Consuming Is Not Mindless Buying Of Stuff. It Is Social Co-Ordination Through The Exercise Of Choice In The Marketplace.

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[postintro]This article continues the occasional series from Professor Raushan Gross on The Institutions Of Entrepreneurship. Entrepreneurship is a powerful pathway to innovation, growth, prosperity, and a better life for all. Its emergence and thriving are not automatic; it requires enabling institutions. Professor Gross will analyze and explain the institutional supports required for entrepreneurship to play its role in elevating society to the highest levels of achievement.[/postintro]

The writer of a recent Forbes article doesn’t want consumers making their own choices about what to buy and how much to buy. Instead, he provides a plan for consumers to avoid what he calls excess consumerism. In other words, what the writer suggests is essentially that “excessive consumption” is terrible for you and everyone else.

To put the matter mildly, the concept of “excessive consumption” has no basis in how flesh and blood people operate in the real world. This view of excessive consumption does not account for the fact that people’s goals are not focused on buying stuff. They are making individual choices using their own income and making their own decisions to fulfill their own needs and wants. They are not seeking the judgment or moral approval of Forbes writers.

One thing is for sure, and that is people prefer to obtain what they want now rather than later. Real people have time preferences – this statement is far from new. Each of us has time preferences, and we express these preferences in the market, where we make decisions on how we spend our time and income. For example, if I asked you to choose between taking $50.00 today or $50.00 in two years, which option would you choose? If you had the option to purchase bread for $1.50 today, would you buy the same loaf of bread tomorrow for $3.00? These examples clearly show that people make their choices to satisfy their want-satisfaction under personal time preferences. Unfortunately, the idea of consumerism, or excessive consumption, posed by the recent Forbes article clearly shows a widespread misunderstanding of how real people operate in the marketplace.

The Consumer Confidence Report finds consumer confidence has improved since December 2020, including a reported uptick in January 2021, and stated that “Consumers’ expectations for the economy and jobs ……..advanced further, suggesting that consumers foresee conditions improving in the not-too-distant future.” This is good news for consumers and producers. Consumers are confident in the market conditions for consumption, and guess what – the customer still rules!

Let us face it, the idea of excessive consumption in the aggregate is all wrong. Those who support the notion of excessive consumption do not see human behavior as it is but rather how they think it should be. What is essential for a functioning marketplace is not buying more than a Forbes writer believes that one may need, but how people choose to buy more or less of what they want. The market process is about consumers making personal choices using their own time and income to buy what makes them happy and is useful toward their goals. What is wrong with that? I love coffee, and I tend to buy coffee from different places, and I buy beans to make coffee at home. Should a coffee shop owner tell me that I can buy only one bag of coffee because three bags of coffee is excessive? This is true of most things like shoes, streaming movies, and exercise downloads. What may be more for one person can very well be less for someone else.

You see, when it comes to consumption, people tend to pick and choose for themselves what is excessive and what is not. The Forbes writer’s proposition is: what is excessive to me should be excessive to everyone else in the world. However, excessive consumption cannot go beyond what is produced—as we all know, there is scarcity.

Like most people, I want to buy what I deem useful, necessary, and has value. For one thing, consumers are not bumbling idiots – they have goals in mind as they shop for items. Consumers are attentive to prices, needs, timing, and market conditions related to their situation. As long as excessive buying does not harm others or is illegal, they should enjoy an economic system that produces material goods for consumers’ purposes and enjoyment. My enjoyment is a hot cup of joe, and you enjoy power tools or clothes. We can enjoy these things because we earn income to buy them, and they bring joy.

Let us get to the point; consumers who “buy excessively” are, in reality, exercising their freedom in the marketplace. Consumers can determine on their own to either buy fewer or more significant amounts of bread; however, if they buy fewer amounts of bread, they will cause the incomes of wheat producers to fall. On the other hand, consumers who purchase more video game downloads raise the incomes of people employed in that industry. Moreover, the opposite effect happens when consumers are told not to make their own choices in the marketplace. Do not buy more than two cups of coffee a day as that is excessive. Ha!

We must remember that production takes time. Rome was not built overnight, and neither were the items bought in-person or online by millions of people every day. That means if less is purchased, less will be produced in the future.

