WEBVTT 00:00:00.000 --> 00:00:02.339 I was scrolling through LinkedIn yesterday, and 00:00:02.339 --> 00:00:04.419 I think I finally hit my saturation point. Oh, 00:00:04.419 --> 00:00:07.839 yeah. With what? It just feels like every third 00:00:07.839 --> 00:00:10.000 profile, I'm not even kidding, regardless of 00:00:10.000 --> 00:00:12.300 what the person actually does, has the same headline. 00:00:13.960 --> 00:00:18.399 Entrepreneur. Ah, yes. The magic word. It's everywhere. 00:00:18.539 --> 00:00:21.219 It's in Instagram bios. It's on government policy 00:00:21.219 --> 00:00:23.660 white papers. You see it plastered across magazine 00:00:23.660 --> 00:00:27.620 covers in every airport lounge. It's become the 00:00:27.620 --> 00:00:29.739 buzzword of the century. It certainly has a lot 00:00:29.739 --> 00:00:31.879 of cultural cachet right now. It really evolves 00:00:31.879 --> 00:00:35.880 into this catch -all term for success or ambition 00:00:35.880 --> 00:00:39.060 or just hustle. Exactly. Hustle. If you have 00:00:39.060 --> 00:00:40.619 a side gig, you're an entrepreneur. If you have 00:00:40.619 --> 00:00:42.829 an idea for an app. Boom. Entrepreneur. And that's 00:00:42.829 --> 00:00:44.670 where the problem starts. The word gets stretched 00:00:44.670 --> 00:00:47.490 so thin it almost loses its meaning. And that's 00:00:47.490 --> 00:00:50.310 the issue. It feels so deluded. I mean, on one 00:00:50.310 --> 00:00:52.130 hand, we use it to describe someone like Elon 00:00:52.130 --> 00:00:55.189 Musk, who is, you know, literally trying to colonize 00:00:55.189 --> 00:00:58.530 Mars. The highest possible stakes. Right. And 00:00:58.530 --> 00:01:00.030 on the other hand, we use it for someone opening 00:01:00.030 --> 00:01:03.109 a really lovely but very traditional boutique 00:01:03.109 --> 00:01:05.590 bakery down the street. And we're using the same 00:01:05.590 --> 00:01:07.629 word for two fundamentally different economic 00:01:07.629 --> 00:01:10.750 activities. We are. So the mission for us today 00:01:10.750 --> 00:01:13.329 in this deep dive is to cut through all that 00:01:13.329 --> 00:01:16.170 noise. What are we actually talking about when 00:01:16.170 --> 00:01:18.290 we say entrepreneurship? Is it just owning a 00:01:18.290 --> 00:01:21.590 shop? Is it inventing the future? Or is it something 00:01:21.590 --> 00:01:25.500 else entirely? That is the definition dilemma. 00:01:25.760 --> 00:01:28.719 And honestly, the confusion isn't new. It goes 00:01:28.719 --> 00:01:31.060 back centuries. To really understand it, we have 00:01:31.060 --> 00:01:33.719 to leave the whole Silicon Valley narrative completely 00:01:33.719 --> 00:01:36.159 behind for a bit. Okay, I'm ready. Where are 00:01:36.159 --> 00:01:38.540 we going instead? We need to look at French dictionaries 00:01:38.540 --> 00:01:42.459 from the 1700s, medieval German guilds, and this 00:01:42.459 --> 00:01:44.439 is my favorite part, perhaps most surprisingly, 00:01:44.739 --> 00:01:48.519 literal sea pirates. Pirates are on the agenda. 00:01:49.620 --> 00:01:51.920 Okay, I am very ready for that. But let's start 00:01:51.920 --> 00:01:54.400 at the beginning. The word itself, the etymology, 00:01:54.540 --> 00:01:55.859 it feels like it's doing a lot of heavy lifting. 00:01:55.980 --> 00:01:57.980 It's French, obviously. It is. It comes from 00:01:57.980 --> 00:02:01.280 the verb entreprendre. Which means? It translates 00:02:01.280 --> 00:02:03.739 simply to undertake. Pretty straightforward. 00:02:04.379 --> 00:02:06.340 The word first appeared in a French dictionary 00:02:06.340 --> 00:02:10.639 way back in 1723. But even before that, in Britain, 00:02:10.819 --> 00:02:13.099 they used a different word that I actually think 00:02:13.099 --> 00:02:15.379 captures the spirit a bit better. What was that? 00:02:15.500 --> 00:02:18.259 They called them adventurers. Adventurers. I 00:02:18.259 --> 00:02:21.280 like that. It implies a journey into the unknown, 00:02:21.419 --> 00:02:24.219 which feels much more accurate than, say, founder. 00:02:24.699 --> 00:02:27.300 A founder just starts something. Yeah. An adventurer 00:02:27.300 --> 00:02:29.340 explores. It really does capture the spirit of 00:02:29.340 --> 00:02:31.759 it. But if we strip away the romance for a second 00:02:31.759 --> 00:02:34.780 and look at the raw economics, the core definition 00:02:34.780 --> 00:02:39.120 rests on two pillars. Value and risk. Value and 00:02:39.120 --> 00:02:41.520 risk. At its most basic level, entrepreneurship 00:02:41.520 --> 00:02:44.479 is the creation or extraction of economic value. 00:02:44.699 --> 00:02:47.099 It's about identifying an opportunity to deliver 00:02:47.099 --> 00:02:50.139 a product or service that people want. But, and 00:02:50.139 --> 00:02:52.740 this is the absolute key, it requires considerable 00:02:52.740 --> 00:02:55.919 initiative and it must, must bear risk. Okay, 00:02:55.919 --> 00:02:58.060 value and risk. That sounds straightforward enough, 00:02:58.139 --> 00:03:00.219 but this is exactly where the bakery versus Elon 00:03:00.219 --> 00:03:02.419 Musk distinction comes in. Because opening a 00:03:02.419 --> 00:03:04.199 bakery is definitely risky. Of course it is. 00:03:04.569 --> 00:03:06.490 You're finding a commercial lease. You're buying 00:03:06.490 --> 00:03:08.949 thousands of dollars of flour and ovens hiring 00:03:08.949 --> 00:03:13.370 staff. You could absolutely fail. But we generally 00:03:13.370 --> 00:03:17.129 instinctively distinguish that from entrepreneurship 00:03:17.129 --> 00:03:20.210 in the high growth sense. We do. And it's a distinction 00:03:20.210 --> 00:03:22.409 that often gets lost in casual conversation. 00:03:22.650 --> 00:03:25.830 But it's vital for economic theory. There is 00:03:25.830 --> 00:03:27.889 a fundamental difference between a small business 00:03:27.889 --> 00:03:31.030 and entrepreneurship. Let's unpack that distinction 00:03:31.030 --> 00:03:32.669 because I think it can hurt feelings sometimes. 00:03:32.909 --> 00:03:35.830 People feel like their hard work is being downgraded 00:03:35.830 --> 00:03:38.150 if it's just called a small business. And it's 00:03:38.150 --> 00:03:40.530 not about downgrading the effort at all. The 00:03:40.530 --> 00:03:43.710 effort is immense in both cases. It's about the 00:03:43.710 --> 00:03:46.569 intent and the underlying economic mechanism. 00:03:46.909 --> 00:03:49.110 So what's the difference in intent? A small business 00:03:49.110 --> 00:03:52.349 like a local dry cleaner or that wonderful bakery 00:03:52.349 --> 00:03:55.210 usually offers an existing product or service. 00:03:55.430 --> 00:03:57.710 They aren't trying to reinvent the wheel or, 00:03:57.729 --> 00:03:59.610 you know, disrupt the global bread market. Their 00:03:59.610 --> 00:04:02.330 primary goal is stability to make a good living. 00:04:02.669 --> 00:04:05.090 Exactly. Making a living for the owner, providing 00:04:05.090 --> 00:04:07.490 a few local jobs, becoming part of the community. 00:04:07.710 --> 00:04:10.770 They don't typically aim for explosive exponential 00:04:10.770 --> 00:04:13.969 growth. Their success is measured in years of 00:04:13.969 --> 00:04:16.230 stable operation. Right. The baker wants to sell 00:04:16.230 --> 00:04:18.230 good bread to the neighborhood. They aren't trying 00:04:18.230 --> 00:04:20.990 to franchise to the moon or create a bread as 00:04:20.990 --> 00:04:24.420 a service app. Precisely. Whereas entrepreneurship, 00:04:24.660 --> 00:04:26.879 particularly in the way economists and investors 00:04:26.879 --> 00:04:30.040 view it, is aimed squarely at growth, innovation, 00:04:30.180 --> 00:04:33.040 and scaling. It's about creating something genuinely 00:04:33.040 --> 00:04:36.160 new, a new product, a new process, a new market, 00:04:36.300 --> 00:04:39.639 and scaling it up as rapidly as possible. And 00:04:39.639 --> 00:04:41.500 that's where the outside money comes in. That's 00:04:41.500 --> 00:04:43.459 the telltale sign. This is the type of venture 00:04:43.459 --> 00:04:45.839 that usually seeks venture capital or angel funding 00:04:45.839 --> 00:04:48.079 because the upfront costs of that innovation 00:04:48.079 --> 00:04:50.740 and scaling are so high. It's not just about 00:04:50.740 --> 00:04:53.500 creating income for the founder. creating massive 00:04:53.500 --> 00:04:57.139 wealth through scale and eventually an exit so 00:04:57.139 --> 00:04:59.680 to use an analogy the small business is playing 00:04:59.680 --> 00:05:02.279 a known game with known rules trying to win a 00:05:02.279 --> 00:05:05.000 local match the entrepreneur is trying to invent 00:05:05.000 --> 00:05:07.939 a new sport entirely That's a very strong analogy. 