A podcast based on the winning principle that entrepreneurs need only know the laws of economics plus the minds of customers. After that, apply your imagination.

135. Mark Packard: How to Put Time on Your Side

Entrepreneurial action occurs in time. This brings uncertainty, because of continuous change. We can’t know what will be our future result, yet we must produce now in order to discover it. Are there answers to this conundrum? Yes. They’re found in action, and the timing of action. Mark Packard joins the Economics For Business podcast to share his research.

Download The Episode Resource “Mastering Time” (PDF) – Download

Kay Takeaways and Actionable Insights

There are three ways we can think about time.

Eternalism: Time goes back in the past to infinity and forward in the future to infinity. It’s a real thing, e.g., we can identify “points” in time. This is the time of physics.

Presentism: Past time does not exist, it is a memory pattern; the future is undetermined, it’s just a mental image. The only time that exists, and is real, is now. This is the time of Austrian economics.

Growing tree: The past is real, it has been determined, and there is one real historical truth (think roots and branches). The present is real and unfolding (new leaves growing every day). The future is undetermined.

Presentism is the view of time that best aligns with Austrian entrepreneurship and subjectivism. Entrepreneurs act based on their own sense of time, which can be both objective (the clock is ticking) and subjective (how I act in time and how I feel about it).

Entrepreneurial action occurs in time, which brings uncertainty.

Why must entrepreneurs deal with uncertainty? Because production takes time, and there is continuous change, so the outcomes of the production process in the future can’t be known. Even if the entrepreneur knows what demand is today, it can change over time, and can’t be known in the future. Businesses choose entrepreneurial action long before they know how it is going to turn out. Entrepreneurial uncertainty is a consequence of the existence of time.

Time is scarce, but it’s not a resource.

We can legitimately refer to time as being scarce. We often feel as though there is not “enough” of it. We’d like to be able to try to pack more effort and action into the time available to us.

When we talk in terms of scarcity, it’s tempting to think that time is a resource, akin to other scarce resources. We manage those other resources, we allocate them, we combine them, we use them efficiently.

We’d like to think the same way about managing time. But we don’t have control of it. Time just flows. It’s not at our disposal to use and allocate as we see fit. We can’t defer judgement on how to allocate our time, for example, because time keeps flowing and by deferring judgement we just did allocate some present time to not acting.

The resource over which we do have control is our effort.

We can choose how to allocate our efforts in time. Our efforts are not scarce in the same way that time is scarce. Our efforts are limitless; we can put effort into a wide range of applications. It’s because time is scarce that effort must be allocated as if it were scarce.

As time flows, customers’ perception of value changes, and entrepreneurs must follow this change process closely.

The effects of the flow of time are not exclusively limited to the allocation of entrepreneurial effort. They are also manifested in the customer’s Value Learning Process. (Mark Packard describes this in detail, and gives us some management tools: Mises.org/E4E_44Mises.org/E4E_55Mises.org/E4E_62, and Mises.org/E4E_73).

As a result of the flow of time, customer value is a process. Customers prefer the best satisfaction they can presently identify. As time flows, and they gain more knowledge and experience, what they value changes. Their preferences are different in the future than in the present. There is continuous change.

Since consumers are sovereign to the entrepreneur, it is mandatory to keep up with these changes. The continuous process of value learning never stops, and entrepreneurs must follow closely, gathering feedback, empathically interacting with this feedback, and making adaptive changes in their value propositions in response.

Sometimes, customer preferences may stabilize. Entrepreneurs may come to believe that there is a loyal cadre of reliable customers, and may invest in nurturing this loyalty and in relationship building. But they can not permit themselves to become too comfortable in these relationships. Customers are not loyal to a product or service or brand or supplier. They always seek the best satisfaction, and once new knowledge is available to them, they will change their behavior.

All entrepreneurial choices about action are made in the context of time, with significant consequences for outcomes.

Because customer preferences are continuously changing through time, entrepreneurs are faced with an uncertain decision about when to act. At what point in time do they have enough knowledge to go to market with a new value proposition, or a new or improved product or service? They know that, as soon as they act, customer preferences are going to change further (perhaps as a consequence of the action). If the entrepreneur decides that acting as the first mover in introducing an innovation gives them an advantage, they also know that competitors have an opportunity to process the new changes and overtrump that advantage as a second mover. Both are competing over the customer’s shifting sense of greater satisfaction.

