Economic Perspective: Age and Business Start-ups

MARY WALDEN:

“Today’s program looks at age and business start-ups. Mike, many people dream of starting and owning their own business. There’s also a certain romance about start-ups being mainly a young person’s venture. For example, Bill Gates of Microsoft, Steve Jobs of Apple and Mark Zuckerberg of Facebook all started their companies around the age of 20. So are young people more likely to open new businesses?”

MIKE WALDEN:

“Of course it depends how you define young. Based on some new research we have from the National Bureau of Economic Research the answer is no. In fact, the research found that the average age of a person who is starting a new business is not in their 20s, not in their 30s. It’s in their 40s. In face, specifically 42.”

“Now you can always have exceptions, the ones you mentioned Gates, Jobs and Zuckerberg, but the average age of a business entrepreneur starting a new business is 42. And I think there are couple logical reasons for that. Number one, you need some experience. You need to know what you’re doing. Yeah, there can be smart people that know exactly what to do when their in their 20s, but most of us have to learn for a while. They have to know the in’s and out’s of their job, and they have to observe and know what kind of business will fly.”

“And so it takes a while, maybe a couple decades until you’re ready to go off on your own. The second reason is financing. If you don’t have a track record, how are you going to get financing? Again there are exceptions, but for most businesses you need to go borrow money, and the lender needs to see a track record of what you’ve been doing, how successful you’ve been doing it, and whether they want to take a risk on you starting a new business.”

“So I think experience, knowledge and energy actually combine to make middle-age the best time to start a new business.”