00:05:08.199 --> 00:05:10.420 And to really understand why we make this distinction, 00:05:10.680 --> 00:05:13.160 we have to look at the history of the idea itself. 00:05:13.439 --> 00:05:16.600 Because entrepreneurship wasn't always just about 00:05:16.600 --> 00:05:20.040 making money. It has this surprisingly deep intellectual 00:05:20.040 --> 00:05:23.519 history involving three specific economists who 00:05:23.519 --> 00:05:27.540 really shaped how we see this figure today. I 00:05:27.540 --> 00:05:29.500 was looking at the notes on this. We've got Cantillon, 00:05:29.540 --> 00:05:32.639 Say, and Spanter. It's interesting. They almost 00:05:32.639 --> 00:05:34.480 feel like they're describing three completely 00:05:34.480 --> 00:05:36.800 different people. They're describing three different 00:05:36.800 --> 00:05:39.019 functions, really, each one built on the last. 00:05:39.259 --> 00:05:42.199 The first one takes us way back to the 18th century. 00:05:42.319 --> 00:05:45.040 An Irish -French economist named Richard Cantillon. 00:05:45.220 --> 00:05:47.459 Cantillon. He's the one who introduces the concept 00:05:47.459 --> 00:05:50.040 of the risk taker. And Cantillon is so interesting 00:05:50.040 --> 00:05:52.740 because he completely shifts the focus from the 00:05:52.740 --> 00:05:55.139 owner. To the decision maker. It's not about 00:05:55.139 --> 00:05:56.879 who has the money. It's about who has the guts. 00:05:57.060 --> 00:05:59.500 That's the absolute crux of it. In his text, 00:05:59.519 --> 00:06:01.660 C 'est sur la nature du commerce en général, 00:06:01.879 --> 00:06:04.699 which was written in the 1730s, he defined the 00:06:04.699 --> 00:06:07.120 entrepreneur as someone who buys at a certain 00:06:07.120 --> 00:06:09.800 price and sells at an uncertain price. Yeah. 00:06:09.860 --> 00:06:11.980 Okay, give me a practical example of that. Think 00:06:11.980 --> 00:06:14.600 of a farmer. The farmer knows the cost of his 00:06:14.600 --> 00:06:18.300 seeds, his land, and his labor. That's the certain 00:06:18.300 --> 00:06:21.779 price. He has to pay for all that up front. But 00:06:21.779 --> 00:06:24.519 he has absolutely no idea what the wheat will 00:06:24.519 --> 00:06:26.839 sell for at the market next month. A drought, 00:06:27.040 --> 00:06:29.899 a flood, a sudden glut from another region. And 00:06:29.899 --> 00:06:32.480 as Christ collapses. Right. That's the uncertainty. 00:06:33.480 --> 00:06:35.519 Cantillon saw the entrepreneur as the person 00:06:35.519 --> 00:06:37.879 who willingly stands in that gap. They make decisions 00:06:37.879 --> 00:06:41.139 about obtaining and using resources while personally 00:06:41.139 --> 00:06:43.180 absorbing the risk of the enterprise. So it's 00:06:43.180 --> 00:06:44.680 not just the person who owns the farm, the one 00:06:44.680 --> 00:06:46.879 with the capital. No, and that was his key distinction. 00:06:47.199 --> 00:06:49.620 He separated the entrepreneur from the mere owner 00:06:49.620 --> 00:06:52.500 who just provides the capital. The owner takes 00:06:52.500 --> 00:06:54.519 a financial risk, sure, but the entrepreneur 00:06:54.519 --> 00:06:57.000 takes the operational risk of actually navigating 00:06:57.000 --> 00:07:00.459 the unpredictable market. So it's basically gambling, 00:07:00.519 --> 00:07:02.699 but with a business plan. Calculated gambling. 00:07:02.759 --> 00:07:06.040 Yes. It's about making judgments under uncertainty. 00:07:06.259 --> 00:07:09.120 So that's our first layer, the risk taker. Then 00:07:09.120 --> 00:07:11.120 we move forward to the early 19th century and 00:07:11.120 --> 00:07:13.120 meet Jean -Baptiste Say. Also a friend. Also 00:07:13.120 --> 00:07:16.139 from the French school. Yes. And he saw the entrepreneur 00:07:16.139 --> 00:07:19.279 not just as a risk taker, but as the optimizer. 00:07:19.420 --> 00:07:21.959 Say's definition feels very modern, almost like 00:07:21.959 --> 00:07:24.459 a management consultant. He talks about shifting 00:07:24.459 --> 00:07:27.620 resources around. He does. Saeed's big contribution 00:07:27.620 --> 00:07:30.879 in his treatise on political economy was that 00:07:30.879 --> 00:07:33.439 the entrepreneur shifts economic resources out 00:07:33.439 --> 00:07:36.500 of an area of lower productivity and into an 00:07:36.500 --> 00:07:38.879 area of higher productivity and greater yield. 00:07:39.079 --> 00:07:41.800 So it's not necessarily about inventing a brand 00:07:41.800 --> 00:07:44.579 new gadget from scratch. Not at all. It's about 00:07:44.579 --> 00:07:47.160 rearranging the existing pieces on the board 00:07:47.160 --> 00:07:49.519 to make them worth more. Like an economic conductor. 00:07:50.170 --> 00:07:52.069 Taking the same instruments that are just making 00:07:52.069 --> 00:07:54.329 noise and arranging them to create a symphony. 00:07:54.449 --> 00:07:56.350 That's a fantastic way to put it. Think of it 00:07:56.350 --> 00:07:59.230 like this. You have a pile of wood. As raw timber 00:07:59.230 --> 00:08:02.310 or firewood, it has a certain low value. But 00:08:02.310 --> 00:08:05.269 if an entrepreneur takes that same wood and organizes 00:08:05.269 --> 00:08:07.610 the labor, the tools, and the skill to build 00:08:07.610 --> 00:08:10.389 a violin, they have shifted that resource into 00:08:10.389 --> 00:08:13.209 an area of vastly higher productivity and value. 00:08:13.689 --> 00:08:17.430 That active combination, that shift, that's entrepreneurship, 00:08:17.670 --> 00:08:19.730 according to say. That makes a lot of sense. 00:08:19.930 --> 00:08:22.810 It's about spotting inefficiency. You see a resource 00:08:22.810 --> 00:08:25.430 being wasted or underutilized and you're the 00:08:25.430 --> 00:08:27.970 one who intervenes to fix it. Exactly. So we 00:08:27.970 --> 00:08:30.490 have the risk taker and the optimizer. But then 00:08:30.490 --> 00:08:32.629 we get to the 20th century and we meet the most 00:08:32.629 --> 00:08:37.610 famous and maybe most misunderstood name in entrepreneurship 00:08:37.610 --> 00:08:40.169 theory. Joseph Schumpeter. Joseph Schumpeter. 00:08:40.269 --> 00:08:42.799 And he basically blows the whole thing up. Schumpeter 00:08:42.799 --> 00:08:45.120 is the creative destruction guy. This is the 00:08:45.120 --> 00:08:48.120 definition that Silicon Valley and every tech 00:08:48.120 --> 00:08:50.700 bro has really latched on to. The idea that you 00:08:50.700 --> 00:08:53.360 have to break things to make progress. He absolutely 00:08:53.360 --> 00:08:56.320 is. Schumpeter saw the entrepreneur as the innovator. 00:08:56.440 --> 00:08:58.539 For him, it wasn't enough to just bear risk, 00:08:58.620 --> 00:09:01.039 like Cantillon said, or to optimize, like Say 00:09:01.039 --> 00:09:04.220 said. The entrepreneur's core function was disruption. 00:09:04.620 --> 00:09:08.000 He famously described the gale of creative destruction. 00:09:08.419 --> 00:09:11.879 It's such a violent image for economics. It is, 00:09:11.960 --> 00:09:13.840 but he believed it was the essential fact about 00:09:13.840 --> 00:09:16.440 capitalism. He argued that a healthy economy 00:09:16.440 --> 00:09:19.000 is never in equilibrium. It's always being upended. 