Producers and manufacturers determine what to make more or less of based on market demand. Demand begets production. The market provides for those willing to buy, and people who are not willing to buy do not stimulate production. Producers accommodate mass demand with scarce resources. Consumption is a balance of scarcity and abundance, and the outcome creates more choices for consumers. You see, economic thriving does not revolve around buying stuff, it is the outcome of consumer choice.

On the whole, excessive consumption may not fulfill a Forbes writer’s desires, but it may bring true happiness for some people. People who buy – whether excessively or not – fulfill their economic role of supporting business owners and their local community. To assert that consumers should stop “excessively” buying products assumes away the prospect that people do not change shopping patterns or increase family sizes over time. I was always told that you do not bite the hand that feeds you. The market is the only social place where the coordination between consumers and producers can facilitate goals and mutually beneficial choices for everyone involved via the buying process. These “excessive” purchases fuel the economy, which helps all people flourish and live their best lives.

Take A Job? No, Make A Job.

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The institutional and cultural guidelines today for personal and family income tell us to take a job. The government publishes jobs data as a key indicator of the health of the economy. They publish the inverse set of data – unemployment statistics – for the opposite reason, an indicator of the unhealthy state of the economy. We are subject to reports and commentary on job creation and job destruction. There are blue-collar jobs and white-collar jobs, and there are “non-jobs” in the so-called gig economy (which is institutionally and culturally and frowned upon because it does not provide “stable” or “reliable” jobs, and doesn’t offer “job benefits”, thus exposing gig workers to some set of vagaries or injustices).

Jobs are a product of the industrial revolution. Serfs and peasants in the feudal economy didn’t have jobs. They were “tied to the land” as the history books tell us, either farming for the aristocratic landholders or scrambling for subsistence on land they didn’t own. As soon as factories appeared, so did “jobs”. Somehow, the term tended towards tasks that were “low” and menial.

A job is something the worker takes. It is given to him or her as a gift, a privilege, an act of generosity of an employer. We should be grateful for our jobs, and try hard to keep them, not lose them. 

Concepts such as the minimum wage level for a job are intricately entangled in the hierarchical job-granting schema. The power center determines for you how much value you are deemed to generate.

Our entire lives are constructed around jobs. We consume education in order to become qualified for a job. We plan to fund our pension income from the proceeds of a  job. We access the healthcare system via the benefits provided to us as a result of our job. We call a job held for a long time a career. Jobs overwhelm lives.

What if the institutional and cultural guidelines were different? What if the life-system we are plugged into from birth was not so dominated by the concept of jobs, of working for corporate employers?

Reframing how we think of the structure of the economy.

The picture we paint of the economy when we talk in terms of firms creating jobs for employees to take is hierarchical. We look up to “Big Business” and rank them on their number of employees. These companies make up the DJIA and S&P 500 indexes that we talk about every day. Smaller companies don’t get a mention. They sit lower down the hierarchy.

If we reframe this picture to think about a network rather than a hierarchy, we can assign a more equally important role to every node and every connection. We can see productive activity distributed across the network, with opportunities throughout. The economy is a collaborative system of production in which there are innumerable choices for each of us to decide how to contribute.

The gradual abandonment of hierarchy in organization is, in fact, quite well advanced in the digital age. Our thinking about jobs and employment needs to catch up.

A life of production versus a life of earning.

Our reward for working at a job is often expressed as earnings. Not only earning dollars, but earning a good living, earning our keep, earning a promotion. We earn by keeping in line, following orders, performing tasks. In the collaborative economic network, we can be producers rather than earners. We focus on how much our productivity in generating output to nearby nodes – team-mates, partners, customers, the next stage of the value chain – so that our connections are strong, and we are evaluated as a strong and reliable link.

Our time and effort is focused on how to be more productive, rather than how to fit in to an administrative harness. Our creativity is liberated and we evaluate our work-life for its stimulation rather than its weekly earnings.

Division of labor and division of knowledge.

Economists have identified a phenomenon they call division of labor as one of the great secret sources of job productivity. The more narrowly each individual worker specializes, the better the combined organizational outcome. This thinking has been pervasive since Adam Smith’s picture of the pin factory in The Wealth Of Nations.  

