Are Entrepreneurs More Rebellious — Or Do They Just Come From Rich Families?

"Of course you have to be smart; but it's a unique combination of breaking rules and being smart that helps you become an entrepreneur." The controversial saying comes from economist Ross Levine. Mr. Levine, together with economist Yona Rubenstein, has recently published a working paper comparing the traits of self-employed individuals with incorporated businesses to the characteristics of salaried workers and the self-employed individuals who don't have incorporated businesses. To be clear, incorporating a business involves taking a business and making it a a separate entity under the law. This excludes self-employed workers such as a hot dog vendor, who would be included in the category of self-employed individuals who don't have incorporated businesses.

According to the research findings, self-employed workers with incorporated businesses were almost three times more likely than salaried workers to have engaged in illicit and risky activities as youth, including but not limited to shoplifting, marijuana use, skipping school, drug dealing, and assault. To put it bluntly, the study seems to indicate that entrepreneurship seems to be concatenated with mischievous tendencies as a teenager. 

It is an intriguing conclusion. Yet careful scrutiny of some of methodologies of the study reveals a number of disconcerting flaws. The first is that the study also shows that such mischievous teenagers were, on average, more likely to come from high-earning, two-parent families. They were also, on average, more educated than other types of employees. In and of themselves, both these features already point to a possible fallacy in the study's proposed causal mechanism. One can easily see how the easier access to funds that comes from being born in a wealthy family, coupled with a higher level of education, can foster an entrepreneurial spirit. This is especially true in the United States, where higher education tends to value and encourage entrepreneurship. It could therefore be the case that what's truly motivating entrepreneurship is an access to higher levels of education and a greater facility to raise capital. 

In addition, within the incorporated business category, the economists make no comparison between the success of mischievous and non-mischievous entrepreneurs. Instead, the economists prefer to address the question of entrepreneurship as whole, and conclude that "entrepreneurship, at the median, pays — and it offers the possibility of comparably enormous returns." Yet despite the misleading title of the Wall Street Journal's article, we don't really know where the mischievous entrepreneurs lie in this spread compared to the non-mischievous ones. Who is more likely to accrue such "enormous returns"? The economists don't seem to address that. It could therefore be the case that while mischievous teenagers do make up more a higher percentage of entrepreneurs, they do not make up a higher percentage of successful entrepreneurs. Further analysis of this kind could change the entire story.

As such, although the results of the study point to a tempting conclusion, one must be cautious before hastily agreeing to what the study is proposing. In fact, the plethora of unexamined assumptions that the study makes seem to underline its meretricious nature, and undermine the general cogency of its claim. In the end, a lot is left to be answered before one can reasonably link mischievousness to dexterity as an entrepreneur.