It’s a dilemma that has been discussed and debated time and time again. If you have thought about dropping out of school to start a business, or to focus on a business you have already launched, or are in any way curious about the possibility then this is a good place to start. Unfortunately, there is no one answer that will apply to you, your neighbour, and the rest of the world. The good news is that it is possible to arrive at a decision that is best suited for you.
Therein lies an important distinction. To reach a place where you can be satisfied with the decision that you make takes a great deal of reflection and self-awareness. It is also helpful and important to analyze and unpack some of the most commonly repeated risks and rewards of dropping out of school when seriously considering this route. So without further ado, let us commence.
The Entrepreneurial Risk
Can you count the amount of times you’ve heard how difficult entrepreneurship can be? Or how rare it is for people to succeed through this avenue? Let’s together examine these arguments.
1) Do you think if you drop out you’ll become the next [Insert stereotypical examples of successful drop-outs i.e. Steve Jobs, Bill Gates etc.]?
This is perhaps the most commonly heard rebuttal against drop-outs. However, it should not be dismissed as it raises an important point. If you are misguided enough to believe this sentiment, i.e., that school is tying your creative free spirit and breaking away will allow you to build the next Apple, Facebook, etc., then you need to step back and think long and hard whether this is your only reason for dropping out. If it is, stop it.
This should go without saying, but dropping out will not make you a millionaire. Steve Jobs continued to audit classes for a year after dropping out and Bill Gates planned his eventual software company for years before he actually dropped out. Even so, the wild success that they amassed is not the rule. They are the exception to the rule and odds are you will not join them. You are the rule. It may be a better idea to finish school. Have I driven this home yet?
It’s also worth it to note that many of today’s drop-out superstars came from less than humble beginnings, for example Bill Gates and Mark Zuckerberg. There is something to be said about the privileges present in these successful cases and the reality that many people don’t have the same luxuries and how that influences both their decision to leave school. Or if they do leave school, how it impacts the level of success they achieve in their venture.
2) Degrees are valued in the real world (i.e. job market). You’re risking your degree on the small chance of “making it”. What happens if it doesn’t work out, you won’t have a back-up plan.
This argument, while being jam-packed and sounding somewhat frenzied, is also rather common. Let’s examine it:
Firstly, while degrees have in the past been proven to yield higher levels of employment this is rapidly changing. The Economic Policy Institute found that the unemployment rate for recent college graduates in 2015 was 7.2 percent, which was 2.3 percent higher than that of 2007. Meanwhile, the underemployment rate in 2015 was 14.9 percent, which was up 5.3 percent from 8 years earlier.
These numbers alone are worrisome particularly to those seeking employment coming out of college. The impact of unemployment on college graduates is far greater when you also consider rising tuition costs and inflation, leaving students with little choice but to take out loans which, upon graduating into a labor market with limited job opportunities, they may find difficult to repay. In fact, the cost of higher education has grown far more rapidly than median family income. According to the College Board, from the 1984–1985 enrollment year to the 2014–2015 enrollment year, the inflation-adjusted cost of a four-year education, including tuition, fees, and room, and board increased 119.5 percent for private school and 124.7 percent for public school.
Furthermore, while there are undoubtedly occupations that require a degree or some form of specialized training, there are many more that do not and that number is growing steadily. For example, many jobs in the tech field are now more concerned with their candidates’ portfolio and skillsets than they are their formal education.
This is not to say that academic institutions and degrees have become obsolete, but that education comes in many forms and some of the stereotypes are untrue or outdated. Also, the conviction with which these claims are made is equally harmful and needs to be readjusted as it provides a simplistic and therefore an obscure representation of the current climate.
As for what happens if your venture is unsuccessful, and you decide against pursuing a new one, and you are unable to land a 9-5 you are satisfied with, and you are absolutely insistent that there is no hope left for you in the world—college has no age limit. If you are convinced that the only way to your career goal or otherwise is through an educational institution, then finish your degree or start a new one.
3) Approximately 80% of businesses fail. You’ll likely be part of this statistic.
Of course, this is by far the most fear-inducing risk of all. The dreaded statistic that is continuously repeated, and it tells you that you have a high probability of failing. In considering dropping out, you also have to consider and accept that you may fail. You are not alone in running this risk and playing the odds, as the failure rate is high whether you have completed your education or not.
