“unpropaganda, what are you doing writing about entrepreneurship?! You’re a working stiff.”
Yeah, yeah, I know – I can empathize with the reader. Some people have no qualifications whatsoever to be writing about business, entrepreneurship, careers, or college. For example, the authoress of this article has no entrepreneurial experience and a Mickey Mouse degree. Why would anyone follow her for career advice?
But in my defense, entrepreneurship has been an interest of mine for the past few years. Currently, I have (modest) debt I need to pay off, and want to get experience in the work force – but I can definitely see myself later in life starting and running my own business, either brick-and-mortar or over the internet. If I could do it all over again, I probably would have become an entrepreneur after my undergraduate studies. Some of my colleagues from graduate school have already taken the plunge and started their own technology and consulting companies (some professors have, too).
What *exactly* is an entrepreneur?
The definition of an entrepreneur is:
“An entrepreneur is someone who organizes, manages, and assumes the risk of a business or enterprise.”
The word comes from the 13th century French verb “entreprende”, meaning “to do something”, or “to undertake.” By the 16th century, the word had become a noun and assumed its modern meaning of someone who undertakes a business venture. In a more abstract sense, an entrepreneur is agent for overseeing the distribution of resources in society. If he distributes them wisely, he winds up with a product or service more valuable than the inputs, resulting in a profit. Otherwise, the market punishes him with a loss.
It is important to distinguish an entrepreneur from a shareholder. Both of them are business owners. Thanks to mutual funds, anyone can be a business owner – partially anyways. Currently I have about $10,000 in my 401k, but that doesn’t mean I’m an entrepreneur. An entrepreneur not only owns the business, but manages it as well. Typically though, an entrepreneur owns a far greater amount of the business than any shareholder normally. In order to keep control of his business, an entrepreneur needs to own at least 51% of the company. This causes the entrepreneur to take on correspondingly greater risk than a diversified shareholder. Greater risk; greater chance at reward.
That is one of the biggest upsides to being an entrepreneur. I am a chemical engineer. My peak late-career pay is likely to be around $150,000 – but probably not much more. You might say “Wow that’s alot of money!” But take a second to ponder something – an entrepreneur has no theoretical limit to their potential earnings. If your company is a smash hit, you can become filthy rich.
And I had to spend 11 years of my life in school.
Entrepreneurs come from all age groups. Ray Kroc was an old man when he got rich off McDonald’s. Twentysomething entrepreneurs are a minority – the mean age of entrepreneurs is 40 years old. This kind of makes sense in retrospect, since 40 years of age is probably the earliest time in someone’s life when they have accrued enough disposable wealth to risk investing into a business.
Broadening Your Perspective Via Foreign Travel
In hindsight, I think that 18 is is simply too young to begin attending college with the intent to succeed at a high level. The brain is still developing. The maturity just isn’t there. And homesickness can be a really big problem. I however, did not have much of a choice I did not come from a wealthy family. As I have already discussed, my father was a bum, and my mother supported the family. It was a “high-conflict” household, and I had to get out. I had enormous motivation to go to college and escape a worse situation as quickly as possible. If your situation is not like this, count yourself as blessed indeed. My life from age 18 until now has been nothing but hard work and study. Most people are simply not built for that kind of punishment at age 18.
A feature of many successful entrepreneurs is that they have a broad perspective of the world. Instead of immediately jumping into college, if you come from a wealthy family, I advise taking a year off of high school to reflect on your situation, travel, and enjoy yourself. We Americans are an awfully cloistered bunch, and the cure for that is meeting and experiencing other cultures. For example, you could make The Grand Tour of Europe, and experience the culture and sights of the Old World. I never had a chance to do that, and I wish I did. Not only was the Grand Tour a cultural pilgrimage, but it was also a way to build contacts and connections across Continental Europe. As the great historian Edward Gibbon said:
“…foreign travel completes the education of an English gentleman.” -Edward Gibbon
As I have already discussed, this is also an excellent time to try your hand at learning a foreign language – a very handy skill for an entrepreneur to have. Of course, which language to learn depends on where you might see yourself doing business globally. But if I had to pick two language worth knowing for the budding entrepreneur, it would either be Spanish or Mandarin Chinese. Other good choices are Portuguese, French, Japanese, and Korean.
