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Category: Entrepreneur Factor®

Why Entrepreneurial Companies Outperform the Competition

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Abstract

Various traits differentiate entrepreneurs from non-entrepreneurs, making the former successful and the latter more likely to face failure in their ventures. Some of these traits include leadership skills, risk-taking initiatives, openness to organizational change, and perseverance in the face of challenges and failure. Two of the most accomplished entrepreneurs are Jeff Bezos, who founded Amazon, and Bill Gates, who co-founded Microsoft. These entrepreneurs have shown remarkable leadership and transformed their startups into some of the largest corporations in the world. They have achieved this feat by rallying their followers to support and implement their vision. This report has evaluated the traits and strategies used by Gates and Bezos and compared them with those used by non-entrepreneurs to develop important insights on what it takes to excel in entrepreneurship.

The report explains that successful entrepreneurs should be willing to take calculated risks, embrace strong leadership skills, practice perseverance, learn from failure, and engage in corporate social responsibility to strengthen their brands’ public image. Additionally, successful entrepreneurs should develop strong networks and create a continuous improvement and innovation culture to pivot and exploit market opportunities. However, non-entrepreneurs are known to be characterized by a fear of taking risks, weak leadership skills, impatience, lack of intense social and professional networks, and an organizational culture resistant to change.

Why Entrepreneurial Companies Outperform the Competition

Introduction

Although entrepreneurs usually face challenges in the path to success, they can generally overcome the obstacles they face and transform their startups into large companies with a comprehensive market presence. Some of the globally-renowned entrepreneurs include Bill Gates and Jeff Bezos. They have excelled in entrepreneurship and are billionaires who have grown their companies from startups into multi-billion and trillion-dollar corporations. Therefore, it is essential to evaluate their entrepreneurship strategies and personal traits that differentiate them from non-entrepreneurs to understand what it takes to succeed. This paper will provide a background on these entrepreneurs and their crucial life lessons, analyze their entrepreneurial traits, how they innovate and overcome obstacles, and how they handle failure.

Outstanding Entrepreneurs and Key Lessons in Life

One outstanding entrepreneur is Jeff Bezos, the founder and former CEO of Amazon. His company focuses on e-commerce, digital streaming, cloud computing, and artificial intelligence (Amazon, 2020). He started the business in 1994 from his garage in Washington as an online bookstore and gradually grew it into a $1.71 trillion company by 2021 (Amazon, 2021). Currently, Bezos is the world’s richest person. One of the valuable key life lessons from Bezos is applying the “regret minimization framework.” This is a concept where people picture themselves at an advanced age, try to imagine their biggest regret in life during the old period, and then work backward to take actions that will prevent remorse.

Bezos applied this framework when deciding whether to quit his former job at Wall Street and start an internet company. He realized that he would regret missing out on entrepreneurship opportunities on the internet, so he quit his job and started Amazon (Bayers, 1999). Bezos used the same framework when choosing an appropriate leadership style, and he embraced transformative leadership, where leaders work with teams to create a vision and implement change (Fridson, 2001). Bezo’s actions show that successful entrepreneurs should not only embrace risk and follow their vision but they should also use leadership to inspire followers to adopt change.

 

                                       

Exhibit 1: Amazon’s Revenues

Source: https://www.statista.com/statistics/266282/annual-net-revenue-of-amazoncom/

The second entrepreneur is Bill Gates, the co-founder of Microsoft Company, which develops and manufactures computer electronics, computer software, personal computers, and other technology products. Gates and his co-founder (late childhood friend) Paul Allen invented the first product, the rudimentary computer, in 1972. Since then, he has provided leadership at Microsoft as CEO, and the company’s value surpassed the trillion-dollar mark and is currently worth in excess of $2 trillion. (See Exhibit 2). One of Gates’s most important life lessons is the importance of continuous innovation by taking risks and thinking ahead of time.