Failure in this context refers to being unsuccessful in your venture as a result of any number of reasons such as an outside advancement rendering its key purpose obsolete or ineffectual, it no longer being feasible or practical, or you abandon it etc. However, the definition of “failure” and its implication must be reimagined and redefined particularly as it pertains to entrepreneurship. Why is that the case?
Because implicit in this field is the process of continuous learning and adapting. In any start-up venture, and particularly in the early stages, you are constantly encountering hurdles and roadblocks—oftentimes that is what thwarts you. In fact, some entrepreneurs go through several failed start-ups before finding their golden ticket.
Meaning they “fail” then create then “fail”, and so on. While it is easier said than done, the fact remains that it only takes one successful venture to hit the jackpot. In a field so changeable and especially so intermittent, how much weight or meaning then does the word “failure” carry?
Your business venture is not comparable to a course you take and fail. The possibilities and opportunities do not vanish the moment when you can no longer support your startup. Instead, you can learn from your missteps by possessing the humility to accept the lessons and insights you gained from those mistakes.
The Entrepreneurial Reward
Time and time again, dropping out has been equated to failure and unemployment. This sentiment has become commonplace. This is untrue in many ways and while it is often difficult to ignore the pressure of those around us, a decision of this magnitude requires it. There are absolutely risks involved, however there are a plethora of advantages as well. Now that we’ve looked into the risks of dropping out, this is a good place to discuss some advantages. Let’s go through some.
1) Low risk, high reward
For the tech market specifically, the field is burgeoning with opportunities—and I’m not just talking about Silicon Valley. The new crop of drop-outs are better equipped to maneuver this route given that they have grown up in the world of the internet and smartphones. Furthermore, the tools to create new technology have become much more accessible.
Again, few drop-outs become “tycoons” by any means, but the kind of skills and experience you amass by starting a company cannot be taught in school and are highly coveted by already established companies. What this means is that your company failing translates to you either starting over, going back to school, or taking a high-paying job as a result of the knowledge you’ve acquired.
Many tech companies seek young talent, and are unperturbed if their employees lack a college education. For instance, Facebook Inc., Google Inc., and others offer internships to teenagers. In 2014, Facebook hired a 17-year-old, while in 2013, Yahoo Inc. bought news-summarizing app Summly from now 19-year-old Nick D’Aloisio for $30 million. He worked as a Product Manager at the company until 2015. Apple promotes 20 apps created by developers under 20 years old in the iTunes store, noting that “these fresh talents prove innovation and creativity transcend age.”
If tech is not your calling, however, that should not mean that you are destined to stay in school. For generations, kids have been told to go to college whether or not they have any idea of what career path they want to follow. If you don’t want to become a doctor, a lawyer, an engineer or if you don’t want to study finance and economics—you are told to study the arts and humanities. You have no direction, but at least you’ll have a degree. And while a humanities degree comes with many advantages, if you are in school—regardless of what your area of study is—just to be in school this is a waste of your valuable time.
If you are a creator, then your best bet is to create. When you create, you are betting on yourself and not on your degree. If you want to become a writer, or an illustrator, or a filmmaker, or a plumber—you need to hone your craft. For example, as a writer, an English degree will develop your critical lens and will sharpen your written communicative skills, but you will be primarily studying and writing about the works of others. Instead, take up freelancing gigs, practice your art, and establish yourself in your industry.
Once you have a portfolio to showcase, you can choose for yourself whether you want to form your own practice or work for an existing company. Regardless, you will be doing work you are interested and passionate about. Education is important but it needs to correspond with your needs and it absolutely does not end or necessitate the ivory tower of academia.
2) Opportunity cost
The study of economics teaches that the risk of “missing out” on one possibility is the cost incurred when pursuing another. The opportunity cost of dropping out to pursue a business is the possibility that staying in school and receiving a degree may have landed you a job. On the flip side, the opportunity cost of staying school, if school is not the right option for you, is 4 years of your life. Actually, cross that—The New York Times recently reported that only 53% of freshman earn a bachelor’s degree in six years of schooling. This means that both the drop-out rate has risen and that those who remain are likely to remain for a little over half a decade.
Following the truism that time is money, 6 years of schooling is a lot of time and a lot of money spent. Particularly in the case where a student is pursuing a degree just for the sake of pursuing a degree, is in the wrong program, or if their field of study is unrelated to their career interests. Another opportunity cost for the entrepreneurial minded student is the risk of staying in school while other’s launch ideas before they’ve had the chance.