While the European Grand Tour might be good fun, a more practical alternative “Grand Tour” might be to tour Asia: India, Japan, China, Korea, Vietnam, Malaysia, and Indonesia. There you will truly be given a culture shock. I’ve never had the pleasure of visiting Asia, but I sure would like to one day.
Entrepreneurship After High School
If foreign travel sounds like an expensive bore to you, and you want to jump right into the action, here is some more advice. There are some upsides and downsides to starting a business after high school. The upsides are that it is genuine, real-world applicable experience; not theoretical book work. If you’re smart and successful, you no longer have to work someone else’s job: you can make your own job, and be self-employed. There are no formal education requirements for being an entrepreneur. As a young person, you are unlikely to be married and/or have children, making it much easier to work the longer hours necessary to make your business run properly. You also don’t have to take out student loans to start a business – instead you need to find investors and secure business loans. Also, you have maximum control over who you work with and do business with – if you think someone is a dickhead, you either fire them or don’t do business with them; its that simple. I can recount a few times in engineering school where I had to work with people I didn’t care for and I hated it.
It is worth discussing student loans in more detail, and how awful they are for your wealth-building prospects. Current total student loan debt in the USA sits at $1 trillion as of 2014 statistics. I have no clue how this debt will ever get paid off, but that’s another blog post. Forty million Americans have student loan debt, and the average college grad back in 2015 was $35,000 in debt (I had about $20k after 11 years of school). It is worth reflecting on how our society and government won’t let 17 year old kids vote or buy guns, but will let them become de facto indentured servants via student loans. Student loans are a wealth killer, and not having to take them out is a huge advantage to becoming an entrepreneur. Instead of putting yourself into debt, you are building assets.
The downsides though, need to be considered. There is no steady paycheck, and it can lead to a lonely, solitary existence. The chances of failure are high: half of all businesses fail within 5 years. From the get-go, things may be overwhelming due to being totally understaffed: you will have to fill in the roles for all of the employees you don’t yet have. Starting off, you simply may not have any profitable business ideas. Many doors in the business world are simply closed to you – how will you convince venture capitalists to fund your fledgling tech startup when you have no university education in STEM? Unless you can convince Peter Thiel to fund you $100,000 out of his own pocket, I’d say the odds are pretty poor. A cure for the lack of ideas may be to work for a few years in the private sector, and observe what practical problems exist in the industry which can be profitably solved. Of course, working sucks, so instead it might be more profitable to grow your list of contacts and potential business partners who can provide profitable ideas for you via mutual exchange.
Another problem with entrepreneurship is that it can be slow, frustrating work. Growth and earnings can be very slow at the outset, since you have virtually no customer base when you start off. Your personal life may suffer (this is not a big drawback for me, considering I have no personal life).
Another problem is that your pool of contacts and connections is likely to be small and of low-quality. Connections are the lifeblood of a successful entrepreneur; they bring ideas, customers, and funding to the table. Good connections are people with money that know other people with money. Your “boyz” that you hung out with in high school are unlikely to make the cut.
Again, if you come from a family of means, and are dead-set on entrepreneurship, it might be in your best interest to move to where the entrepreneurial action is in America; and that doesn’t necessarily mean Silicon Valley.
Advice on Mixing College and Entrepreneurship
To sound like a broken record, I again can only advise getting a STEM degree if you are interested in using a college education to further your entrepreneurial ambitions. Many degrees are simply worthless for entrepreneurship and problem-solving. What kind of product or service will you try to market with a Women’s Studies Degree? Tampons?
Oddly enough, business and “entrepreneurship degrees” are also not worth it for entrepreneurship. A business degree will not teach you anything you couldn’t learn on your own. Furthermore, everyone has a business degree – the field is glutted, and does not do much to differentiate you. Entrepreneurship degrees are complete oxymorons – as I said before, there are no formal education requirements to becoming an entrepreneur. Instead of spending money on a baloney entrepreneurship degree, that money would have been better spent invested into a business. Take some accounting courses, and you’ll have eaten your fill of what a business degree has to offer. I have mixed feelings on the MBA as a tool for entrepreneurship. On the one hand, it can theoretically teach useful business skills. On the other hand, if you already majored in a serious STEM degree, an MBA is likely to be death-by-boredom. Too much education is bad for an entrepreneur (I should know). After my PhD, I simply feel incapable of the massive physical and mental energy output required to be a successful entrepreneur – at least for the time being.
