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Entrepreneurship as a career option
This page evaluates entrepreneurship as a career option. It provides information that can help you answer a question of the form Should I pursue a career in entrepreneurship?
See all pages evaluating particular career options|See our main career selection pages: factors to consider, ...
Entrepreneurs start businesses.
- In order to be a successful entrepreneur, you need to have unusual personal characteristics.
- The variance in earnings of entrepreneurs is enormous. Some become multibillionaires, and others go bankrupt. Most entrepreneurs could make more money doing something else, but there's a possibility of making far more money than you would be able to in other careers.
- As with earnings, the variance in social value that entrepreneurs produce is enormous. As a group, entrepreneurs contribute a great deal of social value, but most produce very little social value.
If you're interested in the possibility of pursuing entrepreneurship, see our entrepreneurship learning recommendations.
Relevant personal characteristics
Some characteristics relevant to being a successful entrepreneur are:
- Determination. Famous venture capitalist Paul Graham says that this is probably the biggest predictor of success.
- Strong ability to work independently without much guidance or supervision.
- Tolerance of high uncertainty. It's often very unclear whether or not an enterprise will succeed, and whether one is working in the right direction at any given time.
- An idea that you're passionate about. Your chances of success are much better if you care a great deal about the product that you're producing.
- Willingness to accept the risk of not accomplishing anything significant. Most apparently promising ideas don't lead anywhere.
Carl Shulman at the 80,000 Hours blog lists:
- Ability to recognize when your product is not promising. Many startup founders are unwilling to acknowledge evidence that their product is not a good one.
- Experience. The chances of success per attempt increase with number of past attempts, even when the past attempts are unsuccessful.
- Intelligence. Your chances of success are much higher if you're at the 99th percentile than they are if you're at the 90th percentile, and they're much higher if you're at the 99.9th percentile than they are if you're at the 99th percentile.
Paul Graham lists factors that he thinks should not play a major role in whether or not somebody should become an entrepreneur in Why to not not found a startup. Some of the factors that he lists are factors that we've listed as relevant. Even if some of the characteristics that we list above are not strictly necessary, they still increase one's expected success, and whether one has them should play some role in one's decision.
Entrepreneurs' earnings vary by a factor of 10,000+.
Startup genome gives survey results on salaries, finding that 73% of startup founders make less than $50k/year.
A very small fraction of startups receive venture capital funding. In Salary or startup? How do-gooders can gain more from risky careers Carl Shulman at the 80,000 Hours gives figures for the amount of money that entrepreneurs who received venture capital ended up making over the span of ~ 4 years. Of the entrepreneurs studied, 67.4% made less than $1 million, 19.7% made between $1 million and $10 million, and about 10% made more than $10 million.
At the high end, people like Sergey Brin and Larry Page (founders of Google) Mark Zuckerberg (founder of Facebook) and Jeff Bezos (founder of Amazon) earned ~$20 billion over the course of their careers. However, they constitute a negligible fraction of entrepreneurs.
Further information: social value of entrepreneurship
- 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.
- Salary or startup? How do-gooders can gain more from risky careers
- Should more altruists consider entrepreneurship?
at the 80,000 Hours blog.