The Wall Street Journal just published an article about how under-30 business-owners are basically scarcer than ever. Reflecting on my own experience, I thought “yeah, everyone’s totally poor in their twenties!” I had absolutely no money with which to float a business, and too many loans to take on another one, not to mention no extra time after career-building work hours to build a side business to profitability. I was scared just to get through to a safer time. So I blew my chance to be an under-30 entrepreneur. I assume most peoples’ 20s were like that.
But something else in the article got my attention too. Someone from Harvard Business School said that new ideas and new businesses are part of “the vitality of this country.” Which is troubling, when you think of contemporary under-30 entrepreneurs like Steve Jobs and Mark Zuckerberg. Where would we be without iPhones and Facebook? And what might we miss out on in the future if would-be entrepreneurs are derailed by debt and fear?
Going a little farther back, I thought about Thomas Edison, John D. Rockefeller, and Andrew Carnegie. I have been watching a History Channel mini-series about “The Men Who Built America” featuring these among others. Thomas Edison received 1,093 U.S. patents in his lifetime, of which the first, for an automatic ballot counter, was awarded when he was 22. John D. Rockefeller opened his original oil refinery when he was 24 with seed money saved from his wages as a bookkeeper. Andrew Carnegie made his first investment at age 20, which led to his vision to mass-produce steel to make skyscrapers.
Say what you will about these robber barons, but they were all from modest backgrounds – they all worked as children to supplement their families’ incomes, selling newspapers on trains, selling candy and potatoes, and working as a “bobbin boy” (changing spools of thread in a cotton mill), respectively. And yet they all had the means to be able to embark on lucrative self-employment by age 30.
Which led me to the natural questions of: if America has been built significantly with the work and vision of young entrepreneurs from Edison to Zuckerberg, and young entrepreneurs are at a statistical all-time low, is America’s mojo going to dry up? And if some of the greatest under-30 entrepreneurs of all time were from unimaginably poor immigrant and single-parent families, what is stopping us now?
The WSJ article indicates that there is a correlation with the recent rise of educational debt. I would agree from experience that debt is worse than just being poor, in terms of the possibility of entrepreneurship. Because when you are in debt, you need to be making predictable money all the time. And basically all the money is claimed before you can save it. So until debt is done (and long after), you do not have the time or money to seed an effort of your own. I could see the phenomenon of student loan debt freezing out young entrepreneurship on the large scale.
Worse than that, the under-30 range is the magic time when entrepreneurship makes sense. Because you are otherwise useless with zero skills and have nothing to lose! I was indebted from age 22 to 31. Now even with (or because of) my senior-level, high-paying job, I would need at least 4 years of living expenses saved before I would feel comfortable considering a side venture. Because my job is specialized and it would be hard to re-enter the workforce at my current level in case of failure. I currently have 1 year of expenses saved and it would take me 2.5 years to save the rest. By then I would be even less likely to do it, which is an example of why the problem extends beyond the under-30 demographic.
Entrepreneurship is actually the best reason I can think of to avoid debt in planning one’s education and career path. The received wisdom that educational debt is a good investment is aging fast. Any money spent on a degree has diminishing returns these days due to the lackluster job market and stagnant wages. Given the unwelcoming job market graduates are flocking into, it makes no sense at all to rule out entrepreneurship because of debt acquired buying a seat at the alternate table.
I was never interested in entrepreneurship and did not consider my debt a bottleneck to a lifestyle I might like better. But if I could give one piece of advice to high school kids, I would say that you don’t know yet what your dreams will be and don’t let debt close the door on them potentially. I would recommend to school children to plan to have, say, $25K saved by college graduation or by age 25 so that roughly one year’s expenses would be available to support an entrepreneurial venture while one is still young enough to bounce back from possible failure. I think kids these days owe themselves the opportunity to take that option.