When does the entrepreneur know enough? How does a business identify the narrow window in the customer’s value learning process that provides a signal to act? Timing is a big, important piece in the entrepreneurial puzzle.

There are several areas of time management where entrepreneurs can improve their skills.

While time isn’t a resource to be allocated, it provides a context for action in which entrepreneurs can subjectively make changes for the better.

Recalibration

Is your internal clock moving too fast or too slow? Do you find that you are always running late, or, alternatively, arriving too early and consequently “wasting” time (i.e., burdened with time periods you can’t fill with appropriate action)? If so, it’s time to recalibrate. Change the pace at which you do things. The world proceeds objectively at clock time, but your internal clock is subjective. You may need to align the clocks better. Change your schedule or rearrange your tasks to make your internal clock better aligned with real clock time.

Better time planning

Sometimes we simply err in assessing how much time to allocate to each of our various tasks. Each one takes longer than we planned, and by the end of the day, we’re several tasks “behind” and some will remain undone. If that happens over and over again, if there is regularity in your mistiming, you should change your mode of planning. Allocate different — more realistic — amounts of time to the completion of each task. Allow for delays. Don’t “lose track of time”.

Fix your prospective memory

Do you put tasks on your to-do list for the future and then forget them? This is a failure of prospective memory — your memory of the future. Prospective memory is your recall of the schedule you had planned out for yourself. One answer is to use mechanical or digital aids. Write down your to-do’s on a calendar. Enter them into your phone. Set an alarm as reminder.

Whatever, happens, don’t be the bottleneck.

Time management is not trivial. For entrepreneurs, being late, missing meetings, missing deadlines, or experiencing delays is likely going to cost you dearly.

Don’t be the bottleneck, don’t be the one causing the problems, for your colleagues, your partners, your customers, or any collaborators. Fix your own timing issues.

Additional Resources

“How to Master Time” (PDF): Download PDF

“Value is a Learning Process” (PDF): Download PDF

134. Per Bylund: The Unrealized

Understanding The Unrealized requires us as entrepreneurial businesspeople to think better, and to resist settling for what is merely feasible in a regulated, risk-mitigated world. We must ask what could be possible in a different world, and act on that basis. Sound economics supports such action. Per Bylund takes us through his thinking about The Unrealized.

Key Takeaways and Actionable Insights

First, see beyond what’s there.

From Bastiat’s famous parable about the broken window comes the economist’s instinct to think about 2nd, 3rd, and Nth order consequences of actions. These are typically unseen by those who don’t think like economists, and never even considered by politicians.

Entrepreneurs always have 2nd or 3rd alternative actions in mind if the consequences of their first choice are unexpected, and they will always adjust further if required by customer feedback, with the constant aim of producing high customer value and satisfaction. They see beyond what’s there.

Government regulators and legislators make promises on the basis of forecast 1st order consequences only.

Regulators promise that the consequences of their actions will be beneficial, at least to some groups. For example, in minimum wage legislation, they promise a pay raise for the lowest paid workers. What is not seen are all the jobs that disappear — are never offered — as a 2nd order consequence of making minimum wage labor unaffordable to the profit seeking entrepreneurs, the ones who create jobs.

Beyond the unseen is The Unrealized.

In reality, regulations are not what politicians promise. They are not actions to help people. They are restrictions on entrepreneurs’ economic behavior. Entrepreneurs are aiming at satisfying customer wants as much as possible. Regulations aim to restrict this customer-satisfying action by forbidding certain innovations, or declaring that they must be designed and implemented in ways that have value for the regulator and not for the customer or entrepreneur.

Entrepreneurs are forced to abandon some of their efforts to generate new value by satisfying customers, or to redirect their efforts into less value-producing channels. The potential output of their creativity goes Unrealized.

Society accumulates and compounds losses when entrepreneurial creativity is curtailed.

What could have been the case if entrepreneurs were unbound, if the regulatory chains were cast off? We can’t know. But we can know that The Unrealized is a cost to society.

