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82. David K. Hurst: Business School Fallacies and Acting Your Way to Better Thinking

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At E4E, we believe that Austrian economics can guide business execs and entrepreneurs to better thinking about how to manage businesses that thrive. Business educator David K. Hurst blames neo-classical, Chicago School economics for the bad thinking that pervades business today.

Key Takeaways & Actionable Insights

Here’s how he phrased it in our @e4epod Episode #82:

I emerged from Chicago believing, or at least accepting, the basic assumptions which lay behind business education at that time, which was heavily influenced by what I came to understand was neoclassical economics. That is, it believed in greed as the primary motivation. It was all about individual self-interest and utility maximization, I think, was the word. It was heavily rationalistic in that it believes that we ought to behave like little mini scientists with everything based on evidence and data and then lastly, the focus was very much on equilibrium, that markets were self-equilibrating and that the natural condition in organizations was stable. Stability was the norm and change was something that you had to manage and that if things went awry, it was mainly because you weren’t following standard procedures. Management was essentially about allocating resources… It was nothing about innovation… and making sure things ran in a steady, linear, rational fashion.

When I got into the real world, I found that these principles were, well, wrong.

The right principles are those that Jesus Huerta de Soto includes in his Austrian theory of dynamic efficiency. David Hurst sums them up this way:

Of course the linear, stable, rational model is the way academics think businesses ought to run, if only they would listen to them, and the fact you can’t run them that way because the world is nonlinear. It’s dynamic.

Organizational Dynamism

To illustrate dynamism at work, David described a frantic time of disarray in a newly acquired company when a major project management problem arose, and sclerosis caused by hierarchy and central planning, multiple process manuals, traditional career paths and rigid job descriptions impeded a response.

Spontaneously, individuals on the front line formed small teams (they’d be called Agile today) to hunt down innovative and collaborative solutions to this and other challenges that arose. They were non-hierarchical, with no process manual, no reporting structure and no fixed operating plan.

Similar small, collaborative, horizontal teams multiplied to solve problems of business recapitalization, debt and cash flow management, innovation, pricing and many more. The business, after divesting unproductive divisions and products, became profitable, grew and thrived. There was improvement and it was, as David put it, non-linear.

New Organizational Theory: Boxes and Bubbles

David reflected on this experience and developed a theory to explain it. He observed that, in the dynamic crisis time, traditional hierarchy and procedure had faded into the background, and the spontaneous order of agile teams had taken the foreground. Both continued to exist.

I called them boxes and bubbles, boxes being the formal box structure which productive, large-scale organizations end up using, and bubbles were these soft, informal teams that we formed at a moment’s notice. They formed easy coalitions with each other and when they did the job, they burst. They disappeared and went back into the mixture out of which new bubbles could come.

The Theory Of Complex Systems

Applying complexity theory, David developed what he calls an organic approach to business management, modeled after natural ecosystems, such as a forest. Forests start off as weeds — small and fast — and end up as big and slow trees. Yet forests are dynamic: they renew themselves through fire, burning the obsolete, decadent growth to create the space into which new growth can come. At that stage, the forest starts to build a new community of fresh growth. It continues in an infinite loop, existing for indefinite periods of time.

David Hurst's Business Ecocycle Model

Austrian theory, of course, embraces the idea of complex systems. We know that any economic endeavor, any market, and any firm operates within a complex system of millions and billions of provider-customer exchanges, governed by the idiosyncratic subjective value scales of consumers and the entrepreneurs who strive to empathize with them and serve them. We know that these complex systems can’t be managed in any traditional, hierarchical, procedures-manual sense, and they can’t be predicted. We understand business cycles and adaptive behavior.

How Did Business Schools Come to Teach The Wrong Model?

How did the business schools get to teach their totally inadequate model?

They adopted this model in the late 1950s. Their goal was to come up with systems to produce economies of scale, how to produce more of the same. Like the steel business – very inefficient, highly polluting but facing tremendous demand for steel for rebuilding the world in the 1950s and there was no reason to change.

The theory that emerged was how to perpetuate this success. But nothing lasts unless it is incessantly renewed. Firms must innovate to maintain dynamic competitiveness. The organizational structure required to run something with economies of scale, a very mechanical, machine-like, productive hierarchy, is very poor at innovation because those are exactly the dynamics that you’ve got rid of in the pursuit of efficiency, in the pursuit of low prices.

The theory that businesspeople used to support them in this productive model was of course neoclassical economics. It appealed to them to explain why it was all about rationality and it was all about stability, keeping things the same.

The Uses of Knowledge

David tells us that Hayek became his guide.

It seemed to me that The Fatal Conceit applied to the corporate world, the mini socialist structures. I mean, when I graduated from business school, the Fortune 500 were the sort of last refuges of Stalinist bureaucracy. They were central planners, so Hayek’s critique applied to them. That’s the way they work. People at the top were dictators, that’s the word for it.

Businesses fall into what David refers to as a “power trap”, bureaucratic and rigid.

