What Would The World Be Like Without Entrepreneurs? Pretty Grim.

Reading Per Bylund’s How Entrepreneurs Build the World inspired a thought: What would the world be like without entrepreneurs? Could we really know what our world would be like without entrepreneurs and competitive markets? The Austrians view the entrepreneur as a key player in the market economy—not a glorified hero, as Israel Kirzner stated, but as the purveyor of information in the interaction of decision making between buyers and sellers.

F. A. Hayek expressed that many interactions and exchanges between market participants are spontaneous. With the absence of entrepreneurs in a market economy, the consumer could no longer demand products. Producer-entrepreneurs would no longer try innovative activities in which to profit through a harmonious spontaneous order of consumer-seller interaction. Nor would information through prices, as Ludwig von Mises found, be communicated effectively between buyers, suppliers, and sellers. There would be no new advancements in product or science breakthroughs from which the combination of inventions could further spin off other innovations that add increased value. In a real sense, no one would get what they want. More importantly, no one would act.

I think we can agree with Bylund. He asserted that the world was built by entrepreneurs. Without entrepreneurs, we would still be experiencing a Stone Age existence, feudalism, and dragging along at work and at home with antiquated means to modern ends. We would own archaic products and pay for ineffective services deemed valueless. No incentive would exist for producers and others to serve the consumer. The consumer would have no expectations to find value in products. This situation of no entrepreneurs would ipso facto lead to a dystopian state of autarky.

Consider how the world was built by entrepreneurs. Most of what we purchase and use daily started in the mind of entrepreneurs with their energy and capital. They thought of consumers’ needs and wants and brought products into existence with continually more reasonable and affordable prices, making these products available to almost all people. If the entrepreneur were absent from the market, our lives would look vastly different and our economy would be stagnant.

Toothpaste, floss, and brush were invented by William Colgate; the elevator was brought to us by Elisha Otis; and the printing press was accelerated by Richard March Hoe who invented the rotary printing press. The laptop or smartphone you are using to read this article was created by several entrepreneurs acting to provide you with this capability. That morning brew you drink was developed by entrepreneurs who used their capital and produced and delivered coffee beans to you—from bean to cup. Another innovator created the coffee maker.

The list goes on as to the benefits entrepreneurs have brought us and the progress they have made in the lives of the average person enjoying these conveniences spun out by the market process, competition, and ingenuity. Without entrepreneurs, a minimum of needs would be fulfilled in the market. The consumer would not have a voice—no vote. A lack of entrepreneurship would result in less human flourishing the world over. If it were not for entrepreneurs in their insistence to meet consumer demands and expectations, we would still be using rotary phones!

Additionally, companies would not exist. Or would they exist in a different form? In order to pursue innovation, firms need to acquire learning paths as described by Alfred Chandler (2001) in Inventing the Electronic Century. Chandler explained that the technology industry started as a result of entrepreneurial spin-offs directing newer innovative solutions based on the acquisition of learning paths. Chandler described the epic movements of entrepreneurs:

Those earlier industries were based on a number of basic technological innovations: the electricity-producing dynamo, which brought the electric lighting that transformed urban life, and electric power, which so transformed industrial production techniques; the telephone, which brought the first voice transmission over distances; the internal combustion engine, which produced the automobile and the airplane; the new chemical technologies that permitted the production of man-made dyes and, of more significance, a wide range of man-made therapeutic drugs, and other man-made materials ranging from silicon and aluminum to a wide variety of plastics. (p. 11)

As Chandler explained, the consumer electronics market would not have started ex nihilo—without entrepreneurial-minded people within the firms or without consumers demanding new and innovative products.

Learning paths facilitate the evolution and continuation of innovation. Market feedback enables firms to produce the products consumers demand. Once learning paths are discontinued, firms do not invest in innovative production methods. As the saying goes, “you cannot get blood from a turnip.” Why then would you think that firms that are not entrepreneurial will be entrepreneurial? They won’t. As Hayek so famously stated, “The market process is discovery through trial and error.” It is amazing how this critical function of the market is taken for granted—no inventions, no innovations, no competition, no entrepreneurs.

Consider the role of an employer—the one who provides employment to those wanting to earn a livelihood. Commerce and e-commerce would break down along with the division of labor, ultimately resulting in a decline in knowledge spillovers and entrepreneurial networks. Forget about ordering your favorite products or foodstuffs online and having them shipped to you expeditiously at a responsible price.

