The One-Person Business Boom

AI is lowering the barriers to entrepreneurship, and new data suggests solo businesses are on the rise. Nasdaq’s Michael Normyle joins Jeff Praissman in this IBKR Podcast episode to explore how AI is fueling new business formation, boosting productivity, and reshaping what it takes to build a company.

Summary – IBKR Podcasts Ep. 414

The following is a summary of a live audio recording and may contain errors in spelling or grammar. Although IBKR has edited for clarity no material changes have been made.

Jeff Praissman

Hi, everyone. This is Jeff Praissman with Interactive Brokers Podcast. It’s my pleasure to welcome back to our studio Nasdaq’s Michael Normyle. Hey, Michael. How are you? 

Michael Normyle

Doing well, thanks. Glad to be back. 

Jeff Praissman

Always loving you come in, you know, once a month for our talks. And you’d, you know, written an article that’s up on the Nasdaq’s website about AI and how it’s enabling more entrepreneurship. 

And today I kind of want to discuss that article with you. 

Michael Normyle

Just to give a quick plug for it, it was part of the launch of the Nasdaq Economic Institute. So if people, you know, Google for the Nasdaq Economic Institute or go to nasdaq.com and find our landing page, it’s up there if people want to take a look into it. 

Jeff Praissman

And Michael, your article argues that AI is actually making entrepreneurship more accessible than ever. So what data first convinced you that AI was having a measurable impact on new business creation in the US? 

Michael Normyle

Yeah. So it really did start for me with the census data. That’s really the basis for this research, and it’s census data that’s on business applications, and it’s actually based on IRS submissions. And so, of course, as an economist, I’m always reading lots of news, and I’d seen some people noting this rise in business applications and kind of circling and saying, “Maybe that’s AI, I don’t know.” And I thought, you know, it’d be interesting to look into it a bit deeper and see if we could get a little bit clearer proof that AI is actually a factor here. And so that is what we did, and it’s really looking at who is starting businesses, what sectors they’re coming from, and then applying those sectors to the adoption rates of AI in those sectors and the exposure scores of AI in those sectors to see if there is a link. And that’s really where we did see the case that AI has been a key contributor to this growth in business applications. 

It’s not the only one, but it was certainly a big factor that’s been driving the rise in applications for businesses that we’ve seen in the last year, and of course, that implying a rise in entrepreneurship as well. 

Jeff Praissman

And, you know, one of the most striking findings in your research for me was just the rise in a one-person business since, you know, early 2025. And, you know, why do you believe that AI is, you know, particularly empowering solo entrepreneurs rather than, say, larger startups or, like, you know, the kind of headline names or, you know, even traditional small businesses? 

Michael Normyle

Yeah. And so I think just a bit of background first for that business applications data that this is based on. The census really buckets it into two categories. One is high propensity applications, and those are ones that are expected to hire people in the first year of the business beginning and often come from certain industries. Then there’s all other, and so those tend to be one-person companies, whether, you know, it’s a one-person consulting shop or an eBay store or Etsy shop or whatever. And so that’s really one of the interesting elements that we’ve seen about the data which shows that almost all this growth in business applications since the start of 2025 comes from one-person businesses. And I think a big reason why AI is especially boosting those one-person businesses is that a lot of people, maybe they had a business idea bouncing around in their head for a while, but before AI, they probably needed to hire someone or maybe two people, and that made the cost of starting up a business too expensive. 

But, you know, going ahead, you could run into that situation where a business idea wouldn’t support what, you know, one, two, three employees. But if you have to pay just $200 a month, for example, for one of these pro tier AI subscriptions instead, that really dramatically lowers the cost of starting a business, and the threshold for a profitable business becomes much lower to reach as well. And so timing-wise, we see early 2025 as really the starting point, and that also sort of adds to our confidence in AI being a factor because we’re a couple of years into the gen AI era, and that’s given people time to develop some comfort and skills with these AI tools. And around that same time, we also saw a step change in the model quality with, like, the thinking models coming out around then, and also the beginning of agentic coding. 

And so all these things really coalescing to make that one-person business a lot more feasible. So I think that’s really what we see with the one-person business. And this isn’t to say necessarily that, you know, those larger startup or the traditional small businesses aren’t, you know, using AI or having a boost yet from AI, but it’s just not showing up in the data as of yet, at least. 

Jeff Praissman

Yeah. So it sounds like AI, you know, is potentially really lowering some of those traditional barriers to entry for these, you know, entrepreneurs trying to start up, you know, small businesses, not having to hire any, you know, additional employees, at least in the beginning. Not having to have those, you know, outsource of, you know, capital for them. 