00:09:19.200 --> 00:09:21.559 The idea is that new innovations don't just add 00:09:21.559 --> 00:09:23.899 to the economy. They destroy old industries. 00:09:24.159 --> 00:09:26.549 The classic example being the automobile. Right. 00:09:26.710 --> 00:09:29.470 The car didn't just compete with the horse -drawn 00:09:29.470 --> 00:09:32.330 carriage. It annihilated the entire industry. 00:09:32.669 --> 00:09:35.490 Ferriers, stable owners, whip manufacturers, 00:09:35.629 --> 00:09:38.950 all gone. But in doing so, it created a massive 00:09:38.950 --> 00:09:41.970 new transportation network. Oil and gas industries, 00:09:42.230 --> 00:09:45.029 suburbs. It remade society. It remade society. 00:09:45.269 --> 00:09:48.909 And Schumpeter believed this dynamic disequilibrium 00:09:48.909 --> 00:09:52.820 is what drives all real progress. So for Schumpeter, 00:09:52.940 --> 00:09:54.759 if you weren't fundamentally upsetting the status 00:09:54.759 --> 00:09:57.379 quo, you aren't an entrepreneur. You're just 00:09:57.379 --> 00:09:59.080 a manager running a business. That was his very 00:09:59.080 --> 00:10:01.360 strong view. However, it's important to note 00:10:01.360 --> 00:10:03.379 there is a counterpoint to all this high drama. 00:10:03.600 --> 00:10:06.620 An economist named Israel Kersner had a slightly 00:10:06.620 --> 00:10:09.559 quieter take. OK, what was his view? Kirzner 00:10:09.559 --> 00:10:11.679 argued that entrepreneurship doesn't always have 00:10:11.679 --> 00:10:14.100 to be a gale of destruction. It can be incremental. 00:10:14.379 --> 00:10:17.019 It can be about alertness. Right. The alertness 00:10:17.019 --> 00:10:19.480 theory. Sometimes you just make a slightly better 00:10:19.480 --> 00:10:21.299 mousetrap. You don't have to blow up the entire 00:10:21.299 --> 00:10:24.370 house to do it. Precisely. Kersner pointed out 00:10:24.370 --> 00:10:26.850 that a lot of very real innovation is just noticing 00:10:26.850 --> 00:10:29.230 things that others have missed, like realizing 00:10:29.230 --> 00:10:31.350 that people want a coffee shop on a specific 00:10:31.350 --> 00:10:34.309 corner that doesn't have one or replacing paper 00:10:34.309 --> 00:10:37.629 straws with plastic ones. Or nowadays, the entrepreneurial 00:10:37.629 --> 00:10:40.169 opportunity is shifting back from plastic to 00:10:40.169 --> 00:10:42.789 paper or bamboo. That's not destroying an industry. 00:10:42.950 --> 00:10:45.690 No. Kersner would say it's actually nudging the 00:10:45.690 --> 00:10:48.769 market towards equilibrium, filling a gap rather 00:10:48.769 --> 00:10:50.970 than Schumpeter's disruption, which blows the 00:10:50.970 --> 00:10:52.889 equilibrium apart. So we have this whole spectrum. 00:10:52.970 --> 00:10:56.169 The risk taker, the optimizer, and the destroyer. 00:10:56.190 --> 00:10:58.850 It's fascinating. But this is all very Western, 00:10:59.009 --> 00:11:03.230 very academic. I was really struck by the example 00:11:03.230 --> 00:11:05.950 in the research from the Ashanti Empire. It shows 00:11:05.950 --> 00:11:09.110 that this concept of the big man who generates 00:11:09.110 --> 00:11:11.850 wealth is universal, but how different societies 00:11:11.850 --> 00:11:14.679 treat them varies wildly. The Ashanti example 00:11:14.679 --> 00:11:17.259 is fascinating because it shows a society that 00:11:17.259 --> 00:11:19.940 formalized and institutionalized the status of 00:11:19.940 --> 00:11:21.779 the entrepreneur. What do you mean by that? In 00:11:21.779 --> 00:11:24.600 the 18th and 19th centuries in West Africa, they 00:11:24.600 --> 00:11:27.120 had a concept called abirimpon, which translates 00:11:27.120 --> 00:11:30.100 to big men. These were successful entrepreneurs 00:11:30.100 --> 00:11:33.559 who accumulated significant wealth, usually through 00:11:33.559 --> 00:11:36.820 trade in gold or slaves, unfortunately. But the 00:11:36.820 --> 00:11:39.279 state, the Ashanti state, didn't just tax them 00:11:39.279 --> 00:11:41.159 or ignore them. They brought them into the fold. 00:11:41.399 --> 00:11:44.419 They did. If these entrepreneurs performed heroic 00:11:44.419 --> 00:11:47.159 deeds and accumulated enough wealth, they were 00:11:47.159 --> 00:11:49.399 given formal political recognition by the state. 00:11:49.620 --> 00:11:51.639 So they were effectively knighted for being good 00:11:51.639 --> 00:11:54.740 at business. In a way, yes. The research mentions 00:11:54.740 --> 00:11:57.120 they were rewarded with a mena, which was an 00:11:57.120 --> 00:12:00.210 elephant. tale, and it served as a kind of heraldic 00:12:00.210 --> 00:12:03.070 badge. It was a very clever way for the state 00:12:03.070 --> 00:12:05.309 to integrate these powerful, wealthy individuals 00:12:05.309 --> 00:12:08.110 into the political hierarchy rather than letting 00:12:08.110 --> 00:12:10.490 them become a rival power center. That's the 00:12:10.490 --> 00:12:12.970 tension, isn't it? Societies throughout history 00:12:12.970 --> 00:12:15.029 have always tried to figure out what to do with 00:12:15.029 --> 00:12:17.549 entrepreneurs. Do we celebrate them? Do we fear 00:12:17.549 --> 00:12:20.250 them? Do we try to regulate them into oblivion? 00:12:20.389 --> 00:12:23.830 And that regulation aspect is crystal clear in 00:12:23.830 --> 00:12:26.350 the history of Germany. Medieval Germany had 00:12:26.350 --> 00:12:28.710 the guilds, which were incredibly restrictive. 00:12:29.129 --> 00:12:31.690 To be a master craftsman, you had to get this 00:12:31.690 --> 00:12:34.549 thing called the Kleiner Befagungsnachweis. Which 00:12:34.549 --> 00:12:37.070 translates to proof of competence, right? A certificate. 00:12:37.210 --> 00:12:39.370 A small proof of competence, yes. You needed 00:12:39.370 --> 00:12:41.289 this certificate just to be allowed to train 00:12:41.289 --> 00:12:43.450 apprentices. But the really interesting part 00:12:43.450 --> 00:12:46.049 in how this fluctuated over time. For a long 00:12:46.049 --> 00:12:49.789 time after 1871, Germany had Gewerbefreiheit, 00:12:49.929 --> 00:12:53.110 basically freedom of trade. You didn't need a 00:12:53.110 --> 00:12:55.110 certificate to start a business. It was a free 00:12:55.110 --> 00:12:57.750 -for -all. For a while. But then in the 1930s 00:12:57.750 --> 00:12:59.610 under the Nazis and then again in West Germany 00:12:59.610 --> 00:13:02.269 in the 1950s, they reintroduced stricter rules. 00:13:02.649 --> 00:13:05.429 You needed a master certificate just to set up 00:13:05.429 --> 00:13:07.570 a new business in dozens of different crafts. 00:13:07.870 --> 00:13:09.950 That's a huge barrier to entry. We argue about 00:13:09.950 --> 00:13:12.110 this very thing today with occupational licensing. 00:13:12.529 --> 00:13:15.950 Do you really need a state license to braid hair? 00:13:16.169 --> 00:13:18.929 Do you need a license to be an interior designer? 00:13:19.330 --> 00:13:21.779 It's the exact same debate. The argument for 00:13:21.779 --> 00:13:24.080 the certificate is quality control, consumer 00:13:24.080 --> 00:13:26.860 protection, and stability. The argument against 00:13:26.860 --> 00:13:29.360 it is that it kills entrepreneurship by making 00:13:29.360 --> 00:13:32.480 it too hard to start. It protects the incumbents, 00:13:32.539 --> 00:13:35.220 the existing masters, from any new competition. 00:13:35.720 --> 00:13:38.620 So we've established that this role, this adventurer, 00:13:38.720 --> 00:13:41.720 has existed for centuries, and societies have 00:13:41.720 --> 00:13:43.759 oscillated between trying to control them and 00:13:43.759 --> 00:13:46.080 celebrate them. But let's fast forward to the 00:13:46.080 --> 00:13:48.970 human element, the psychology of it all. Because 00:13:48.970 --> 00:13:51.309 I feel like we have a very specific and very 00:13:51.309 --> 00:13:54.330 stubborn image in our heads of what a founder 00:13:54.330 --> 00:13:57.409 looks like today. A hoodie. The garage, the college 00:13:57.409 --> 00:14:00.149 dropout. The Mark Zuckerberg, the Steve Jobs, 00:14:00.169 --> 00:14:02.610 the Bill Gates archetype. We are constantly told 00:14:02.610 --> 00:14:04.870 that entrepreneurship is a young person's game. 00:14:04.990 --> 00:14:07.110 You need the boundless energy of a 20 -year -old 00:14:07.110 --> 00:14:09.769 and, you know, the naivety to not know what's 00:14:09.769 --> 00:14:11.669 supposed to be impossible. It's an incredibly 00:14:11.669 --> 00:14:13.870 compelling narrative. It makes for great movies. 