The boss would come and say, “Well, I want to do this deal so find me some assumptions that make it work.” Instead of getting evidence-driven strategy, you got strategy-driven evidence. It was totally inverted. The process was actually a process of power, and the structures are structures of power. It ends up with elites”.

The Organic Approach to Management

David described working with an entrepreneur in South Africa.

He was Austrian, but not an economist. He was a tool and die maker in Austria and he had come out to South Africa and he had set up a tool and die business to make fuel tanks for the automotive industry in South Africa. This guy was a wizard on the technology of stamping. It was just know-how, practical knowledge.

He wasn’t dealing in abstractions at all. It was all about practice and things emerged on the shop floor, “Oops. Okay, so that’s interesting.” He was continually experimenting, tinkering, and he was hugely successful because he had this extremely efficient, effective process. And he was not intellectual in the remotest. If you tried to ask him, “What principles are you operating by?” he wouldn’t be able to tell you and that was okay. It’s the power of practice and that the actions come first, and the words come later.

There is a space in my diagram, on the left-hand side, it’s all about acting your way into better ways of thinking and on the right-hand side, it’s about thinking your ways into better way of acting. The two are melded together. It’s a dance, if you will, between the two sides.

The way you come out of business school is thinking about the job of management like an engineer. You had this machine which required to be maintained, lubricated, fixed, parts replaced sometimes, but it was essentially a machine, a smooth running machine, and you think like an engineer.

I see the manager as a gardener. A gardener has engineering aspects, but they also have wilder aspects to them. The gardener creates the conditions in which, in the case of enterprises, people can grow. They grow people. That’s what it’s all about. I see this gardener as the one being able to conduct this dance. You need to dig up soil and replace it. You may need to tear down existing plants and put them on a bonfire and burn them, break out the chainsaw and saw. At other times, you need to supply structure, a lattice on which they can be trained and pruned and all that kind of stuff. The gardener seemed, to me, to capture this duality to the manager’s task.

Measuring Unmeasurables

Peter Drucker said that there a lot of unmeasurable things which are absolutely valid and are absolutely critical. Like Mises, he understood that measurement is always about the past. It’s always about what happened. He says,

The things that really matter are the unmeasurables that refer to the future.” The example he gives is the ability of the enterprise to attract young, high motivated people. He said, “If you can’t attract these people, eventually it’ll show up in the numbers, but it’s not something you’ll see in the numbers right now because it hasn’t happened yet. It’s straws in the wind.

How do you measure unmeasurables? Through Hayekian knowledge theory: getting everybody in the organization talking to each other about what’s happening, about what they’re seeing every day, because that’s where it’s happening, on the ground. This is all a part of acting our way into better ways of thinking, getting ideas, seeing the opportunities emerge out of what we’re doing, out of the action.

Free Downloads & Extras From The Episode

Austrian School vs. Neoclassical School: Download PDF

David Hurst’s ecosystem model (JPG): View Image

David’s book, The New Ecology Of Leadership: View on Amazon

David’s original HBR article on “Boxes and Bubbles”: Download The Paper

“The Austrian Business Model” (video): https://e4epod.com/model

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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Why All CEO’s Can Benefit From A Familiarity With The Austrian Business Model.

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For our Economics For Business initiative, we have adopted the motto: Think Better, Think Austrian.

Everyone in business can benefit from studying and understanding the fundamentals of economics. By this, we do not mean the economics of GDP and employment levels and the money supply, and not the economics of the Federal Reserve and the Treasury Department. We mean the economics of human action – how and why individuals behave the way they do in markets, in buying and selling, and in everyday life. Businesses are successful when they fit into and contribute to the everyday lives of customers, and economics provides understanding of how to do so.

The brand of economics that helps you to think better is called Austrian economics, because it originated at the University of Vienna. You may have heard of the Chicago School of Economics, made famous by Milton Friedman and others. Many so called “schools of thought” are named for their geographical origins.

Austrian economics is a tool for business because its thinkers have developed a particularly rigorous body of economic theory, and its practitioners have translated the theory into a complete toolset for application in business. Mainstream economics is not particularly useful for business, for many reasons. Insofar as it deals in fictitious aggregates such as GDP or “the automobile industry”, it can’t help firms who are making decisions about real resources to serve their customers and enable their employees. Insofar as it mathematicizes economic processes for analytical ease, it can’t help firms who deal in trust, loyalty, service, and human values, rather than equations. Mainstream economics can’t be used to strengthen your business model.

Austrian economics, on the other hand, can provide exactly that level of practical utility. In fact, Austrian economists have developed an Austrian Business Model to demonstrate the applicability of this brand of economics in business. The ABM is a framework from which any company can develop or refine its own unique business model suitable for our fast-accelerating digital age. If you are a CEO contemplating the sustainability of your firm’s business model, the ABM will provide you with some new ways of thinking.

A new way to think about value.

