Older and Bolder
Issue:Winter 2015 : Features
One of the most iconic faces of entrepreneurship in American history is one that appears on signs all across the nation. “Colonel” Harland Sanders started franchising his Kentucky Fried Chicken restaurant at age 65 with a family recipe for fried chicken and a $100 Social Security check. That was in 1955. Less than a decade later, Sanders had 600 franchises in the United States and Canada.
Today, one of the prominent faces of entrepreneurship is Mark Zuckerberg, the 30-year-old billionaire and cofounder of Facebook, the social media Web site that’s one of the 10 most visited sites in the world. Zuckerberg took Facebook live from his Harvard dorm room in 2004, dropped out of school and relocated to Palo Alto, Calif., where he now runs the company.
Popular perceptions may suggest people like Zuckerberg and his Facebook co-founders represent the future of entrepreneurship. But they’re actually outliers, says Duke University professor Vivek Wadhwa. He co-authored a paper on technology entrepreneurship for the Ewing Marion Kauffman Foundation, and found that the average and median age of founders of technology firms was 39.
“Experience is the most important ingredient of success,” Wadhwa says. “The stereotypes are inaccurate and a legacy of the dot-com days.”
The age group that had the highest rate of entrepreneurship across all industries from 1996 through 2007 was 55 to 64. The age group of 20 to 34 had the lowest rate during this period, which included the dot-com boom.
Entrepreneurship in the age group of 55 to 64 is hardly a new phenomenon. People in that age range are far more “experienced, balanced, and wiser,” Wadhwa says. They also have less of something else — fear. “The strongest factor that prevents people from becoming entrepreneurs is the risk,” Wadhwa adds. “Once you’re in this age group, the risk and the fear is much less.”
Other factors can explain the prevalence of entrepreneurship among older adults. For one, people 55 and older may have more wealth they can use to launch a business, notes Dane Stangler, a Kauffman Foundation analyst. Also, some older adults may not possess the skills most in demand in a rapidly changing economy so they find themselves turning to self-employment as a way to making a living. That fact “lurks in the data” but is hard to tease out, Stangler says.
Stangler says these older and bolder adults could fuel an entrepreneurship boom. The country is now experiencing rapid growth in the numbers of people in the 45 to 64 age group, and life expectancy keeps growing. By 2050, American life expectancy is projected to be 83 years, compared to 78 now. If the rate of entrepreneurship in this group stays constant, this could all translate to a multitude of new companies in the future.
Rising entrepreneurship among older adults isn’t confined to one type of business either. “The pattern generally holds across industries,” Stangler says. “There’s no industry that stands out for being where the young people are starting companies, and another where the middle age and older demographic groups are starting companies.”
While more senior entrepreneurs may be forming companies, how likely is it those companies will produce major innovations like Facebook? Might an older entrepreneur be more likely to start a “lifestyle” firm, while a younger person more apt to start a groundbreaking one? “Such a concern makes sense, but further research needs to be done,” Stangler writes.
Kauffman Foundation research also demonstrates that immigrants tend to be more entrepreneurial than native-born Americans. One in four engineering and technology companies launched between 1995 and 2005 had an immigrant founder.
Immigrants are also more likely to start businesses of all types. They had higher entrepreneurship rates across all industries every year from 1996 through 2008. In that last year alone, the gap between the overall entrepreneurship rates of the two groups was the widest in the survey period: The rate was almost twice as high for immigrants as it was for the native-born population.
This article is reprinted from Econ Focus, the quarterly magazine of the Federal Reserve Bank of Richmond. The views expressed are those of the contributor and not necessary those of the Federal Reserve Bank.