00:14:14.090 --> 00:14:16.389 The problem is if we actually look at the data, 00:14:16.490 --> 00:14:18.929 specifically a massive study by the U .S. Census 00:14:18.929 --> 00:14:21.730 Bureau and researchers at MIT, that entire image 00:14:21.730 --> 00:14:24.029 is statistically false. Okay, bust the myth for 00:14:24.029 --> 00:14:26.279 us. What's the reality? The average age of a 00:14:26.279 --> 00:14:31.110 successful startup founder is 45. Not 25, 45. 00:14:31.269 --> 00:14:34.250 That's not old by any means, but it is definitely 00:14:34.250 --> 00:14:37.490 not the coding in a dorm room narrative. Not 00:14:37.490 --> 00:14:39.470 even close. Yeah. And it gets more interesting. 00:14:39.590 --> 00:14:41.970 The data consistently shows that the probability 00:14:41.970 --> 00:14:45.509 of success actually rises with age well into 00:14:45.509 --> 00:14:48.610 your late 50s. A 50 -year -old founder is significantly 00:14:48.610 --> 00:14:51.509 more likely to achieve a successful exit or hit 00:14:51.509 --> 00:14:53.830 high growth targets than a 30 -year -old founder. 00:14:54.049 --> 00:14:55.990 So you're telling me my best years are still 00:14:55.990 --> 00:14:58.250 ahead of me. I don't have to be 19 to have a 00:14:58.250 --> 00:15:00.980 good idea. That's what the data says. And when 00:15:00.980 --> 00:15:02.860 you think about it, it makes sense. People ask, 00:15:03.019 --> 00:15:05.659 is it about resources? Capital. Yeah, that would 00:15:05.659 --> 00:15:07.740 be my first guess. You have more savings at 45. 00:15:08.080 --> 00:15:10.440 Capital is part of it, for sure. Older founders 00:15:10.440 --> 00:15:13.440 can bootstrap more easily. But the bigger factor 00:15:13.440 --> 00:15:16.360 is what economists call human capital. Meaning 00:15:16.360 --> 00:15:19.960 experience. Experience, management skills, deeper 00:15:19.960 --> 00:15:22.940 industry knowledge, and crucially, better networks. 00:15:23.360 --> 00:15:25.879 When you're 45, you've been working for two decades. 00:15:26.320 --> 00:15:28.820 You know who to call to get a supply chain. fixed. 00:15:28.899 --> 00:15:31.059 You know how to hire, how to fire, how to read 00:15:31.059 --> 00:15:33.659 a balance sheet. When you're 20, you're figuring 00:15:33.659 --> 00:15:36.320 all of that out from scratch on the fly. Okay, 00:15:36.379 --> 00:15:39.120 so the age myth is busted. What about the college 00:15:39.120 --> 00:15:41.720 dropout myth? The idea that school just gets 00:15:41.720 --> 00:15:44.600 in the way of building things. Also largely a 00:15:44.600 --> 00:15:47.659 myth perpetuated by a few very famous outliers. 00:15:48.039 --> 00:15:50.980 Research by two economists, Macalachi and Shimardi, 00:15:51.159 --> 00:15:53.820 shows a direct and positive relationship between 00:15:53.820 --> 00:15:56.100 higher education and entrepreneurial success. 00:15:56.379 --> 00:15:58.679 So more school is better. Generally, yes. And 00:15:58.679 --> 00:16:01.399 their insight is key. You might not need a university 00:16:01.399 --> 00:16:03.539 degree to start a business. Anyone can go online 00:16:03.539 --> 00:16:06.500 and register an LLC for $100. But college provides 00:16:06.500 --> 00:16:09.759 the complex problem -solving skills, the analytical 00:16:09.759 --> 00:16:12.200 frameworks needed to operate that business at 00:16:12.200 --> 00:16:14.919 a higher level as it grows and faces more complex 00:16:14.919 --> 00:16:17.000 challenges. It's the difference between starting 00:16:17.000 --> 00:16:19.259 and scaling. The dropout might have the initial 00:16:19.259 --> 00:16:21.960 spark, but the education helps you manage the 00:16:21.960 --> 00:16:24.259 fire once it gets big. That's a perfect way to 00:16:24.259 --> 00:16:26.360 put it. Now let's dig into the personality traits 00:16:26.360 --> 00:16:27.799 because this is where the research surprised 00:16:27.799 --> 00:16:31.250 me the most. We have this image of entrepreneurs 00:16:31.250 --> 00:16:34.830 as diehard optimists. And you have to be, right? 00:16:35.029 --> 00:16:37.789 You think so. To start a business is on some 00:16:37.789 --> 00:16:41.070 level an irrational act. Most of them fail. So 00:16:41.070 --> 00:16:43.669 you have to possess this optimism bias, this 00:16:43.669 --> 00:16:46.129 illusion of control. You have to believe you're 00:16:46.129 --> 00:16:48.480 the one who is going to be. the exception to 00:16:48.480 --> 00:16:51.279 the rule. And many do. But a fascinating study 00:16:51.279 --> 00:16:53.919 by Goodmanson and Lechner looked at the long 00:16:53.919 --> 00:16:56.399 -term survival of firms, and they found that 00:16:56.399 --> 00:16:59.759 firms led by distrusting entrepreneurs were actually 00:16:59.759 --> 00:17:02.799 more likely to survive than those led by optimists. 00:17:03.240 --> 00:17:05.779 Distrusting. That sounds counterintuitive. We 00:17:05.779 --> 00:17:08.359 usually associate distrust with being toxic or 00:17:08.359 --> 00:17:11.119 being paralyzed by fear and unable to act. Right. 00:17:11.220 --> 00:17:13.599 But in this context, think of it less as paranoia 00:17:13.599 --> 00:17:16.099 and more as defensive pessimism or just healthy 00:17:16.099 --> 00:17:18.619 skepticism. OK. The researchers found that this 00:17:18.619 --> 00:17:20.819 trait of distress leads to something they called 00:17:20.819 --> 00:17:24.509 sensible task selection. Sensible task selection. 00:17:24.789 --> 00:17:28.309 So while the optimist is on stage visualizing 00:17:28.309 --> 00:17:31.349 success and manifesting your destiny, the distrusting 00:17:31.349 --> 00:17:34.490 founder is in the back room visualizing the lawsuit. 00:17:34.710 --> 00:17:36.849 Essentially, yes. The distrusting entrepreneur 00:17:36.849 --> 00:17:40.130 reads the fine print on every contract. They 00:17:40.130 --> 00:17:42.470 don't just assume the client will pay on time, 00:17:42.549 --> 00:17:45.789 so they get a significant deposit up front. They 00:17:45.789 --> 00:17:48.250 analyze the risks in a new market more thoroughly. 00:17:48.730 --> 00:17:51.490 The optimist sees a red flag and thinks, ah, 00:17:51.650 --> 00:17:53.369 that won't happen to me. I can fix that. I'm 00:17:53.369 --> 00:17:55.890 special. And a distrusting entrepreneur. The 00:17:55.890 --> 00:17:57.789 distrusting entrepreneur sees a red flag and 00:17:57.789 --> 00:17:59.970 immediately prepares a contingency plan for when 00:17:59.970 --> 00:18:02.910 it inevitably catches fire. In the long run, 00:18:03.069 --> 00:18:05.109 that rigorous failure avoidance is what keeps 00:18:05.109 --> 00:18:07.150 the company alive when the optimist company runs 00:18:07.150 --> 00:18:09.390 out of cash. It's almost the anti -manifestation 00:18:09.390 --> 00:18:12.470 mindset. It's survival through pragmatism, not 00:18:12.470 --> 00:18:14.490 just positive thinking. It reminds me of that 00:18:14.490 --> 00:18:16.809 Andy Grove quote, only the paranoid survive. 00:18:17.190 --> 00:18:19.109 It's the perfect summary of it. And while we're 00:18:19.109 --> 00:18:21.009 looking at where these traits come from, we have 00:18:21.009 --> 00:18:22.910 to touch on the nature versus nurture debate. 00:18:23.230 --> 00:18:26.170 Are entrepreneurs born or are they made? The 00:18:26.170 --> 00:18:28.670 father factor data stood out to me here. It's 00:18:28.670 --> 00:18:32.349 a 2025 study, I think. that showed nearly 75 00:18:32.349 --> 00:18:36.210 % of male entrepreneurs start a firm in the same 00:18:36.210 --> 00:18:39.890 or a very closely related industry as their father. 