And the cost is cumulative. Technology and innovation thrive and grow in response to observations of how customers experience value from it. Entrepreneurs introduce a new application of technology by building on what’s available today and adding to the value experience that they observe customers enjoying today. If innovation is restricted by regulation (or any other barrier), these observations can’t take place. The next big thing that builds on today’s big thing won’t happen. We keep falling behind what is possible because of these regulatory restraints. Consumers become cumulatively worse off. Society is permanently and increasingly damaged.

We are placed on a different value trajectory — one that limits our options.

What if Henry Ford had been restricted from introducing assembly line manufacturing of automobiles? It’s not hard to imagine such a case in the OSHA environment of today. What if the innovation cloud of new roads, better engines, gas stations with coffee and hot dogs, and all the other ancillary results of assembly line manufacturing had not been allowed to form?

Such a thought experiment demonstrates how regulation places society on a different trajectory than what is possible from unlimited entrepreneurial innovation. Will Uber’s technology launch us on a trajectory of ever-more-ingenious applications of on-demand service, stimulated by consumers’ unlimited imagination of greater and greater convenience? Or will taxi medallion regulation permanently limit that imagination to keep it within the boundaries of bureaucratic compliance and control?

Per Bylund’s term for the effects of bureaucratic control is limited optionality. Quality of life is elevated when we have greater optionality. Regulators don’t want us to have that experience. Less optionality means less value.

Continuous reinvention can’t be planned.

The second and third and Nth order consequences of unrestricted entrepreneurial creativity and consumer imagination are not subject to planning. Emergent new inventions and innovations are not predictable. The probability of positive outcomes from the creative process can be enhanced by entrepreneurial intent and aspiration and effort. But on the other hand, the range of positive probabilities is greatly reduced by restrictions on that intent and aspiration. What could be is bounded by what is attempted, and regulations narrow the field in which attempts are made.

Make sure you do not restrict your own creativity with self-imposed regulation-like limitations.

Regulation limits innovative possibilities. What if the same is true of your own entrepreneurial practice? What if The Unrealized is concealing itself in your own business? Are you sure that your imagination about possible futures based on your understanding of customer wants is expansive enough? Are you sure that you have considered all possible approaches to satisfying those wants, even the ones that are most unlikely? Have you examined every possible pathway to a unique position in the marketplace? Have you found every possible way to cut out cost and time from your production process? Are all your processes designed and engineered to remove all barriers to successful outcomes?

If you are inside a corporation, are there corporate restrictions that act like regulations, channeling your creativity into pre-ordained pathways and towards pre-selected attractors? Are there unnecessary constraints on emergence?

The Unrealized lurks everywhere. The entrepreneurial task is to root it out.

Additional Resources

Per Bylund’s book, The Seen, The Unseen, And The UnrealizedMises.org/E4B_134_Book

Mises U 2021 presentation, “The Seen, The Unseen And The Unrealized”: Mises.org/E4B_134_Lecture

“The Broken Window Fallacy” by Robert P. Murphy: Mises.org/E4B_134_Article1

“Compounding Shortfalls in Innovation” by Hunter Hastings: Mises.org/E4B_134_Article2

“Mark Spitznagel: At What Price Safety?” — another take on The Unrealized from an investing perspective: Mises.org/E4B_134_Article3

133. Ulrich Möller: The Video Game Industry Points to the Future of Organization Design

Austrian economics has a lot to say about how to organize firms for maximum value generation. Austrian principles point to the delegation of entrepreneurial judgement to the front-line employees who interact directly with those who actually create value: users.

The military organization models of the twentieth century, involving command-and-control in hierarchical structures, are slow to change, and the management literature evidences an unwillingness to abandon the hierarchy. But there is a fast-growing industry that’s the locus of prodigious value generation where the hierarchy has already been abandoned and flat networks of distributed judgement are taking its place. Ulrich Möller is one of several Austrian economists who are studying the firms in the video game industry and demonstrating how their findings can bring positive organizational change to the rest of the business world.

Download The Episode Resource “The Future of Organization Design” (PDF) – Download

Key Takeaways and Actionable Insights

Organizational innovation has a long and successful track record in the video game industry.

A lot of value has been generated in the video game industry in a short period of time. Video games surpass movies and music in revenue. Without a long history of corporate hierarchies and bureaucracy to shed, firms in the industry embraced the organizational innovations of open source software, including anonymous collaboration among highly distributed self-organized teams, peer review systems, and agile processes.

