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Entrepreneurship: The Ultimate White Privilege?

A new study finds that future entrepreneurs score high on measures of teenage delinquency. They're also disproportionately white, highly educated, and male. Here's why that might not be a coincidence.

Jordan Weissmann
Aug 16 2013, 8:24 AM ET

One of the great privileges that comes with being born wealthy, white, and male in the United States of America is that you can get away with certain youthful indiscretions. Indiscretions like, oh, smoking prodigious quantities of marijuana [ http://www.nytimes.com/2013/06/04/us/marijuana-arrests-four-times-as-likely-for-blacks.html ], for instance. If you're an upper-middle-class caucasian, chances are the cops aren't going to randomly stop and frisk you in the street under dubiously constitutional pretenses. And if you do somehow get caught baggie-in-hand, your parents can likely afford a decent lawyer to help plea bargain your way into some light community service. It's a cushy setup.

Today, I'm finding myself wondering if that leeway -- that societal room to do a little law breaking, punishment free -- isn't part of the reason why so many of the successful entrepreneurs in this country are, yes, white guys [ http://whitemenwearinggoogleglass.tumblr.com/ ].

Sorry if that sounds a bit out of left field, but let me explain. Ross Levine, an economist at the University of California, Berkeley, and Yona Rubinstein, a professor at the London School of Economics, have released a fascinating working paper [ http://www.nber.org/papers/w19276.pdf ] exploring the demographics, personality traits, and earnings of entrepreneurs. Among their findings, they conclude that:

A) Entrepreneurs are "disproportionately white, male, and highly educated"; and

B) As teens and young adults, they're far more likely than the average American to have partaken in "aggressive, illicit, risk-taking activities," such as skipping class, smoking pot, gambling, and shoplifting.

It does not strike me as a coincidence that a career path best suited for mild high school delinquents ends up full of white men. That, again, is part of white privilege; youthful indiscretions have fewer consequences that might, say, keep you out of a good college.

That said, while Levine and Rubinstein's findings hint at the role race might play in entrepreneurship, they don't flesh it out fully enough for us to draw hard conclusions. So with that in mind, let's wade into some of the details about precisely what this study does and doesn't tell us.

We'll start with the demographic data, shown below based on the census figures from 1994 to 2005. The group we care about here are the self-employed workers with incorporated businesses, at the far right of the table. Why just them? Because they're who we traditionally consider entrepreneurs, as opposed to everyday small business proprietors. Unincorporated businesses tend to be tiny operations -- think of a bodega, or a carpenter who works alone out of a pickup truck -- with little chance of growing. As Levine and Rubinstein find in their study, the people who run them tend to earn less than salaried workers. Incorporated businesses, on the other hand, are actual companies (yep, with 1st Amendment rights and everything). They can be anything from a chain of gyms to an accounting firm to a small tech startup. But the important thing is they're independent legal entities and are often set up to attract investment and grow.

And, as you'll notice, 84 percent of the incorporated self-employed (people who, for the purposes of this piece, we'll just shorthand as "entrepreneurs") are white, compared to 71 percent of the whole prime working-age population. They're also 72 percent male.



So, again, entrepreneurs are overwhelmingly and objectively white guys. What else do we know about them? To gather more info, Levine and Rubinstein turn to the NYLS79, a government survey that began tracking more than 12,000 14 to 22 year olds over the course of their lives starting in 1979. The young folks who eventually became entrepreneurs tended to be from wealthier families with more educated parents. They generally reported higher self esteem, and, importantly, performed better than average on learning aptitude tests. The most successful entrepreneurs, measured by income, also tended to fare well in salaried jobs before making the leap to running their own business.

And, yes, they were frequently rule breakers. In 1980, the survey subjects were asked to fill out a 23 question "Illiict Activity Index" that covered "themes associated with skipping school, use of alcohol and marijuana, vandalism, shoplifting, drug dealing, robbery, assault, and gambling." The future entrepreneurs were turned out to be real louts; if their high schools were "The Breakfast Club," they'd be the Judd Nelsons of the crew. They were more likely to have "used force to obtain things," to have stolen something worth less than $50, and to have been stopped by police. On the combined illicit activity index, they scored 21 percent higher than their average peer. Salaried workers scored 1 percent lower.



So who's most apt to become an entrepreneur? In the end, Levine and Rubinstein find that it's the smart rule-breakers. Workers who scored above average on both learning aptitude and illicit activities were 60 percent more likely to become entrepreneurs than their peers, controlling for other characteristics.

"It is a particular mixture of traits that seems to matter for both becoming an entrepreneur and succeeding as an entrepreneur," the paper concludes. "It is the high ability (as measured by learning aptitude and success as a salaried worker) person who tends to "break-the-rules" (as measured by the degree to which the person engaged in illicit activities before the age of 22) who is especially likely to become a successful entrepreneur."

And, once again, the people with this combination of traits tend to be overwhelmingly white and male.

That's what the study tells us. Here's what it doesn't. First, the paper says little about the specific kinds of misbehaviors future entrepreneurs are partial to. The analysis is also silent on whether smart, rule-breaking minorities are equally likely to become entrepreneurs as their white peers, or if their lives end up running a different course. Knowing that information could help us understand whether white kids essentially get a free pass on their behavior, or if smart teens are just generally good at staying out of lasting trouble. The paper also doesn't tell us whether smart young minorities are more or less prone to illicit behavior than their white peers, which might tell us how many potentially match the profile of a successful entrepreneur to begin with.

But even without those answers, here's my preliminary take-away: To be successful at running your own company, you need a personality type that society is a lot more forgiving of if you're white. Privilege indeed.

Copyright © 2013 by The Atlantic Monthly Group

http://www.theatlantic.com/business/archive/2013/08/entrepreneurship-the-ultimate-white-privilege/278727/ [with comments]