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?