No entrepreneurs today, no entrepreneurs tomorrow. Without entrepreneurs today, who would pave the way for future entrepreneurship? There would be no one and no place to start—or as some say, “to build upon the ruins” created by past entrepreneurs. If the Great Atlantic and Pacific Tea Company (i.e., A& P) did not innovatively create the supermarket revolution of its day, the products and services consumers demand now would not exist—no home delivery, self-checkout, coupons, variety of foodstuffs, one-stop shopping. No gaming consoles, laptops, smartphones, modern medicine, quick-service restaurants, streaming, social media, customizable shoes, mass-produced clothing, etc. These industries and products would not exist today if the entrepreneur did not exist.

Without the entrepreneurial function in the market, the world would look different. Would there be such a term as consumer? Would better products with better quality come to the market each month, quarter, or year? Maybe not. The picture is bleak without the entrepreneur—without the entrepreneur putting forth savings, capital, energy, and resources to provide consumers with their most urgent demands. Where would the world be without entrepreneurs?

50. John Rossman on the Principles And Mechanisms Of Business Growth

Principles are the guiding cultural lights illuminating for employees and partners how your company thinks about its mission and about customers and customer value. Mechanisms make the principles operational – every time, by every team, on every project, without fail or variance. You need both for success.  On this week’s episode, learn from author John Rossman (Think Like Amazon: 50 ½ Ideas To Become A Digital Leader) about the Principles and Mechanisms of growth businesses.

Key Takeaways & Actionable Insights

John Rossman is an advisor who helps leaders compete in the digital era, by crafting and implementing innovative digital business models and capabilities. He was an executive at amazon and launched the third party selling platform – in that way, he probably directly helped a number of our listeners become successful entrepreneurs. And he is the author of Think Like Amazon: 50 ½ Ideas To Become A Digital Leader – a tremendously useful book for everyone in business because it delivers a long list of actions you can implement immediately.

Principles and Mechanisms

John emphasizes the dual roles of what he calls principles and mechanisms in business growth. Principles are designed and communicated by company leadership: they are the few, fully codified, fundamental ways of operating that the entire company cares deeply about and executes unwaveringly. Amazon famously has 14 leadership principles starting with Customer Obsession.

But principles alone will not get the job done. They can’t implement themselves. So the second part of John’s message is that every principle must have a mechanism to operationalize it. A mechanism might consist of a complete set of generally applicable process steps and guidelines to follow them, adapt them to different circumstances, equip them with metrics and arm them accountability. The mechanism ensures that the principle can be executed again and again, by different teams on different projects across different parts of the organization and across cultures and generations.

We illustrate a few of the examples that John shared with us in this accompanying graphic.

Principles Of Austrian Economics And Their Mechanisms

John’s insight about principles and mechanisms is the same one we implement at Economics For Entrepreneurs. Our principles are principles of economics. Our mechanisms are process tools we’ve summarized in our series of knowledge graphics.

For example, a core principle of Austrian Economics is the subjectivity of value. Every individual customer experiences value in their own idiosyncratic way, and the entrepreneur’s task is to gain insight into each individual’s sense of value, in order to be able to cater to it.

We have provided three mechanisms to date for entrepreneurs to use to gather data about how individuals experience value in different ways, and to act upon that economic data:

Use the contextual in-depth interview tool to gather qualitative data for empathic diagnosis.

Follow the value learning process map in order to be able to facilitate value effectively.

Design and deploy a Subjective Value Cycle system in order to be able to repeat the value facilitation process.

Our project is to continue to add to the inventory of mechanisms to help entrepreneurs in the implementation of economic principles.

Connect with John Rossman on his LinkedIn page.

Free Downloads & Extras

Principles and Mechanisms: Our Free E4E Knowledge Graphic
Understanding The Mind of The Customer: Our Free E-Book

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49. Paul Tenney’s Global Entrepreneurial Journey Leads To Database Technology Success in Asia

On this week’s Economics For Entrepreneurs podcast, Paul Tenney describes and explains the 8 stages of his international journey to start, grow and manage a customer-success focused database technology company in Asia.

