Rampell: Only the privileged can afford to take risks
The United States is supposed to be the land of the entrepreneurial spirit, where people grab their bootstraps and take big risks to try to change the world (or just get rich).
But the past few decades have given the lie to this piece of the American dream. By many metrics, entrepreneurship rates have tumbled. There was a brief spike in self-employment during the recession, but that seems to have been caused by necessity rather than opportunity, as people reinvented themselves as "independent consultants" because they couldn't find stable work and needed to paper over the holes in their resumes.
There is one subset of Americans whose entrepreneurial spirit and opportunities are blossoming, however: elite, newly minted MBAs.
Historically the United States' top business schools have funneled students into lucrative but safe Organization-Man-style careers in fields such as consulting, finance, consumer products and tech. But increasingly, bright-eyed and bushy-tailed young B-school elites are striking out on their own. One graduate of the class of 2014 I met recently, for example, said he deliberately did not line up a job because he plans to start his own company. He's not quite sure what the company will do just yet; he just knows he'd rather work for himself, with all the risk and upside that entails, than be a slave to The Man. He'll figure out the rest in due course.
Struck by his gumption, I started calling around to prestigious business schools. Sure enough, places such as Harvard Business School and MIT's Sloan School of Business say the share of graduates venturing into new ventures has been climbing, in some cases to record highs. And the influx into entrepreneurship appears to be by choice.
The University of Pennsylvania's Wharton School, for example, saw the share of grads who decided to start their own businesses rather than seek employment at existing firms quadruple since the recession began, from 1.6 percent in 2007 to 7.4 percent last year. At Berkeley's Haas School of Business, the entrepreneurship rate doubled in a year, from 5 percent in 2012 to 10 percent in 2013.
At Stanford's Graduate School of Business, nearly one in five members of the class of 2013 was launching a business by graduation, a rate surpassing even that of the dot-com bubble.
What's going on? Why are young, elite MBAs thirsting for the risks and rewards of shark-tankery, particularly when entrepreneurship seems so unattractive or inaccessible to Americans writ large?
Every professor, administrator and young entrepreneur I spoke with had a different theory. Maybe it's changes to the curriculum. Or lower barriers to entry in certain industries, thanks to developments such as cloud computing. Or better access to venture capital (although most of the young entrepreneurs I interviewed haven't gotten to that stage). Or the influence of pop cultural phenomena such as the "The Social Network."
The explanation I found most convincing, though, came from Bryce Meredig, who will receive his MBA from Stanford this week. He's one of three co-founders of Citrine Informatics, which uses data-mining to rapidly design new advanced materials for applications ranging from energy to aerospace.
He's quite confident his company will change the world. But even if it doesn't, he says, he like the other new MBAs hoping to change the world with their own start-ups will be fine. And that realization is crucial to his ability to ignore the lure of a comfortable corporate life.
"The cost of failure feels really low," he said. "If Citrine tanks, none of us feels like we will have lost career opportunities as a result." If things end badly in a couple of years, he says, he and his co-founders will likely still be able to compete for more traditional jobs at places like McKinsey and Google. They see only upside to trying something crazy.
This sentiment is partly about the culture of Silicon Valley, where failure is indeed less stigmatized. But it's also about something bigger than just local social mores and attitudes.
It's about an advantage bestowed upon the United States' elites, thanks to the skills and networks they have inherited or acquired. When you are highly educated and well-connected, you have the freedom to try new things and take big risks because those risks turn out to not be so risky after all. As with so many other facets of our economy, there are really two Americas when it comes to entrepreneurship: There is the America that can afford to invest blood, toil, tears and sweat into launching a possibly brilliant, but also possibly doomed start-up. And there is the other America, whose financial security is so precarious that it cannot ever afford to fail, and increasingly is unable to try.
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