‘One man draws out the wire, another straights it, a third cuts it, a fourth points it, a fifth grinds it at the top for receiving the head; to make the head requires two or three distinct operations; to put it on, is a peculiar business, to whiten the pins is another; it is even a trade by itself to put them into the paper; and the important business of making a pin is, in this manner, divided into about eighteen distinct operations, which, in some manufactories, are all performed by distinct hands’.

The division of labor reduces us all to pin head grinders. The goal is to make each of us so specialized in our function that we can only operate in a hierarchy, we can only perform one narrow task, and we are easily replaced by another individual who can be quickly trained in repetitive pin head grinding.

There’s another alternative, and that might be called division of knowledge. Knowledge is the source of economic production, increasingly valuable when we add to it, whereas labor is a cost, to be reduced and, if possible, eliminated. Every individual has unique knowledge; it’s experiential, subjective, an act of cognition. The most valuable knowledge is tacit, not subject to analysis and not easily shared, guiding individual activity in unique ways. 

Individuals can collect, curate, polish and adapt their own knowledge to make more of a contribution to collaborative economic production. They can aim to be best at something in their network based on unique, individual tacit knowledge. It might be welding metals together or writing code or detailing cars or growing vegetables or setting prices for hard-to-price items. They can easily find out what knowledge is required and valued in nearby parts of their network, and adapt appropriately, exhibiting their knowledge for the most eager buyers.

Division of knowledge is more empowering than division of labor.

Measure your own performance.

 One of the ways that the job-granting hierarchy exerts control over the job-taker is performance reviews. The employer makes rules about what constitutes desirable performance, and designs ways to measure how well the rules are internalized by employees. Those job-takers who conform best are those who are rewarded with pay increases, promotions and recognition. Performance attributes like “works well with others on teams” and “achieves departmental goals” are designed for the benefit of the hierarchy, and not as guides to self-realization for individuals.

Many of the corporate performance programs require the individual employee to undergo a personality evaluation, often using industrialized frameworks such as the Myers-Briggs Typology Indicator, literally assigning individuals to pre-determined boxes and using the classifications to evaluate their ability to fit in. They’re not examining your personality profile to enlighten you.

Such performance criteria and performance measures are intended to be tied to incentives, to be a medium of motivation. But the high-powered incentives that truly motivate are values such as purpose and meaning, and the sense of achievement that comes from an individual effort to attain a self-chosen goal of the highest order. In a large firm, individual effort can have only a trivial effect on company performance, or even team performance in a corporate context. And there is usually no place for truly individual performance. That would not constitute working well with others.

As an individual entrepreneur, or a founding team member, or a critical member of a small business, it is possible to maximize personal achievement, elevate personal incentives, and take a more direct route to purpose and meaning. Data indicate that small companies are better at attracting superior talent, better at rewarding individual performance, and better at nurturing the kinds of innovation that motivated individuals can contribute. Often, these innovations are better ways to work: new routines, new capabilities, new knowledge sharing. Better ways to work mean more achievement, and more fulfillment for those who participate in the new ways. People-led process innovation becomes a virtuous circle.

Treating Consumers As Means Not Ends Is A Fatal Business Model Flaw.

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Recently, some of the Big Tech companies of Silicon Value have been caught in anti-market behavior. They have censored or even banned some of their own consumers. Since value lies in consumer experience, and since capital is the net present value of future claims to revenue streams from consumers, these firms are destroying value and consuming capital. Why? How can this happen?

Where Is the consumer? 

The goal of business – the end, to use means-ends language – is to facilitate an experience for the consumer that they value. Using Austrian economics as its foundation, the Economics For Business project has built an innovative business paradigm and a complete business model framework on the principle of consumer value. Entrepreneurs are those who create new value, and they submit to evaluation by the consumer to determine their success. They maintain a clear line of sight to the consumer at all times, from the very first step in imagining a new business, new product or service or any improvement in their offering, all the way to the consumer’s ultimate usage experience.

Technology-driven means not thinking about the consumer.