Michael Normyle

Exactly. 

Jeff Praissman

And you had mentioned, you know, agentic coding. You know, for people that aren’t following AI closely, could you kinda go on a little, you know, what exactly are they and, you know, how are they, you know, why are they making, you know, helping with such a significant breakthrough for, you know, entrepreneurs? 

Michael Normyle

Yeah. So the agentic coding tools, those are tools where the AI can work autonomously to complete tasks, and it can work autonomously for long periods of time as well. And they can be, you know, part of your coding environment. They can understand your file system. And so with these tools, it can be almost like you hired your own software engineer, in a sense, who often, you know, as a person, they demand relatively high compensation, even on a freelance basis. 

Of course, it does help for people using agentic coding to have a familiarity with software development when using these tools, but of course, it’s not required. That’s what we’ve seen as part of this sort of vibe coding trend that’s been on the rise in the last year plus here. 

Jeff Praissman

And your analysis found that, you know, sectors such as technology, finance, you know, and professional services are really driving a large share of the growth in these business applications. So what makes these industries especially well-positioned to benefit from AI versus other ones? 

Michael Normyle

Yeah, I mean, I think with tech it’s fairly straightforward, right? Because it is so good at coding, so that really kinda answers that question for us. But that also applies to the finance and professional services industries as well, which they rely a lot on analyzing data, drafting documents, and creating presentations, managing compliance, things like that. And these are the areas that AI is quite good at already, and so that’s why those industries are especially well-suited to benefiting from AI. 

Jeff Praissman

And Michael, a little bit earlier, you kind of touched on, yeah, it’s called, like, the marginal entrepreneur, right? Someone who has an idea, but maybe not really has the, you know, maybe the time or the money or the, to go full in before AI. You know, so their idea was viable in theory, but sort of in real life, hard to execute. Could you add a little bit more detail about who that person is and why AI is finally enabling them to be able to launch businesses? 

Michael Normyle

Yeah. I mean, I don’t think it’s really sector specific or anything like that. I think it’s really just, you know, the math question of making your business idea pencil out here, where before you’re considering, like, the legal cost of bringing someone on, plus the actual cost of paying someone and, you know, maybe you need office space or things like that.  And you compare that to the reality that perhaps your cost can be yourself plus your AI subscription. And at launch, that makes it a lot easier for your business to be viable. And so that’s why we’re talking about this marginal entrepreneur, this person that their business idea didn’t used to be feasible and now is becoming feasible with the cost of starting a business being reduced so much. 

So it’s really more of a cost question than, you know, an industry question or a person in general. And at the same time, you know, we’re talking about this period that’s seen a relatively soft labor market, at least compared to a few years ago. So perhaps if you’re someone who’s been looking for a job for a while and you’re already out of the labor force or you’re currently unemployed, maybe this is a way to at least, you know, make some income for yourself and potentially turn it into a business. So it could be people that were looking for a job and they become somewhat discouraged as well and start to see, you know, a path for creating their own business. 

Jeff Praissman

So Michael, some observers worry that AI could eliminate jobs. Your research points to AI creating new businesses instead. So how should we think about the balance between these two trends? 

Michael Normyle

Honestly, I think it’s a little too early to make a definitive statement about how AI will impact the labor market. I don’t think there’s much data to actually show a clear impact just yet, and this is something that we watch pretty closely. We get a lot of questions about it, and it’s really not showing up in the data. And I think, you know, to this point, on our last podcast, we spoke about research showing that the falling share of junior hiring is more about the rise of remote work than AI. And so there’s cases where people might be misattributing things happening in the labor market to AI. And then similarly, I’d say there’s concerns about AI impacting specific industries, and software engineers are kind of considered one of the most exposed industries, but that appears overblown because job openings for software engineers, they’re up 20% in the last year on Indeed. So I think the jury’s really still out on the labor market trend at this point. And I’d even be a little bit cautious about drawing really strong conclusions about the AI impact on business formations. At the end of my article, I say we’re in the early innings, but that I think the signs are quite encouraging. 

So I think ultimately this could be an overlooked channel for AI to support the labor market. So these one-person businesses, they’re bucketed as one-person businesses or all other technically, on the basis that they don’t plan to hire anyone for the first year. But of course, there’s no rule saying that they can’t. Maybe the business really takes off, and they need to hire someone in one, two, three, four months, or maybe in two years. But so it could ultimately be kind of an overlooked source where AI is potentially adding to hiring. 

Jeff Praissman

Yeah, your article, it highlighted a strong connection between AI adoption and productivity growth. 