In addition, the industry created its own laboratory for testing revolutionary organizational theories in virtual economies set in virtual worlds.

Valve is a company in the video game industry that took organizational innovation to its logical conclusion: the end of hierarchy.

Valve — a very successful, industry-leading company — pursued a value-generation logic to frame its approach to organization:

  • Creativity is our core resource — the most important skill in game development.
  • Creative employees are key to our capabilities.
  • Creative people are most productive when left to express their own creativity in their own way.
  • Hierarchy blocks creativity, as do planning and routine.
  • How do we design a company to attract and retain the sort of people who are able to take the boldest creative steps?

The answer? Let employees decide what to work on. Let them exercise entrepreneurial judgement. Let them, in effect, do both strategy and implementation. Give them all the decision rights. Let them identify customer preferences — since they know the customer best; let them decide how best to address those preferences; let them decide how to achieve competitive differentiation; let them allocate resources, choose costs, and manage profitability; let them control quality and decide when software is ready to ship.

Employees work in self-organizing teams, and are free to migrate from team to team, and free to change their roles. There are no fixed job descriptions.

In place of command-and-control, a few simple rules or constraints have emerged for the exercise of governance.

F.A. Hayek wrote about norms that emerge in social groups to shape behavior. These are not legislation, i.e., written formal restrictions. They are what he called rules, constraints that everyone accepts in the shared commitment to collaboration and the pursuit of the most favorable outcomes.

The most significant of these rules at Valve is the “Rule Of Three”, a simple agreement that at least three individuals must agree on the initiation of a new project, or on other major decision points. The emergent standard was that this is just enough to prevent maverick behavior, and a low enough number to facilitate agile action that’s not bureaucratically constrained.

Another rule or constraint goes by the name of Social Proof. This is a broader and looser peer review standard. If the original team wishes to recruit more members, they must persuade others of the value generating potential of the project (in competition with other projects in the firm); successfully doing so constitutes “social proof” of value.

Rules-based peer review process replaces management structure.

Conventional approaches to organizational design focus on structure. This might be command-and-control hierarchy, or structured networks, or strategic business units or functional departments. Valve abandoned structural thinking and replaced it with flow analysis. How can we attract the most creative people to our venture? How can we encourage the most productive flows of bold creative thinking? How can teams best assemble and collaborate for the most productive output? How can we integrate with the user community in the best way? How can the most value-generative projects attract the best resources?

These are all questions about flow. Austrian economists are distinctive in viewing capital as a flow rather than a structure, and this view holds true for human capital just as much as physical capital. Emergent rules for self-organizing human systems can perform all the managerial functions that were historically left to control structures.

Actionable Insight Summary

  • Design your organization for flow not structure.
  • Design to attract the most entrepreneurial people in the most entrepreneurial roles (self-selection).
  • Let them self-organize.
  • Let rules and value codes emerge.
  • Teams as business units.
  • Eliminate the boundaries between the firm and customers and other partners.

Additional Resources

“The Future of Organizational Design” — our E4B Knowledge Graphic (PDF): Download PDF

“Levels without Bosses? Entrepreneurship and Valve’s Organizational Design” by Ulrich Möller and Matthew McCaffrey: View Paper

“Entrepreneurship and Firm Strategy: Integrating Resources, Capabilities, and Judgment through an Austrian Framework” by Ulrich Möller and Matthew McCaffrey: View Paper

132. Saifedean Ammous on Knowledge Entrepreneurship

Saifedean Ammous is a knowledge entrepreneur. He creates new knowledge that’s valued by his customers, because it helps them to think better and better informs their actions. He carefully appraises the knowledge provided by great thinkers of the past, and re-presents in a newly compelling fashion. He develops effective memes and ideas. He innovates in channels and distribution. He demonstrates how knowledge entrepreneurship can work in the 21st Century’s globally-connected and digitally-connected economy. He joins the Economics For Business podcast to share some of his learnings and experiences

Download The Episode Resource “Knowledge Entrepreneurship” (PDF) – Download

Key Takeaways and Actionable Insights.

Collect available knowledge then develop a new perspective.