A lot has changed since Mr. Zuckerberg left Harvard, and today’s drop-outs do not have to struggle with the same roadblocks. The costs associated with launching a company has plummeted while the options to raise money have multiplied. Conversely, the price of tuition is steadily increasing, causing student debt to increase alongside it.
3) Thrill of following your passion
There is no exact dollar amount to quantify following your passion. Nor is there an exact statistic, but there are far too many people in the world with regrets of opportunities passed. Although opportunities do not end if you decide to finish your degree, some opportunities cannot wait.
Last year, The Wallstreet Journal published an article about a group of college drop-outs who share house in San Francisco’s Mission District. The piece charts their individual journeys navigating the life of a college drop-out turned entrepreneur. The following anecdote is not cherry picked for the sake of argument. Rather, the same theme runs throughout:
Ari Weinstein, [one of the housemates], wanted to hire as a summer intern a Stanford University student who had done designs for Workflow. The student also had an internship offer from Facebook, for $6,300 a month. Mr. Weinstein offered to match the salary. A few weeks later, the student said Facebook, unprompted, raised its offer to $8,000. Mr. Weinstein conceded defeat. He made another pitch. He asked Mr. Frey to move to San Francisco. “Are you sure you want to keep doing this college thing?” Mr. Weinstein texted. Mr. Frey agreed to come. He didn’t want to miss out. A month later, he moved into the house, sleeping on a mattress on the ground until a room opened up.
The article ends here and it is unclear whether the Stanford drop-out was successful in that bold move. The moral however, is that the opportunity he was given is not a common occurrence and rather than allowing it to slip by, he took the chance. There is something to be said for being young and having the rest of your life ahead of you.
This, however, is another outstanding example. Not everyone can boast an internship with Facebook that offers $8,000/month and reject it. The fact is many successful entrepreneurs making a great deal of money, with figures of a million or more, are names that you have never heard of. We hear of Bill Gates’ whopping annual income and that number is unfathomable to us. If you’re aspiring to that, then the odds are sadly stacked against you. You will not get rich right away, however if money is your main driver, then consider that by earning 0.000083% of his annual salary, you are still racking in seven figures.
Dropping Out Not an Option?
Yet all is not lost for those unwilling to take the plunge. While it may be a difficult act to balance, there are a plethora of advantages to starting a business while still in school. If it becomes difficult to manage, there is always the option of enrolling part-time so that you are not forced to sacrifice your grades or your business. Here are several advantages of launching a business while still a student:
1) Build your network
Developing a company can be an overwhelming undertaking. Colleges offer access to advisors that can assist you and provide advice on a number of topics including finding important contacts and identifying funding sources. You can visit faculty members who have a solid understanding of your industry to get valuable insight on your chosen venture. Furthermore, college is a fantastic place to meet other like-minded and driven individuals. As an entrepreneur you must value efficiency and in college is where you will find a cheap talent pool. As a matter of fact, you may just happen on your dream team.
2) Develop your concept
Ideas and business opportunities are not interchangeable terms. Ideas sometimes lead to business opportunities but not every idea should be pursued. There has to be a need for your product and you must have the resources to create this product. School can be a valuable mentor in this sense with its access to competitions and guest speakers, to name a few. Oftentimes a startup needs to pivot multiple times before gaining traction, and being in an environment where it is possible for you to experiment and test your concept will allow you to arrive at a more refined product and therefore you will be better prepared to launch it.
3) Fostering creativity
A college campus is brimful of idealistic young adults talking over big ideas. Of course as previously mentioned, not every idea needs to be nor should be pursued. However, sometimes it’s helpful to surround yourself with free thinkers as it fosters a different perspective and can sometimes plant the seed of a solution to a problem you are encountering or a strategy you haven’t yet thought of.
If you are at this crossroad, then be comforted in the fact that there is no one right way to be a successful entrepreneur. It can be achieved through multiple avenues. The struggle is to decide on one that is best suited for yourself and your needs. Whether you choose to stay in school while you work on your venture or if you decide school is not providing you with the tools you require, if you are persistent and hardworking, it can be done. Remember, you are the sole author and creator of your entrepreneurial journey and your story only ends if or when you decide to end it.