Have We Reached Peak Entrepreneurship?

One goal crosses the political divide: the need for more entrepreneurs

By Julio M. Ottino & Mark P. Mills

In today’s hyper-partisan era, one goal crosses the political divide: the need for more entrepreneurs.

Encomia are everywhere: Politicians praise them, Hollywood lionizes them, venture capitalists chase them, universities foster them. Entrepreneurs, from Henry Ford to Elon Musk, are embedded in American lore. In an earlier era they were popularized in Horatio Alger rags-to-riches terms; today it’s the garage-to-tech-titan stories that have legendary status for Millennials.

Could it be, however, that we’ve hit peak preoccupation with entrepreneurship?

Although entrepreneurial magic is often discussed in “tech” terms, the reality is most startups involve such things as restaurants and lawn services or electricians and car services — much of which require no college degree. By contrast, the vast majority of tech entrepreneurs emerge from universities.

Have colleges and universities received the message? The battle to have schools take entrepreneurship seriously has been won. Consider how much has changed.

When boomers left high schools, circa 1970, there were just 16 colleges and universities offering courses in entrepreneurship, and college-centric startup “incubators” were essentially non-existent, according to Kaufmann Foundation data. Now, over 1,500 universities offer such courses and college-based incubators are everywhere. Unsurprisingly — and whether it’s cause or effect — the share of today’s freshmen who say they want to be entrepreneurs has doubled since 1970. But even with that doubling, the actual share of college students declaring such a goal remains just 3.3 percent.

Yet on some campuses, the proliferation of “angel” investment groups, start-up competitions, and mentor networks would make you think the entire point of attending college is to become an entrepreneur. And this despite the fact that the vast majority of students will become employees, not employers.

Meanwhile, according to Gallup research, the majority of employers “think college graduates aren’t developing workplace skills.” These employers aren’t referring to coding or computation skills, but, rather, to “human qualities” such as “relationship building, dealing with complexity and ambiguity, balancing opposing views, teaming and collaboration, co-creativity.” Even though such qualities don’t come naturally to all people, they are eminently teachable — the business of the university.

Hence the importance of distinguishing between entrepreneurship and innovation. Companies — and the country — need both. But if its jobs we’re worried about, educators may have the wrong emphasis. Ultimately, it is innovation that, while critical to entrepreneurship, is more broadly vital to the economy and to companies for creating jobs.

Of course startups create jobs. But the legendary zero-to-one-thousand employee successes — Hewlett Packard, Intel, Microsoft, Apple, Google, Facebook — don’t tell the whole story. A St. Louis Federal Reserve analysis of the past two decades reveals that tiny companies (under 20 employees), which include startups, created just 15 percent of net jobs. Big firms (over 500 employees) accounted for 40 percent of net new jobs, while small and mid-sized firms (20 to 500 employees) created 45 percent.

Still, however rare, the archetype of the under-30 tech titan is very seductive. In fact, the data show that people over 45 years old are twice as likely to start a company as those under 35. And notwithstanding Peter Thiel’s admonishment that many students should just skip college and go straight to starting a company, nearly 80 percent of entrepreneurs attended college, a share doubtless higher for tech-centric startups.

There is a magnetic allure to funding or fostering a new generation of geniuses who might create the next “Unicorn” — a Google or a Facebook. CB Insights counts nearly 200 so-called Unicorns (private companies valued at over $1 billion) in today’s panoply of venture-funded companies. But even those vaunted companies have the same core challenge as every other well-established firm: finding talented and innovative employees.

This has obvious relevance for universities where, despite a profusion of stakeholder goals, the central mission remains educating the next generation. The true revolutions we hope for in every domain — from health care and transportation to energy and manufacturing — will not emerge from Shark Tank competitions around clever products. Instead, transformational advances come from the deep knowledge that emerges when people of all ages spend time studying hard problems, often collaboratively.

However, the policies and priorities associated with such an old-fashioned educational concept don’t lend themselves easily to political nostrums or campus placards. Perhaps we need to be more innovative about the idea of what constitutes entrepreneurship.

In practice, this means educators need to foster innovation-as-a-skill. Such a re-focus doesn’t mean abandoning the startup culture. On the contrary, innovation is a key feature of entrepreneurship. And the innovation skill has lifelong value for individuals, not to mention employers that necessarily need more than episodic bursts of brilliance.

But it turns out that teaching innovation is harder than simply making the hackneyed assertion to “think outside of the box.” True innovation requires cultivating the instinct to be creative and fostering a fearlessness to take up seemingly intractable challenges with the idea that “there must be a better way.” This is partly a matter of character, and it may be closer to an “art” than a science.

America was producing entrepreneurs long before the word became fashionable. Risk-taking and even “irrational exuberance” together with a contrarian spirit are part of the American DNA. Nobel economist Edmund Phelps captured this quite simply as the “dynamism” of America. Dynamism is the feature that will lead to more innovators, not just entrepreneurs — something both policymakers and educators can embrace.

Julio M. Ottino is Dean of Northwestern University McCormick School of Engineering. Mark P. Mills is a McCormick Faculty Fellow and a Senior Fellow at the Manhattan Institute.

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