Social value of entrepreneurship

This page discusses the social value of entrepreneurship | View other pages on the social value of particular activities

For more on entrepreneurship, see entrepreneurship as a career option.

Considerations

• In general, earnings are correlated with social value produced. The fact that entrepreneurs' earnings are highly variable reflects high variance in social value produced.

• The average earnings of entrepreneurs of a given quality are higher than the earnings of the average entrepreneur of the same quality. So your expected earnings (in the technical sense) if you do entrepreneurship are higher than your probable earnings if you do entrepreneurship. Because most people care more about their probable earnings than their expected earnings (on account of risk aversion), this is a consideration in favor of entrepreneurship having higher expected social value than other careers do. If you're equally good at entrepreneurship and another career, you can probably contribute more expected social value (as measured by earnings) as an entrepreneur than if you pursue the other career.

• If your expected earnings are higher as an entrepreneur than they are in other careers, then the expected amount that you can donate to charity is higher than it is if you pursue other careers. If you donate a large fraction of your earnings to highly effective charities such as those recommended by GiveWell, the expected social value that you're able to contribute as a result of pursuing entrepreneurship is enhanced substantially.

• There's high variance in social value produced beyond what's captured by income. For example, Google doesn't earn income from those who use its products, and so produces social value out of proportion with its earnings. In the other direction, game developer Zynga arguably does harm on account of fostering addictive behavior amongst clients. If you're an entrepreneur, you can make a product that produces positive externalities while minimizing negative externalities, thereby contributing social value out of proportion with your earnings.

See also

• Salary or startup? How do-gooders can gain more from risky careers
• Should more altruists consider entrepreneurship?

at the 80,000 Hours blog.