One of the biggest misunderstandings of how entrepreneurship works is to assume recessions immediately spark new companies. They usually don’t. But this may be one more way 2020 is unlike no other.
The most important economic role that recessions play is to cull underperforming firms and industries. We do want workers to take the painful steps to transition out of dying sectors and into growth ones — though they likely need more support to get there. Though we do see big lumbering giants call it quits during economic downturns (like, say retail chains), recessions are particularly brutal to smaller firms.
The American economy is on a decades-long aging toward larger and older firms. Entrepreneurship has been declining for decades and recessions are typically unkind to the new and the small.
