The following is a guest post from Brabble Director of Business Development Patrick Mackaronis. Pat is a subject matter expert in global entrepreneurship and business ownership. In this post, he dives into reasoning as to why the number of business owners seems to be dropping, and what can be done to alleviate this in the future.
Per statistics compiled by the federal government, less than 10% of individuals are entrepreneurs. However, this small pool of individuals accounts for half of all the employment created in the United States. Being entrepreneur myself, I set out to uncover the reasons why there were so few entrepreneurs in America. During some extremely rough math, I figure that if you could increase the percentage of entrepreneurs and small businesses to just 11 or 12% could create enough jobs to bring the unemployment rate down considerably.
Of course, most people point out government regulation, taxes, and other external forces which make it hard for small businesses to start and grow. However, as I and other small businesses know, even with all the regulation and extra real economic forces, any company can succeed with the proper planning and determination. So, I wondered why is it that more individuals do not shift to being self-employed business owners. I’ve been trying for years to build other businesses and help others become independent entrepreneurs. During this journey, I started to realize something. Entrepreneurship takes more than just learning specific organizational skills or even the discipline necessary. Almost everything when it comes to business owners can be determined. But there is one thing that separates business owners from the rest of the population.
I sometimes use the movie “The Matrix” as a metaphor for the difference between employment and entrepreneurship. I will explain this trope in greater depth. For those who have not seen the Matrix, the Matrix is about a world that is dominated by human-made machines which became self-aware and enslaved humanity. These devices use the energy created by the human body to power themselves. To keep the humans occupied, alive and oblivious to their real existence a massive computer program called the matrix was created that acts as a virtual reality world in which every human being was plugged into and living their lives. These humans were unaware that the life that they were living was nothing more than a video game.
When looking at our current economic system, I started to notice the similarities between “The Matrix” in the real world. Instead of self-aware machines enslaving an entire population, we have corporations which have brainwashed a whole generation of individuals into thinking that the only way to success is through employment. And in trying to develop people into entrepreneurs, I have essentially had to give those individuals the proverbial red pill. I started to realize that to train someone to become an entrepreneur you could just teach them the basics of running a business, but you also should change their mindset.
As a child in school when it was time to talk to the guidance counselor about choosing a possible career, every reasonable choice out there is given to us. Even outlandish jobs such as being an astronaut were given credible consideration. But the minute that I told them that I wanted to be a business owner it was as if I said to them that I wanted to quit school and live the rest my life on the streets. I was immediately told the business ownership was not a realistic goal and that only the rich could start businesses. They also pointed out that most companies fail. The one common denominator that all Americans have is education. What I mean by this is everyone is required to go to school as a child. So, I start to wonder whether the framework of our educational system is the reason why there are so few entrepreneurs and why so many people have a complete mental opposition to the idea of self-employment.
From childhood, we are taught that the only way to success is to get a college degree. We are told that we must get a job and some large corporation or become some professional like a doctor or lawyer to be successful. As a child, I remember being force-fed the statistics about average income and the amount of education. Never once was the idea of self-employment even considered.
One of the most popular responses to the idea of starting a business is the risk inherent in not having a stable job. I’m told that job security and having a steady paycheck is what matters. However, being laid off twice, I know that the idea of a regular guaranteed paycheck is a joke. To me, there is nothing worse than having your livelihood and your success in the hands of somebody else. But most people cannot think outside of the box and don’t have the financial education to understand that there will be very few financially stable people who pursue the employment route. Before the 70s being an employee meant having a guaranteed paycheck once you retire. Being an employee meant having an income that would go with inflation. But after the 70s when the devaluation of the dollar took hold, all the standard economic rules no longer applied.
I would consider the start of the information age as the late 60s. The information age changes the world. Before the information age, only those with sizable resources or a great deal of education could ever succeed in the world of business. However, the information age afforded the average individual the opportunity to harness the power and resources of our collective knowledge to build any enterprise they could imagine. What you’re seeing emerging in economics today is a pure meritocracy. As the saying goes, the deck is being shuffled. You’re recognizing complete destitute individuals becoming billionaires and at the same time seeing millionaires lose everything. And the economic divides are no longer based on your lineage but instead based on your ability to think for yourself.