The histories of many Silicon Valley tech firms reveal that they don’t have this line of sight to the consumer. Many started out to build a technology, one that performs efficiently, automates effectively, and exhibits cool features. There’s a pride in engineering, as there should be. But even the most beautiful technology can’t succeed without consumers in mind. The technology-driven approach to innovation must not contravene the principles of the consumer-driven approach to value.

When consumer value is not the business model.

Facilitating consumer value is a business model. Value is a learning process for consumers, of which exchange value (paying in dollars for value anticipated) is a component part. The revenue model for the entrepreneurial firm consists in earning this exchange. It’s all integrated. Some Silicon Valley companies (Google, for one) accepted investor funds and began operations without a business model in place. When consumer value is not integral to the firm, it’s quite possible that they lose their grip on the concept. They don’t create value for consumers, or for the economy. Or for investors, for that matter – they’re using investor funds in ways the consumer does not value.

In many Silicon Valley models, consumers are creators of content for the technology company to control, analyze and re-sell as data to the advertiser. Consumers are creating value for the platform, not vice versa.

Monetization as an afterthought.

We often hear the word “monetization” in descriptions of Silicon Valley business models. The word itself is quite revealing. It certainly doesn’t connote a commitment to serving the consumer. Monetization is the search for a revenue model after the technology is launched. Many of the monetization schemes are advertising-based, which can be problematic. They are often value-destroying for consumers, especially in the “interrupt and annoy” formats that are common on the internet today. Advertising is certainly not innovative – it’s been around for a very long time, long before Silicon Valley came into existence. When firms are selling consumers to advertisers, their commitment to consumer value becomes secondary.

It’s not that B2B business models are any less valid than B2C. They key is to remember the Austrian principle that value in any stage of the production chain is made possible only if there is consumer value at the end of the chain. Microsoft, for example, is a technology company primarily focused on B2B value propositions in areas like business productivity. They always have an eye on the next stage in the value chain: improved business productivity and efficiency enables Microsoft’s customers to, in turn, produce lower cost consumer services and enhanced consumer experiences. Microsoft has its eye not only on the immediate B2B customer, but also the next stage of the value chain.

A cultural problem.

Ultimately, the kinds of Silicon Valley companies to which these observations apply face a cultural problem. Consumer value and consumer service are not a sufficient part of their DNA. They were founded and developed to nurture technology – in some cases, brilliant technology, in others more mundane; they found technical ways to reach mass distribution based on the new power laws of digital networks; they found bolt-on monetization schemes that responded to mass reach. Culturally, the idea of consumer value has never been central to them.

Perhaps that’s why, today, we see Twitter censoring its users and throwing them off the platform, angering many more.

Generative products versus central control.

The value promise of today’s digital products and digital markets is exciting for consumers. The term “generative” has been coined to describe the new characteristics of products that give consumers leverage – make their jobs easier; that provide adaptability so that consumers can change them to suit their own purposes; and that are easy to master and easy to access. The spirit of generativity lies in unleashing end-user creativity.

Some Big Tech companies don’t seem to believe in the generativity of their products and their consumer relationships. They prefer centralization and control. They want to collect and control consumer data and turn it into their own closed products. That’s why they need so many engineers to build the algorithms and the data banks. That’s why they need so many content monitors to project their control. They are centralizers in a world of decentralization. This leaves them open to disruption by the next generation of entrepreneurs who start their journey from the point of view of what consumers value.

Mike Masnick’s proposal: Protocols, Not Platforms.

Our Knowledge Graphic: Silicon Valley Is Bad At Entrepreneurship

 

 

Your Attitude And My Attitude Are The Sources Of Economic Growth And National Prosperity.

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Who are the drivers of prosperity? Economists would say it’s them. At least the ones who work for the Federal Reserve and the US Treasury and numerous think tanks and lobbying firms in Washington DC would say that. They capture economics in mathematical models, with variables like money supply, government spending, workforce participation, and mysterious forces like technological advance. By tweaking their variables, they believe they can forecast outputs such as GDP and employment levels. The economy is a mathematical machine and they are the geniuses in charge.

Bezos, Zuckerberg, and Cook would say it’s them. They run the tech companies that dominate global commerce, employ people, provide retail platforms for minion companies that sell apps and gadgets and groceries. Without them, there’d be no economy and no prosperity.

