Wednesday, 12 February 2014


I somehow missed this paper when it came out, by Ross Levine and Yona Rubinstein, which argues that misfits make better entrepreneurs. More precisely, they find that teenagers who get into trouble are much better at starting their own firms:
We disaggregate the self-employed into incorporated and unincorporated to separate
between “entrepreneurs” and other business owners. In contrast to much research, we find that
entrepreneurs earn much more per hour and work many more hours than their salaried and
unincorporated counterparts. Moreover, the incorporated self-employed have a distinct combination of cognitive, noncognitive, and family traits: besides tending to come from high-income families with well-educated mothers, the incorporated self-employed are highly educated themselves, and—as teenagers—scored higher on learning aptitude tests, exhibited greater self-esteem, and engaged in more aggressive, illicit, risk-taking activities. The combination of strong labor market skills and “break-the-rules” tendencies accounts for both entry into entrepreneurship and the comparative earnings of entrepreneurs.
Who else figured out that kids who get into trouble make great leaders? You guessed it - the German army in the interwar years. Desperate to find a solution to the problem of collapsing morale as evidenced by the 1918 mutinies, the German army ran a program to identify what makes great infantry leaders. Their result? Get guys who are smart, but have to repeat a class in school because of discipline issues. They don't just follow rules blindly; they will focus on getting the job done their way; and because they don't just follow the rules, they tend to earn the respect of their men (this is from one of the best reads in military history - "Fighting Power" by Martin van Creveld).

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