And this is where I started to realize what separated most entrepreneurs from everyone else. It isn’t money, or lineage, or any of the other traditional separators. Instead, it’s the ability to solve your problems. Our educational system is excellent at telling our children how to think. In retrospect, I started to realize that our educational system is explicitly designed to destroy our ability to problem solve. The place where I saw the most conflict at least in my situation was in mathematics. Mathematics is all about problem-solving. However, it didn’t matter if I got the right answer if I knew the steps to get there. The grading system was all about showing your work in being able to use the correct formulas to get the answer. Many of our tests were for five-point questions where the answer was only one or two points of the entire problem. I would routinely fail tests because I would either not show my work or use a formula that was not what they wanted.
Of course, this mass analogy is just a small part of the more significant problem. Having worked in many fields as an employee over the past 11 years, I have seen a significant cross-section of people. The one trait that seems scarce in almost every individual is the ability to think for themselves. Many times, working with fast food employee would accidentally make a spill. Rather than figuring out how to clean it up themselves, they would go and ask a supervisor what to do.
One of my favorite problems encountered in the retail industry that quickly separates those who can think for themselves and those who cannot is when somebody is on the register. When somebody is working a cash register and accidentally types in the wrong amount when cashing out a customer, it’s as if the world came to an end. Rather than taking out a calculator or a pad and paper in figuring out the change many people will rush to the supervisor. The option of figuring out what to do themselves is an even a thought in their mind.
Notes on the set our educational system isn’t deliberately trying to make her kids into drones. However, I started to diagnose the reasoning behind the inability to problem solve. It has nothing to do with intelligence, as I have seen some of the most intelligent people I know being unable to explain the simplest of problems. I’ve realized that it comes down to one simple thing. We have been trained as children to fear failure and do everything we can to avoid mistakes. As children or parents may scold us for making a mistake. In school, we do everything we cannot get an F on quizzes. As adults, we are trained to fear the idea of hitting rock bottom.
I started to test my theory. I dealt with those who had the hardest trouble thinking for themselves by telling the entities that if anyone asks what they’re doing just say them that I told them to do it correctly the way they’re doing it. This shifting of responsibility from them to me gave them the confidence that they needed to think for themselves. Time after time that I’ve used this tactic it has worked. Now some people will never break their fear of failure. People like these should go to college and get a degree so they can get an easy reasonably well-paying job. But for those who can break the chains of fear, it isn’t an overnight transformation, but rather a journey. Every bump in the road and every failure you run into any dust yourself off and drive.
As an entrepreneur in emerging markets, almost every client I deal with has something that they want to be done on their idea that I have never done before. Rather than saying “never mind, I don’t know how to do it,” I figure it out. This is a trait that I have always had and is one that can’t be learned. At least not in the traditional sense. Instilling in yourself confidence is less a matter of learning and more a matter of being broken. As a business owner, I started out as a marketing consultant, transferred myself into physical establishments, and finally into startups. Almost everything I did was self-taught, and almost every challenge I took on, I took on for the very first time. I failed more times than I’ve succeeded. However, every failure allowed me to be more successful the next generation.
The key to breaking yourself of the chains and becoming self-reliant is merely to put yourself in a situation where failure is a possibility. Of course, the key is to start out small. Perhaps you could start a side business. Regardless of what you do chances are you’ll probably not succeed. But your failure will teach you more than make you a better entrepreneur than if you succeed. Naturally, you don’t risk your entire financial future on your first business venture. But the next time around you will learn not to make the same mistakes. And if you fail again and you figured out another aspect of the business. Eventually, he failed so many times that you run out of things to fail at.
Now of course by failure I don’t mean that your company goes out of business every time. Even today with a successful business I fail all the time. I’ve had advertising campaigns that have been complete failures. I started and offered new services that didn’t produce results. As you grow in your entrepreneurial endeavor to failures, become less and the ramifications less costly to your bottom line. Those who say failure is not an option will never succeed. Because to succeed you need to be able to consider the idea of failure. The key, however, is not to give up once you have failed. Dust yourself off and go at it from a different angle.
Patrick Mackaronis is a subject matter expert and industry veteran in finance, entrepreneurship and startups. He is in New York City, where he is growing his social network startup Brabble to new heights.