How entrepreneurs differ, and how they don't

My cover story in this month's APS Observer looks at some of the research on entrepreneurial psychology. For those in too much of a hurry to read the whole thing, here's the conclusion (with a few typos fixed):

In some ways, the Schumpeterian view of entrepreneurs — as ruthless, risk-defying capitalist superheroes with ambitions as big as their outsized egos — persists. For the latest example of this approach, one need look no further than how Mark Zuckerberg is fictionally portrayed in The Social Network, a new movie about the origins of Facebook: He is brilliant, backstabbing, arrogant, and innovative. And certainly some entrepreneurs do fit this mold.

But with more than 550,000 new firms opening in the US each year, it’s obvious that only a tiny percentage of startups ever become global phenomena like Facebook — and most entrepreneurs are nothing like the Zuckerberg of the movies. As Shaver has labored to prove, it’s time to do away with much of the stereotypical personality sketch.

That doesn’t mean, however, that we should ignore all personal characteristics in evaluating potential entrepreneurs. It is just that the relevant characteristics have more to do with how equipped someone is to endure the rigors of entrepreneurship than with personality. Consider what the studies have found, beginning with how entrepreneurs are similar to everyone else. Entrepreneurs are no more likely to care about money. On average, they are no more ruthless than non-entrepreneurs, or any more spontaneous. They should not be portrayed as either gooey optimists or control freaks. They do not crave risk more. They’re not more outgoing or agreeable. And they don’t have a magical problem-solving approach that’s denied to the rest of us.

Shaver likes to emphasize how important it is for more people to realize this. Psychological perceptions matter. A young college grad with a big idea who thinks he lacks the personality to create a business should reconsider. So should venture capitalists and financiers who think they can instantly distinguish a winner from a loser during a first meeting. This is nonsense, as the ways in which entrepreneurs differ are mostly unrelated to the kinds of personality features that can be observed in such a manner.

But (and this is a large but) the few psychological differences that entrepreneurs do have are crucial ones. The PSED found that entrepreneurs are more willing to sacrifice other parts of their lives for their ventures. Their lives are less balanced and more heavily oriented towards their work. They care a lot less what others think of them. Shaver believes this is because entrepreneurs find their primary validation in the success of their businesses. No wonder that entrepreneurship attracts people who both expect to succeed and are better able to cope with the stress and rigors it brings. Starting a business can be grueling and full of uncertainty, and it will exact too heavy a cost on people unable or unwilling to throw themselves at the process.

Maybe, then, the right lesson to draw from the research is that more people than we think are capable of starting and running new businesses, but there are good reasons why not all of them will — or should — try.

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