Larry Fink at BlackRock, Jamie Dimon at JPMorgan Chase, David Solomon at Goldman Sachs, Warren Buffet at Berkshire Hathaway, and the other titans of finance would say it’s them. They are the financial capitalists who supply the juice to keep the economic lights burning.

Edmund Phelps was awarded the economics Nobel Prize for revealing that it’s none of these. It’s you and me. You can read his theorizing in Mass Flourishing: How Grassroots Innovation Created Jobs, Challenge, And Change.

Prosperity on a national scale—mass flourishing—comes from broad involvement of people in the processes of innovation: the conception, development, and spread of new methods and products—indigenous innovation down to the grassroots. This dynamism may be narrowed or weakened by institutions arising from imperfect understanding or competing objectives. But institutions alone cannot create it. Broad dynamism must be fueled by the right values and not too diluted by other values.

Note the term “broad involvement”. Phelps means everyone in the nation: he describes a culture of innovation.

the stuff of flourishing—the change, challenge, and lifelong quest for originality, discovery, and making a difference.

Modern economies display what he calls dynamism: the appetite and capacity of “indigenous innovation”, and “original ideas born of creativity and grounded on the uniqueness of each person’s private knowledge, information and imagination”. Phelps is not an Austrian economist – he can’t afford to be, since he chooses to make his name and his living inside the academic fortress of Keynesianism, not assaulting it from the outside. But he certainly sounds like one in his invocation of subjectivity in identifying these personal, individual, and psychological drivers of prosperity.

There are great benefits for the individuals who populate and participate in a dynamic modern economy:

the mental stimulus, the problems to solve, the arrival of a new insight, and the rest. I have sought to convey an impression of the rich experience of working and living in such an economy. As I considered this vast canvas, I was excited to realize that no one had ever depicted what a modern economy felt like.

“What a modern economy felt like”! Isn’t that the ultimate in subjectivism in economics? He goes further into subjectivism by identifying attitudes and beliefs as the drivers of economic results.

attitudes and beliefs were the wellspring of the dynamism of the modern economies. It is mainly a culture protecting and inspiring individuality, imagination, understanding, and self-expression that drives a nation’s indigenous innovation.. (with) a new set of values – modern values like expressing creativity for its own sake, and personal growth for one’s own sake.

As measures of prosperity, Phelps focuses largely on survey data: people answering questions about how they feel. Among the most important of these, in Phelps’s mind, are job satisfaction scores and life satisfaction scores. He conducts a comparative analysis across (mostly Western) countries that leads him to conclude that people derive more life satisfaction from activities as producers than activities as consumers. This finding stands in opposition to many of the critics of capitalism, who deride the system for making conspicuous consumers of us all, focused on what we buy rather than what we make.

As producers, it is our individual knowledge that gives us power:

it would appear that only increasing economic knowledge—knowledge of how to produce and knowledge about what to produce—could have enabled the steep climb in national productivity and real wages in the take-off countries.

With time, the modernist emphasis on increasing knowledge—and the presumption that there is always more knowledge to come—triumphed over traditional emphases on capital, scale, commerce, and trade. But where did that knowledge come from? Whose “ingenuity” was it?

The ingenuity is yours and mine.

In a follow-up work called Dynamism: The Values That Drive Innovation, Job Satisfaction And Economic Growth, Phelps gives us more specificity about the “modern values” people in dynamic, innovative economies hold:

  • More satisfaction from non-material rewards than from material rewards;
  • An outsize desire for achieving something through one’s own efforts (and being recognized for it);
  • Huge satisfaction in succeeding and prospering;
  • Delight in the sense of flourishing that comes from life’s journey and the thrill of voyaging into the unknown;
  • Satisfaction from making a difference, making a mark.

Underlying these satisfactions are the values of individualism, vitalism, and self-expression. Modernist satisfactions are inherently individualistic: one’s own and one’s closest family. Vitalism looks to challenges and opportunities that contribute to the feeling of being alive. Self-expression is the imagination and creation of new things and new ways that enable an individual to reveal who they are. Mass flourishing occurs in a dynamic economy where these humanist values fuel the necessary desires and attitudes for innovation and growth.

