Rates of Entrepreneurship Are Increasing, but Can It Last?

Recent statistics suggest that rates of entrepreneurship and business ownership are on the rise, which is good news for the economy, but is this increase sustainable? The first quarter of 2018 has seen the highest rate of entrepreneurship since the Great Recession, representing the peak of several years of consistent growth. Experts are divided on whether this trend will continue for the next several years, which is an important variable to consider, as rates of entrepreneurship are closely linked with economic growth overall.

Factors for the Increase

So why are we starting to see the peak of entrepreneurial growth now?

  • The ease of creating a new business. First, it’s easier than ever to start a new business. Thanks to the ubiquity and accessibility of the internet, almost anyone can register their business from the comfort of their living room. They can also make money online in innumerable ways, from blogging and selling advertisements for that blog, to consulting with people online. There are more opportunities for new businesses than ever before, and people are jumping on those opportunities.
  • The booming economy. There are always economic obstacles to contend with, whether it’s unemployment or trade tensions, but for the most part, the past decade has been a period of universal growth for the economy. The stock market has seen impressive growth each year since 2008, and consumer confidence is allowing people to spend money at a higher-than-average rate. This combination of factors makes entrepreneurs more optimistic, which encourages them to take bigger business risks. It also decreases the rate of business failure, which keeps those ventures open and operating for longer.
  • Idolization of startup culture. It’s also important to consider the role of startup culture, and the American idolization of that culture (along with entrepreneurship). Consumers are fed stories in the media about self-made billionaires, who came up with a brilliant idea, assembled a team of talented people in a fun environment, then eventually built an empire worth a fortune. With capitalistic values and unlimited admiration, it’s natural for people to feel pulled toward the entrepreneurial lifestyle.
  • Fewer traditional career paths. Finally, it’s important to consider the decreasing value and availability of traditional career paths. It’s no longer common to work for a single company for 35 years toward a comfortable retirement; instead, it’s much more common to seek contract work, hop between jobs, and take non-traditional career paths. Accordingly, entrepreneurship is often more exciting, more available, or more valuable than traditional career paths.

Is This Sustainable?

So are these factors sustainable enough to keep the rate of entrepreneurship growing?

  • Business creation and opportunities. The ease of creating a new business will likely increase in the coming years. The internet is reaching more corners of the world, new technologies are constantly emerging, and people are constantly building off the ideas of their contemporaries. Unless some significant new barrier to entry emerges, such as a requirement for new entrepreneurs or a higher tax rate, this factor will remain undeterred.
  • The stock market. Some economists speculate that a market crash, a bear market, or even a full-scale recession could be looming in the near future. Consumers and investors have been enjoying an unprecedented period of growth, and it may be time for that growth to slow-or even reverse, to return to a “normal” price level. If and when that happens, it could make entrepreneurship much more challenging, but could also provide new types of opportunities. Everything depends on how consumers interpret the correction, and how optimistic they are about the future of the economy.
  • Capitalism and materialism. Western culture is undergoing constant evolution, but it’s unlikely to change dramatically in a short period of time. The capitalism and materialism that make people idolize startup culture and entrepreneurship are likely to continue indefinitely.
  • The future of work. As automation and overseas labor make conventional career paths even rarer, there will be more pressure for consumers to pursue entrepreneurship as a long-term career (or as a way to build wealth). As technology becomes more advanced, displacing millions of jobs, this will make entrepreneurship rates grow even faster.

It’s possible that the rate of entrepreneurship will continue to grow indefinitely, but it’s equally likely that one or more of these factors will slow in momentum, causing a ripple effect that discourages new entrepreneurs from entering the fray. Pay attention to how these economic factors interact in the future to determine how entrepreneurial rates may subsequently change.