Key Takeaways & Actionable Insights

Storytelling can be a powerful aid to effective business strategy. A good story can identify both a destination and a path to get there, and unite people on a shared journey. That’s why we like to use the Economics For Entrepreneurs podcast to tell journey stories from time to time: to illustrate and inspire.

Paul Tenney's Global Entrepreneurial Journey

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This week’s guest, Paul Tenney, tells us a particularly illustrative journey story, since it combines an entrepreneurial career of achievement and purposeful geographic mobility.

First, pick a promising industry with a potential for long term growth.

In the 2000’s, Paul identified database marketing technology as a growth industry, with expansive future promise but current low maturity (“e-mail spammers” were disdained at cocktail parties).

Learn and build a track record working for a growth company in the growth industry.

Paul rapidly accumulated executive experience, since growth demands that all employees step up to new responsibilities.

Develop your customer focus.

A fundamental lesson of Austrian Economics is that understanding customers and their needs always comes first in business building. This is especially true in emerging business technology. It’s easy to become focused on “product” (the technology) and lose sight of the customer, who may not understand the tech but view it as a means to an end rather than an end in itself. Paul focused on customer success activities, which revealed customer problems to be solved, and taught him the primacy of customer care in building business relationships.

Accelerate your accumulation of experience.

Experience becomes knowledge and knowledge becomes a personal competitive advantage. A growth business can provide accelerated knowledge-expanding opportunities. In Paul’s case, the opportunity came via an international posting, opening new customer vistas and revealing new customer requirements from the same technology.

Identify a partnering route to launch your business.

Your goal is to establish an independent business to run. The challenge of the transition from employment to entrepreneurship can be modified in a number of ways. One is to find a partnership that can both bear some uncertainty for you, and provide you with a strategic resource advantage. Paul partnered with the company that had previously employed him to provide technology, so that he did not have to build it from scratch. He developed his own customer base using this technology.

Establish an initial value proposition.

The technology partnership supported a strong customer value proposition in Paul’s local geography: experience the benefits of world-class big company tech, with customized/localized service, and the low unit economics that come with the partner’s scale.

Then take the Customer Success route to deeper understanding of market needs.

Paul had learned how a well-developed Customer Success capability could generate insightful customer problem statements. These represent unmet needs for which Paul’s new company could develop new and unique local solutions.

Gain higher ground with an advanced business proposition.

Paul was able to establish new high levels of customized local service (e.g. language) while maintaining the global list price for technology. Insights gleaned over time led to the realization that simplifying the technology proposition – e.g. by reducing the complexity caused by hyper-personalization of e-mail marketing to end-consumers, and focusing on the binary question of whether or not e-mails generated sales – resulted in a better customer value experience.

This focus also resulted in new-to-the-world services (such as the “fatigue curve” and “rehabilitation rate”), further elevating the value proposition.

Paul shared a lot more of his experience: about raising capital, about value theory, about the role of resilience in the entrepreneurial journey, and about the customer success of de-complexifying technology. Don’t miss his inspiring journey story and download the free illustrated journey map here.

Learn more about Paul’s company Ematic Solutions from their company website.

Free Downloads & Extras

Paul Tenney’s Global Entrepreneurial Journey: Our Free E4E Knowledge Graphic
Understanding The Mind of The Customer: Our Free E-Book

Start Your Own Entrepreneurial Journey

Ready to put Austrian Economics knowledge from the podcast to work for your business? Start your own entrepreneurial journey.

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48. Chris Casey’s Journey To A Distinctively Austrian Financial Services Business

Learn how directly Austrian Economics can be applied in entrepreneurial business design. A creative founder of a financial services firm demonstrates to customers how an understanding of business cycle theory and monetary theory can be applied to investment portfolio design.

Key Takeaways & Actionable Insights

Chris Casey's Entrepreneurial Journey

Click to Download The Full Version

Innovation often emerges from the combination of existing components in new ways. 

In Chris’s case, the new combination was his knowledge of Austrian Economics – specifically Business Cycle Theory and Monetary Theory – and of Finance. He invested a great deal of time and effort in mastering both parts of this knowledge combination.

Chris Identified An Unmet Customer Need, A Dearth Of Available Solutions, And A Potential for Market Growth. 

There were a few – probably a very few – customers for a financial services offering designed with recognition of the relevant principles of Austrian economics in mind. But the fact that there was at least some customer need provided evidence of potential. Then external stimuli such as the 2008 financial crisis and the Ron Paul Presidential Campaigns caused a growth in demand.

