Not a lot’s going right in the U.S. economy. Gas prices are surging, mortgage rates are rising, labor force participation is plummeting, and the affordability crisis keeps getting worse.
There is, however, one bright spot many economists are celebrating: U.S. entrepreneurship is on the rise. Nearly six million new business applications were filed last year (the most on record), and we’re on track to beat that record in 2026. Despite everything else, America might be more entrepreneurial than ever before.
That’s why I was struck when last week my colleague, Dan Chiolan, shared the following statistic: Of the 5.7 million new businesses that were created last year, only 30% of them are expected to create any jobs … ever.
Wait … What?
Yes, you read that right. According to the U.S. Census Bureau, roughly 70% of new businesses in America are considered “likely non-employers,” meaning they aren’t expected to create any jobs at all. How do we know? A variety of factors, such as whether the owner has provided a first-wages paid date, or if they’ve indicated they’re hiring. The data tells us America isn’t creating more businesses; it’s simply filing more paperwork.
Perhaps this was a one-off? No. Over the past twenty years, the share of new businesses unlikely to employ people has doubled. Meanwhile, the share of “high-propensity” businesses (i.e. those likely to make hires) has been halved, and the actual number has flatlined, meaning (real) American entrepreneurship has, in fact, gone stagnant.
How is this possible? Does it have to do with AI? Probably not, as the trend began long before ChatGPT. Looking at the spike in 2020, it’s more likely Covid-related, which means it probably has to do with people sitting at home with little to do. Allow me to introduce my latest economic theory:
The Fake Business Boom
What we’re witnessing isn’t a rise in entrepreneurship, but a rise in what I call fake businesses. What’s a fake business? What it sounds like. It’s the “creative side-project” your high-school friend launched when they were bored in lockdown. It’s your second-cousin’s “lifestyle brand” that hasn’t sold a product, but has started a Substack. It’s the “collective” whose mission isn’t to collect revenue, but Instagram followers. It’s the kind of business you can just about make time for without quitting your job, because, well … it isn’t really a business. It’s a hobby you happened to incorporate.
How do people have time to incorporate their hobbies? Because creating an LLC now takes about 15 minutes. It also costs around $130 — roughly 30% lower than the average price of a date. In other words, the most accessible hobby in America isn’t pottery or pickleball … it’s entrepreneurship.
Can I prove my theory? No. As with gravity, however, there’s no other theory I know of that makes sense. The number of non-employer businesses is soaring, and the amount of revenue those businesses generate is plummeting, implying the existence of millions of new businesses with little-to-no sales. Given how many of my friends have launched Instagram accounts posing as “companies,” one can only extrapolate that evidence and conclude that they are the problem.
The Cult of Entrepreneurship
The question, then, is why anyone would start a fake business. Why not just have a hobby outside of work? Why make it an LLC? The answer, as with all fads, is simple: because it’s in right now.
The hottest job in the world today is “founder.” From Jensen Huang to Elon Musk, founders are the rockstars of our digital age. This is reflected in the data: Roughly 70% of Gen Z say owning a business is “part of the American dream” (significantly higher than the rest of the population), and nearly half say they don’t want a normal nine-to-five at all.
More important than being a founder, however, is the ability to call yourself one. The term “founder” evokes independence, fearlessness, and bravery — the kinds of attributes people love to signal on dating apps or social media. As such, the number of Americans who added “founder” to their LinkedIn profile last year jumped 69%.
I suspect most of those new “founders” run fake businesses. And honestly, I get it. Unlike starting a real business (which requires significant sacrifice), a fake business allows you to keep your real job while also becoming a “business owner.” It’s all the great taste of being a founder, with none of the calories. Does it matter what your business does or if it makes money? Of course not! All that matters is that you have one.
