The Risk/Reward Calculation Is Moving in Favor of Entrepreneurship

Layoffs are mushrooming in the tech industry. For example, Amazon, Salesforce, and Facebook—big, public tech companies—have all announced sizable layoffs. These are high-paying, skilled jobs that used to be thought of as safe. These jobs were abundant while these companies grew for many years and competed for talent, creating a market where talent always knew they could find a job. Things have changed. These companies are all reducing or freezing headcount at the same time. This is playing out with smaller private tech companies too.

Absent a reversal, I suspect this will lead to a big uptick in entrepreneurship. Until now, employees with safe, high-paying jobs have had a strong incentive to not pursue entrepreneurship. Low-risk, high-reward positions were abundant. But with the market changing, the risk is greater. If you’re laid off, your reward is low (zero pay). For those who have entrepreneurial desire, starting a company now makes more sense. They’ll still be in a high-risk situation, but they’ll also have a shot at high rewards and have more control over their own destiny. Said differently, in an environment where you can’t find a job, what do you have to lose by trying to start a company?

I think we’ll start seeing more people (in tech and other industries) look at the changing risk/reward dynamics and decide to bet on themselves.