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The Slow Death of American Innovation

The number of Americans starting new businesses has collapsed

Forget the hype.

Measured by venture creation, the unsexy but all-important metric, American innovation is on life support.

Although the cost and logistical complexity of starting a technology-powered business have plummeted, the number of Americans starting news ones has collapsed.

This system-wide problem compounds through shrinking numbers of people working at young companies.

What’s happening?

The precipitous drop in entrepreneurial innovation is the result of three interconnected trends: education, debt, and risk-aversion.

American education — designed for a mechanical economic era — is intended to produce workers, not owners. As a result, entrepreneurial skills — creative problem-solving, rapid experimentation, team-building — are undervalued in education. Over time, students adapted to what is measured — rote learning and systematized testing — at the expense of entrepreneurial creativity. This dynamic is truest for those with advanced degrees.

American debt, including student debt for young people, has skyrocketed. The average college graduate starts her career with five-figure debt. This debt, required by many young people because of inflated tuition costs, is decoupled from job placement and earning potential. Saddled with decades-long debt, innovation-aged people are unable or unwilling to venture out on their own.

In contrast to their swashbuckling self-identity, many working-age Americans are risk-averse. When life is comfortable — when people have food, shelter, and necessities — starting something new and risky doesn’t make much sense.

The inverse is true, too. Immigrants are entrepreneurial because, without institutional help, they have to be. Gritty, determined people make great entrepreneurs.

America is home to the most advanced companies in the world, but if you look beyond splashy Silicon Valley-style startups, American innovation is on life support.