Value is one of those terms that is used loosely in business, which leads to flawed understanding. Business schools and business writers refer to “value creation”. Often, they mean market value, the dollar difference between the stock market value of the number of shares outstanding at one point in time and some earlier point in time. Sometimes they equate revenue or profit generated with value. In these cases, value is objective and can be calculated and allocated a dollar denomination.

Austrian economics defines value as subjective. It is a feeling in the customer’s mind, a complex outcome of cognitive, emotional and biological processes, both conscious and unconscious. Value emerges for customers as they live their life and try to assemble an ecosystem of services to help them make it better. This value is context-dependent, idiosyncratic and changeable. This value is created entirely in the customer’s own domain. Firms can’t create value.

This is a very different premise than we are traditionally taught at business school or even in the everyday language of business discussion. For example, a popular book on business models makes this statement: there is something about some firms that makes them more profitable than their rivals. In the framework of the ABM, we would say: there is something about some customers’ desired experiences that makes facilitating them more profitable than other customers’ desired experiences.

This value perspective can stimulate some new behaviors in firms.

  • Obsessive and total focus on the customer — identifying them, understanding them, letting them lead the process of value creation.
  • Selection of a precisely defined group or cohort of customers as your audience, with continuous development of ever deeper and more detailed understanding of their subjective preferences.
  • Development of a value proposition — a hypothesis about how you will help the customer to an experience that they will value. It’s simply that — a hypothesis that you will test as much as possible for verification, but which is never proven until the cycle of market exchange, experience and evaluation is completed.

This business model starts with developing deep understanding.

A new business relationship with value.

Value is what customers seek. Their life is a search for value and an assessment of whether value was realized in their everyday experiences. If your business can not create value, what can it do? The answer is : facilitate value – make it more possible for customers to enjoy their experience.

A design approach can be used – experience design. Experience design consists of imagining every element of the customer’s experience, based on their value learning cycle. What is it about your value proposition that will make them anticipate a valuable experience? What will make them feel that this experience is preferable to any alternative they have, direct or indirect? What will cause them to exchange value — give their dollars for your offering — and what is the price they will be willing to pay? What ensures that they will assess the experience positively after the event?

The key to design is (1) to imagine every possible element of the subjective experience, empathically embracing the customer’s individual context; (2) to understand that every little detail counts and that small differences in delivery can make a huge difference to the perceived experience. In fact, since customer service is so highly developed in modern economies, it is the small details that generate differentiation and uniqueness for your brand.

Since the business is never in control of value, it is important to make measurement part of experience design. Once in the marketplace, your value proposition goes “wild”. You no longer control it. The customer is creating the value and you are not. The best you can do is to be available if they want to invite you into their process, and to be observant of their behavior. Measurement is observation. Don’t presuppose, but do collect data, preferably qualitative data at the individual customer level. This is your raw input for continuous improvement.

Phase 2 is a customer-led design and assembly phase for the entrepreneur.

An experimental approach to value exchange.

Austrian economics sheds bright light on exchange – the transaction between seller and buyer. Exchange is governed by uncertainty – a business can’t know or predict with accuracy what the customer is going to do in the future, or how they will view the terms of exchange. Will the customer perceive sufficient value to even enter into exchange? It’s the ultimate market test. The customer is weighing the benefits they subjectively perceive against the costs, which include money but also any other difficulties or barriers they perceive to making the exchange. Is participating in your offering totally convenient (which is the general standard today) or is there anything in the experience that makes it less convenient and less compelling?

The best way to solve this challenge is to experiment with as many offer bundles as you can in order to observe market results. Does your service sell better online or direct-to-customer? Do customers prefer to subscribe or to buy by the unit? If they try, do they convert? Test as many bundles as you can.

Once you have established the right bundle and willingness to pay, calculate your cash flow and choose your costs in order to generate the margins and profits you require. This is the opposite of the margin math taught in business school, where firms calculate their costs and then add a margin. Austrians discover the price the customer is willing to pay, and then choose the costs compatible with that willingness to pay. The customer determines the price of the exchange, not the business.

Phase 3 is an experimenting and testing phase for the entrepreneur.

Value Agility

You’ve achieved some marketplace results. You’ve established that the customer perceives value in your offering and they’re willing to pay a price that generates positive cash flow and profit.

That same marketplace is incessantly changing. Your approach to the 4th stage of the Austrian business model is dynamic. You make sure that you have all the feedback loops required to receive marketplace data about the acceptance of your offering, and any changes in customer preferences and competitive behaviors. You manage 360 degree monitoring of the customer experience and you anticipate and expect that your experience design, however excellent, will erode over time. The customer will demand something even better, and competitors will aim to match or improve on your delivery. It’s important to keep your model of customer value preferences fresh, and to be planning and preparing new and improved value facilitations. You find ways to maintain flexibility in your capital structure to facilitate the required agility.

Agile businesses continually test and evaluate innovations, and introduce them to the marketplace. Value improvement and value innovation are your goals. The process never stops. The journey never comes to an end.

