Young people are turning to entrepreneurship – but the trend isn’t inevitable
ENTREPRENEURSHIP is all the rage. Research released today by HSBC shows that nearly a quarter of young people starting university this autumn want to work for themselves when they graduate. Banker, lawyer and consultant are no longer the default options.
This news won’t please everyone. Due to the conspicuous wealth of Silicon Valley’s have-yachts and other cultural biases, entrepreneurship is often crudely misrepresented as solely a private good. However, successful entrepreneurs will go on to employ thousands of people and provide goods and services that make all our lives better in a trillion different ways. Even failed entrepreneurs provide feedback for other business founders about what will and won’t work.
Despite HSBC’s encouraging findings, the growth of a more entrepreneurial society isn’t inevitable. To understand why we just need to look across the pond, where the Brookings Institution has uncovered data showing a secular increase in the share of economic activity taking place in older firms in the US between 1992 and 2011: “a trend that has occurred in every state and metropolitan area, in every firm size category, and in each broad industrial sector.” In 1992, firms aged 16 years or more made up 23 per cent of the economy, but the latest data suggests this has leapt to 34 per cent. Over the same period, the percentage of private sector workers employed in these mature firms increased from 60 per cent to 72 per cent. The American dream needs waking from its slumber.
The authors of the report suggest that the US should expand the numbers of immigrant entrepreneurs granted permanent work visas, as well as allow foreign graduates of US schools who concentrate in the STEM fields to remain in the US to work for other enterprises. We suffer from similar policy constraints in the UK. It is telling that there is a consensus of concern across the political spectrum – from the Institute of Public Policy Research to the Adam Smith Institute – that we are also closing the door to the world’s best and brightest.
A key policy area not explored in the report, however, is the need to open up the public sector procurement process to entrepreneurial businesses. After all, UK public spending is still well above 40 per cent of GDP. Although some goods and services need to be provided by big businesses, we don’t currently have a level playing field. The tortuous tendering process needs to be made faster and simpler so smaller businesses can compete for government contracts.
Big, established businesses can and do innovate, but they are less good at it than lean, experimental startups. If we want a more innovative economy, we should want young people to aspire to entrepreneurship; we should want some to succeed and expect others to fail; and we should want those that succeed to keep taking risks.
If you are particularly altruistic, you might want this because it will make some of these young entrepreneurs small fortunes, but my concern isn’t with cultivating the next generation of millionaires. We should want this because entrepreneurs give us all more of what we want for less. Perhaps it’s time to start talking about the British dream.
Philip Salter is director of The Entrepreneurs Network. tenentrepreneurs.org