You've probably heard people say it's easier than ever to start a new business, given the expansion of financing options and greater accessibility of useful technology. What you might not have heard is that it's also easier than ever for a publicly traded firm to fail.
NPR social science correspondent Shankar Vedantam reports in a segment aired Wednesday that the odds of a publicly traded company going under have increased significantly over the past several decades.
"One of the central ideas of being an entrepreneur now is that you don't fear failure as much as your parents might have done 40 years ago," says Vedantam .
That lack of fear is probably a good thing given the likelihood of failure. Research from Tufts University shows that before 1970, the chances a publicly traded firm would survive for five years were 92 percent, according to Vedantam. That percentage declined to 70 percent in the 1980s and 63 percent by the 2000s.
The data was based on analysis by university researchers of 30,000 publicly traded firms operating between 1960 and 2009. That means we're not talking about startups or small private businesses, which are widely known to face steep odds. The U.S. Small Business Association reports new establishments have roughly equal odds of floating or sinking in the first five years of existence.
"So even as innovation is producing wonderful things for consumers--you know, mobile phones instead of pay phones, email instead of snail mail, taxis at the press of a button--what you also see is that companies now have much higher odds of dying and dying suddenly," says Vedantam. And if you're working at a company that suddenly goes under, that's "not so great for you," he says.
Kind of makes "fail fast" sound more like an inevitability than a mantra, doesn't it?
Listen to the full segment here.