Founder Worship…
Why has this happened? Over the past two decades, our society has been psychologically subdued into a state of founder worship. Founders aren’t just businesspeople anymore — they’re trendsetters, celebrities, cowboys, and tastemakers. They’re on magazine covers and billboards. They do podcasts and write manifestos and dominate our algorithms. Founders are a unique combination of rich and relevant that many dream of but rarely achieve.
As a result, there’s significant social capital in becoming a founder. Starting a company today doesn’t just make you rich; it also makes you interesting. That’s a powerful proposition for a generation who say their lives lack meaning. While people used to fill the empty holes inside of them with alcohol, extra-marital affairs, and eventually yoga, today, they do it with startups.
… Gone Wrong
An unhealthy obsession with founderdom can lead to dark places. I know countless examples of people who were undone by their deep-seated desire to be Steve Jobs (Elizabeth Holmes, Sam Bankman-Fried, Charlie Javice, etc.). None have fascinated me more, however, than a recent scandal involving Phoebe Gates, Bill Gates’s daughter.
The 23-year-old Stanford grad is currently under investigation after it was revealed her $185 million Hailey-Bieber-backed shopping startup had faked its sales. Known as “cookie stuffing,” the fraudulent practice is common in the affiliate marketing industry, but it also raises a deeper and more interesting question: Why did the daughter of the nineteenth-richest man feel the need to fake her way into being a founder? We now have the answer: because it’s cool.
I should have known the minute she publicly announced her Series A, which looked less like a financing event and more like a Coachella lineup. I also should have known when she and her co-founder launched one of the more popular fake businesses du jour: a podcast. Or maybe I should have known when she achieved the Holy Grail of fake businesses: a Call Her Daddy appearance. Anyway, the point is there were signs.
Harder Than You Think
As you can probably tell, I’m not a fan of the Fake Business Boom. Fakeness notwithstanding, I resent the lie it promotes that might lead millions of careers astray: that starting a business is easy.
Simply put, it isn’t. One in five American businesses die in their first year, and half are gone within five. And while the dream of raising venture capital is exciting, for most people it’s just that — a dream: Only 0.05% of startups ever get venture funding, and of those that do, roughly three-quarters fail to return a single dollar to their investors.
I don’t mean to discourage anyone from starting a company. Done right, it can be transformational. But we should also acknowledge the truth about being a founder: It’s very difficult, often unrewarding, and requires enormous amounts of personal sacrifice that likely won’t pay off. This isn’t opinion — it’s statistical fact.
Choose
Many seem to believe they can avoid the downsides of entrepreneurship by starting a fake business. “Do it on the side,” they think, “and you won’t have to commit.” What they don’t realize is that nothing meaningful has ever been achieved on the side. That’s true for an important reason: Meaning is derived not from the ends, but from the means. That’s why it’s called meaning. It’s directly proportional to the amount you’re willing to sacrifice.
The better option is to choose. Either choose to start a company or choose to not start a company, but don’t trick yourself into thinking you can choose both at the same time. This applies to every other realm of life too. From side-hustles to “situationships,” young people have developed an allergy to making decisions. We can barely decide what to eat or watch, let alone what to do with our careers. This likely stemmed from our addiction to algorithms, as the more we outsource responsibility to our phones, the less accountability we take for ourselves. But for too many young people, the result has been that instead of living our lives, we let life happen to us.
This state of limbo is a condition we have the power to reject. Founder or not, great meaning exists within anyone’s reach. It lies both within your work and outside of it, at your current job, and your next one. It’s right there for the taking. All you have to do is choose.
See you next week,
Ed
My niece and nephew, as well as many of their friends, have a side hustle. Driving Uber or delivering Amazon, event bartender or fashion design. I think you're right that partly it's a creative outlet, but it's also an economic necessity. Quitting their real job entirely is impossible because then they will lack healthcare and it's impossible to afford outside of paid employment. But their jobs are boring and lack any security so the side hustle is a bridge between jobs and some income beyond just paying the rent.
I think you are spot on Ed. Many similar examples all around me lately. Good work Ed.