One of the romantic notions about the modern business age is the start-up.
Seemingly everyone wants to be an entrepreneur and create a start-up. The idea is thought of as the ultimate business nirvana, a statement of courage, where a person is free to control his or her own destiny and create something of value from nothing.
Some of this may be true, though running a business does also come with stress, but there is no doubt that entrepreneurship is critical to any dynamically growing economy. Working at a start-up and entrepreneurship in many forms can also be profoundly liberating, and the really great entrepreneurs such as Thomas Edison, Henry Ford and Bill Gates certainly changed the world.
So this may be regarded by some as heresy, but something odd has happened over the past 10 to 20 years, and that is that it is impossible to attend dinner parties and not meet tons of people who work or want to work at start-ups. This might be fine but for the fact that many of these start-ups fail and burn capital that could have been allocated, potentially more effectively, elsewhere in our economy.
Above all, many of those running start-ups who are often very young don't always seem cut out to be entrepreneurs.
To be fair, part of the growth in start-ups arose because corporations were simply no longer providing the long-term jobs or security they once did, so starting a business has become a natural option for many. But start-ups are now so ubiquitous that those who work for salaries may actually be the ones bucking the trend.
And it seems that the growth of start-ups -- itself a rebellion against the rigidity of the old corporate structure -- arrived at the same time as the technology revolution and is intrinsically wedded to that revolution.
The actual data about the volume of start-ups in the past 10 years or so is rather contradictory.
In 2009, about 0.34% of the population created a new business, compared with just 0.28% in 1998, even leading up to the height of the Internet bubble, according to the Kauffman Index 2015: Startup Activity - National Trends.
The rate of new business creation fell off somewhat after the credit crisis, but as of 2014 was back at about 0.32%.
Meanwhile, the Federal Reserve has blamed the lack of economic growth on insufficient entrepreneurship, claiming that the number of employees at companies that have been around for less than five years slumped to a record low of 9.1% in 2013.
Perhaps the issue is really not so much the number of start-ups but people's faddish attitude toward the concept and the type and nature of the modern start-up.
The Solow Paradox is economically fundamental to the core value of the tech revolution. It tries to explain why we haven't seen the massive gross domestic product growth during the tech revolution that we did during earlier industrial or commercial revolutions.
