Richard Branson and Harland David Sanders are exceptional. Branson was always an entrepreneur, shunning school to trade in Christmas trees and budgerigars; while "The Colonel" waited until he was 65 before starting KFC.
Branson and Sanders are exceptions to the rule – that there is a sweet spot for successfully starting and growing a business. Thankfully, it's rather large: 25 to 49. After this age, entrepreneurship is more likely to take the form of self-employment or micro businesses without growth ambitions.
According to Demographics and Entrepreneurship – a book that we have recently released with the Fraser Institute – leaders across developed countries should be concerned about ageing populations and mitigate the pressure this will exert on reducing the quantity and quality of entrepreneurship.
The ideal demographics for entrepreneurship peaked around 1995, the UK, US, Australia and Canada are all expected to see a significant projected decline in this key entrepreneurial age group across all four countries by 2065.
Short of governments distributing aphrodisiacs – and sadly clinical trials suggest oysters and other natural libido enhancers don’t actually work – what can be done? Across 498 pages, we have some suggestions.
Chapter considers the impact of capital gains tax upon entrepreneurship. Capital gains tax is effectively a tax on future consumption over current consumption. Mitchell and his co-authors argue that high rates reduce start-up activity:
“Compared to other countries in the OECD, Australia, Canada, the United Kingdom, and the United States all have room for improvement when it comes to their top personal capital gains tax rates. The United States and Canada, for example, have top capital gains tax rates above the OECD average and rank in the top third of countries with the highest top capital gains tax rates in the OECD. While Australia and the United Kingdom have top capital gains tax rates under the OECD average, they, too, still have room for improvement as 11 and 14 countries have top capital gains tax rates lower than those in the United Kingdom and Australia, respectively. All four countries are thus able to improve their position on capital gains taxes in order to spur entrepreneurship.”
In chapter 9, Peter Vandor and Nikolaus Franke consider immigration. The evidence shows that immigrants are particularly entrepreneurial, with the Global Entrepreneurship Monitor showing higher entrepreneurial activity among first-generation immigrants than natives:
“The relatively strong inclination of immigrants to become entrepreneurs is not a new phenomenon. Historians have documented the economic impact of immigrant entrepreneurs in different countries and time periods. Jewish immigrants constituted a significant share of successful entrepreneurs in the United Kingdom between the 1930s and 1950s. These mostly Lithuanian and Polish immigrants have left their mark in many industries, creating household names such as Marks and Spencer or the food retail giant Tesco by introducing product and financial innovation.”
Just consider Silicon Valley. As John Collison, an Irish immigrant and co-founder of the payments start-up Stripe, explains in the New York Times: “The U.S. is sucking up all the talent from all across the world… Look at all the leading technology companies globally, and look at how overrepresented the United States is. That’s not a normal state of affairs. That’s because we have managed to create this engine where the best and the brightest from around the world are coming to Silicon Valley.”
Collison is right. Our Government desperately needs to change tack to offset the uncertainty around Brexit. As Vandor and Franke argue:
“The economic and political climate of a country plays a significant role in the attraction of highly skilled migrants, as has been witnessed with the Brexit vote and the election of president Trump in 2016. Even before any concrete policy measures had been implemented, the public perception of these events had already triggered a measurable decrease in graduate student applications for universities in the United Kingdom and the United States. At the same time, universities in countries associated with more open policies, such as Canada and Australia, saw a significant increase in applications in the aftermath of these events, suggesting a redirection of mobile international talent in their direction.”
We are in the planning stages of a research-led project on the connection between immigration and entrepreneurship. If this is the sort of thing you or your company would like to get involved, drop me an email to find out more.