Your business model must yield sufficient cash flow for substantial amounts of new capital investment each year. Your organizational design must facilitate the addition of new capabilities and the discontinuation or de-emphasis of existing capabilities that no longer are perceived as unique or compelling by the changing customer. Agile businesses monitor their dynamic capability — how much is being added, how much is being changed or updated. Are you keeping up with the customer, the ecosystem in which you engage, and your competitors?

Phase 4 is a phase of continuous dynamic change for the entrepreneur.

You can learn more about the Austrian Business Model here.

 

What Is A Business Model? It’s Not What You’ve Been Told.

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What is a business model? It’s a question asked frequently on Google Search, so there must be doubt in businesspeople’s minds.

The reason for the uncertainty is clear. The term business model sounds like a thing – a completed canvas, a written document, a spreadsheet with macros. But it’s not a thing, it’s a lived experience, for both business executives and their customers.

The Austrian Business Model

In a recent edition of the Economics For Entrepreneurs podcast with Dr. Per Bylund of Oklahoma State University, we described a very different kind of business model framework we called the Austrian Business Model, based on principles of Austrian economics. It’s a recipe for business success. We chose the term “recipe” purposefully, to communicate these features:

  • A recipe is a non-linear process: there are inputs and outputs, there are many different sub-processes progressing at different rates designed to integrate at critical points, and subject to adjustment by the operator as new information is revealed (“the oven’s on fire!”; or, “this tastes like it needs more salt”).
  • A recipe is dynamic. All parts of it are in motion all the time – assembling, combining, mixing, cooking.
  • A recipe is adaptive. If the chef does not have all the ingredients at hand, he or she may substitute or leave out some elements. If a guest does not like some ingredient, the chef might work around it. New methods of cooking may lead to a better outcome with the same ingredients. There is learning from experience about what techniques work best.

Like a recipe, a business model is also a non-linear process, dynamic, always in motion, adaptive and improved with experience and learning. And, like a recipe, it unites multiple lived experiences. There is the chef’s lived experience, operating the recipe this time, as well as applying accumulated experience from previous times, and perhaps the inherited experience of family members from past time. And there is the lived experience of the recipient who tastes the output, in the context of a dinner party or a family meal. An experience is always shared.

In fact, the focus on experience is critical in a business model. Its end result is a value experience – value perceived by a customer, sufficient to justify the price they’re willing to pay for anticipated value, sufficient to deliver value in the use experience, and sufficient to support an assessment of value after the fact, looking back on whether the experience met expectations.

The experience-centric business model

An experience-centric business model traverses four phases of value learning for the entrepreneur.

Understanding Value

The foundation of a business model is an understanding of value for a specific set of customers. There are conventional business models that talk of “creating value” – whether that is the economic value of returns on capital that are higher than the cost of that capital, or shareholder value in the form of higher stock prices, or even brand value and product/service value. But all of these routes to “value creation” are misdirections. Firms can’t create value. It is customers who create value through their experiences. Value is something customers experience after they have made the economic calculation to buy a product or service, used it, and then stepped back after usage and assessed the experience compare to their going-in expectation. Value is formed in the customer’s domain, and not by the producer.

That’s why economists refer to value as subjective. It’s a perception that varies with each individual customer, with changes in context, and with changes in time and circumstances. The task of the business model developer is to understand the subjective value preferences of a specific set of customers in a specific context at a specific time.

Value Facilitation

Producers can suggest to customers that they can help them bring about the value experience they seek. The word “help” is important. Operating a business model is not an exercise in “making things happen”, it’s the art of helping them to happen.

In the business literature, there is talk of the design process – designing experiences for customers based on listening to their feedback. That is all very  well-intentioned, but it doesn’t quite capture the art of value facilitation. Customers form value through cognitive, mental and emotional processes, consciously or unconsciously, interpreting interactions and information and constructing an interpreted and experienced reality within which their feelings of value are embedded. Value is formed in people’s life experiences and it’s not the role of the producer to act as designer.

Producers and marketers must ask, how does the customer live their life? What is the life context? What are the challenges the customer faces? These and many more questions prepare the producer to humbly request to fit in and contribute to the customer’s life. If invited in, there is the possibility of value facilitation.

Value Exchange

Your customer is going to undertake a complex subjective balancing of the value they perceive based on your proposition and their own willingness to pay, in the context of all their alternative choices and any historical experiences they have had, either with your proposition or others. You can try to understand their process, but you can’t direct it. For example, you can’t set pricing. The customer determines the price they are willing to pay, and the producer’s job is to discover that price, through testing. Therefore your revenue model must balance the price the customer decides upon, with the costs you choose to include in assembling your offering. Costs are never forced upon businesses – they are always chosen. In the Austrian business model, entrepreneurs buy as many inputs as possible on the market, where costs are known and are rendered efficient through competition, as opposed to keeping costs internal, where they can’t be known exactly and may be unstable or hard to control. Your margins are emergent from this equation of customer-chosen pricing minus entrepreneurially-chosen costs. Don’t try to set margins in advance.

