Last week I discussed the recent MIT Second Machine Age Conference, an event inspired by the best-selling book of the same title published earlier this year by MIT’s Erik Brynjolffson and Andy McAfee. In his closing keynote, McAfee shared with us what to me was a rather surprising paradox: Entrepreneurship has never been easier, but entrepreneurship is on the decline. He showed us data from a July article by the Brookings Institution: in 1992, 23% of all firms were 16 year or older, and employed 60% of the private sector workforce; by 2011, such mature firms were 34% of the economy, and employed 72% of private sector workers. But, during the same period, firm share and employment declined for all other companies aged less than 16 years.
I was frankly not aware that entrepreneurship has been declining for years. To the contrary, I’ve viewed entrepreneurship as being closely associated with the transformative innovations all around us, and the core of Schumpeter’s 70 year old theory of creative destruction, according to which successful, mature companies that once revolutionized their industries are too slow to respond to the waves of startups now attacking them with innovative products and services.
Five years ago, The Economist published a special report on entrepreneurship. “Entrepreneurialism has become cool,” it said, and called it “An idea whose time has come.” The Economist concluded that “The rise of the entrepreneur, which has been gathering speed over the past 30 years, is not just about economics. It also reflects profound changes in attitudes to everything from individual careers to the social contract. It signals the birth of an entrepreneurial society.”
Moreover, as plenty of books and articles remind us, it’s never been easier to become an entrepreneur and start your own company. Digital technologies are inexpensive and ubiquitous, startups have access to all kind of cloud-based business services, and customers can now be easily reached and supported over mobile devices.