Phelps fears (and presents data to support those fears) that these values are being eroded in today’s America. Opposing values are gaining ground. There is considerable dissatisfaction among many participants in the modern economy. There appears to be a falloff in the non-material rewards of work. Household surveys show losses in reported job satisfaction and life satisfaction. There is a loss in the sense of agency, of the experience of succeeding at something and the sense of voyaging into the unknown. Some sociologists point to a rising narcissism among young people that makes them self-indulgent. They place more value on trying to be someone than on trying to do something.

We may be losing the dynamism of indigenous innovation that leads to mass flourishing. Check your attitude.

 

 

Cast Down Your Bucket Where You Are: How Entrepreneurs Use The Institutions of Entrepreneurship To Thrive In The Technological Epoch

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How can institutions such as education, family, language, laws, and economy be understood as the catalysts for emerging institutions of entrepreneurship?

From an entrepreneurial perspective, institutions result from emerging social phenomena based on subjective experience and perspective. Institutions of entrepreneurship include action, technology, knowledge and learning, culture, and values. You see, institutions of entrepreneurship do not thwart marketplace initiatives; instead, they are instrumental for entrepreneurial action to advance into the near future. Many of our institutions are the result of human action and not of design, but over time, predetermined narratives tend to come into existence. From an entrepreneurial point of view, set narratives of entrepreneurship are guides toward a general framework of individual potentialities and should not be deterministic. Institutions serve as constraints and, at the same time, as action enablers.

As in all entrepreneurial matters,  subjectivity applies. The subjectivity of entrepreneurial institutions should allow individuals the ability to take advantage of newly emerging market opportunities. If nascent entrepreneurs go about serving others in the marketplace the same way as previous actors, they will ultimately get the same result. As a case in point, it was Einstein who changed Newton’s longtime theory of gravity by pointing out there is a special and a general relativity. Einstein replaced Newton’s theory, not using the same thoughts and processes as Newton, but from his subjective institutional experiences, knowledge, and skills that he possessed at a particular point in time as new ideas emerged. The theory of relativity gave physics a massive leap in science. The conventions of physics allowed Einstein to use the institutional framework to discover and attempt to be part of something useful for science and the layperson.

Can we extend this same sentiment to the entrepreneur to advance using the institutions of entrepreneurship?

I say yes! An entrepreneur’s experience within institutional environments is subjective, so in the words of Booker T. Washington, nascent entrepreneurs should “cast down your bucket where you are.” Ideally, everyone should have the opportunity to “cast down a bucket where they are,” particularly via emerging entrepreneurial institutions, as a means to learn from the marketplace and participate in the market economy.

Emerging entrepreneurship institutions – such as starting a business on the internet – are the key to entry into markets that may have once been unobtainable for some people, primarily because institutions are subjectively experienced. In many ways, institutions can be identity-producing. If Mary Kay started her business a certain way, it does not mean others following her footsteps have to do it the same way to be successful as she was. Like Isaac Newton, she inspired. Emerging entrepreneurial institutional environments, for those individuals steeped in institutional identity, provide a chance for individuals to realize an alternative to the normative ways of participating in a given marketplace. Moreover, nascent entrepreneurs can use emerging institutions via institutional superhighways through multiple technological devices (i.e., smartphones, laptops, social, and e-commerce platforms) to make transaction-based sales that can serve consumers across the globe.

Institutional environments ought to allow everyone the chance to pursue their entrepreneurial plans. As we know, plans are often diverted due to unexpected events, which is why entrepreneurial institutional environments should serve as market feedback mechanisms and not barriers to market entry. Dropping a bucket means using production factors to serve consumers in the best possible way, not waiting for the ideal circumstance to participate in the marketplace. Entrepreneurs should not wait for an ideal situation, ideal investment, or the perfect business idea.

Within the institutions of entrepreneurship, one should be able to drop down their bucket where they are. Institutions of entrepreneurship should make room for new entrepreneurial participants via technological devices, i.e., smartphones, tablets, laptops. Higher levels of entrepreneurship are not the cause but the effect of technological advancements. Technology is not static but dynamic and the same for the people using it. “Tools and machinery are primarily not labor-saving devices, but means to increase output,” as Ludwig von Mises once said.