The best metric to monitor is not margin or profit, but cash flow. Keep it positive, monitor it weekly, and adjust to its signals.

Value Agility

Once invited into the customer’s experience, the producer has an opening to act as the value facilitator-on-the-spot for the customer. As the customer lives the experience – operates the recipe – there will be questions, unexpected occurrences, errors to fix, context changes, and many more unanticipated twists and turns.

The entrepreneur’s business model secret at this stage is agility. Business models that talk about strategic pillars and similar unchanging elements risk failure in the light of customer volatility and change.

A key to success lies in good feedback loops. Your business model must prepare your firm to be dynamic in response to customer preference changes and all the new information coming to you from the market every second, minute and hour. If you don’t maintain dynamism, your business model will weaken and your grip on competitive advantage will loosen. Your value proposition must strengthen and improve continuously. Your model of customer preferences must be kept fresh. Your value facilitation must demonstrate continuous improvement at a faster rate than the customer’s value experience erodes.

Empathy, humility, adaptability, and agility. These are the components of the contemporary business model. There’s a framework you can use to shape these components for your own unique application of the model, in The Austrian Business Model video.

78. Per Bylund Introduces the Austrian Business Model

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Every business needs a business model, a recipe for generating profitable and sustainable revenues that result from bringing the customer an experience on which they place a high value.

How do entrepreneurs design successful and profitable business models? They combine theory and experience — theory provides the foundational starting point, and experience refines the model based on action-based learning and real-life feedback.

The best theory — the meta-theory — for business models comes from Austrian economics. This is a proposition we intend to demonstrate rigorously and completely in our Economics For Business platform. Dr. Per Bylund joined us on the Economics For Entrepreneurs podcast to provide an exposition and explanation of the core structure of the Austrian Business Model (ABM).

Key Takeaways and Actionable Insights

The model can be expressed as 4 core components for the entrepreneur:

  • Understanding and defining subjective value.
  • Facilitating value for specific customers.
  • Exchanging value with customers in the market.
  • Value dynamics — agility in continuously refining the value proposition.

1. Understanding Value

The foundation of the Austrian Business Model is a deep understanding of subjective value. This understanding changes everything: its implications ripple through the entire model from the beginning and throughout all phases.

Value is created only in consumption. The customer (in both B2C and B2B models) creates value. Value is in the customer’s domain. It’s an experience that customers evaluate after the fact against their expectations. The entrepreneur isn’t even present when value is created.

This is a very different premise than we are traditionally taught at business school or even in the everyday language of business discussion. For example, a popular book on business modelsi makes this statement: there is something about some firms that makes them more profitable than their rivals. In the framework of the ABM, we would say: there is something about some customers’ desired experiences that makes facilitating them more profitable than other customers’ desired experiences.

It’s hard to get one’s head around just how different this approach is. It requires some new behaviors:

  • Obsessive and total focus on the customer — identifying them, understanding them, letting them lead the process of value creation.
  • Selection of a precisely defined group or cohort of customers as your audience, with continuous development of ever deeper and more detailed understanding of their subjective preferences.
  • Development of a value proposition — a hypothesis about how you will help the customer to an experience that they will value. It’s simply that — a hypothesis that you will test as much as possible for verification, but which is never proven until the cycle of market exchange, experience and evaluation is completed.

Phase 1 is an understanding phase for the entrepreneur.

2. Facilitating Value for Specific Customers

Starting from the hypothetical value proposition, the entrepreneur advances to the phase of designing a value experience for the chosen target audience of customers, based on as deep an understanding of their subjective values as it is has been possible to develop so far. The entrepreneur is continually adding to that understanding — creating new knowledge as much and as frequently as they can.

Design consists of imagining every element of the customer’s experience, based on their value learning cycle. What is it about your value proposition that will make them anticipate a valuable experience? What will make them feel that this experience is preferable to any alternative they have, direct or indirect. What will cause them to exchange value — give their dollars for your offering — and what is the price they will be willing to pay? What ensures that they will assess the experience positively after the event?

The key to design is (1) to imagine every possible element of the subjective experience, empathically embracing the customer’s individual context; (2) to understand that every little detail counts and that small differences in delivery can make a huge difference to the perceived experience. In fact, since customer service is so highly developed in modern economies, it is the small details that generate differentiation and uniqueness for your brand.

Then the entrepreneur turns to value assembly, assembling the resources to deliver the desired features and attributes of the experience to market. What is the right organization for market delivery? Since it is impossible to know exactly the costs and quality you will be able to achieve in your firm, Austrian theory advises entrepreneurs to obtain as much of the required capability on the market at market prices — via outsourcing, partnerships, alliances, and external supply chains — and to limit internal capabilities only to those that cannot be obtained on the market, those that are genuinely unique and advantaged for you.

Use a value alignment approach to check for each element that your value delivery is aligned with the customer value preference — that you know what they want and you can deliver it in the way that they want it.