00:18:40.150 --> 00:18:43.849 75 %! That is an absolutely overwhelming number. 00:18:43.990 --> 00:18:46.369 It suggests that entrepreneurship is almost a 00:18:46.369 --> 00:18:48.529 trade you learn at the dinner table. It completely 00:18:48.529 --> 00:18:51.609 demystifies the process. If your dad comes home 00:18:51.609 --> 00:18:53.490 and complains about supply chains every night, 00:18:53.589 --> 00:18:56.009 you learn the vocabulary. You'll learn that business 00:18:56.009 --> 00:18:58.769 isn't some black box of magic. It's just a series 00:18:58.769 --> 00:19:01.230 of problems to be solved. It lowers the psychological 00:19:01.230 --> 00:19:04.470 barrier to entry. It feels normal. And there's 00:19:04.470 --> 00:19:06.309 also the peer influence factor that supports 00:19:06.309 --> 00:19:08.890 this. Research by Jesper Sorensen found that 00:19:08.890 --> 00:19:10.569 if you work in a company with a lot of former 00:19:10.569 --> 00:19:12.990 entrepreneurs, you are significantly more likely 00:19:12.990 --> 00:19:15.170 to become one yourself. The if he could do it, 00:19:15.190 --> 00:19:17.569 I can do it effect? Precisely. It normalizes 00:19:17.569 --> 00:19:19.970 the path. But there's a fascinating flip side 00:19:19.970 --> 00:19:22.309 to this nurture argument. The Teenage Rebellion 00:19:22.309 --> 00:19:25.440 study by Levine and Rubinstein. paints a slightly 00:19:25.440 --> 00:19:28.140 more chaotic and frankly more interesting picture 00:19:28.140 --> 00:19:30.960 this one was great tell me about it so they analyzed 00:19:30.960 --> 00:19:34.079 a huge data set and found that successful entrepreneurs 00:19:34.079 --> 00:19:38.339 were on average disproportionately white male 00:19:38.339 --> 00:19:41.980 wealthy and highly educated fitting the privilege 00:19:41.980 --> 00:19:45.000 profile you might expect right no surprises there 00:19:45.349 --> 00:19:48.549 But this is the kicker. As teenagers, this same 00:19:48.549 --> 00:19:52.430 group was also disproportionately prone to aggressive, 00:19:52.690 --> 00:19:56.210 illicit and risk taking activities. So they were 00:19:56.210 --> 00:19:57.990 the smart kids, but they were the smart kids 00:19:57.990 --> 00:20:01.049 who were also like smoking behind the gym or 00:20:01.049 --> 00:20:03.369 selling fireworks out of their locker. Exactly 00:20:03.369 --> 00:20:05.869 that. They scored high on aptitude tests, but 00:20:05.869 --> 00:20:08.670 they had a history of breaking rules. And if 00:20:08.670 --> 00:20:11.430 you think about it, that combination is incredibly 00:20:11.430 --> 00:20:14.089 potent for an entrepreneur. You need the raw 00:20:14.089 --> 00:20:16.319 intelligence. to build and execute, but you also 00:20:16.319 --> 00:20:18.799 need that rebellious streak, that willingness 00:20:18.799 --> 00:20:21.240 to challenge the status quo. A fundamental disrespect 00:20:21.240 --> 00:20:24.000 for the way things are done around here. That's 00:20:24.000 --> 00:20:26.680 it. If you are a strict rule follower who always 00:20:26.680 --> 00:20:28.980 colors inside the lines, you are probably going 00:20:28.980 --> 00:20:32.000 to be a fantastic employee or manager, but you 00:20:32.000 --> 00:20:33.960 might not be the one to disrupt an entire industry. 00:20:34.259 --> 00:20:36.710 Disruption requires a bit of delinquency. It 00:20:36.710 --> 00:20:39.150 seems so. And speaking of mental states, we should 00:20:39.150 --> 00:20:41.730 briefly touch on the concept of flow, Mihaly 00:20:41.730 --> 00:20:44.690 Csikszentmihalyi's famous idea. Being completely 00:20:44.690 --> 00:20:47.529 in the zone. Right. Being so thoroughly engaged 00:20:47.529 --> 00:20:50.450 in an activity that you lose all track of time, 00:20:50.529 --> 00:20:53.910 of your surroundings, even of yourself. Csikszentmihalyi 00:20:53.910 --> 00:20:56.789 linked this psychological state directly to breakthrough 00:20:56.789 --> 00:21:00.019 innovation. But what's really fascinating is 00:21:00.019 --> 00:21:02.299 that he connected it all the way back to early 00:21:02.299 --> 00:21:05.519 education, specifically the Montessori method. 00:21:05.700 --> 00:21:07.519 Oh, interesting. I went to a Montessori preschool. 00:21:07.599 --> 00:21:10.440 I just remember a lot of wooden blocks and being 00:21:10.440 --> 00:21:12.039 told not to interrupt people. Well, that's the 00:21:12.039 --> 00:21:15.299 core of it. That prepared environment in a Montessori 00:21:15.299 --> 00:21:17.819 classroom is designed specifically to let children 00:21:17.819 --> 00:21:21.279 engage in deep. uninterrupted concentration on 00:21:21.279 --> 00:21:24.200 a task of their own choosing. Six at Mahali suggested 00:21:24.200 --> 00:21:26.819 that this type of early conditioning builds the 00:21:26.819 --> 00:21:29.400 neurological capacity for flow later in life. 00:21:29.579 --> 00:21:32.099 You learn early on that you can control your 00:21:32.099 --> 00:21:34.140 environment and lose yourself in productive work. 00:21:34.279 --> 00:21:37.200 Wow. And that is a foundational skill for a founder 00:21:37.200 --> 00:21:39.980 who needs to maintain intense focus amidst the 00:21:39.980 --> 00:21:42.339 constant chaos of a startup. That connects the 00:21:42.339 --> 00:21:45.140 dots all the way from building blocks to building 00:21:45.140 --> 00:21:48.680 companies. That's incredible. Now. I want to 00:21:48.680 --> 00:21:50.759 bridge this psychological discussion of risk 00:21:50.759 --> 00:21:53.599 taking back to the economics because we throw 00:21:53.599 --> 00:21:55.940 the word risk around so loosely. Oh, that's a 00:21:55.940 --> 00:21:59.180 risky move. But in economics and specifically 00:21:59.180 --> 00:22:02.319 in entrepreneurship theory, risk is a very specific, 00:22:02.519 --> 00:22:04.900 very technical term. It is. And the distinction 00:22:04.900 --> 00:22:07.000 is absolutely crucial if we want to understand 00:22:07.000 --> 00:22:09.880 what an entrepreneur actually does. This framework 00:22:09.880 --> 00:22:11.759 comes from Frank Knight, an economist working 00:22:11.759 --> 00:22:14.359 in the 1920s. He distinguished between risk, 00:22:14.519 --> 00:22:17.430 ambiguity and true uncertainty. We often just 00:22:17.430 --> 00:22:19.990 call the last one nice and uncertainty. Okay, 00:22:20.049 --> 00:22:21.930 let's break this down for everyone because I 00:22:21.930 --> 00:22:24.109 think people, myself included, tend to conflate 00:22:24.109 --> 00:22:26.950 them. The jar of balls analogy is perfect here. 00:22:26.990 --> 00:22:29.390 Okay, picture a jar full of colored balls. Scenario 00:22:29.390 --> 00:22:32.069 number one. I tell you there are exactly 50 red 00:22:32.069 --> 00:22:34.450 balls and 50 white balls in the jar. You don't 00:22:34.450 --> 00:22:36.029 know which one you'll pick out, but you know 00:22:36.029 --> 00:22:38.670 the precise probability distribution is 50 -50. 00:22:39.130 --> 00:22:42.210 That is risk. Okay, so risk is measurable. You 00:22:42.210 --> 00:22:44.589 can calculate the odds. Insurance companies and 00:22:44.589 --> 00:22:46.680 casinos, they operate on risk. They know the 00:22:46.680 --> 00:22:49.400 math. Exactly. They can price it. Now, scenario 00:22:49.400 --> 00:22:52.220 two. I show you a jar. I tell you it contains 00:22:52.220 --> 00:22:55.559 100 balls, and they are all either red or white, 00:22:55.619 --> 00:22:58.000 but I don't tell you the ratio. Maybe it's 99 00:22:58.000 --> 00:23:00.619 red and one white. Maybe it's the reverse. You 00:23:00.619 --> 00:23:03.279 know the possible outcomes, but you don't know 00:23:03.279 --> 00:23:06.680 the odds. That is ambiguity. Harder to bet on 00:23:06.680 --> 00:23:09.480 for sure, but you at least know the basic parameters 00:23:09.480 --> 00:23:12.160 of the game you're playing. Right. Now, scenario 00:23:12.160 --> 00:23:14.759 three. I just show you a closed jar. You don't 00:23:14.759 --> 00:23:16.140 know how many balls are in it. You don't know 00:23:16.140 --> 00:23:17.700 what colors they are. You don't even know for 00:23:17.700 --> 00:23:19.420 sure if they are balls. Maybe they're cubes. 