A value proposition naturally emerged. 

For a narrow but highly receptive target audience, the value proposition that “Austrian Economics is vitally important to designing investment portfolios” proved to be very effective in generating a value anticipation.

Communication skill is a critical element. 

A value proposition doesn’t sell itself. Chris utilized – and continuously polished – his communications skills to help customers fully appreciate the direct link to their desired value: a feeling of improved financial security because the uncertainties identified by Austrian Economics are accounted for in portfolio design.

Chris’s implementation was consistent with the value proposition, and capable of delivering. 

In portfolio design, the product of Chris’s service firm, the inputs from business cycle theory and monetary theory are top-down elements. Chris added the bottom-up element of personalization of the design process to the individual customer. This is classical Austrian entrepreneurship: understand the customer’s needs, empathize with them, and customize the service so they feel individual satisfaction of idiosyncratic needs. In subjective value analysis, portfolio performance is not the sole criterion for the value experience. Customer feelings are far more significant.

Chris keeps an eye on the competitive frame of reference to maintain the uniqueness of his offering. 

Chris’s competition is not other investment advisors. It’s the general demeanor of Wall Street sales-focused firms. “Stay fully invested” and “Don’t try to time the market” are typical sales communications of these firms that don’t truly have customers’ best interests in mind. He can always utilize this contrast as a value frame of reference.

Chris’s success exemplifies the clarity that results from candid entrepreneurial self-assessment and the embrace of the entrepreneurial process. 

Self-assessment = In what field am I best resourced to enter and do business?

Entrepreneurial process = Identify opportunity by identifying customer dissatisfactions in that field.

Visit WindRock Wealth Management at https://windrockwealth.com

Free Downloads & Extras

Chris Casey’s Entrepreneurial Journey: Our Free E4E Knowledge Graphic
Understanding The Mind of The Customer: Our Free E-Book

Start Your Own Entrepreneurial Journey

Ready to put Austrian Economics knowledge from the podcast to work for your business? Start your own entrepreneurial journey.

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47. John Chisholm’s Tools And Techniques For Success In The Entrepreneurial Process

In this episode, Hunter Hastings talks to John Chisholm, author of Unleash Your Inner Company: Use Passion And Perseverance To Build Your Ideal Business.

John is a very successful repeat entrepreneur (he founded and grew multiple businesses in multiple fields and had multiple successful exits). He looked back on his successes and formulated a 10-step process that all entrepreneurs can follow, with a full suite of tools we can all use.

This beats the business school case study method!

Key Takeaways & Actionable Insights

Entrepreneurship is a process. Taking this view enables successful navigation over time, whatever the interim ups and downs. 

Sometimes the process can feel like stumbling through a jungle, tripping over rocks and vines, always picking yourself up again and marching onwards. Don’t expect the process map you start with to be the one you continue with. Don’t plan too far ahead. Do be adaptive. Nonetheless, the process view is a source of support during the journey.

Processes require operating tools. John Chisholm’s toolset starts at Need and Advantage. 

“All you need is a Need and Advantage.”

Need = “A real, unsatisfied customer need in an area about which you are passionate.” 

He defines Need in an Austrian way: a subjective value sought or anticipated by a customer. He defines Customer as a living breathing person (or group of people, as with a corporate customer) rather than an abstract “market need”. Unsatisfied means that the need is not addressed by currently available products and services (requiring the entrepreneur to understand customer dissatisfaction). And Real means shared by a sufficient number of customers or sufficiently intense in one or more customers to make it worthy of you to satisfy. 
The entrepreneur must have an advantage for satisfying that need. John’s process is aimed at establishing and extending that advantage, in spite of the fact that existing businesses will have more and better resources than you.

John offers a 10-step process for entrepreneurs to follow. 

You’ll find John’s process pretty complete, cogent, and consistent with Austrianism. We didn’t cover every step of the process in the podcast, but we did pick out two tools and one principle.

Make a STARS inventory of your resources and strengths and turn them to your advantage. 