And include communications design and delivery as part of your experience design. It’s not an add-on or a supplement or a marketing budget item to dial up or dial down depending on cash availability. It’s part of the customer experience that you are designing and delivering.

Finally, make measurement part of the experience design. Once in the marketplace, your value proposition goes “wild”. You no longer control it. The customer is creating the value and you are not. The best you can do is to be available if they want to invite you into their process, and to be observant of their behavior. Measurement is observation. Don’t presuppose, but do collect data, preferably qualitative data at the individual customer level. This is your raw input for continuous improvement.

Phase 2 is a customer-led design and assembly phase for the entrepreneur.

3. Exchanging Value

Does the customer perceive sufficient value to enter into exchange? It’s the ultimate market test. The customer is weighing the benefits they subjectively perceive against the costs, which include money but also any other difficulties or barriers they perceive to making the exchange. Is participating in your offering totally convenient (which is the general standard today) or is there anything in the experience that makes it less convenient and less compelling?

The best way to solve this challenge is to experiment with as many offer bundles as you can in order to observe market results. Does your service sell better online or direct-to-customer? Do customers prefer to subscribe to buy by the unit? If they try, do they convert? Test as many bundles as you can.

Once you have established the right bundle and willingness to pay, calculate your cash flow and choose your costs in order to generate the margins and profits you require. This is the opposite of the margin math taught in business school, where firms calculate their costs and then add a margin. Austrians discover the price the customer is willing to pay, and then chooses the costs compatible with that willingness to pay. The customer determines the price of the exchange, not the entrepreneur.

Cash flow is your most important financial metric. Make sure you monitor it closely and make sure your accounting methods are the right ones to serve your individual ends. Accounting is a tool like any other — use it subjectively to help you meet your goals.

Phase 3 is an experimenting and testing phase for the entrepreneur.

4. Value Agility

You’ve achieved some marketplace results. You’ve established that the customer perceives value in your offering and they’re willing to pay a price that generates positive cash flow and profit.

That same marketplace is incessantly changing. Your approach to the 4th stage of the Austrian business model is dynamic. You make sure that you have all the feedback loops required to receive marketplace data about the acceptance of your offering, and any changes in customer preferences and competitive behaviors. You manage 360 degree monitoring of the customer experience and you anticipate and expect that your experience design, however excellent, will erode over time. The customer will demand something even better, and competitors will aim to match or improve on your delivery. It’s important to keep your model of customer value preferences fresh, and to be planning and preparing new and improved value facilitations. Agile entrepreneurs continually test and evaluate innovations, and introduce them to the marketplace. Value improvement and value innovation are your goals. The process never stops. The journey never comes to an end.

Your business model must yield sufficient cash flow for substantial amounts of new capital investment each year. Your organizational design must facilitate the addition of new capabilities and the discontinuation or de-emphasis of existing capabilities that no longer are perceived as unique or compelling by the changing customer. Agile entrepreneurs monitor their dynamic capability — how much is being added, how much is being changed or updated. Are you keeping up with the customer, the ecosystem in which you engage, and your competitors?

Phase 4 is a phase of continuous dynamic change for the entrepreneur.

Over the next few months, we’ll be building out the tools and knowledge entrepreneurs need for every one of the four phases of the model and the steps within. Keep up with us at E4EPod.com/signup.

Free Downloads & Extras From The Episode

Dr. Bylund’s Mises University Lecture, “Austrian Economics in Business”: Mises.org/E4E_78_Lecture1

Dr. Bylund’s Mises University Lecture, “How Entrepreneurs Built the World”: Mises.org/E4E_78_Lecture2

“Means-Ends Chain Tool” (PDF): Mises.org/E4E_01_PDF

“Tools for the Value Learning Process” (PDF): Mises.org/E4E_62_PDF

“Identifying Dissatisfaction Interview Guide” (PDF): Mises.org/E4E_Interview

“Insights Generation Tool” (PDF): Mises.org/E4E_67_PDF_A

“ACT! Austrian Capital Theory at Work” (PDF): Mises.org/E4E_19_PDF

“The Austrian Business Model” (video): Mises.org/E4E_ABM

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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Per Bylund Introduces The Austrian Business Model.

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Podcast Transcript: Conversation With Economist Dr. Per Bylund; August 11, 2020

Listen to the full episode here.

Hunter:

Per, welcome again to Economics for Entrepreneurs.

Per:

Thanks for having me on again, Hunter.

Hunter:

You’re very generous in the consulting help that you give to entrepreneurs and all kinds of businesses and in your student teaching, so you’re shaping the next generation of business leaders and innovators and you gave two presentations at Mises University 2020. We’ll highlight some of the content today and we’ll link to those lectures on YouTube, which are accessible to everybody. One was called Austrian Economics and Business, and the second one was How Entrepreneurs Built the World. We’ll cover the essence of both of them today, but I’m going to start by laying out a proposition that it sounds to me like you’re putting the final touches to something we can call the Austrian Business Model. Is that correct?

