In a new book entitled, author Tyler Cowen notes that the entrepreneurship rate in the United States has plummeted to about 7.5% of American companies today that are considered “startups,” down from about 13% in the 1980s (when, coincidentally, our firm started, back in the recession of 1987).
At the same time, the percentage of workers who “switch jobs” every year, a general indicator of workers finding better prospects elsewhere – as opposed to shifts caused by layoffs – has declined by nearly 50% since 2000. Cowen further points out the overall decline in measured productivity, now at about half the post WWII average since we moved out of the great recession, as well as about a 25% decline since 2000 in U.S. patents that are also filed in Europe and Japan (an indicator of greater scientific rigor, he believes).
More alarmingly, the type of innovation occurring these days tends to be more incremental than fully transformational. Here, think: Uber, Airbnb or Snap, to name just three recent examples of the new innovation.
One of Cowen’s conclusions appears to be that a “complacent class” — defined as a risk-averse populace that has lost “the capacity to imagine or embrace a world where things do change rapidly for most if not all people” – has “sapped us of the pioneer spirit that made America the world’s most productive economy.”
In his book, Cowen points out the contrast between the changes of the past 50 years and those that occurred in the first half of the 20th century. His view is that we went from dramatic improvements in health and education, coupled with a vast proliferation in technologies like autos, planes and phones, to the changes in the past 50 years which, by contrast, he finds more modest. “A lot of our technological world seems to have stood pretty much still.”
Cowen draws an interesting point, noting how what he calls “matching” makes it easier than ever for people to find what they need, or an algorithm thinks they need. It’s true for shopping for everything for music and movies to clothes and spouses. A click or a swipe and, often as not, we find what we’d previously had to spend a long time looking for. (He even humorously points to a new dating app from Oscar Mayer for specifically targeting bacon-lovers. You gotta’ love it.) His implication appears to be that we are both less creatively inclined perhaps, and more complacent in accepting the status quo as life becomes easier, and the incentive to improvise and create diminishes.
Cowen, an Economics professor at George Mason University predicts the U.S. will see a wave of online crime that will “wall off” the Internet, thus “reinforcing group isolation.” He sees the world becoming a more dangerous place, where “the higher the benefits of peace, the more gun-shy and war-shy the prosperous and peaceful countries will become.” He sees this as incentive for smaller, radicalized groups to “seize territory or start wars…”
There are many who would argue against some of his depressing and Doomsday predictions. While it acknowledges the recent decline in startups, it hasn’t yet allowed time for the necessary re-emergence from the most recent recession, nor for the entrepreneurial spirit many in business today see around us in the up and coming generation of new entrepreneurs. In other words, the jury’s out.
Whether you agree or disagree with Cowen’s assumptions and conclusions, he’ll make you think. And isn’t that, at the core of it, what ultimately incentivizes the entrepreneur — thinking of a better way? Here’s hoping his dire predictions can be undone in some small, ironic way with some soul-searching by tomorrow’s entrepreneurs on the conclusions he draws.