Gates had a vision of becoming the most successful software company. Despite intense competition from established firms such as IBM, he ventured into the competitive software industry when he released the software product Xenix in 1980 (Microsoft, 2020). He took a fundamental risk by dropping out of Harvard to create Microsoft Company in 2008 (Fridson, 2001). This demonstrates that successful entrepreneurs have a solid vision and are persistent in achieving that vision regardless of their circumstances or obstacles. Gates applies both autocratic and transformational leadership, required in the rapidly changing tech world where accurate decisions need to be made promptly.

 

Exhibit 2: Microsoft Revenues

 

 

Source: https://www.statista.com/statistics/267805/microsofts-global-revenue-since-2002/

Traits Entrepreneurs Share Which Make Them Perform Better than Non-Entrepreneurs

Taking Risks

Entrepreneurs often take risks in their quest to pursue and achieve their vision. They tend to act quickly and decisively to make the most of the opportunities that they have identified. For example, Gates and Bezos took risks by leaving education and employment opportunities in prominent organizations to pursue their vision. When entrepreneurs take such significant risks, they are likely to work hard and remain focused on their image since failure is no longer an option. For example, Bezos knew that he had to make Amazon successful since he quit a lucrative job opportunity on Wall Street. He had to remain focused to achieve his vision and not have regrets in life at an old age (Bayers, 1999).

Persistence and Perseverance

Many entrepreneurs embody these two traits: aggressively work hard to pursue a vision and overcome obstacles they face in their path. Gladwell (2008), in the book Outliers, discusses the concept of the 10,000-hour rule, which states that people should perform deliberate practice for 10,000 hours before they can become world-class in a field. This entails pushing one’s skill as much as a person can in the quest to excel in a specific area. Gates, Bezos and Plank, have all accomplished the 10000-hour rule, which is a manifestation of their persistence and perseverance in pursuing their visions (Kouzes & Posner, 2007). Persistence and determination are closely related to handling failure, and many entrepreneurs who face loss will learn from it and improve their future outcomes.

Strong Leadership Skills

One of the most common traits associated with successful entrepreneurs is strong leadership. All entrepreneurs require strong leadership skills to rally their followers towards a shared vision and goal (Gladwell, 2008). Many successful entrepreneurs such as Jeff Bezos apply transformative leadership to build solid teams and use charismatic traits to inspire them to embrace transformative change. Bill Gates has been known to use the autocratic leadership style when making important, sensitive, and time-barred decisions. Ventures owned by non-entrepreneurs stagnate in terms of innovation, and they are unable to respond to the constantly changing needs of customers. Ultimately with this type of organizational behavior, such ventures fail.

Corporate Social Responsibility

Finally, many successful entrepreneurs implement corporate social responsibility (CSR). For example, Bill Gates created the Bill and Melinda Gates Foundation, the largest private foundation globally (Bill and Melinda Gates Foundation, 2020). It invests in health, social welfare, and education (See Exhibit 3). Bezos also contributes to charity, and for example, he made a $10 million donation to Seattle’s Museum of History and Industry in 2011 (Market Realism, 2020). Corporate social responsibility creates a positive public image of entrepreneurs’ companies and attracts consumers to a brand.

Exhibit 3: Bill and Melinda Gates Donations past 20 years

 

Source: https://www.gatesnotes.com/2020-Annual-Letter

How Entrepreneurs Pivot as Compared to Non-Entrepreneurs

Creating a Culture of Continuous Innovation and Improvement

Entrepreneurs usually pivot by creating a culture of continuous innovation and improvement within the company. Constant innovation ensures that a venture takes advantage of any market opportunities to improve the existing products, launch new products or target new market segments. Most successful entrepreneurs usually invest heavily in research and development to identify existing market opportunities and diversify their product portfolio. For example, Bezos has created a culture of continuous innovation at Amazon and has grown its brand portfolio to over 75.1 million products sold on Amazon as of March 2021. (See Exhibit 4). However, non-entrepreneurs usually fail to create a culture of continuous improvement, generally due to a lack of strong leadership. As previously discussed, weak leaders are unable to inspire followers to adopt change initiatives that create value. An example is Kodak Company, which failed to embrace digital photography opportunities since its culture was not receptive to change and continuous improvements, which led to its collapse (Buchia, 2015).

