Reuters/Robert Galbraith

A tale of two definitions of entrepreneur—one thriving, one flailing.

For entrepreneurs in America, it is the best of times, and it is the worst of times. It is "the age of the start-up," and "American entrepreneurship is plummeting." We are witnessing the Cambrian Explosion of apps and the mass extinction of apps. These are the glory days of risk, and we are taking fewer risks than ever. Tech valuations are soaring, and tech valuations are collapsing, and tech valuations are irrelevant. "A million users" has never been more attainable, and "a million users" has never been more meaningless. It is the spring of hope. It is the winter of despair.

The story of American entrepreneurship begins with a tale of two definitions of entrepreneur. When the press imagines the modern entrepreneur, our minds turn to tech—coders, hackers, hoodies, apps, Silicon Valley (the show), Silicon Valley (the valley). And it's true: This sliver of entrepreneurship has grown, by all sorts of measures, for example by venture-capital funding:

But researchers studying national entrepreneurship trends aren't caught staring at the tip of the iceberg. When they describe "declining business dynamism" (at Brookings) and steadily falling entrepreneurship (at BLS), they're looking at the whole block of ice. And it's melting.

What's melting, exactly? Not the kids' apps, but the mom-and-pop stores. Derek's Coffee and Thompson's Corner Store would be considered start-ups. But a new Starbucks or Whole Foods is considered part of an existing franchise. So as chains have expanded by more than 50 percent since 1983—Walmart gobbles up smaller competition with a particularly greedy appetite—start-ups have perished, as Jordan Weissmann has explained. The demise of small new companies isn't limited to retail. Construction and manufacturing start-ups have collapsed by more than 60 percent in the last four decades. Here's the industry-by-industry die-off from Brookings data ("entry rate" is an industry's share of firms that one-year-old or younger):

So there are fewer new companies, and a lot more Dunkin Donuts. Why should you care? Because it's a sign that America has lost its edge? Because Big Government is killing entrepreneurship? Because McDonald's is gross? Not necessarily. Americans are still among the most productive workers in the world, countries with much "bigger" governments (by tax revenue, at least) have much higher rates of self-employment and small business formation, and McDonald's breakfast is objectively better than many small restaurants that don't know how to do proper hash browns.

One good reason to care about start-ups in America is that they tend to start ... in ... America. Going back to the late 1970s, as globalization started to accelerate, the majority of net job creation has come from new companies, rather than old firms, which are often expanding abroad. The vast majority of job creation at big multinational corporations—as much as 75 percent of new jobs—happens overseas, since other countries are growing considerably faster than our 2-percent rate.

One paradox of globalization is that it's localized employment. Since big companies off-shore much of their job growth (or replace what's left of it with software or smart hardware), the future of work in the U.S. will come from work that absolutely has to be here, like health care, education, and food services. Start-ups can be special for many reasons—they can challenge lumbering incumbents, they can create new demand for stuff, they can introduce more ideas—but from a big-picture macroeconomic standpoint, they're also special because they're here, and when they expand they tend to expand here. It's easy to make fun of Silicon Valley these days. But at least its companies have a California address.

This post originally appeared on The Atlantic.

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