The Generalist - Who Becomes an Entrepreneur?

Friends,

Over recent months, I’ve become increasingly obsessed with a question: who becomes an entrepreneur?

This begets many others:

• Is entrepreneurship a young person’s game or better left to experienced minds?
• Do founders tend to spike on one dimension, or are they well-rounded?
• Are mental health issues positively or negatively associated with self-employment?
• What kind of upbringing produces founders?

I’ve reviewed dozens of academic studies to try and answer these questions (and many others). Today’s piece outlines the most compelling results, hopefully providing new ways of understanding those that build businesses. To begin that exploration, jump in now.

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Who Becomes an Entrepreneur?

Actionable insights

If you only have a few minutes to spare, here’s what investors, operators, and founders should know about who becomes an entrepreneur.

• The market misjudges you. Entrepreneurs may not be born but made. When employers underestimate (and undercompensate) a worker’s value, the rational decision for that person is to start a business of their own.
• You’re well-rounded. Though venture capitalists often talk about finding a founder that “spikes” on a certain dimension, those most likely to become entrepreneurs are well-rounded. A 2005 study from Edward Lazear suggests that the self-employed tend to be generalists, not specialists.
• Mental health issues run in the family. According to one study, entrepreneurs are much more likely to face mental health problems – both directly and in their broader family. Sufferers of bipolar disorder, ADHD, and OCD are all more likely to go solo.
• You survived a difficult childhood. Running a business is not for the faint of heart. It is perhaps not surprising then that childhood adversity may increase entrepreneurship rates. One 2021 paper analyzes this connection by observing a group that suffered extreme hardship: China’s Great Famine survivors.

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One of The Generalist’s primary obsessions is understanding how great organizations are made. In pursuit of that subject, we’ve studied companies from around the world, across industries, and at different stages of maturation, hopping from Starbucks to Stripe, Y Combinator to Flexport, Rappi to Kaspi, and DST to TSMC.

We spent significant time on the organization’s origin story in each of these cases. How did a trip to Italy influence Howard Schultz’s entrepreneurial vision? What did the Collison brothers build before they tackled payments? Why was Morris Chang perfectly positioned to build the largest semiconductor fabricator in the world?
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Beneath the obsession with epic organizations is, perhaps, an even greater interest in the people and stories behind them. Despite that curiosity, we have yet to focus on the phenomenon of entrepreneurship itself. What factors influenced the approximately 582 million entrepreneurs to build businesses? What characteristics and experiences drive someone to leave the safety of employment for the volatility of pioneerdom?

To try and answer these questions, I’ve reviewed dozens of academic studies on entrepreneurship and the factors that lead to it. It goes without saying, hopefully, that there are perhaps hundreds of intriguing, interesting papers on this subject. Today’s piece summarizes the seven results that I found most compelling. In some instances, they confirm the lessons gleaned from studying the companies mentioned earlier; at other points, they challenge them.

These findings are not presented as definitive truths. Indeed, academia’s replication crisis means that most studies should be viewed with some skepticism, perhaps especially those focused on Western, Educated, Industrialized, Rich, and Democratic (WEIRD) subject groups. Rather, I view them as intriguing frames of reference, heuristics through which part of the picture may be understood. Hopefully, they contribute to improved understanding for founders themselves and those who work with them.

With that, let’s explore the fundamental question: who becomes an entrepreneur?

Build valuable connections and learn from great minds in The Generalist community

CEOs, VC partners, product managers, engineers, and operators leverage The Generalist community to boost their social capital, enhance their professional education, and increase the number of opportunities they see.

We’re excited to kick off the following in February:

• Curated introductions. On Wednesday, February 15th, we’ll begin a new round of our curated introductions for community members. These carefully planned connections could be the way you meet your next cofounder, investor, or game-changing hire.
• A session with Jimmy Soni. On Thursday, February 23rd, we’ll sit down with Jimmy Soni, the award-winning and best-selling author who covered PayPal’s turbulent early days and the shaping of a generation of tech talent. We’ll dive into Jimmy’s creative process and his thoughts on the sector’s next great stories.

Maximize your career potential in tech by leveraging opportunities to connect, learn, and grow your network with our community.

In a meme

​​​​For the pictorially inclined, here's the whole piece — all 2,700 words of it — in a single meme.

Puzzler

​​​​​​All guesses are welcome and clues are given to anyone that would like one. Just respond to this email for a hint. Today’s riddle is reportedly the oldest one ever recorded. We can thank the Sumerians for it.

Congratulations to Saagar B, a new winner in 2023. He was first to pounce on last week’s puzzler, outpacing Drew M, Alexia B, Karolina E, Guillermo O, Jugal S, Kam C, Sylma M, Alex M, Jonathan H, Nick D, Izu W, Jack S, Gustavo A, Nathan M, Gary J, Sam Z, Ajay J, Shashwat N, Joshua K, Steven R, Michael O, Jim W, Epicurean, Ryan C, Andrew S, Eugene H, and Krishna N.

The answer? Fire.
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See you all soon, and sending my best for a lovely rest of the day.

Until next time,
Mario

PS - I thought I’d share one final note: I finally got around to seeing Tár this past week, and it’s probably the best film I’ve seen since Phantom Thread. An incredibly compelling watch!