Per:

I think so. That’s a pretty accurate way of putting it, I think. I mean, what I did in my lecture was basically talk about how first mainstream economics is not very helpful for businesses and business owners and those starting new businesses. Even though there is a subject and usually a course called Managerial Economics, what you learn there is simply to maximize curves and to put marginal revenue equal to marginal cost and things like that, and when you don’t really have those numbers and you don’t have equations in your business it’s not very helpful at all.

Per:

And then economics tends to not look inside the black box that is the firm, they just assume that there are firms. So it’s not strange that it’s not very helpful, but Austrian economics is different. We look at human beings and human action, and that is what is going on within a business and their businesses in a sense of organized action towards a specific end and the businesses try to satisfy their customers. And how do you do that? Well, we have plenty of answers to that in Austrian economics.

Per:

So an Austrian Business Model would simply be a way of structuring your business and following guidelines to make sure that you avoid errors and mistakes.

Hunter:

Good. So we could call a business model applied theory, applied theory to generate what you called in one of your lectures unceasing innovation and improvement at the level of the firm on behalf of the customer, obviously. We could call it process logic for continuous and sustainable value generation which then results in revenue generation and profit for the firm.

Hunter:

One of the interesting things in your lecture was you said that experienced entrepreneurs are generally Austrian even if they don’t know it and successful businesses are Austrian by definition. So the Austrian Business Model works, you would say.

Per:

Yeah, exactly. And what I mean by that is simply what I’ve learned from experience that talking to experienced entrepreneurs they have learned how the economy works, how the market economy works, and they have learned how to avoid the common mistakes and how to structure your business so that you have the greatest chance of survival. And the way they’re doing that is pretty much the same thing as we do in Austrian economics, but we do it in terms of theories. So we generalize it and we have general ideas and rules in a sense for how the economy works. Well, by applying those we can help businesses succeed to a much greater extent. And there’s, of course, a golden opportunity here because you have all these experienced entrepreneurs and business leaders who have this gut feel or this intuition that they’ve generated through just accumulating experience, but they don’t really have a terminology or words for it. They don’t have it well formulated, but we do in Austrian economics. We have the theory so we can provide them with this language and such things as putting the customer first, that value is subjective and what that means, the implications for the business, and so forth. So there’s a lot that we can really learn from each other, both practitioners and Austrian theorists.

Hunter:

Good. That’s exactly what we’re trying to do here. The place to start, you’ve mentioned it already, but it strikes me that it represents one of the true differences of applying Austrian economics in businesses, this understanding of value as subjective, and it creates a very different perspective on value because it takes place in the mind of the customer. It’s an experience of the customer, so that the true locus of value generation is in the customer’s domain when they use an experience the entrepreneur is offering.

Hunter:

So let’s start there. What are the business model implications for entrepreneurs of subjective value?

Per:

Well, that’s what we said. I mean, value is really created in consumption, so it’s only in the use of a product or service that you actually get the value from it. That’s why we consistently talk about not entrepreneurship as value creation, but it’s value facilitation. So the only thing you can do as an entrepreneur is to provide a good or an experience to a customer, and then what the customer makes of it is really out of your hands. You can’t really do much about it. What you can do is sort of nudge the customer in one direction or the other and try to help them figure out that there is something valuable to them on their own terms from using your product. But that’s all you can do. So value in that sense is personal and it’s subjective, so you can’t really put it in any type of objective measurement.

Per:

So we talk about profit in dollars, for instance, but the value of having something is it’s not… You can’t express that in dollars. You can’t express that in anything else and mainstream economists, when they teach these things they talk about utiles as a sort of measurement of utility you get from something. I mean, it’s like having a fancy meal with a loved one in a restaurant, for instance. I mean, if you get great service and a great meal and a great atmosphere and everything, the whole package there, what is that worth to you? Well, it’s worth to you… The whole experience is worth some degree… You get a good feeling inside, and you have a memory that you can live off for a very long time and so forth. Of course, you might be able to pay a certain dollar amount for it, but the value to you is your experience. It’s really nothing else.

Per:

So we have to understand this when we run a business, when we start a business, and when we study businesses, too, that what you’re doing is trying to help them get the best experience possible. So the customers should experience something that they value on their own terms, whether or not they can actually put the actual words on it.

Hunter:

Right, and that’s something that tends to be neglected in business school and their models, which are very mathematical. They look at things objectively, they try to engineer the results in terms of numbers, and they miss that subjective value description that you’ve just so eloquently made.

Hunter:

So we start the model there, and then you mentioned that we help the entrepreneur think about understanding the customer and their subjective value, and then they can create a value proposition. So let’s describe what a value proposition is in the Austrian Business Model.