Saifedean took degrees in economics and engineering, at bachelor’s, master’s and Ph.D. levels. His accumulated knowledge was valid for the university professor track. Then his spontaneous knowledge accumulation efforts took him to Austrian economics and a new perspective: that the economics he had learned to date didn’t make any sense, and that regime higher education was best understood as just another malinvestment. Most importantly, regime higher education was customer-less: it did not provide value for customers, because that was not its purpose. From that point on, Saifedean followed the path of customer sovereignty and of exploring what customers identified as valuable.

Teaching is value generation.

Saifedean’s first customers were students in his university classes. He was able to generate value for his students by teaching them the economics they wanted to learn, along with giving them the optionality of seeing the knowledge through his distinctive perspective. When students engage and say thank you, it’s a signal of value.

A transformative event precipitated a shift into independent knowledge entrepreneurship.

In Saifedean’s case, the transformative event was Bitcoin, the study of which opened up a deeper understanding of hard money and low time preference. He “upgraded” to the Bitcoin Standard by exiting academic teaching and switching to entrepreneurial knowledge sharing. The first step was writing and publishing a book called the Bitcoin Standard (conventionally published by Wiley) and then leaving academia for the joys of hard money.

He switched his platform for teaching from the university to the internet, and now is able to reach many more customers — citizens of the world who want to learn more about Austrian economics and to understand Bitcoin and hard money. How did he know they were out there? They self-selected via Saifedean’s twitter feed.

The “factory” for knowledge production and distribution is a website.

A fairly basic website (i.e., not requiring any technological expertise or gear that is not available to everyone) is the platform for the new level of knowledge entrepreneurship. At saifedean.com, customers have been able to:

  • Receive and read book chapters as they are written;
  • Access video and audio online courses in Austrian economics;
  • Buy books;
  • Subscribe to podcasts (which he runs like a seminar);
  • Find a “complete central bank replacement pack”.

Saifedean told us he is just getting started, and there are more knowledge innovations in the pipeline.

The Entrepreneurial Method.

This unfolding timeline is an excellent example of the entrepreneurial method at work.

  • Start with what you know.
  • Find motivation in what you are passionate about.
  • Utilize available resources.
  • Let collaborators and customers self-select in.
  • Use networking and influencers rather than conventional advertising and marketing to drive expansion.
  • Let spontaneous order unfold.

In addition, Saifedean associates the Austrian concept of lowering time preference with entrepreneurial success. Low time preference — willingness to save/sacrifice in the short terms for benefit in the longer term — is an essential part of the entrepreneurial method. One of the entrepreneur’s “bird-in-the-hand” resources is their individual utilization and allocation of their personal time and effort.

A new age of entrepreneurship is emerging and surging.

In The Bitcoin Standard, Saifedean looks back to the nineteenth and early twentieth century as a period of technological innovation by entrepreneurs under the gold standard, bringing us indoor plumbing, electricity, the internal combustion engine, airplanes and elevators, among many more. Entrepreneurs were able to accumulate capital in the form of wealth stored in hard money to finance their innovations.

He believes that the emerging Bitcoin Standard era will precipitate a new entrepreneurial flourishing, further accelerated by free software, network access, blockchain and hard money savings.

Additional Resources

“Knowledge Entrepreneurship” — our E4B Process Map (PDF): Download PDF

Saifedean.com

The Bitcoin Standard (in over 20 language translations) 

The Principles Of Economics 

The Fiat Standard 

“Austrian School vs. Neoclassical School” (PDF): Download PDF

Twitter for Saifedean.com: @Saifedean

Twitter for Saifedean Ammous: @SaifedeanAmmou6

131. Saras Sarasvathy On The Entrepreneurial Method

The scientific method has served us well to date. The entrepreneurial method, informed by the principles of Austrian economics, can take society much further. Dr. Saras Sarasvathy joins the Economics For Business podcast to distill the essence of the value-generating and wealth-producing method.

Download our knowledge graphic for the Entrepreneurial Method.

There is an entrepreneurial method — a systematic way to achieve the unpredictable.

The scientific method aims to discover universal laws that make the future predictable. If we have enough scientific understanding we can, for example, build bridges that we can predict will not collapse. We can construct an entire scientific infrastructure in our society.

The entrepreneurial method aims higher, at human flourishing. It aims at discovering how we can all work together to achieve our human purpose, including new purposes that we all agree are worth achieving. We can construct an entrepreneurial structure to build a better human life and a better society.