Exhibit 4: Estimate of the number of products currently selling on the Amazon US website:

 

Source: https://www.scrapehero.com/how-many-products-does-amazon-sell-march-2021/

Networking

“However, he viewed failure as an opportunity to learn from mistakes, and he implemented improvements when innovating new products in the future. (Haralambous, 2018).” Entrepreneurs recognize the importance of social and professional networks in enabling them to understand and exploit market opportunities

Many successful entrepreneurs surround themselves with people who complement their areas of weakness and better understand the industry they operate in. Moreover, one of Bill Gates’ well-known quotes is, “Surround yourself with people who challenge you, teach you and push you to be your best” (Buchia, 2015).

How Entrepreneurs Handle Failure

Entrepreneurs usually understand that they will experience failure at certain points in life and create an opportunity to better themselves for future initiatives. Entrepreneurs do not give up when faced with failure. Instead, they seek lessons that will help them achieve a better outcome in the future. Jeff Bezos has faced failure several times, and many products introduced to Amazon fail to be successful.

Conclusion

This report evaluates and highlights the strong traits of successful entrepreneurs such as Jeff Bezos and Bill Gates. Some of the main factors that differentiate entrepreneurs from non-entrepreneurs are their ability to exercise strong leadership, take risks, create a continuous improvement culture, invest in networking opportunities, and handle failure well. These leaders could transform their vision into reality, and they grew their startups into multi-billion and trillion-dollar corporations.

Small Caps Still Beckon. And They Don’t Have to Be Risky

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Small cap stocks are still worth considering, and investors don’t need to take on added risk with quality approaches like the ERShares NextGen Entrepreneurs ETF (ERSX).

ERSX selects the most entrepreneurial, primarily Non-US Small Cap companies, that meet the thresholds embedded in its proprietary Entrepreneur Factor (EF). ERShares’ ETF delivers compelling performance across a variety of investment strategies without disrupting investors’ underlying risk profile metrics. Their geographic diversity enables them to harness global advantages through additional returns associated with currency fluctuations, strategic geographic allocations, comparative trade imbalances, and relative supply/demand strengths.

Small stocks have been hot for a while. They’re not flaming out anytime soon.

“However, despite short covering in the Russell 2000 Index over the past few reporting periods, I continue to see the small caps as heavily shorted, and thus the biggest area of opportunity if equities continue to advance,” writes Schaeffer’s Investment Research Vice President of Research Todd Salmone.

ERSX: A Prime Choice for Small Cap Exposure

ERSX tracks a fundamental-selected index of global small cap ex-US equities weighted by market capitalization. The fund’s index is benchmarked against the FTSE All-World Ex-US Small Cap Index, a market-capitalization weighted index representing small cap stocks’ performance in developed and emerging markets excluding the United States. The index is derived from the FTSE Global Equity Index Series (GEIS), which covers 98% of the world’s investable market capitalization.

ERSX 1 Year Performance

“Continuing with the small cap versus large cap theme, I was amazed when our own Quantitative Senior Analyst Chris Prybal put the chart below, together last week. It is the 10-day, equity-only put/call volume ratio on only components of the Russell 2000 Index,” adds Schaeffer’s.

Smaller companies are more levered to economic rebounds, enhancing the potential of ERSX this year. The ERShares ETF is also alluring because ex-US small caps are more attractively valued than domestic equivalents.

Up 60%, the Small Cap ERSX ETF Is Not Fazed by Last Week

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Small cap stocks lagged the broader market last week, but that doesn’t dent the case for exchange traded funds such as the ERShares NextGen Entrepreneurs ETF (ERSX).

