So the Kauffman Foundation says that entrepreneurship reached a 14-year high last year, despite the a crippling credit crisis and a terrible recession. Good news, right?
Robert Reich isn't so sure:
Yes, a growing number of Americans went out on their own before the recession, but clearly their numbers have vastly increased. While some are happy about their new status, most are worse off than they were before. It's one thing to be a contingent worker in good times and when you're young; quite another in bad times when you're middle-aged...Indeed, America's startup businesses do need better access to credit. But many entities that look like small new businesses are actually self-employed people who need more than bank loans. They need predictable income and benefits.
Reich's provocative idea is that many new "businesses" are not businesses at all. They're just people with bad jobs, who happen to be technically self-employed. (Think: temp workers and independent contractors who nonetheless come to an office every day.)
There's probably some truth to this, but I think Reich's analysis misses an important point. Yes, starting a company sucks--Paul Graham once told me it's like getting punched in the face--and any rational person would, in the short-term, prefer a predictable salary and health benefits instead of no salary and no health care. But smart people don't live in the short-term; and, in the long-term, starting a company can work out very nicely.
The bottom line is that we won't know what the explosion in entrepreneurial activity that coincided with the Great Recession will mean until we see what happens to all these new companies. I can't tell you how many times I've heard entrepreneurs say that they were lucky to get started in a down economy. (Lower prices, cheaper labor, fewer competitors.)
37signals founder David Heinemeier Hansson puts it well: "The skills and the culture you pick up [during a recession] will stick with you forever," he writes. "The corporate mind of 37signals became imprinted with frugality and efficiency that still is at the core of who we are today."