The Study of Entrepreneurs

The first dream of Mr. T and I is to be self-employed in projects of our choosing. By definition, this means we want to be entrepreneurs. As a research geek, I spend my free time reading studies (you do, too, right?!). Recently, I’ve focused my efforts on studies about entrepreneurs. If I can learn about them, maybe I’ll be successful in becoming one. Here are four things I’ve learned:

  • Entrepreneurs see higher returns on educational investments. A study on educational returns found that “each additional year of formal education increases an entrepreneur’s income by a significant 9.4% [. … T]he corresponding percentage for employees is somewhat lower at 8.1 %. […] In other words, when you are an entrepreneur you earn 1.7 % higher returns on your formal education than when you are an employee.” One of the guesses as to why that might be is that entrepreneurs make a business focusing on what they’re good at. They use the skill set they gained in formal education to create the perfect job. I think the conclusion of the study is also interesting: “it seems value enhancing to stimulate people who wish to become entrepreneurs to go to school first, and not follow the ideas propagated by the relatively few billionaire dropouts, such as Richard Branson and Bill Gates, that ‘real’ entrepreneurs do not need formal schooling.” So, if you want to be an entrepreneur, school is worth the investment. If you want to see a bigger return on your education investments, become an entrepreneur!
  • Entrepreneurs experience less stress. A study on the stress levels of entrepreneurs found that no groups of people had statistically significant lower levels of perceived stress than entrepreneurs. What to hear the groups with statistically significant HIGHER levels of perceived stress over entrepreneurs? Full-time employees, part-time employees, unemployed persons, and homemakers–so, basically everyone else! Psychological capital and subjective well-being (overall satisfaction with their lives) also had a big impact on reported perceived stress levels. Pyschological capital involves four factors: self-efficacy, optimism, hope, and resilience. The higher this score, the lower the stress level of the entrepreneur. Two practical implications emerge: entrepreneurs should spend time learning to manage stress and seek to increase their psychological capital.
  • “Follow your passions” is actually good advice: After the above study, I started feeling a bit down about our abilities as entrepreneurs because we’re not hugely confident in our abilities to perform the tasks demanded of an entrepreneur. Self-efficacy is defined as having the belief that you will succeed in a certain task (in this case, entrepreneurship). The above study showed that your level of self-efficacy was important. But this study looked at passion. The study found that passion was a significant driver of entrepreneurial behavior and was positively related to the entrepreneur’s “entrepreneurial identity centrality” (or the amount the entrepreneurs identify themselves as entrepreneurs over any other identity). Self-efficacy was an interesting finding. Passion did lead to more self-efficacy (if you are passionate enough about what you plan to do, you are more likely to feel like you can succeed at doing it). However, “the path between entrepreneurial self-efficacy and entrepreneurial behavior is not [positive and significant]. Even though the relationship between entrepreneurial self-efficacy and behavior occurs in the predicted direction, the path coefficient did not reach statistical significance.” Thinking you’ll succeed (self-efficacy) is less likely to motivate you into becoming an entrepreneur than being passionate about what you want to do. And that passion can actually help you feel more confident in your ability to succeed. Start with a passion!
  • Success and Failure are both part of the experience: A study on the rhetoric of entrepreneurship looked at the transcripts of 89 presentations by entrepreneurs at Stanford University. The researchers searched the presentations for terms associated with failure (ie:fail, mistakes, error, etc.). Things they discovered:
    • Failure is a common theme: Fail and its derivatives (failure, failed, etc.) were mentioned over 600 times in all but 3% of the transcripts. This discourse of failure was spoken with cliched phrases: “Fail Fast” or “Constructive Failures.”
    • Success and Failure are entwined: The entrepreneurs were just as likely to mention “success” as they were failure. 79 presentations mentioned “success.” Of those 79 presentations, 77 also mentioned “failure.” Common themes included failure as a “natural part of the process” with one entrepreneur stating: “Your job is to fail your way to success.” Often, failure was accompanied by the word “pivot” to indicate that the success lies in identifying the failure and pivoting the project toward success.

Do you have entrepreneurial aspirations? Did any of these studies intrigue you?


Financial Relativity (Your Experience is Not Mine)


Northern Expressions: Woody Allen


  1. Yes, I absolutely have entrepreneurial aspirations! I’ve been self-employed for about 3 three years now (in fact, started my business at 39weeks and 4days pregnant…..mad!) and I can honestly say I can’t ever see myself becoming a traditional employee again. I used to be ill so often as an employee, now as self-employed I very rarely am – because I’m happy! My youngest baby will be starting nursery in September and while I don’t want to wish mine or his life away, I can’t wait to really be able to get stuck in properly and build something amazing.

    I find the comment about failure interesting (and in fact just blogged about it last night). For many people, failure is something to be avoided at all costs whereas for the truly successful, failure and success are completely intertwined. I’m not there yet – I’m frightened of failure still because I don’t want to let myself or my family down.

    Not long now to your big trip (I’m a long time lurker!). I’m from the UK. Has anyone told you how much it rains here? Like, all the time. It’s raining now. It doesn’t get called ‘This green and pleasant land’ for nothing you know!

    • MaggieBanks

      First, that is amazing that you started being an entrepreneur right before having a kid. I got my current job at about 8 months pregnant with my second. 🙂 So what is your business? Second, I am VERY familiar with UK weather. I have been 3 times, the last being a semester from Jan-April in London. We are from Seattle and Portland which have VERY similar weather. My gills open right up! 🙂

  2. thejollyledger

    Restaurateurs must not be entrepreneurs because every one I have met is stressed out and bat-$hit crazy!