ERSX selects the most entrepreneurial, primarily Non-US Small Cap companies, that meet the thresholds embedded in its proprietary Entrepreneur Factor (EF). ERShares’ ETF delivers compelling performance across a variety of investment strategies without disrupting investors’ underlying risk profile metrics. Their geographic diversity enables them to harness global advantages through additional returns associated with currency fluctuations, strategic geographic allocations, comparative trade imbalances, and relative supply/demand strengths.

Some market observers believe last week’s small cap lethargy could give way to upside opportunity.

“After a fierce run, smaller-capitalization stocks were hit by profit-taking this week, amidst a spike in Treasury yields. But gains still lie ahead for small caps, which are supported by strong earnings growth and reasonable valuations, analysts say,” reports Jacob Sonenshine for Barron’s.

A Good Time to Consider ERSX?

As investors look for ways to position their portfolios for the months ahead, small cap stock ETFs can help jumpstart a new market cycle.

Small cap companies typically show an advantage over large- and mid-cap stocks during the initial stages of an economic expansion phase. Small cap stock performances are more correlated with U.S. GDP, so their financial performance may be more aligned with the initial U.S. economic expansion period. There are other reasons to consider ERSX.

“The higher rate of return on the risk-free bond makes owning stocks less attractive. Another problem: While typically, higher yields are positive harbingers of growth for smaller companies, which are more economically sensitive than larger ones, that’s when yields are rising gradually,” according to Barron’s.

Increased fiscal spending could also support a shift toward cyclical companies, which are more tied to the broader economic recovery. These smaller companies, banks, manufacturers, and commodity producers typically do better as the economy exits a recession.

ERSX tracks a fundamental-selected index of global small cap ex-US equities weighted by market capitalization. The fund’s index is benchmarked against the FTSE All-World Ex-US Small Cap Index, a market-capitalization weighted index representing small cap stocks’ performance in developed and emerging markets excluding the United States. The index is derived from the FTSE Global Equity Index Series (GEIS), which covers 98% of the world’s investable market capitalization.

ERSX 1 Year Total Return

Find Plenty of Potent Themes under One Umbrella with This ETF

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Many exchange traded funds check one box. Some check several. One that checks many relevant themes is the ERShares NextGen Entrepreneurs ETF (ERSX).

ERSX selects the most entrepreneurial, primarily Non-US Small Cap companies, that meet the thresholds embedded in its proprietary Entrepreneur Factor (EF). ERShares’ ETF delivers compelling performance across a variety of investment strategies without disrupting investors’ underlying risk profile metrics. Their geographic diversity enables them to harness global advantages through additional returns associated with currency fluctuations, strategic geographic allocations, comparative trade imbalances, and relative supply/demand strengths.

Year-to-date, entrepreneurial companies are market leaders. That’s obviously one trait in favor of ERSX, but there’s more to the story.

ERSX isn’t any old small cap ETF. It blends domestic and international exposure, which is relevant at time when many markets are betting international smaller stocks will top U.S. equivalents. Non-U.S. equities are poised to take flight, and it’s possible that this asset class is in for a substantial period of out-performance.

ERSX 1 Year Performance

More Reasons to Embrace ERSX

U.S. small- and mid-caps have it easier than their international peers. Smaller U.S. companies benefit from operating in one of the easiest countries for commerce. The United States regularly places near the top in the World Bank’s annual rankings of countries for its ease of doing business. The companies have access to a population of 330 million consumers who principally speak one language, and they operate one set of national laws and regulations.

Small cap companies typically show an advantage over large- and mid-cap stocks during the initial stages of an economic expansion phase. Small cap stock performances are more correlated with U.S. GDP, so their financial performance may be more aligned with the initial U.S. economic expansion period.

The ERSX ETF tracks a fundamental-selected index of global small cap ex-US equities weighted by market capitalization. The fund’s index is benchmarked against the FTSE All-World Ex-US Small Cap Index, a market-capitalization weighted index representing small cap stocks’ performance in developed and emerging markets excluding the United States. The index is derived from the FTSE Global Equity Index Series (GEIS), which covers 98% of the world’s investable market capitalization

On measures such as return on equity measures, international small- and mid-sized (SMID) companies are higher quality. They have been trading on average at a 40% discount to US small- and mid-caps. Yet investors have not taken advantage of this opportunity.