So why is that—I mean, I guess it’s kind of obvious that relationship’s important for investors, right? They want to be efficient in growth and, you know, but maybe more so policymakers and, you know, to watch. 

Michael Normyle

Yeah, I think that’s really probably a really clear dynamic that we’ve seen so far. 

And one of the things that I highlight in this article is that most of this growth in these one-person businesses, they’ve been in high AI adoption sectors, and those sectors have also had the strongest productivity growth over the last 20 years. And so those high AI adoption sectors, for 20 years, those sectors have been growing at a 2.2% annual rate compared to 1.6% for medium adoption sectors and negative 0.1% for low adoption sectors. And of course, this is entirely unrelated to AI, right? Except for, like, maybe the very recent period. But this is showing that we have more businesses going into sectors that really add to productivity historically. And so in doing so, that adds disproportionately to economic output relative to the number of people involved. So you might have a solo consultant armed with AI tools producing the output that a small team used to do, and that’s the kind of thing that, you know, shows up in GDP data down the line. 

Jeff Praissman

And, you know, if AI continues to lower the cost of entrepreneurship, could we see a future where, you know, I guess, you know, more professionals really just choose to work independently, so rather than as employees? So kind of, yeah, I guess some of these, you know, large behemoth companies end up, you know, losing a little bit of the share to these small independent pods, for lack of a better word. 

Michael Normyle

Yeah. I mean, I think it’s certainly a possibility. Of course, there’s always, you know, a case-by-case basis where some people wanna be an entrepreneur, other peoples don’t wanna be, you know, depending on how, you know, you like to, you know, manage your own life and everything. But like we talked about with the marginal entrepreneur, I think suddenly more business opportunities have become viable. So we’re looking at about 90,000 more businesses, more business applications each month right now than we saw in early 2025. So of course, for an economy with 160 million employees in it, it’s, you know, maybe many more entrepreneurs in a relative sense, but it could be a pathway that helps people reemploy themselves during recessions maybe, which could potentially reduce the depth and duration of economic downturns. But that’s something that, you know, we don’t have the data on yet, but it would be interesting to see how that unfolds in the future. 

Jeff Praissman

And Michael, looking beyond individual companies, what are some of the broader implications for the US economic growth, you know, if AI, if it continues to drive these business formations into these, you know, in these high productivity sectors? 

Michael Normyle

I think it should help support US economic growth, right? Because if you think about longer term growth in the trend sense, it really comes down to labor force growth plus productivity growth. And the US, we’ve seen slowing labor force growth. Of course, we have an aging population, so the Congressional Budget Office projects that it’s gonna grow just 0.4% over the next decade. In the last four years, it was about 1% on average, so a step down from 1% to 0.4%. And funneling more workers into high productivity sectors can help offset that drag from slower labor force growth, or perhaps more than offset it if we’re in the, you know, real upside scenario for AI. So I think it could be essential for sustaining or even boosting trend growth in the US. 

Jeff Praissman

And we’re still, you know, in the early innings of this trend, right? Like, AI is so new and so explosive right now. But looking ahead, you know, over the next three to five years, what developments in AI are you watching most closely, and what do you think they could mean for the future of entrepreneurship? 

Michael Normyle

Yeah. I think first I do wanna see this trend in business formations continue. Like I mentioned, you know, we’ve gotten two more extra months of data since the initial release here, and we have seen that uptrend in one-person businesses continue. So it was about 60,000 more per month a couple months ago. Now it’s 90,000 more per month, so that’s a pretty big jump. And if, you know, to your point earlier, if it broadens out beyond these one-person businesses, that could certainly be another element to, you know, supporting the economy. And part of the secret sauce of the US economy’s success has always been this ability to be a fertile ground for innovative companies, and we wanna see that continue, so we can grow the next batch of trillion-dollar companies and the next batch and the next batch. And so, you know, I think we want to continue to watch AI adoption rates, and I think those are maybe lower than a lot of people think. A survey from the Consensus puts it at just 21% of US businesses at this point. So if we see that adoption ramp up even faster, probably see more people figure out how to create profitable businesses using AI, and hopefully that translates into continued entrepreneurship and the, you know, next trillion-dollar company. 

Jeff Praissman

Michael, as always, this has been great. For our listeners, you can find more from Michael on our website, ibkr.com. Go to Campus, lots of past podcasts and articles, as well as on nasdaq.com, Economic Institute. This article that we discussed is called AI is Enabling More Entrepreneurship, but he’s got tons of great stuff up there as well. 

Until next month, Michael, thank you.