Entrepreneurs choose a control strategy that’s appropriate to uncertainty.

Some people fear entrepreneurship because its outcomes are uncertain. But this is worrying about the wrong things: outcomes are outside your control. Entrepreneurs are more discerning about what can be controlled: means.

Dr. Sarasvathy lists several control strategies:

The Bird-In-The-Hand Principle: work with what you’ve got and can control, which she sums up in the questions: Who Am I? What Do I Know? Whom Do I Know? What resources do I own or control now? This is the first principle of control.

Affordable Loss Principle: Entrepreneurs can control their downside, making it affordable and limiting uncertainty, by asking “What one value generation project would I undertake even if I risk losing everything I invest In it?”

Crazy Quilt Principle: How do entrepreneurs control the uncertain process of identifying the right partners, including hiring the right people? They don’t try to predict the results of hiring and pitching. Instead, don’t hire, don’t ask. Just talk to people — those who fit best will self-select into your project.

Lemonade Principle: Don’t fear the unexpected. Welcome surprises. All unexpected happenings are opportunities and can become resources. Leverage contingency, and make lemonade out of lemons.

The Pilot Is The Plane Principle: Everyone on the plane is a pilot, co-engaged in shaping history. The plane will reach a destination, the exact nature of which is unclear, and everyone on the plane contributes to getting there.

There are some guidelines that entrepreneurs have established over time.

Non-Predictive Action Is The Driver

Everything in the entrepreneurial method is driven by action. Or, more completely, action, interaction and reaction. Things you care about, things you can actually do, things we can do together, and how we handle surprises. Interacting with the environment with a sense of purpose, and thereby changing it in some way.

Even-If Thinking

Our aspirations and the outcomes we experience may not be symmetrical. Not succeeding is not the same as failing. Even if a new idea does not work out, what is the worst that can happen? We shouldn’t make decisions just because we can’t predict the future. Embrace the unpredictable but make sure the downside is under your control.

Intersubjectivity

The great productivity of entrepreneurship comes from intersubjectivity — two or more people can interact and come up with something neither one had actually thought about or dealt with or considered or contemplated before. Intersubjectivity is more than interpersonal and beyond negotiation. It’s a question: “I am doing this. What do you think?”

The Entrepreneurial Method leads to social good and a new role for business in society.

A side effect of everyone in society learning the scientific method was the emergence of the middle class, defined by income. Science brought productivity which enabled a large swath of society to earn enough money to escape poverty. Everyone was able to harness science.

Let’s teach everyone the entrepreneurial method. Let everyone start companies, grow companies, invest in companies, all with no thought of prediction. A middle class of business will emerge, defined not by income but by venturing. This middle class will produce more jobs and more enduring, more stable companies, embedded in strong communities, with greater well-being and less churn. The fruits of creativity take root in endurance and durability — not in Schumpeterian creative destruction — and contribute to stability and the taking on of bigger challenges. Decade after decade, the middle class of business will generate value and produce wealth, employing lots of people and educating successive generations to take the entrepreneurial method with them into a better future.

Additional Resources

“The Entrepreneurial Method” (PDF): Mises.org/E4B_131_PDF 

Among the innovations planned for the Economics For Business platform is a series of encapsulations of important research papers. Here is a sample:

“The World-Making Scope Of The Entrepreneurial Method — An Encapsulation” By Gabriele Marasti (Original paper: “The Middle Class Of Business”): Mises.org/E4B_131_PDF2

Some links:

Effectual Entrepreneurship (PDF): Mises.org/E4B_131_Book

“What Makes Entrepreneurs Entrepreneurial?” (PDF) Mises.org/E4B_131_Paper

“Entrepreneurship As Method: Open Questions for an Entrepreneurial Future” (PDF): Mises.org/E4B_131_Article

130. Eamonn Butler’s Primer on Entrepreneurship and Its Social Good

Entrepreneurship is the great force for social good — in fact, the greatest force for good in the history of civilization. It’s the system of continuously improving the lives of others so we can improve our own lives. Through entrepreneurship, we can achieve greater and greater levels of community, collaboration and societal advance. Eamonn Butler, Co-Founder and Director of the Adam Smith Institute, has written what he calls a Primer for understanding and appreciating the wonderful institution of entrepreneurship. He highlights some of the key points on the Economics For Business podcast.