An Equity Decline is Just Fine for This Entrepreneurial ETF

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A Treasury market gone haywire is weighing on riskier assets, but equity declines could bring opportunity with the ERShares Entrepreneurs ETF (ENTR).

ENTR tries to reflect the performance of the Entrepreneur 30 Index, which is comprised of 30 U.S. companies with the highest market capitalizations and composite scores based on six criteria referred to as entrepreneurial standards. ENTR primarily invests in US Large Cap companies that meet the thresholds embedded in their proprietary Entrepreneur Factor (EF).

The Entrepreneur Factor

ENTR selects the most entrepreneurial, primarily US Large Cap companies, that meet the thresholds embedded in the ERShares proprietary Entrepreneur Factor (EF).

There has been a thematic approach to investing in entrepreneurs. Investors can tap into the entrepreneurship economy with a targeted strategy to enhance an investment portfolio with quickly rising companies.

So, what is an entrepreneurial company, and how is it different from others? Entrepreneurial companies are led by a main founder. From decades together, founder-run Entrepreneurial companies have shaped the economy by investing in their people and in general innovation, leading to exceptional growth. Many entrepreneurial companies are run by Founder-CEOs.

Their presence is reflected in the company’s performance, and having the right Founder-CEO can make an important difference. The differential between the period with the Founder-CEO still in the company and the period without the founder is approximately 7% in excess return. Entrepreneurs typically provide the difference between success and failure and wealth creation versus wealth destruction. In another sense, disruptive innovation moves at a rapid pace, and only the most capable leaders survive.

ENTR 1 Year Performance

Is This Small Cap Pullback a Good Buying Opportunity?

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Recent market weakness is weighing on previously hot small cap equities, but that scenario could prove to be just the time to jump in. Consider the case of the ERShares NextGen Entrepreneurs ETF (ERSX).

ERSX selects the most entrepreneurial, primarily Non-U.S. Small Cap companies that meet the thresholds embedded in its proprietary Entrepreneur Factor (EF). ERShares’ ETF delivers compelling performance across a variety of investment strategies without disrupting investors’ underlying risk profile metrics. Their geographic diversity enables them to harness global advantages through additional returns associated with currency fluctuations, strategic geographic allocations, comparative trade imbalances, and relative supply/demand strengths.

“Small-capitalization stocks had been on an impressive run since September, when investors started moving into more economically-sensitive assets on hopes for an end to the pandemic and the reopening of the U.S. economy—plus trillions of dollars in fiscal stimulus,” reports Jacob Sonenshine for Barron’s. “Economic downturns are a bigger threat to the stability of smaller firms, since they don’t have the same access to capital that larger companies enjoy. And with many small-cap companies focused on the U.S. market, their earnings also tend to be more sensitive to changes in the domestic economic landscape.”

Getting Down to Business

Small caps capture more upside when markets are trending higher, yet they can also get hit harder during a downtrend, which makes this trade the riskiest of the bunch.

Yet there are good reasons to go with this segment, and beyond traditional cap-weighted strategies at that.

“In recent days, investors have been repositioning away from cyclical stocks after the group’s long winning streak, and small-caps have been no exception. While it is anybody’s guess when this pullback will end, small-cap stocks are looking increasingly attractive to some analysts as a result,” adds Barron’s.

ERSX 1 Year Total Return

Why Tax Hikes Could Stall Growth

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With the White House needing revenue to fund an ambitious $3 trillion infrastructure package, corporate tax hikes are now very much on the table.

Investors in growthier assets like the ERShares Entrepreneurs ETF (ENTR) may have it better than most.

Against the backdrop of potentially higher taxes, ERShares COO and Chief Investment Strategist Eva Ados advises sticking with entrepreneurial companies.