Engineering is where the money is at, and is probably the best way to lend credibility to yourself when seeking investors to fund a company in the technology sector. Which engineering to go into depends heavily on what kind of technology you are interested in pursuing:
- Anything with chemicals -> Chemical engineering
- Semiconductors -> Electrical engineering
- Medical devices -> Biomedical Engineering, or again chemical engineering
- Web-based technology/Silicon Valley-type tech startup -> Computer Science
- Information technology/big data -> Computer science
- Computer hardware/microprocessors -> Computer/electrical engineering
- Military stuff -> kind of a grab bag of any kind of engineering
- Biotechnology -> Chemical or Biological engineering.
- Aircraft -> Aerospace engineering
- Nanotechnology -> Depends, probably chemical engineering
There are significant benefits to having a STEM degree if you want to become an entrepreneur. For one, you will now have the technical skills needed to think up your own technologies, and also to judge the feasibility (or bogosity) of other technologies. Having that engineering degree in your talent portfolio lends a great deal of credibility to yourself. An engineering degree also forces you to learn how to balance deadlines and get serious work done on time. Also, college is a great environment for networking. You have a unique mix of young, energetic, intelligent people all concentrated into one area, and environment that is hard to replicate elsewhere. Facebook, Microsoft, reddit, WordPress, and Yahoo! all began in college dorm rooms. Alumni networks can also be a source for potential investors. While I no longer own the text, I do recall from The Millionaire Next Door statistics inside showing that most American millionaires had college educations. A 2008 study of 500 startups showed that the companies piloted by college grads earned twice as much revenue and had twice as many employees as those headed by someone with only a high school diploma. We all know how Steve Jobs, Mark Zuckerberg, Michael Dell, and Bill Gates all dropped out of college – but Jeff Bezos however, did outstanding in school.
Some companies though, may simply be too difficult to fund due to the massive barrier to entry. Not anyone can simply ask investors for money to buy a fleet of planes and hop right in to the air transportation industry. Likewise with certain high-technology defense products (e.g. fighter jets). The art of entrepreneurship is finding low-capital business ideas that generate big profits. To quote Sun Tzu:
“What the ancients called a clever fighter is one who not only wins, but excels in winning with ease.” -Sun Tzu
That is not to say a degree is all sunshine and rainbows. College is a massive opportunity cost in terms of time and money – it takes at least four years to graduate, and can cost a small fortune to pay for (if you don’t have scholarships or a GI Bill). Those precious resources of time and money could have been invested into building up a business – an asset. It has to be worth it.
One thing I would not do is obsess over college rankings if my intent was to become an entrepreneur anyways. Engineering school at State U will serve you just as well as engineering school at an expensive private college. The increased debt load is completely not worth it. The only time you should attend such a college is if there is significant financial aid available to pay for it all. Back in 2010, I was visiting various universities for interviews with the faculty for chemical engineering graduate school. One of the professors I spoke with at a prestigious Northeastern university outright said she did not believe her school was worth it for undergraduate engineering, and that a state school was a better choice.
The Dark Side of Engineering School
While I am not an entrepreneur, what I do have to offer my readers though is perspective on college. I am what you might call a “large-scale consumer” of academia’s major “product”, called higher education. As such, I can probably offer some perspective as to the worth of this “product.”
While earlier in this article I showered praise upon engineering degrees, I must say I have some misgivings in retrospect regarding my college education. In hindsight, engineering school is kind of a ripoff. While the degree is valuable, the education is pretty much all up to you. The professors often do not care if you learn the material, and make little effort to be good teachers (those that do are worthy of praise). My question is this: if the whole degree is self-taught, what is the purpose of the university then? If you can learn everything by yourself, why not just buy the books off Amazon used for cheap, and teach engineering to yourself at your own leisure? Hell, da Vinci didn’t need to go to engineering school to work his magic, and neither did the gentlemen-scientists of The Enlightenment (well OK, some did go to university, but it was different back then). Often times, the TA’s and professors are foreigners, who have absolutely awful English-language skills, making it very difficult to understand and follow them in the course. I can honestly say looking back, that probably 10% of the effort was put in by the professors, and the other 90% was my own effort.
If you’re going to put that much effort into a degree, why not just put the same amount of effort into starting and building a profitable business?