a slightly different form as a guest post in the Get Rich Slowly blog.)