“Ultimately, companies will shift to tax havens such as Ireland or UAE, where higher taxes won’t hurt them,” according to the issuer. “Ados encourages investors to keep an eye on entrepreneurial companies as they emerge from the economic recovery. She believes they are the best hope in developing effective growth strategies to offset potential tax rate increases.”

Taming Taxes with ‘ENTR’

Many entrepreneurial companies have long duration cash flows, meaning they should benefit as interest rates remain low.

Citing an economic recovery in tow, the Fed recently decided to keep rates steady while forecasting stronger guidance for the next couple of years.

“As widely expected, the Fed held interest rates steady at a near-zero level in its latest meeting,” a Nasdaq article said. “U.S. interest rates have been this low since March 2020. Federal Reserve officials continued to project near-zero interest rates at least through 2023, while boosting economic growth expectations on vaccine and stimulus optimism.”

ENTR 1 Year Total Return

Why You (Still) Shouldn’t Sleep on Small Caps

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Recent lethargy in smaller stocks could spell opportunity some investors looking to assets like the ERShares NextGen Entrepreneurs ETF (ERSX).

ERSX selects the most entrepreneurial, primarily non-U.S. small cap companies that meet the thresholds embedded in its proprietary Entrepreneur Factor (EF). ERShares’ ETF delivers compelling performance across a variety of investment strategies without disrupting investors’ underlying risk profile metrics. Their geographic diversity enables them to harness global advantages through additional returns associated with currency fluctuations, strategic geographic allocations, comparative trade imbalances, and relative supply/demand strengths.

Amid rising Treasury yields, smaller stocks briefly fell out of favor, but the 2021 set-up for the asset class remains compelling.

“Small-cap stocks have had a remarkable run during the pandemic. As a result of this growth, many traders have been left to question whether or not this trend will continue in the months ahead,” notes Schaeffer’s Investment Research. “According to Todd Salamone, the technical picture of Russell 2000 and ETFs like the iShares Russell 2000 ETF (IWM) does suggest that the rising trend will likely continue.”

ERSX 1 Year Total Return

Smaller Can Be Better

The small cap category has underperformed its large cap peers, notably those mega cap tech companies that benefited in the post-coronavirus environment. However, a broader market rally has helped small caps outperform in 2021, and even outpace the tech-heavy Nasdaq. Even with recent weakness, small caps are topping large- and mid-caps this year.

“Speaking on small caps holistically, Salamone singled out the iShares Russell 2000 ETF (IWM) as offering diverse exposure to the small cap segment. The ETF is comprised of stocks throughout 11 different sectors, with the five biggest areas of exposure being a mix of growth and value segments like health care (the largest), consumer cyclicals, industrials, financial services, and technology (the smallest),” notes Schaeffer’s.

ERSX isn’t a traditional ETF. It blends domestic and international exposure, which is relevant at time when many markets are betting international smaller stocks will top U.S. equivalents. Non-U.S. equities are poised to take flight, and it’s possible that this asset class is in for a substantial period of out-performance.

Switching Back to Growth? Consider the ERShares ENTR ETF

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For once, value stocks are getting all the love, but that doesn’t mean growth fare should be glossed over. The ERShares Entrepreneurs ETF (ENTR) is an asset that can position investors for a growth rebound while maintaining some value exposure.

The fund is comprised of 30 U.S. companies with the highest market capitalizations and composite scores based on six criteria referred to as entrepreneurial standards.

The economy is currently in the nascent stages of the traditional recovery cycle, and investors should not let short-term noise distract them from growth opportunities. While there are the obvious plays in large tech stocks, investors shouldn’t overlook additional growth opportunities that often fly under the media’s radar. ENTR is an avenue for capitalizing on those opportunities.

Along with expectations of a rebound in profit growth this year and a recovery in economic activity, many market observers are arguing that the foundation for further stock market gains is in place.

ENTR 1 Year Total Return

Breaking Down the ‘ENTR’ Thesis

Growth stocks are often associated with high-quality, prosperous companies whose earnings are expected to continue increasing at an above-average rate relative to the market. Growth stocks generally have high price-to-earnings (P/E) ratios and high price-to-book ratios. Still, data suggest the growth/value premium isn’t overly elevated relative to historical norms.