John recommends making and continuously updating an inventory of your individual strengths. The STARS acronym stands for Skills, Technologies that you know and can use, Assets and Achievements, Relationships and Reputation, and Inner Strengths. He has wise advice on each one of these subjects, and he suggests multiple uses for the completed STARS inventory:

  • Use it to assess the fit of your strengths with the customer needs you have identified.
  • Use it to identify strengths gaps you’ll need to fill.
  • Use it to build your own self-confidence (most people under-estimate their own strengths).
  • Use it to innovate by making new combinations by pairing STARS elements in new ways.

We provide a template with directional examples here. 

Map out a logical and sequential growth path with John’s “bowling pins” methodology. 

John’s advice is to avoid tackling too large a market and too large a target customer group at the outset. Focus on a best fit intersection between your resources and customer needs. Label it. Then identify the next most logical adjacent customer need you can fill, ideally leveraging your learning from the first market. Keep on building up the map of adjacent needs to fill. When you’ve got to 10, think of them as bowling pins. Knock them down one by one, starting with the first – that’s your early focus – and ultimately completing them all. That’s your vision – the largest set of customer needs you can possibly fill.

John calls this process Upsizing A Customer Need, and notes that this bowling pin strategy is particularly persuasive to venture capitalists – they like it that you are focused, and also that you have a map to growth.

We reproduce John’s bowling pin map here.

Make the most of limited resources: Different is better than better. 

How do you overcome the fact that existing businesses in a market you are trying to enter have greater resources than you? John’s answer: focus on being different rather than better. If you can identify how to be different – with a different solution, for a different target audience (even if it is small to begin with) you’ll evade competition.

John has additional advice about scalability, network effects, partnering and other tools for growth. Listen to the complete podcast for a rich reward of process tools and methods.

Free Downloads & Extras

STARS – Your Resources: Our Free E4E Knowledge Graphic
Upsizing A Customer Need: Our Free E4E Knowledge Graphic
Understanding The Mind of The Customer: Our Free E-Book

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A Nation Has Lost Its Way. Entrepreneurship Will Put Us Back On The Right Track.

A nation has lost its way. On July 13, 2012, in a political campaign speech in Roanoke, Virginia, United States President Barack Obama uttered the sentence: “If you’ve got a business—you didn’t build that”. Successful entrepreneurs and businesses, he implied, owed their success to government spending and public infrastructure.

President Obama’s statement has been used to justify a view of economics that is dominated by government planning, intervention and regulation, and has contributed to public vilification of entrepreneurial success. The result has been a “new normal” of stagnant economic growth, the dullness of over-regulation, and growing socialist sentiment.

Contrast this with the story of one entrepreneur, Steve Jobs. Jobs was an entrepreneur from the beginning of his adult working life. He co-founded Apple in 1976, and co-created the breakthrough Apple Macintosh in 1984. He introduced the desktop publishing industry. He helped to develop the visual effects industry. He helped to develop a line of world-changing and culture changing products including iPod, iPhone, iPad and iMac. He launched a series of digital services like iTunes and the App Store. Today, Apple provides employment for tens of thousands directly, and hundreds of thousands more working for suppliers, vendors and app developers. Few human beings have done as much good in the world as Steve Jobs, entrepreneur. He did build that.

You and I have the opportunity to do the same, and the nation and the world have the opportunity to re-experience the glories of entrepreneurial action, exciting innovation and surging economic growth.

We will do so by rediscovering and re-asserting the economic role of entrepreneurship. Entrepreneurship is voluntary action: individuals energized to activate their ideas, create new benefits, and build new firms and new capabilities. The ethic of entrepreneurship is betterment: serving others by improving their lives, and delivering unprecedented experiences of health, wealth, comfort, convenience, speed, and augmented capabilities. The result of entrepreneurship is value for all: greater feelings of satisfaction, confidence, opportunity and optimism. Entrepreneurs elevate the achievement and aspirations of the nation. That’s what Steve Jobs did.

We’ll accomplish this return to the entrepreneurial spirit that built America by following the entrepreneurial method. We’ll start by sharing the knowledge of what entrepreneurship can achieve and how individuals embrace entrepreneurship. We’ll release young people from the constraints of the educational institutions that don’t teach entrepreneurship, and show them how to learn the new way. We’ll build a community of entrepreneurs who share the enabling knowledge, ideas, skills, tools and techniques. We’ll celebrate the success stories that light the way. We’ll teach entrepreneurs how to embrace the uncertainty that seems to deter them today.