A path to entrepreneurship: Smoking pot, skipping school and being a smart white dude

100percententrepreurI’ve interviewed hundreds — probably thousands — of entrepreneurs over the past 15 years as a technology journalist.

And here’s something that I can say with certainty: Entrepreneurs are an iconoclastic bunch who tend to follow their own paths and don’t want to (or some simply can’t) work for other people.

Now, here comes some additional research about the psychological makeup and demographics of entrepreneurs, based on real science rather than my day-to-day dealings. The research — conducted by Ross Levine, an economist at the University of California, Berkeley, and Yona Rubinstein, a professor at the London School of Economics — offers a fascinating look at what makes up an entrepreneur.

Here’s a brief overview from the report, which is titled Smart and Illicit: Who becomes an entrepreneur and does it pay?

Besides coming from higher-income families with better-educated mothers, the incorporated—as teenagers—scored higher on learning aptitude tests, had greater self-esteem, and engaged in more aggressive, illicit, risk-taking activities. The combination of “smarts” and “aggressive/illicit/risk-taking” tendencies as a youth accounts for both entry into entrepreneurship and the comparative earnings of entrepreneurs. In contrast to a large literature, we also find that entrepreneurs earn much more per hour than their salaried counterparts.

How much more?

According to the researchers, successful self-incorporated people saw 70 percent more in earnings than successful salaried workers. In other words, they note that “entrepreneurship offers the possibility of comparably enormous increases in earnings.”

Perhaps most interestingly, the report also establishes what it calls an Illicit Activity Index to explore the “break-the-rules” mentality that may go along with becoming an entrepreneur.  To gather this, the researchers established the index, based on 23 questions, covering things such as skipping school, use of alcohol and marijuana, vandalism, shoplifting, drug dealing, robbery, assault, and gambling.

People who both engaged in illicit activities as teenagers and scored highly on learning aptitude tests have a much higher tendency to become entrepreneurs than others without this particular mixture of traits.

The report also found that white men have a higher tendency to start companies. It notes:

First, white men, people with high self-esteem, individual’s with a strong sense of controlling one’s future (i.e., a low Rotter locus of control score), and people with well-educated mothers are much more likely to be incorporated self-employed than others. The economic magnitudes are large. For example, holding other things constant, women are 76% less likely to incorporate than corresponding males.

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[Hat tip to The Atlantic

  • KyleKesterson

    I read the headline in my email and thought, “oh hey, Geekwire did an article on me?” ;)

    Interesting statistics. I just spent the weekend with CEOs and high performing entrepreneurs, women included, most of which shared quite similar backgrounds.

    Experiential education > academics and theory

    • Christopher Fryer

      Dude, I had the same response. It was kind of freaky how accurate some of the stuff was. I wonder if you looked at investors to see how they’d compare…

  • ld

    Wow. This might be an example of how to lie with statistics. The first thing that caught my eye was the ‘incorporatate vs. non incorporate’ columns on the table. Sole Proprietors vs. LLC, S- Corps, and C-Corps and the like. So all the independent contractors who do not bother to incorporate are excluded from the second column. Consider if those people are low risk takers for yourself. :)

    It seems to rely heavily on the NLSY79 a survey that has been ongoing since 1979 by The Bureau of Labor and Statistics. Their description “The NLSY79 is a nationally representative sample of 12,686 young men and women who were 14-22 years old when they were first surveyed in 1979. These individuals were interviewed annually through 1994 and are currently interviewed on a biennial basis.”

    Are the demographics of that particular study/generation still true for today?
    I understand the need for researchers to use pre-existing data for their studies but they segmented the data a bit strangely to exclude the vast majority of people who start businesses so they can have a conclusion of a ‘standard’ profile of an entrepreneur.

  • Kelly

    So close!! How about “A path to entrepreneurship: Smoking pot, excelling in school and being a smart white chick” ;)

  • Tee hee hee

    And all this time I thought that it was weird that I could be a drug dealer and keep a 3.8 in college… :]