Author: Ed Elson

Translation: Shenchao TechFlow

Introduction by Shenchao: The number of new business registrations in the United States reached a historic high last year, but the data hides an awkward truth - 70% of new companies do not intend to hire anyone; they are merely part-time hobbies cloaked in an LLC. When "founder" became the trendiest social label and starting a company is cheaper than dating, the true entrepreneurial spirit is being diluted into an Instagram persona.

The American economy doesn't have much good news right now. Oil prices are soaring, mortgage rates are rising, labor force participation is plummeting, and the cost of living crisis is intensifying.

However, there is indeed one bright spot that has many economists excited: American entrepreneurship is on the rise. Nearly 6 million new business applications were submitted last year (setting a record), and we are expected to break this record by 2026. Setting aside everything else, the United States might be more entrepreneurial than at any time in the past.

That’s why I was shocked when my colleague Dan Chiolan shared the following data last week: among the 5.7 million businesses that were formed last year, only 30% expect to create any jobs… ever.

Wait... What?

That's right, you read that correctly. According to data from the U.S. Census Bureau, about 70% of new businesses are classified as "possibly non-employer enterprises," meaning they are expected to create no jobs at all. How do we know? Through various factors, such as whether the business owner provided a date for the first payroll or indicated they are hiring. The data tells us that America is not creating more businesses; it is simply submitting more paperwork.

Is this an isolated case? No. Over the past twenty years, the proportion of new enterprises unlikely to hire has doubled. Meanwhile, the share of "high propensity" firms (i.e., those likely to hire) has halved, with actual numbers stagnating, meaning (true) American entrepreneurship has actually stalled.

Image: Trend of new business registration applications in the U.S. from 2006 to 2026, light pink denotes "possible employers," dark orange denotes "possible non-employers." Source: U.S. Census Bureau, Stripe.

How is this possible? Is it related to AI? Probably not, because this trend started well before ChatGPT appeared. Look at the spike in 2020; it's likely related to COVID-19, meaning it probably has to do with people being idle at home. Allow me to introduce my latest economic theory:

False Entrepreneurship Wave

What we are witnessing is not a rise in entrepreneurial spirit, but rather what I call a rise in false enterprises. What is a false enterprise? It's literally what it sounds like. It is the "creative side project" launched by your high school friend out of boredom during the lockdown. It is your distant cousin's "lifestyle brand," which hasn't sold a single product but has started a Substack. It is that kind of "collective" whose mission is not to generate income but to gather Instagram followers. It is the kind of business you can barely find time for without quitting your job because... it isn't really a business at all. It is a hobby you happened to register.

How do people have time to register their hobbies as businesses? Because it now takes only about 15 minutes to create an LLC. The cost is about $130 - roughly 30% lower than the average cost of a date. In other words, the easiest hobby to start in America is not pottery or pickleball... but entrepreneurship.

Can I prove my theory? No. But like gravity, I don't know of any other theory that makes sense. The number of non-employer enterprises is soaring, while the revenue generated by these businesses is plummeting, meaning there are millions of new businesses with almost no sales. Given how many friends I have who have started Instagram accounts disguised as "companies," one can only infer from this evidence and conclude: they are part of the problem.

Image: Comparison of the number of non-employer businesses in the U.S. from 1997 to 2023 (left) and average income (right). Source: U.S. Census Bureau, Bureau of Labor Statistics, Bloomberg.

Worship of Entrepreneurship

So the question arises, why do some people start false enterprises? Why not simply pursue a hobby in their spare time? Why turn it into an LLC? The answer, like all trends, is simple: because it’s trendy now.

The hottest profession in today's world is "founder." From Jensen Huang to Elon Musk, founders are the rock stars of our digital age. The data reflects this: about 70% of Gen Z says owning a business is "part of the American dream" (significantly higher than other demographics), and nearly half say they do not want a regular 9-to-5 job at all.

However, more important than being a founder is the ability to call oneself a founder. The term "founder" evokes independence, fearlessness, and bravery - qualities people love to display on dating apps or social media. Thus, last year, the number of Americans adding "founder" to their LinkedIn profiles surged by 69%.

Image: Last year, the number of LinkedIn users in the U.S. adding the title "founder" to their profiles surged by 69%. Source: LinkedIn.