A recent report showed that 14% of business owners are between 30-39, and 4 % are between 18 and 29. These demographics (especially 18-29) own smartphones or laptops with access to e-commerce platforms and digital media – basically access to consumer markets at their fingertips. The next logical question is: if 13% of millennials spend over 12 hours on their phones daily, how can they participate in the marketplace? The data speak to the fact that everyone has the chance to drop their buckets where they are and serve their fellow man.

“At least 81% of entrepreneurs do not have access to a bank loan or venture capital,” says a recent Kauffman Foundation report. The report goes on to say, “Very little of the total capital flow to entrepreneurs is geared toward women and people of color.” Again, institutional environments are entirely subjective, as there is too much diversity among people and circumstances to assume that everyone interested in entrepreneurship might uniformly enter the market and participate evenly. Nevertheless, that is the point! Instead of institutional barriers preventing entrepreneurship, institutions of entrepreneurship and emerging institutions ought to function as superhighways of entrepreneurial accessibility via the means of one’s talent and resources where they are, as indeed most people have access to technological devices.

There are 272.6 million smartphone users across the United States, which means that 272.6 million business opportunities are waiting for people to drop down their buckets. Not to mention, 52.4% of the population worldwide use their smartphone to access the internet.

Entrepreneurship is a function of the market process, an activity that should be open to anyone willing to serve others’ needs. Internet searches are now an institution; they’re how people express needs. There are vast amounts of these internet searches, providing the inquisitive entrepreneurial mind with a million ways to start a business. However, the problem is that not all potential entrepreneurs will experience the same institutional environments uniformly. We all have different plans and expectations of how entrepreneurial institutions should facilitate entrepreneurial pursuits, whether it be the production of music, art, lectures, reading material, cooking lessons, painting services, or exercise tutorials. If buckets are dropped where the person is, the only cost incurred by the nascent entrepreneur is time, and the chances are that someone got served, which is the first step towards the ideal success narrative that we often connotate with entrepreneurship.

Again, there are entrepreneurial opportunities only if entrepreneurial institutional environments create an entry for anyone willing to drop their bucket where they are. Entrepreneurial institutions should operate as uncertainty reducers and not uncertainty enhancers. Therefore, the conventional institutional environments ought to support emerging entrepreneurial opportunities and individual action. The institutions of entrepreneurship should accommodate action in emerging institutions so that the entrepreneurial spirit can pour the horn of plenty on all of us.

Entrepreneurs Are Those Who Refuse To Accept The Status Quo – In Business, Politics, Institutions And Society.

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Entrepreneurs refuse to accept the status quo. Their function is to create new economic value for their customers, and thereby to profit for themselves, both financially and psychically. They do this by introducing new products and services to the marketplace, designing and implementing new processes, adding value to others’ inventions by turning them into market-wide innovations, and offering new pleasures and satisfactions and solutions that no-one knew of or imagined.

The pursuit of new is a refusal to accept the status quo. That includes any and all existing market conditions and structures, any monopolistic incumbent firms, any regulatory barriers, any capital shortages, any “it can’t be done” pessimism. 

We think of entrepreneurs in economic terms, market movers dealing in goods and services, taking dollars and cents in exchange. But the entrepreneurial mindset and the entrepreneurial process can be applied in many more contexts where the status quo requires a challenge and change is called for. Functional entrepreneurship is a process that can be described as a series of steps:

  • Development of entrepreneurial belief. An entrepreneur develops and continually adapts and polishes a belief about the status quo that no-one else holds. The belief is that the status quo is inadequate, wrong, or susceptible to improvement. For whom? For customers – i.e. not for the entrepreneur herself but for others. The status quo is under-serving others, and the entrepreneur is determined to fix that error. The entrepreneur, of course, expects to get something back in return, which could be psychic fulfillment (a sense of purpose and meaning from being the status quo buster) as well as profit (which is the financial signal to the entrepreneur to keep going). It all starts with dissatisfaction and the belief in the possibility of eliminating it.
  • Alignment with customers: As the entrepreneur develops the belief, she or he continuously aligns with (potential) customers. Am I getting this right? Does what I believe align with your preferences? If I change things in the way I am thinking, will you endorse the change? You are the customer, and you are my guide. You have the final decision.
  • Implementation: Given supportive feedback from customers (“the market”), the entrepreneur moves ahead with the new initiative – designing, building, and marketing it. It’s offered to the market as a value proposition (“I think you might like this – here’s why”). The market (i.e. customers) responds yes, no or conditionally (“I’d like it better if………). The entrepreneur receives the feedback, reshapes the value proposition and re-offers it until the customer confirms “Yes! That’s it!”