Growth stocks may be seen as exorbitant and overvalued, causing some investors to favor value stocks, which are considered undervalued by the market. Value stocks tend to trade at a lower price relative to their fundamentals (including dividends, earnings, and sales). While they generally have solid fundamentals, value stocks may have lost popularity in the market and are considered bargain priced compared with their competitors.

See also: New Name, Same Gains for the High-Flying ENTR ETF

Many entrepreneurial firms are concentrated in the consumer discretionary and technology sectors, cementing ENTR’s growth feel.

Entrepreneurial Companies Create More Jobs

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Entrepreneurial Companies Create More Jobs

Many of the rising top companies today are entrepreneurial companies. In addition to providing millions of jobs, these companies continue to amaze us with their innovations and creativity. In this paper, we analyze job growth and salary increases across industries. We also compare these metrics between entrepreneurial companies (as defined by the ERShares proprietary Entrepreneur Factor) and the S&P 500.

Identify Job growth

Entrepreneurial companies have created jobs for Americans throughout the years.  With the information provided, we were able to identify the jobs growth in the ER30 index (the ER30 Index or Entrepreneurial 30 Index is a selection of 30 well-established entrepreneurial companies that are publicly traded) in comparison to the S&P 500.

Table 1

S&P 500 vs. ER30 Job Information

Table 1 shows the total jobs each year from 2011-2019, the number of new jobs created these years, and the year-over-year (YoY) job growth percentage in both the S&P 500 and ER30. Comparing the job growth data of the S&P 500 and ER30, it is surprising to see how many more jobs are being created by entrepreneurial companies over the years. It is important to note that the job data excludes major acquisitions. This means that entrepreneurial companies grow organically and not through mergers and acquisitions. Specifically, from 2011 to 2019, the companies included in the ER30 grew in jobs by around 1000%, while the S&P by a little less than 50%. This result illustrates how fast the entrepreneurial companies create organic job growth.

Table 2

Year-over-year Job Growth Comparison

Table 2 shows the year-over-year job growth rate for the S&P 500 after removing any the ER30 company which is also included in the S&P 500

Figure 1

 

Figure 1 visualizes the job growth of the ER30 companies, comparing them to the total job growth of the S&P 500 and the whole U.S. (the table with the information found on the reference page). We observe that on a year over year basis, entrepreneurial companies have been the dominant leaders in terms of job growth, and the trend doesn’t seem to be slowing down.

Which Companies Created the Most Jobs?

Amazon.com employs over 1,298,000 people as per their fourth quarter’s earnings report. This number dwarfs any other in the list. It is also important to note that this number excludes contractors and temporary personnel. Moreover, with year-over-year growth of 63 %, it has created, by far, the most jobs out of any other S&P 500 company. Part of Amazon’s explosive job growth in 2020 can be attributed to the Covid-19 pandemic, which accelerated e-commerce in a big way. From Amazon Web Services to Amazon Prime streaming services, several revenue streams benefited from the pandemic, lifting Amazon’s worth to almost 1.65 trillion U.S. dollars. It is not an exaggeration to state that Amazon’s success is vastly owed to Bezos’ entrepreneurial mindset and the entrepreneurial culture he has created in Amazon, allowing Amazon to disrupt every industry it has entered.

Another example of entrepreneurial success is Alphabet Inc., Google’s parent company, which ranks second in job creation in the past decade. Currently, Alphabet employs almost 140,000 as per their latest press release (2021 first-quarter report). Google created more than 16,000 jobs in just the first quarter of 2021, with most of those employees working on Google Search and Google Cloud.

In addition to being one of the most prominent employers, Google boasts the highest average salary in the technology sector.

Which Industry Created the Most Jobs?

Among all industries, the service-providing industry has seen the most growth in recent years. Especially, services that have to do with data processing, information technology operations, and related consulting have surged even during the pandemic. The new work-from-home culture entirely benefits from online systems technology.  In the Information and Technology sector, e-commerce and Fintech are among the fastest growing industries.

