The Marriner S. Eccles Institute for Economics and Quantitative Analysis recently hosted Eric Zwick, a professor of economics and finance at the University of Chicago, who shared insights from his research using big data to explore who becomes entrepreneurs and why.

Building on his background in research on public policy and corporate behavior that he conducted as a consultant to the Treasury Department, Zwick has dedicated his career to researching why there are socioeconomic gaps that determine who does and doesn’t become an entrepreneur in today’s economy. Zwick’s current research, which he titled “America’s Missing Entrepreneurs,” is based on tax returns between 2000 to 2022 and revealed a complex answer connected to a combination of access, experience, and timing more than anything.

At his Marriner Eccles Institute event, Zwick began by asking a simple question: “Who are entrepreneurs?” The answer may seem simple, but to find out why there are missing entrepreneurs it requires a bit more of a deep dive.

“If you’re imagining a hoodie-clad Mark Zukerberg, dropping out of college, becoming a founder, that’s not a typical entrepreneur,” Zwick said.

Examining the data further, he noted that two-thirds of business founders are male and that, at the time of founding, the median age is 40. Zwick also noted that most entrepreneurs had at least a median income of $100,000 when they founded their companies, giving them more capital and — perhaps most importantly — experience to start their ventures. Another important data point shows that many founders come from families with higher incomes.

“The higher income someone’s parents are, the more likely they are to be founders,” Zwick noted.

To his point, the data showed that people from the top 1% of the income bracket are 2.4 times more likely to be founders of companies. It also seems to indicate inherent barriers to entrepreneurship based on race and gender, but Zwick argues that things are a bit more complicated.

He described how the normal path to entrepreneurship usually follows what he has termed the “Entrepreneurial Pipeline.” The pipeline begins in childhood with exposure to entrepreneurs and continues in life to include labor market experience and access to liquidity. With that said, Zwick was quick to point out that, “If you throw a bunch of wealth at the people, or liquidity, or subsidized loans, it would have some effect on entrepreneurship for sure, but it’s not really going to move the needle materially,” and it’s “also not going to close some of the gaps.”

Timing is also another important factor that influences who becomes entrepreneurs. Zwick emphasized to the Marriner Eccles Institute audience how the data shows that “graduating into a boom that’s sort of tilted into the direction of entrepreneurial activity has long-lasting impact on your ability to be an entrepreneur later on.”

He used the example of those who entered the tech industry in 2000 during or after the dotcom bubble burst, pointing out that most had a difficult time founding new companies, no matter their background or liquidity, leading many to enter other fields.

Ultimately, Zwick concluded his remarks with a positive thought for the students in attendance, emphasizing that experience is the most important element in the Entrepreneurial Pipeline, and that as residents of Salt Lake City, they are well-positioned to gain that experience because the city “has the highest entrepreneurship rate in the country” of cities with more than 1 million people. Salt Lake offers a labor market experience that is conducive to entrepreneurship, which students at the University of Utah should consider as another bonus of attending this institution.