I suspect that most of these new "founders" are running false enterprises. Honestly, I understand. Unlike starting a real business (which requires significant sacrifice), false enterprises allow you to keep your real job while also being a "business owner." This is all the wonderful flavor of being a founder without any calories. Does it matter what your business does or whether it makes money? Of course not! What matters is that you have a business.

Founder Worship...

Why does this happen? Over the past twenty years, our society has been psychologically conditioned into a state of founder worship. Founders are no longer just businessmen - they are trendsetters, celebrities, cowboys, and tastemakers. They appear on magazine covers and billboards. They host podcasts, write manifestos, and dominate our algorithms. Founders are a unique combination of wealth and relevance that many dream of but few attain.

Image: Count of podcast episodes featuring guests with the title CEO, Founder, or Entrepreneur from 2018 to 2025. Source: Spotify, Prof G Analysis.

Therefore, becoming a founder carries significant social capital. Today, starting a company not only makes you rich but also makes you interesting. For a generation that describes their lives as lacking meaning, this is a powerful claim. In the past, people filled the void inside with alcohol, infidelity, and eventually yoga, while today, they fill it with startups.

...Can Lead Astray

The unhealthy obsession with the founder identity could lead to dark places. I know countless examples of people who ruin their lives due to a deep desire to be like Steve Jobs (Elizabeth Holmes, SBF, Charlie Javice, etc.). However, what fascinates me the most is the recent scandal involving Bill Gates' daughter, Phoebe Gates.

This 23-year-old Stanford graduate is currently under investigation for her shopping startup, which has received support from Hailey Bieber and is valued at $185 million, being exposed for falsifying sales data. This type of fraud, known as "cookie stuffing," is common in the affiliate marketing industry, but it also raises a deeper and more interesting question: why does the daughter of the 19th richest person in the world feel the need to resort to fraud to be a founder? We now have the answer: because it's cool.

I should have known from the moment she publicly announced her A-round funding; it didn’t look like a funding campaign but more like a Coachella music festival lineup. I should have known when she and her co-founder launched one of the most popular false enterprises today: a podcast. Or when she achieved the Holy Grail of false enterprises: appearing on the Call Her Daddy show. In short, the key is that there are signs to follow.

Harder Than You Think

You may have already noticed that I do not like the false entrepreneurship wave. Setting aside the falsehood, I despise the lie it promotes, which could mislead millions of people in their careers: entrepreneurship is easy.

In simple terms, it is not. One in five American businesses fails within the first year, and half disappear within five years. While the dream of raising venture capital is alluring, for most, it's just a dream: only 0.05% of startups have ever received venture funding, and of those that did, about three-quarters failed to return a single penny to investors.

Image: Failure rates of American businesses categorized by age of establishment, with nearly 80% not existing after 20 years. Source: Bureau of Labor Statistics, Clarify Capital.

I'm not trying to discourage anyone from starting a business. Done right, it can be transformative. But we should also acknowledge the truth about being a founder: it is extremely difficult, often unrewarding, requires significant personal sacrifice, and likely won't have a good outcome. This is not an opinion - it's a statistical fact.

Many seem to believe they can avoid the negative impacts of entrepreneurship by starting false enterprises. "Do it in your spare time," they think, "that way you don’t have to fully commit." What they don’t realize is that no meaningful thing is achieved in spare time. There is an important reason for this: meaning comes not from the result, but from the process. That’s why it’s called meaning. It is proportional to the degree of sacrifice you are willing to make.

A better choice is to make a choice. Either choose to start a business or choose not to, but don’t deceive yourself into thinking you can choose both at the same time. This applies to all other areas of life as well. From side gigs to "situationships," young people have developed an allergy to making decisions. We can hardly decide what to eat or watch, let alone what to do with our careers. This may stem from our addiction to algorithms, as the more we outsource responsibility to our phones, the less we take responsibility for ourselves. But for too many young people, the result is that we are not living our lives, but letting life happen to us.

This state of indecision is something we have the power to reject. Whether or not we become founders, immense meaning is within reach for anyone. It exists in your work, outside of work, in your current job, and in your next job. It is right there waiting for you to grab. All you have to do is choose.

See you next week.