Innovation and improvement.

To continuously improve people’s lives, we need new things. We need people to invent things that haven’t been thought of before. And we need innovators, people who improve those things and find new purposes for them or new ways of producing and distributing them. And we need entrepreneurship, the marshalling of resources to produce these better things faster and more efficiently and get them into more people’s hands.

Entrepreneurs are those unique people who organize the marshalling of resources, and who risk their own capital and their investors’ capital in this pursuit of a better future for all.

Cascading Development.

When entrepreneurs undertake this act of discovery, and especially when they succeed, they trigger cascading development. One innovation and entrepreneurial initiative leads to another. They are all aimed at making people’s lives better — easier, healthier, more convenient, more affordable, more efficient. And, eventually, knowledge spreads, and people’s lives are transformed, so that Indian peasant farmers can check produce prices on their smartphone and get the best offer from the market. Development cascades from individual to individual, firm to firm, market to market and country to country. It’s never-ending improvement.

Long-termism and ethical behavior.

The outcome is long term uplift and benefit for all. Entrepreneurs are long term thinkers. They are focused on the lifetime of their company and their products, and perhaps to passing them on to the next generation (Politicians are the opposite — they can only think in election cycles).

Entrepreneurs don’t want to just make a short term profit and then leave the market. They want long term revenues and long term profits. That means creating reliable, returning customers who love the entrepreneur’s product. That requires delighting those customers, serving them impeccably, never letting them down or breaking a promise. There are few other, if any, institutions that are constituted in this way.

This Long-termism is ethical. Entrepreneurship is ethically driven.

Internationalism

A small firm can trade on a global stage, and if they can, they will. It’s easier than ever before in the digital era. New and better ideas quickly spread around the world. But it has always been the case, since the earliest of times. Politicians establish borders to divide people, and then violate them in invasions and wars. Entrepreneurs see no borders between people. Political borders can’t divide markets.

Social good.

Entrepreneurship achieves more for social good than any other institution. Entrepreneurial innovation in goods and services enhances life and opens up new possibilities. Customers flock to entrepreneurs because of the tremendous service they deliver. The constant improvement delivered by entrepreneurs constitutes civilizational progress. The competitive pressure to improve quality and utilize resources more efficiently generates more and more value for the world.

It’s an error to see business as extractive — extracting and using up resources. Business is generative, putting life-changing inventions at the disposal of the global population. What’s seen is the dirt and smoke left over from mining or manufacturing. What’s not seen, and is often unappreciated, is the huge amount of good that comes into the world via entrepreneurship.

Entrepreneurship is the application of property rights at every scale.

It’s another error to think of entrepreneurship as small business or young and immature business. Ray Kroc of McDonald’s was a great example of an entrepreneur who worked out how to operate a hamburger restaurant at global scale with continuous improvement. Entrepreneurship requires property rights; people need to have control over their property in order to transform it into marketable innovations and services. But that does not limit the scale of entrepreneurship. Property rights are a principle that supports global scaling.

The entrepreneurial method.

Probably the best way to define entrepreneurship is as a process or a method. It’s akin to — and as important to civilization as — the scientific method, but different. They both involve trial-and-success, coming up with ideas and testing them. The scientist tests against reality, looking for a law, a repeatable outcome that will never vary. The entrepreneur tests against consumer approval, looking for acceptance that might be repeatable until conditions change, such as new competition arriving. Entrepreneurs can’t predict the future as scientists can, and they can’t exert control in the form of unchanging laboratory conditions. Yet they still are challenged to build a business that lasts.

Can we nurture this institution?

Yes. In school, via literacy and entrepreneurially-oriented education, teaching young people about profit, and uncertainty and the requirement for supportive environmental elements such as property rights and flexible labor laws, and the value of trying multiple different initiatives before discovering a winning proposition. We might not be able to teach successful entrepreneurship, but we can create the conditions for learning.

A selection of books by Eamonn Butler

Entrepreneurship: A PrimerView on Amazon

Austrian Economics: A PrimerView on Amazon

Classical Liberalism — A PrimerView on Amazon

Ludwig von Mises — A PrimerView on Amazon

Friedrich Hayek: The Ideas and Influence of the Libertarian EconomistView on Amazon

The Condensed Wealth of NationsView on AdamSmith.org