A Recession Fueled Entrepreneur

The economic meltdown is causing devastating effects for millions of people, and I’ve witnessed its collateral damage first hand. Some of my smartest, hardest working friends — people that I used to consider untouchable — now find themselves unemployed. Even the most fiscally prudent and financially conservative people have been harshly impacted by the incredible scope of the stock market and housing crashes. Unlike in the past, you didn’t have to be reckless with a credit card, buy a Miami condo with no money down, or risk your life savings on a dot com IPO to be impacted this time around.

I’m fortunate to live in Pittsburgh, because my city has not been affected as badly as other places. BusinessWeek labeled Pittsburgh one of the best places to ride out a recession, Smart Money magazine called Pittsburgh a recession-proof place to retire, and the New York Times said that Pittsburgh is the envy of many recession-plagued communities. In short, Pittsburgh is an awesome place to be in a horrible economy.

That said, if Pittsburgh is one of the least affected cities in the country, I can only imagine how bad things are elsewhere.

My grandfather — we called him Papa — was a big believer of investing in the stock market as the means to a comfortable retirement. When I was ten years old, he helped me purchase my first shares of a publicly traded company, and when we spoke he’d often dispense stock advice. To Papa’s delight, he met CNBC anchor Larry Kudlow at an airport a few years ago. “Michael,” he would later recount, “this man wore the sharpest pinstripe suit you’ve ever seen!”

Papa passed away two months ago, and although his death was an immensely sad and difficult thing to deal with, in a small way I am happy that he didn’t have to live out his final years struggling to get by. In just a few months, his investments lost more than a decade’s savings, and I don’t know what he would have done had he lived another twenty years.

My grandfather’s generation was sold on three ideas which my generation — I’m twenty-seven years old — has trouble believing today. The first is that investing in the stock market for the long term is the best way to save for retirement, the second is that climbing a corporate ladder is the surest way to success, and the third is that social security will be there for your golden years.

Between October 2007 and March 2009, the Dow Jones Industrial Average dropped more than 50%. I am still a believer in free market capitalism and the American economic engine, but I know that this crash has shaken the confidence of many of my friends. Tomorrow morning my company is rolling out its first retirement plan in the form of a Simple IRA. Although most of my employees are in their mid-twenties, and despite their knowledge that it’s best to buy low and sell high, some of them are hesitant to trust the stock market after what’s happened lately. Personally, I’ll be maxing out my IRA, but it’s difficult to blame them for lacking faith.

Another evaporated belief is the notion of climbing a corporate ladder to a comfortable retirement. Gone are the days of joining a company like General Motors with an entry level position, and counting on the business to take care of you for life. Many people my age couldn’t explain to you what a pension fund is, or for that matter how it differs from a mutual fund. Workers of my generation have had stability replaced with insecurity, and endurance replaced by transience.

So much doubt has been placed on the future of social security that many people my age just assume we’ll have none. Social security strikes me as a pyramid scheme that could only be stable in a world where life expectancy decreases while child bearing increases. (Octomom to the rescue!)

Faced with an unpredictable stock market, a non-existent corporate ladder, and an unlikely social security payout, I have never been more at peace with my decision to be an entrepreneur.

As an entrepreneur, I have much more control over my destiny than I would if I worked for somebody else. The stock market’s success is influenced by swings of emotions outside my control, while my company’s success is influenced by the quality of service I provide my customers. This I can control.

If I were an employee of a large business, my corporate ladder could be kicked out from underneath at any time. But, in the words of former Pittsburgher Paul Graham, as an entrepreneur I can grow a corporate ladder underneath me instead of climbing someone else’s to the top.

And when it comes to retirement, rather than relying on my government for socially offered security, I feel more comfortable depending on myself.

Of course, being an entrepreneur has its drawbacks too. Two weeks ago I worked eighty hours in seven days, and in addition to worrying about putting food on my plate, I enjoy the added stress of anguishing for my employees too. Don’t get me wrong; it’s not all roses.

Despite the stresses of being an entrepreneur, I’m much happier to be running my own company in today’s economic climate than I would be working for somebody else. Past and present employees of some large companies (Lehman Brothers, Bear Stearns, and AIG come to mind) must feel like hapless passengers aboard the Titanic. However, being an entrepreneur in a small business is like being the captain of a small speed boat. It doesn’t make the waters any safer, but at least you’re in control of navigating them.