00:23:19.640 --> 00:23:22.539 Maybe the jar is totally empty. That is true 00:23:22.539 --> 00:23:25.079 uncertainty. That is the world of the entrepreneur. 00:23:25.279 --> 00:23:27.700 That is the very definition of their operating 00:23:27.700 --> 00:23:30.809 environment. Frank Knight argued that true economic 00:23:30.809 --> 00:23:33.990 profit is the reward for navigating true uncertainty. 00:23:34.750 --> 00:23:37.150 Because if the odds were known, if it was just 00:23:37.150 --> 00:23:40.029 risk big banks or established corporations with 00:23:40.029 --> 00:23:42.170 huge analytical departments would just calculate 00:23:42.170 --> 00:23:44.930 the math and do it themselves, they would arbitrage 00:23:44.930 --> 00:23:46.869 all the profit away. They'd turn it into a commodity. 00:23:47.369 --> 00:23:50.450 Instantly. The entrepreneur's unique job is to 00:23:50.450 --> 00:23:52.450 step into the situation where no one knows the 00:23:52.450 --> 00:23:54.390 odds because the market doesn't even exist yet. 00:23:54.430 --> 00:23:56.630 You're creating the game from scratch. That's 00:23:56.630 --> 00:23:58.910 such a powerful distinction. Big corporations 00:23:58.910 --> 00:24:01.910 manage risk. Entrepreneurs manage uncertainty. 00:24:02.430 --> 00:24:04.990 You aren't just rolling the dice. You're inventing 00:24:04.990 --> 00:24:07.490 the game while simultaneously trying to figure 00:24:07.490 --> 00:24:09.890 out if dice are even involved in the first place. 00:24:10.029 --> 00:24:12.930 Precisely. And this leads us to look at who is 00:24:12.930 --> 00:24:14.849 willing to step into that kind of uncertainty. 00:24:15.150 --> 00:24:17.609 We talked about the standard white male profile 00:24:17.609 --> 00:24:20.230 earlier, but the real spectrum of entrepreneurship 00:24:20.230 --> 00:24:23.390 is so much wider. In fact, for many groups throughout 00:24:23.390 --> 00:24:26.009 history, entrepreneurship isn't a glamorous choice 00:24:26.009 --> 00:24:28.970 about disruption. It's a raw survival strategy. 00:24:29.309 --> 00:24:31.809 This brings us to the topic of ethnic and cultural 00:24:31.809 --> 00:24:34.450 entrepreneurship. It's kind of a dry academic 00:24:34.450 --> 00:24:37.230 term, but the stories behind it are literally 00:24:37.230 --> 00:24:40.000 the fabric of our culture. I mean, the fish and 00:24:40.000 --> 00:24:42.539 chips story absolutely blew my mind. It's a perfect 00:24:42.539 --> 00:24:45.140 example of immigrant innovation. Fish and chips 00:24:45.140 --> 00:24:47.779 is seen as the quintessentially British dish 00:24:47.779 --> 00:24:50.019 right up there with the Sunday roast. But the 00:24:50.019 --> 00:24:52.519 entire concept of frying fish in a batter was 00:24:52.519 --> 00:24:55.480 brought over to Britain by Sephardic Jewish immigrants 00:24:55.480 --> 00:24:58.079 fleeing persecution in Portugal and Spain in 00:24:58.079 --> 00:25:01.420 the 16th century. No way. Yes. And the first 00:25:01.420 --> 00:25:03.519 proper fish and chip shop, the one that combined 00:25:03.519 --> 00:25:06.359 fried fish with chips, was opened in London by 00:25:06.359 --> 00:25:09.299 Joseph Mallon, a Jewish entrepreneur. in the 00:25:09.299 --> 00:25:11.680 1860s. And it wasn't just a one -off thing. Not 00:25:11.680 --> 00:25:14.420 at all. The first sit -down fish restaurant with 00:25:14.420 --> 00:25:17.259 seating was opened by Samuel Isaacs in 1896. 00:25:17.720 --> 00:25:20.640 He grew it into a massive chain. So this dish 00:25:20.640 --> 00:25:22.880 that is a cornerstone of British national identity 00:25:22.880 --> 00:25:25.920 was actually an ethnic startup. And we see the 00:25:25.920 --> 00:25:27.680 same pattern with the brand Slaziger, right? 00:25:27.720 --> 00:25:29.880 The famous sports brand. Yes, one of the world's 00:25:29.880 --> 00:25:33.079 oldest sports brands. Founded by Ralph and Albert 00:25:33.079 --> 00:25:36.160 Slaziger Jewish Brothers in 1881, they have been 00:25:36.160 --> 00:25:37.849 the official supplier of tennis balls. balls 00:25:37.849 --> 00:25:40.730 to the Wimbledon Championships since 1902. So 00:25:40.730 --> 00:25:43.029 what's the underlying pattern here? The pattern 00:25:43.029 --> 00:25:45.230 is what sociologists call the blocked mobility 00:25:45.230 --> 00:25:48.410 thesis. When minority groups arrive in a new 00:25:48.410 --> 00:25:51.250 country and face discrimination or barriers in 00:25:51.250 --> 00:25:53.470 the traditional labor market, you know, we don't 00:25:53.470 --> 00:25:56.549 hire your kind here, they turn to self -employment 00:25:56.549 --> 00:25:59.549 and entrepreneurship as a way to integrate economically 00:25:59.549 --> 00:26:02.500 and build wealth. If I can't get a job at the 00:26:02.500 --> 00:26:04.940 established bank because of my last name, I'll 00:26:04.940 --> 00:26:07.220 start my own shop and work twice as hard. Exactly. 00:26:07.240 --> 00:26:10.180 We see it with Cuban -Americans in Miami, with 00:26:10.180 --> 00:26:12.839 Indian -American motel owners across the U .S., 00:26:12.839 --> 00:26:15.759 with Chinese business owners in communities all 00:26:15.759 --> 00:26:18.779 over the globe. However, we have to look at the 00:26:18.779 --> 00:26:21.380 data honestly here. While these groups are highly 00:26:21.380 --> 00:26:23.759 entrepreneurial, there is often a gap in the 00:26:23.759 --> 00:26:25.660 type of industries they enter. What do you mean? 00:26:25.859 --> 00:26:28.279 The data still shows that white men are statistically 00:26:28.279 --> 00:26:30.579 more likely to be self -employed and high - high 00:26:30.579 --> 00:26:33.079 prestige, lucrative industries like finance and 00:26:33.079 --> 00:26:35.539 tech. Minority entrepreneurs are often pushed 00:26:35.539 --> 00:26:37.960 into lower margin sectors like retail or food 00:26:37.960 --> 00:26:40.700 service. So the playing field isn't quite level, 00:26:40.819 --> 00:26:43.200 even if the entrepreneurial drive is there in 00:26:43.200 --> 00:26:46.619 spades. What about generational shifts? We always 00:26:46.619 --> 00:26:48.759 hear that millennials and Gen Z are the ultimate 00:26:48.759 --> 00:26:51.440 hustle generation, you know, with the gig economy 00:26:51.440 --> 00:26:54.980 and the side hustle. But the data you found seems 00:26:54.980 --> 00:26:57.420 to paint a very different picture. It's one of 00:26:57.420 --> 00:26:59.519 the great ironies of the digital age. We call 00:26:59.519 --> 00:27:02.240 millennials digital natives and we just assume 00:27:02.240 --> 00:27:04.160 they're all in their basement starting the next 00:27:04.160 --> 00:27:07.640 Facebook. But the hard data shows they are surprisingly 00:27:07.640 --> 00:27:12.019 less likely to engage in true firm creating entrepreneurship 00:27:12.019 --> 00:27:14.799 than prior generations like the baby boomers 00:27:14.799 --> 00:27:18.240 or Gen X were at the same age. Why is that? Is 00:27:18.240 --> 00:27:21.119 it a fear of failure or is it a financial thing? 00:27:21.279 --> 00:27:23.759 It's largely structural and financial. The number 00:27:23.759 --> 00:27:26.980 one anchor is debt. If you leave university with 00:27:26.980 --> 00:27:29.519 six figures of student loan debt, you simply 00:27:29.519 --> 00:27:31.799 cannot afford to step into nice and uncertainty. 00:27:31.980 --> 00:27:34.500 You need a guaranteed paycheck to service that 00:27:34.500 --> 00:27:36.720 debt. You can't bootstrap if you're already starting 00:27:36.720 --> 00:27:39.859 underwater. You can't. And this is a generation 00:27:39.859 --> 00:27:41.779 that came of age during major financial crises, 00:27:41.960 --> 00:27:44.400 the 2008 crash, the long recovery, the pandemic. 