Entrepreneurs are Vanishing…Here’s Why

Old woman holding money in hands

Yesterday, we spent the day riding up to Tacana.

So few people have been there, we thought it might be a ranch myth. 

We recently recounted what a flop the 21st century has turned out to be so far. 

We focussed on the economy. We might just as well have looked at education, health care, human liberty, safety, politics or war. 

Almost everywhere you look things appear to be degrading. We are less rich, less free, less safe and probably less smart than we were 15 years ago.

The age old curse

But some things are easier to measure than others. 

It’s tricky to measure well-being or happiness, for example. It’s easy to measure disposable income. 

In the US, most people have less money to spend than they did in the last century. For all we know, people are, on average, happier now than ever. 

If they are, they should probably have their fool heads examined. 

We promised to look at the ‘why’ of all of it…that is, we offered to present an explanation. 

Why is the 21st century such a disappointment? 

No one knows. But in the February issue of The Bill Bonner Letter, we proposed a simple hypothesis: People are getting older. 

Not that getting older is a disappointment. Just the contrary: People are usually more disappointed when they are not able to grow older. Death is the only alternative we know of. And most people try to avoid it. 

Nevertheless, aging populations tend to slow the rate of economic growth. 

This theme was distasteful to some of our subscribers, who preferred not to think of older people as a drag on the world economy. 

Still, the idea is gaining traction in the mainstream press. This week, the Wall Street Journal reported on a study by the International Monetary Fund. It suggested that ‘aging populations and low productivity will combine to reduce output growth.’

The speed limits of growth

We’ve mentioned before that, at the close of the 20th century, pundits and investors had hoped that new technology — especially the Internet — would remove the ‘speed limits’ to growth. 

These new marvels were supposed to allow us to create wealth much like a central bank does: without saving money or breaking a sweat. 

Some even hoped it would help us to live forever…just like the gods. 

But here we are in 2015…and the speed limits are still there. In fact, they have limited growth even more. 

The IMF says old people impose slower speed limits on an economy: 

An economy’s speed limit – referred to as potential output growth – dictates how rapidly it can expand its production of goods and services without increasing inflation.

The evidence presented in the study suggests that absent policy action to encourage innovation, promote investment in productive capital, and counteract the negative impetus from aging, countries will have to adjust to a new reality of lower speed limits. 

If old people are a drag on progress, technology that helps old people get older is not a formula for economic success. 

As people live longer, they consume not only their own savings, but also the savings of others.

The dying embers of American capitalism

Besides forgetting things and spending money that is not theirs, old people also start few businesses, invent little and hold onto existing jobs, like a dog with a bone.

On this last point, it is worth noting that the over-55 group is the only age group to gain jobs since the crisis of 2008. Every other age group lost jobs. 


That they desperately need the money may be one answer. 

But also they have better work histories, more connections and more experience with the old businesses, old products and old companies that dominate the economy. 

We could have mentioned the falling rate of business start-ups as more evidence of a slumpy century. It is both cause and effect of economic stagnation. But first, let us look at what is happening

The US startup rate has been falling for decades. The Kauffman Foundation, citing its own research and drawing on US Census data, concluded that the number of companies less than a year old had declined as a share of all businesses by nearly 44% between 1978 and 2012. 

As a percentage of existing businesses, the number of start-ups has declined 44% since 1978, says Inc. So far this century, it’s still going down. 

As the number of start-ups goes down, old people who control old companies start to dominate the business — and the political — world. 

These old companies are then in a position to use the Fed’s cheap credit. They have collateral. They have connections. They have what it takes to lay their hands on free money. The little guys don’t.

But without the little guys, there are fewer growing businesses with new products hiring new people and winning new customers. 

Old people are loyal to old products put out by old companies with almost limitless funding from old investors and the old economists running the central bank that was set up 102 years ago. 

Soon, the entire economy creaks and groans. 


Bill Bonner,
for the Daily Reckoning Australia

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Bill Bonner

Bill Bonner

Best-selling investment author Bill Bonner is the founder and president of Agora Publishing, one of the world's most successful consumer newsletter companies. Owner of both Fleet Street Publications and MoneyWeek magazine in the UK, he is also author of the free daily e-mail The Daily Reckoning.
Bill Bonner

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