[2]

In addition to that, the U.S. Bureau of Labor Statistics states that healthcare and social assistance is the fastest-growing major sector in the economy, which includes five out of the 20 fastest growing industries for the next decade. Specifically, the Bureau of Labor Statistics projects that employment in healthcare occupations will grow 15 percent from 2019 to 2029. The rate of growth is much greater than the average for all occupations and represents about 2.4 million new jobs created.

Compared to the rest of the sectors, the outperformance can be attributed to the aging population due to longer life expectancy and the constant increase in patient numbers with chronic conditions.

Which industries lost the most jobs?

Growth within industries has often fluctuated depending on the popularity or trends.

Formerly successful industries are way past their hay days. The manufacturing industry experienced the greatest job decline before the COVID-19 pandemic.

Furthermore, looking beyond the pandemic, even though manufacturing itself might not be declining, machinery and automation is reducing jobs on a big scale. Another industry that has undergone an interesting transformation is the information industry. A distinction can be made now between digital and print information.

The following table shows that newspaper, periodical, book, directory publishers, cable and other subscription details, and wired telecommunications carriers, are the most in decline.

Today, it is easier to find news on social media or company websites, as most news is published on digital platforms.  The cable industry has also suffered due to services such as Apple TV, Netflix, and Hulu.

Table 3

[3]Most Rapidly Declining Industries

Table 4

Fastest Growing Industries

COVID-19 has fundamentally altered the way industries work today. Every industry and industry sector experienced a dramatic shift.

Sectors such as retail, hospitality, and leisure have been struggling, while technology companies have prospered. Some of the industries seem to be coming back to the pre-pandemic levels of operation; however, it is very plausible that the pandemic has affected specific industries irreversibly.

Which companies created the highest paying jobs?

Five companies in the ER30 rank in the top ten highest paying salaries according to CNBC.[4] Salesforce ranked number nine with median compensation of $150,379.  First was Nvidia in number two in the list, with a median compensation of $170,068. Next, was Twitter ranking third with median compensation of $162,852. Alphabet, then ranked number five with a median compensation of $161,254.  Facebook was eighth with a median compensation of $152,962.

In light of this report, the success of entrepreneurial companies is also evident in the extraordinary ability of these companies to provide employment and growth in the economy.

How much of the job growth is created by entrepreneurial companies?

In Table 5, we can observe a widening gap over the years between the job growth achieved by entrepreneurial companies and the rest of the S&P 500.

In 2019, we can see that 43.46 percent of jobs created by the S&P 500 that year came from companies listed in the ER30 index.

 Table 5

Percent of ER30 New Jobs when compared to New Jobs in S&P 500

In figure 2, we notice that over this past decade, the total new jobs created in ER30 increasingly influenced the total increase of jobs in the S&P 500. Specifically, in 2019, companies in both ER30 and S&P 500 are credited for a little less than half of the new jobs created in the S&P, which is impressive. This finding is also evident in table 6

Figure 2

Table 6

Percent of ER30 Jobs in S&P 500

In table 6, we report the total jobs per year in the S&P 500 and the Total ER30 Jobs in the S&P 500. We observe that in 2019, the ER30 companies employed almost 1 million people or 3.66% of the total jobs in the S&P 500. That percent has grown since 2011, when it was only 0.64%.

Table 7

United States Employment Information[5]

After years of academic research demonstrating that entrepreneurial companies create more jobs than non-entrepreneurial companies, we believe this will be the case in the future as entrepreneurial companies continue to create more value in our societies compared to traditional companies.Despite the difficulties and challenges companies had to face over the past decade, such as COVID-19, the employment opportunities offered by entrepreneurial companies have been increasing fast over the years.  Through innovation and dedication, entrepreneurs have succeeded time and again in creating wealth through their fast growth and providing employment opportunities while raising salaries at the same time, thus, benefiting the economy.