00:27:45.529 --> 00:27:48.269 That kind of economic trauma tends to make a 00:27:48.269 --> 00:27:51.029 generation more risk averse. They might do a 00:27:51.029 --> 00:27:54.130 side hustle like driving for Uber for extra cash, 00:27:54.289 --> 00:27:56.309 which is a form of small business. But they are 00:27:56.309 --> 00:27:59.150 much more hesitant to quit their job and go all 00:27:59.150 --> 00:28:02.089 in on a high growth, high risk venture. We're 00:28:02.089 --> 00:28:04.170 also seeing the very definition of what a therm 00:28:04.170 --> 00:28:07.450 is begin to change. We have this rise of project 00:28:07.450 --> 00:28:09.369 based entrepreneurship now. Right. What's often 00:28:09.369 --> 00:28:11.950 called the Hollywood model. Exactly. A producer 00:28:11.950 --> 00:28:15.529 who is the entrepreneur in this case. a specialized 00:28:15.529 --> 00:28:18.990 team for one project, a movie. They bring in 00:28:18.990 --> 00:28:21.150 a director, actors, a cinematographer, editors. 00:28:21.470 --> 00:28:23.710 They work 16 -hour days for six months. They 00:28:23.710 --> 00:28:25.609 finish the product, and then the company essentially 00:28:25.609 --> 00:28:27.910 dissolves. Everyone moves on to the next project. 00:28:28.109 --> 00:28:30.430 And we're seeing that model bleed into so many 00:28:30.430 --> 00:28:32.849 other sectors, high -end construction, software 00:28:32.849 --> 00:28:34.690 development, management consulting. It's the 00:28:34.690 --> 00:28:37.609 pop -up company. It allows for extreme agility 00:28:37.609 --> 00:28:40.849 and brings the best talent to a specific problem, 00:28:41.009 --> 00:28:44.009 but it offers absolutely zero long -term job 00:28:44.009 --> 00:28:47.650 security. Then there are the more values -based 00:28:47.650 --> 00:28:51.410 shifts in what entrepreneurship can be. You mentioned... 00:28:51.579 --> 00:28:53.799 Biosphere entrepreneurship and feminist entrepreneurship, 00:28:54.160 --> 00:28:56.920 these feel like a direct response to that destructive 00:28:56.920 --> 00:28:59.680 winner -take -all Schumpeterian model. They are, 00:28:59.759 --> 00:29:02.559 absolutely. Biosphere entrepreneurship asks a 00:29:02.559 --> 00:29:05.440 radical question. Can we generate value for the 00:29:05.440 --> 00:29:07.900 ecosystem rather than just extracting value from 00:29:07.900 --> 00:29:10.920 it? Can the business model itself actually improve 00:29:10.920 --> 00:29:13.599 the soil or clean the water or sequester carbon? 00:29:13.779 --> 00:29:16.240 And feminist entrepreneurship. That challenges 00:29:16.240 --> 00:29:18.460 the hyper -competitive, aggressive mentality 00:29:18.460 --> 00:29:21.160 of traditional business. It prioritizes things 00:29:21.160 --> 00:29:24.279 like cooperation, workplace equality, and mutual 00:29:24.279 --> 00:29:26.779 respect over ruthless zero -sum competition. 00:29:27.299 --> 00:29:29.740 It aims to improve the quality of life for women 00:29:29.740 --> 00:29:31.980 and communities, not just maximize shareholder 00:29:31.980 --> 00:29:34.740 value. Which brings us to the absolute opposite 00:29:34.740 --> 00:29:37.619 end of that moral spectrum. If feminist entrepreneurship 00:29:37.619 --> 00:29:39.920 is about cooperation, this next group is about 00:29:39.920 --> 00:29:42.380 taking what you want by force. But you argue 00:29:42.380 --> 00:29:44.980 they are still, technically, entrepreneurs. Pirates. 00:29:45.319 --> 00:29:48.440 It sounds like a joke, but in 2014, some serious 00:29:48.440 --> 00:29:51.460 academic research was published linking the principles 00:29:51.460 --> 00:29:54.519 of entrepreneurship to the golden age of piracy 00:29:54.519 --> 00:29:58.099 in the Caribbean. The idea is if you strip away 00:29:58.099 --> 00:30:00.099 the morality for a moment and just look at the 00:30:00.099 --> 00:30:03.160 organizational mechanics, pirates were early 00:30:03.160 --> 00:30:05.220 disruptors. Okay, you have to walk me through 00:30:05.220 --> 00:30:07.799 the business model of Blackbeard. Think about 00:30:07.799 --> 00:30:10.640 it from a purely operational perspective. They 00:30:10.640 --> 00:30:13.019 operated completely outside the law, meaning 00:30:13.019 --> 00:30:15.660 they had zero state protection or contract enforcement. 00:30:16.079 --> 00:30:18.700 They had to organize capital ships, cannons, 00:30:18.940 --> 00:30:21.859 weapons. They had to recruit and manage a very 00:30:21.859 --> 00:30:24.059 difficult workforce. They had to manage extreme 00:30:24.059 --> 00:30:27.440 risk every single day, storms, starvation, the 00:30:27.440 --> 00:30:29.460 Royal Navy. And they had to solve the classic 00:30:29.460 --> 00:30:32.779 principal agent problem. How do you, as the captain, 00:30:32.940 --> 00:30:35.640 get a crew of violent criminals to not just kill 00:30:35.640 --> 00:30:37.839 you in your sleep and steal all the loot? Exactly. 00:30:38.039 --> 00:30:39.880 And how did they solve it? With radical innovation 00:30:39.880 --> 00:30:42.000 and governance. They had written constitutions, 00:30:42.000 --> 00:30:44.720 the pirate code. They had democratic voting for 00:30:44.720 --> 00:30:47.160 the captain. They had a flat compensation structure 00:30:47.160 --> 00:30:49.819 with prescribed shares of the booty. They even 00:30:49.819 --> 00:30:52.220 had workers' compensation. Wait, really? Yes. 00:30:52.779 --> 00:30:55.619 If you lost a leg or an eye in battle, you got 00:30:55.619 --> 00:30:58.839 a specific guaranteed extra payout from the collective 00:30:58.839 --> 00:31:02.339 haul before the rest was divided up. The argument 00:31:02.339 --> 00:31:04.759 is that pirates teach us how organizations form 00:31:04.759 --> 00:31:07.519 and manage risk in a vacuum when there is no 00:31:07.519 --> 00:31:10.619 government to enforce contracts. It's violent 00:31:10.619 --> 00:31:13.420 entrepreneurship, but from a structural standpoint, 00:31:13.759 --> 00:31:17.059 it's entrepreneurship. That is a wild but surprisingly 00:31:17.059 --> 00:31:19.700 compelling lens. Yeah. It's organization born 00:31:19.700 --> 00:31:23.180 from pure chaos. But let's pivot from that to 00:31:23.180 --> 00:31:26.000 the modern version of gathering a crew and finding 00:31:26.000 --> 00:31:29.059 treasure. Funding. This is the big debate for 00:31:29.059 --> 00:31:31.619 any founder today. Do you bootstrap or do you 00:31:31.619 --> 00:31:33.960 take the VC money? This is the critical fork 00:31:33.960 --> 00:31:36.279 in the road for any startup. Bootstrapping is 00:31:36.279 --> 00:31:38.539 when you use your own personal savings. You run 00:31:38.539 --> 00:31:40.660 up your credit cards. You rely on sweat equity. 00:31:40.960 --> 00:31:43.279 You only grow as fast as your sales allow. It's 00:31:43.279 --> 00:31:46.569 slow and it's painful. But you own it. 100%. 00:31:46.569 --> 00:31:48.769 You have total control. The moment you take that 00:31:48.769 --> 00:31:50.970 first check from a venture capitalist or an angel 00:31:50.970 --> 00:31:53.450 investor, the entire incentive structure of your 00:31:53.450 --> 00:31:55.950 company shifts. Because the VC isn't buying your 00:31:55.950 --> 00:31:58.950 product, they're buying an exit strategy. Correct. 