    DH is self-employed and while not wildly successful (money-wise) he sure is gloriously happy and obsessed with his passion.

    • MaggieBanks

      Interesting observation. I think it would be super stressful to be a restauranteur!

  3. Being self employed is a thing I kinda ream off… Finding the right business to do so is the current hurdle I have.
    The quick solution to that is to go freelance… I am working in something else…

    I like the follow your passions and “success and failure are part of the experience” a lot

    • MaggieBanks

      I agree – finding a business venture that covers the “passion” aspect is the first goal!

  4. This stuff is so interesting. I’m so happy you pointed out the education piece, because I hear people mention the dropout thing so often. Um, well, yeah, but Bill Gates and Mark Zuckerberg dropped out of HARVARD, not community college — kind of an important difference. 😉 I’ve realized in the last few years that I hate failure, and I think that’s why I have never had serious entrepreneurial aspirations — I just don’t want to enter into something where I’m basically guaranteed to fail multiple times, even if it’s failing fast or whatever the buzz word du jour is. 🙂 I think that’s actually something I’m super excited for in early retirement — that I can do all the creative stuff I want to do, but without having to worry about whether those things result in any income. I can do them just for love, not for money. So, I don’t know — that’s still a desire to do things my own way, based on my own ideas, but without the entrepreneurial money part. What does that equal?? 😉

    • MaggieBanks

      Oh I’m with you on wanting to do that. And that, of course, is the eventual dream. But in the meantime, I think maybe we can make something work. Might as well try!

  5. I’ve dipped my toe into the entrepreneurial waters a couple times. The full-time job I left in January was with a company I helped build from scratch. I wasn’t the founder, per se, but I was the first full-time employee, and we didn’t even have enough money in the bank for me to take a paycheck for a whole year. So, needless to say, I was fully invested in the success of the company.

    The failure point is the one that rings most true for me. There were so many times in those first couple years when it looked like the entire thing was going to collapse. Eventually, I had to stop even getting emotional or reactive when we had big negative turns of events. It happened way too often to have a breakdown every time. Instead, we’d try to stay level-headed and say, “Okay, that’s really bad. What can we do to make it better?” Maybe that’s related to the stress point; at some point, you have to expect major failures and disassociate your self-worth from the success of the venture.

    • MaggieBanks

      That sounds very stressful, but you’re right… maybe at some point, you just have to embrace the fact that failure is inevitable and you’ll tackle it when it comes (thus less stress).

  6. We’re with you on the path to entrepreneurship! Big things happening this year. 🙂

    • MaggieBanks

      Can’t wait to chat the end of the summer to hear all the exciting things you have planned!

  7. I think failure has to be part of entrepreneurial pursuits. Look at product developers and patenting for instance. Just when you think you’ve come up with the absolutely best, original, idea to solve a problem, just Google it. Nine out of ten times someone else has already done it, patented it, and capitalized on it. So you get creative and maybe you don’t produce the biggest, baddest thing, but expand on the biggest, baddest thing. And you’ll probably flounder many times before you get it right. A certain kind of resilience is required.What Matt mentioned about dis-association is very difficult for many people to live with.

    • MaggieBanks

      I’ve heard it said that “ideas are worthless” because everyone has them, yours probably isn’t original. It’s all about execution in entrepreneurial pursuits!

  8. I’ve always had an entrepreneurial spirit, or at least had lots of potential ideas that I’ve never really acted upon. What I’m looking forward to is similar to what ONL said above: pursuing creative and potentially entrepreneurial outlets without the need to produce income. If these ventures make money, great. If not, no biggie. It’s almost as if I’m after the learning experience and freedom to be creative more than the final outcome, if that makes sense. I do have a very strong belief, though, that I’ll be successful. Not sure if this makes me a potential entrepreneur or not. Either way, I can never imagine myself as a traditional employee ever again!

    • MaggieBanks

      I agree. Being able to dabble without worrying about money will be so exciting! We’ll see if we have the guts to try to be entrepreneurs before that and hope to make money! 🙂

  9. I love your posts about psychological studies! I’m intrigued by the finding that entreprenuers have less stress in comparison to EVERYONE. I kind of hypothesized that part-time employment would have the least amount of stress – but there are other factors to consider, such as whether the part-time employee isn’t earning enough money to cover their expenses.

    • MaggieBanks

      I’m glad you enjoyed this one… if you’re not into self-employment, this was kind of a boring post! 🙂

  10. I’ve always had some entrepreneurial aspirations, but growing up my family was full of people who worked for the man. Once I turned 15, I started working for two different entrepreneurs and developed a lot of respect for them. Made me think I wanted to do it some day. Right now where I’m at with my career it would take me potentially years to get back to the income level I am at right now with a entrepreneurial endeavor. But maybe that’s okay if it aligns with my goals. I plan over the remainder of 2016 to really consider this further and decide if riding out the corporate gig until earlier FIRE is really worth it to me 🙂

    • MaggieBanks

      That’s my husband’s train of thought as well. I want him to explore his aspirations, but the money thing is tricky… he doesn’t make crazy amounts, but it would still take awhile to match his $70,000+ with entrepreneurial income.

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