This mindset and the BAI process – Belief, Alignment, Implementation – can be applied not only in business but in any context or setting where there is dissatisfaction with the status quo on which an entrepreneur can build a belief and a customer can express a preference. As a result, we can imagine a wide range of fields in which the entrepreneurial mindset can be applied to society’s benefit.

Institutional Entrepreneurship

Many of the institutions in our society have reached all time lows of disrespect. Representative democracy is being widely questioned, and the institution of Congress has a very low approval rating (18% job approval – and moving lower – according to Gallup Poll in mid 2020). Also in the Gallup Poll, half of Americans revealed “somewhat negative” or “very negative” ratings of the federal government. We are losing confidence in our money, and the Federal Reserve, the institution charged with preserving its integrity and value, yet does the opposite. Similarly, we re losing respect for educational institutions that prefer to indoctrinate our children rather than educate them. 

In all these instances, there are entrepreneurs who have developed the belief that they can bring improvements to a corroded status quo. Even democracy can be innovated. Or, alternatively, we could re-think the entire founding of the US. Entrepreneurs are the ones who initiate these changes.

Regulatory Entrepreneurship

Regulation is the context in which entrepreneurs work. The more thoughtful entrepreneurs question whether the context is unchangeable, and they find innovative ways to make change. Uber and AirBnB are recent multi-billion dollar examples of what’s possible. Uber is what contracted automobile transportation looks like when entrepreneurs question the regulation that keeps the restrictive taxi monopoly in place. According to Josh Johnston Airbnb is just what hotels look like without hotel regulations. Entrepreneurs can out-think regulators.

Social entrepreneurship

Social entrepreneurship is a term that is often misused to mean entrepreneurial initiatives that are conducted without a profit motive, aiming for a higher target of good for society that entrepreneurial capitalism can’t achieve. The true case is that all entrepreneurship is for social good, because society is simply another word for entrepreneurs’ customers, and entrepreneurs want them to do well. Entrepreneurs offer society more and more good things, while trying to use less and less of society’s resources (i.e. lower costs), thereby freeing them up for other social uses. 

A great example of profit-directed social entrepreneurship is the initiative called Entrepreneur Zones, the brainchild of Dale Caldwell of Fairleigh Dickinson University’s Rothman Institute of Innovation and Entrepreneurship. With Entrepreneur Zones, Dr. Caldwell aims to solve problems of urban poverty, family instability and academic underachievement by establishing an environment where local residents can start and grow businesses and make them thrive, in n environment of shared purpose, supportive investment, training, mentoring and relaxed regulation. The goal is to improve society by making a profit, generating jobs, and creating the social environment in which families can pay their bills and their kids can do well in school. 

Cultural Entrepreneurship

In November 2020, Frank Newport of Gallup wrote A Letter to Elected Representatives, From the Average American, based on what average Americans had told Gallup in surveys. One of the statements is this: “I have lost faith in many of our culture’s institutions in recent years”. The term cultural institutions can include many things from religion to the healthcare system. Gallup reports that Congress has by far the lowest confidence of all institutions, of course, but confidence in many of our other institutions is redoing too. The next lowest after Congress is big business followed by the news media (TV and Newspapers), the criminal justice system, and organized labor, then banks and public schools.

We can see entrepreneurial improvements emerging for all these institutions. Home schooling and private schools; fintech replacing many bank functions; reformers trying to change the criminal justice system; internet news outlets offering alternatives to mainstream news media. Consumers get to choose which of these innovations they’ll support. Entrepreneurs will continue trying to secure that support through integrity, earning trust, and giving great service, which is where so many of our institutions fail.

Entrepreneurs and entrepreneurship are society’s resources for continuous improvement of the status quo.