00:31:59.130 --> 00:32:01.250 They are not a customer. They are an investor 00:32:01.250 --> 00:32:04.769 who needs a liquidity event, a sale to a bigger 00:32:04.769 --> 00:32:07.470 company or an IPO, usually within a five to seven 00:32:07.470 --> 00:32:10.670 year window. They need to get their 10x or 20x 00:32:10.670 --> 00:32:13.660 return to make their funds math work. But maybe 00:32:13.660 --> 00:32:16.440 you, the founder, want to build a sustainable, 00:32:16.579 --> 00:32:18.980 profitable legacy business to pass on to your 00:32:18.980 --> 00:32:21.359 children. Or maybe you have philanthropic goals 00:32:21.359 --> 00:32:23.579 that eat into the short -term profit margins 00:32:23.579 --> 00:32:26.130 that they need. The conflict is baked into the 00:32:26.130 --> 00:32:28.890 model from day one. If I take the money, I ultimately 00:32:28.890 --> 00:32:30.869 work for the people who gave me the money. And 00:32:30.869 --> 00:32:33.390 founders often forget that or they choose to 00:32:33.390 --> 00:32:35.170 ignore it in the excitement of getting that big 00:32:35.170 --> 00:32:38.269 check. They do. And bringing in VCs often means 00:32:38.269 --> 00:32:40.789 you lose control over strategy, over hiring, 00:32:40.910 --> 00:32:43.829 and eventually even over your own job. Boards 00:32:43.829 --> 00:32:46.269 fire founders all the time. I mean, Steve Jobs 00:32:46.269 --> 00:32:48.690 got famously fired from Apple. It's a classic 00:32:48.690 --> 00:32:51.170 Faustian bargain. You get the rocket fuel going 00:32:51.170 --> 00:32:53.390 incredibly fast, but you might lose control of 00:32:53.390 --> 00:32:55.339 the steering wheel. Which brings the government 00:32:55.339 --> 00:32:57.599 right back into the equation. Because if you're 00:32:57.599 --> 00:32:59.720 trying to sell a company or aiming for that massive 00:32:59.720 --> 00:33:03.319 IPO, the tax implications define the entire strategy. 00:33:03.440 --> 00:33:06.059 There's this persistent political belief on one 00:33:06.059 --> 00:33:08.640 side of the aisle that lowering corporate taxes 00:33:08.640 --> 00:33:12.299 is the magic switch to unleash a wave of entrepreneurship. 00:33:13.039 --> 00:33:16.200 Does the data actually back that up? The data 00:33:16.200 --> 00:33:20.000 is surprisingly mixed and much weaker than you'd 00:33:20.000 --> 00:33:22.359 think. It's not the slam dunk that politicians 00:33:22.359 --> 00:33:24.779 often make it out to be. How so? What does it 00:33:24.779 --> 00:33:27.200 say? Well, some studies suggest that high corporate 00:33:27.200 --> 00:33:29.400 taxes can actually incentivize certain types 00:33:29.400 --> 00:33:31.539 of entrepreneurship. That sounds completely backwards. 00:33:31.700 --> 00:33:33.740 Why would high taxes make me want to start a 00:33:33.740 --> 00:33:36.200 business? It's about tax arbitrage and avoiding 00:33:36.200 --> 00:33:39.339 double taxation. If personal income tax rates 00:33:39.339 --> 00:33:41.660 are very high, it might become advantageous for 00:33:41.660 --> 00:33:43.380 a high earning individual to incorporate their 00:33:43.380 --> 00:33:46.079 work, pay themselves a smaller salary and leave 00:33:46.079 --> 00:33:48.160 the profits in the corporation, which might be 00:33:48.160 --> 00:33:50.579 taxed at a lower rate. It can become a kind of 00:33:50.579 --> 00:33:53.220 tax shelter. On the other hand, other studies 00:33:53.220 --> 00:33:55.380 have linked more progressive income taxes to 00:33:55.380 --> 00:33:57.900 higher rates of sole proprietorships. So people 00:33:57.900 --> 00:34:00.240 are starting businesses partly to game the tax 00:34:00.240 --> 00:34:02.940 code, not necessarily because the low taxes unleash 00:34:02.940 --> 00:34:06.400 their inner creative genius. In part, yes. But 00:34:06.400 --> 00:34:09.000 the main, most consistent takeaway from researchers 00:34:09.000 --> 00:34:11.920 like Bruce and Mosen is that the elasticity is 00:34:11.920 --> 00:34:14.820 very low. The response to tax changes is small. 00:34:15.190 --> 00:34:17.570 What does that mean in plain English? It means 00:34:17.570 --> 00:34:19.949 it would take a massive, almost politically impossible 00:34:19.949 --> 00:34:23.130 tax drop, we're talking like 50 percentage points, 00:34:23.289 --> 00:34:25.510 to move the needle on entrepreneurial activity 00:34:25.510 --> 00:34:29.090 by just 1%. So all the political fighting over 00:34:29.090 --> 00:34:32.869 a 2 % or 3 % corporate tax cut is, in terms of 00:34:32.869 --> 00:34:35.329 its effect on startup rates, essentially just 00:34:35.329 --> 00:34:37.750 political theater. From the perspective of creating 00:34:37.750 --> 00:34:39.750 new entrepreneurs, the evidence suggests it's 00:34:39.750 --> 00:34:42.349 largely theater, yes. Things like culture, access 00:34:42.349 --> 00:34:45.670 to education, social safety nets, and the availability 00:34:45.670 --> 00:34:48.250 of early stage capital matter a whole lot more 00:34:48.250 --> 00:34:50.869 than marginal tax rates. So we've covered a lot 00:34:50.869 --> 00:34:53.010 of ground here. We've gone from 18th century 00:34:53.010 --> 00:34:55.329 French dictionaries to Ashanti elephant tales, 00:34:55.429 --> 00:34:57.929 from the psychology of paranoid founders to the 00:34:57.929 --> 00:35:00.329 corporate governance of pirate ships. When you 00:35:00.329 --> 00:35:02.690 boil it all down, what's a big takeaway? I think 00:35:02.690 --> 00:35:04.530 the biggest takeaway is that we need to respect 00:35:04.530 --> 00:35:07.309 the complexity of the word. Entrepreneurship 00:35:07.309 --> 00:35:10.719 isn't one thing, it's a spectrum. It's the risk 00:35:10.719 --> 00:35:13.559 taker, the optimizer, and the creative destroyer 00:35:13.559 --> 00:35:15.880 all at once, and sometimes all in the same person. 00:35:16.199 --> 00:35:18.760 It's a vital economic function, but it's also 00:35:18.760 --> 00:35:21.440 a deeply, deeply human one. It's that fundamental 00:35:21.440 --> 00:35:23.840 drive to reshape the world, whether that's by 00:35:23.840 --> 00:35:26.179 baking a better loaf of bread or by trying to 00:35:26.179 --> 00:35:28.420 colonize Mars. Exactly. And as we look forward, 00:35:28.500 --> 00:35:30.480 I want to leave you and everyone listening with 00:35:30.480 --> 00:35:33.199 a final provocation, something to think about 00:35:33.199 --> 00:35:35.920 based on that biosphere entrepreneurship concept 00:35:35.920 --> 00:35:38.539 we touched on. The idea of restoration. not just 00:35:38.539 --> 00:35:41.380 extraction. Yes. Think about the definition we 00:35:41.380 --> 00:35:44.159 started with, the creation or extraction of value. 00:35:44.400 --> 00:35:47.219 For centuries, entrepreneurship has been almost 00:35:47.219 --> 00:35:49.719 exclusively about extracting value from the earth, 00:35:49.880 --> 00:35:52.460 from labor, from attention, to create private 00:35:52.460 --> 00:35:55.019 wealth. The question for the next century is, 00:35:55.159 --> 00:35:58.539 can that definition evolve? can entrepreneurship 00:35:58.539 --> 00:36:01.300 become primarily about the restoration of value? 00:36:01.480 --> 00:36:03.139 So instead of Schempeter's creative destruction, 00:36:03.380 --> 00:36:05.179 it would be, I don't know, creative restoration. 00:36:05.519 --> 00:36:08.800 Perhaps. As we face global challenges like climate 00:36:08.800 --> 00:36:11.760 change, biodiversity loss, and resource scarcity, 00:36:12.139 --> 00:36:14.659 is it possible that the most successful, most 00:36:14.659 --> 00:36:17.480 celebrated entrepreneurs of the future won't 00:36:17.480 --> 00:36:19.780 be the ones who extract the most? but the ones 00:36:19.780 --> 00:36:21.960 who put the most back, the ones who clean the 00:36:21.960 --> 00:36:24.559 oceans or reforest the land or build circular 00:36:24.559 --> 00:36:27.619 economies? Will the very definition of profit 00:36:27.619 --> 00:36:31.300 itself have to change to include social and environmental 00:36:31.300 --> 00:36:34.460 capital? That is the trillion -dollar question. 00:36:34.840 --> 00:36:37.239 If you can invent a business model that solves 00:36:37.239 --> 00:36:39.820 that, you won't just be an entrepreneur, you 00:36:39.820 --> 00:36:42.119 might just be a savior. And perhaps that is the 00:36:42.119 --> 00:36:44.639 ultimate true uncertainty that the next generation 00:36:44.639 --> 00:36:47.719 needs to navigate. On that rather profound note, 00:36:47.840 --> 00:36:49.840 I'm going to go analyze the risk distribution 00:36:49.840 --> 00:36:52.480 of my launch options. Thank you so much for this 00:36:52.480 --> 00:36:54.760 deep dive. This was fascinating. It was my pleasure. 00:36:55.099 --> 00:36:57.500 And to you listening, go find your own inner 00:36:57.500 --> 00:36:59.900 pirate or your inner baker. Just make sure you 00:36:59.900 --> 00:37:01.539 know which game you're playing. Thanks for joining 00:37:01.539 --> 00:37:01.760 us.