Survey shows surprise decline in US startups run by young people

Heard about all those young people who drop out of college to build their own business? Turns out there are far fewer of them than you might think. Contrary to popular perceptions about tech and millennials, the number of people under 30 who own companies has fallen to a 20-year low.

According to new Federal Reserve data parsed by the Wall Street Journal (paywall):

Roughly 3.6% of households headed by adults younger than 30 owned stakes in private companies … That compares with 10.6% in 1989—when the central bank began collecting standard data on Americans’ incomes and net worth—and 6.1% in 2010.

Meanwhile, the number of young people as a percentage of all entrepreneurs is also shrinking. According to a separate study cited by the Journal, only 22.7 percent of new entrepreneurs in 2013 were aged 20–34, compared to 26.4 percent the year before.

The story suggests that various factors are driving the dearth of young entrepreneurs; these include banks making fewer loans to small businesses and a lousy labor market that has deprived millennials of job skills. In turn, young people may have become more risk-averse, and have less confidence to embark on their own.

The overall picture would be brighter in the event that more older people were picking up the slack by launching startups later in life. That appears unlikely, however, given other numbers:

Overall, the U.S. “startup rate” — new firms as a portion of all firms — fell by nearly half between 1978 and 2011, according to an analysis by Mr. Litan [of the Brookings Institute] and his research partner, economist Ian Hathaway.

Off Topic: Bear Stearns Bailout — It’s the Prime Brokerage, Stupid

By now you all must be up on the news about Bear Stearns being sold for $2 a share to J.P. Morgan Chase. That’s roughly $236 million for an 85-year-old investment bank that was worth $20 billion only a few weeks ago. If you read the top dailies today — The Wall Street Journal, The New York Times and The Washington Post — you will get a 360-degree view of the crisis.

However, the big question is why did the Federal Reserve decide to underwrite $30 billion of its less liquid assets in order to get J.P. Morgan to buy Bear Stearns? It’s a big risk the Fed is taking, and I want to know why. After all, it’s the American taxpayer who would be left holding a bag of rocks if things go sour. Read More about Off Topic: Bear Stearns Bailout — It’s the Prime Brokerage, Stupid