Per:

Well, sure. It’s the complete offering. It’s the complete experience that the customer gets out of what it is you’re offering. And there are many, many ways you can tweak this, of course, but how do you tweak it? Well, the only way of doing this is to know who the customer is to begin with, and it includes all aspects of what it is you’re offering. It’s a time and place, and it’s the price, and it’s the type of language used just introducing it. It’s the actual quality of the thing or the service, and it’s how you follow up on it and how you treat your customer. And all of these things are really part of it. And whether it’s valuable or not, that’s completely in the customer’s own eyes.

Hunter:

Yeah. And this picture of the, I call it the longitudinal multifaceted variable of the experience. It’s really complex. You’ve also mentioned that to think of it through the customer’s eyes, it’s always relative. They’re always thinking, “Well, where else could I get a better experience?”, and it’s always comparative: “What else could I spend the same amount of dollars on?” So the entrepreneur is always going to be thinking about those two elements of the experience, relative and comparative.

Per:

Exactly. And that’s where you try to find your own niche as an entrepreneur and try to provide something unique that is really, really valuable to a certain subset of the market. I mean, in mainstream business, and we talk about market segments and so forth and you’re supposed to find your beachhead market and all of these things, but it’s really important that you really understand the customer and what type of experience they might enjoy and that they might get extra value from. It might be a really, really narrow one or it might be a broad one, and depending on what you want to do as an entrepreneur and how you think that you can get the most value out of it for yourself and provide [inaudible 00:10:35] value, you might choose one that is really specific for just a few customers, but really valuable to them, or you can provide something that is sort of general and not super valuable to anyone where you rather compete on price. But what you are selling is always the complete experience. So if you’re doing something, let’s call it shallow. I mean, this doesn’t sound all that good, but if you have a shallow offering, meaning that basically you just sell stuff and you don’t provide a whole lot of additional experience, no fluff, you don’t provide an experience.

Per:

So any type of retail would be this type of business, like a Walmart or something like that. You don’t go to Walmart because of the experience. You don’t consider paying extra when you go to Walmart because you get special treatment or you get superb customer service or anything like that. You’re just interested in getting the product and getting out of there. That’s basically what you’re doing. So they’re catering to a lot of people who are price sensitive, but they’re not treating you as king, as I said, customer, whereas in other more highly priced retail stores or grocery stores, they might greet you in a different way. They might have music on and all these things, but you’re also paying for it. But it’s a much more narrow market segment, where this segment specifically really value that it is super clean, that they always have a certain number of each product available, that they only have products of a certain quality or a certain brand or whatever it might be. And everything that is part of this experience is part of what you’re selling. So for Walmart it’s keep prices low, but don’t give anything extra like that. But for other goods, pricing might be part of the thing or it might be part of the offering.

Per:

So luxury sports cars, for instance, or yachts or something like that, they might sell those for a price that is really ridiculously high not simply because the cost of production is high because the cost of production might not be high, but because it excludes those who are not rich enough and thereby makes the product much more valuable to those who can afford it. And so the price itself can be part of the experience and part of the good that they’re offering.

Hunter:

Yeah. I think of places like Louis Vuitton stores, which my wife occasionally takes me to, and that’s a totally different experience than Walmart. The prices are extremely high. There’s very little inventory, but the decor of the store is meticulously designed and the members of the staff, of which there are many, are highly, highly trained. They treat you like you’re a member of the elite, and it’s an experience itself. Even if you don’t buy there, it says something about the Louis Vuitton brand. So those are kind of the two ends of the spectrum that you’re talking about.

Per:

Yeah, exactly. That is an interesting example, too, because it’s so obvious that they are catering to one of the two entering. So when you and your wife enter, they might cater to her as the person who gets the experience and makes the decision to buy, but not as much to you even though you might be the one writing the check, right? So you need to know as a business owner what type of customer will I target and what is the actual value to them? Is it usually a couple where one has the income and the other makes the purchases or is it a different constellation? You need to know these things because that’s how you position your offering and how you… You mentioned the decor in the store and things like that, how this works, how it looks, how it feels for the customer. The whole experience is really important.

Hunter:

Right. And it highlights another point you always make, Per, that in designing these value propositions and delivering them, the two firms aren’t competitive. It’s possible that you can buy handbags in Walmart but Walmart and Louis Vuitton, while they’re both retailers and they’re both selling handbags, they’re not competing. They’re designing totally unique value propositions for different people at different times in different states of demand. So we don’t think so much of firms competing with each other as firms designing unique experiences.

Per:

Yeah, exactly. That’s exactly what they’re doing.

Hunter:

Good. So we’ve mentioned another element which is different in the Austrian Business Model and that’s pricing, and this is fundamental and you covered it in your lecture where we’re taught traditionally in the business school to think about cost plus pricing. We’ve mentioned it before in the podcast, but let’s cover it again in the sense that that’s the wrong way to think about it, that the customer decides what the price is that they’re willing to pay for the experience you’re offering and then the entrepreneur chooses the price. Can you go over that again for us because it’s really important?

Per:

Yeah. Yeah. I would love to. And you mentioned the cost plus method of pricing and this is sort of one of my pet peeves, and I really, really hate that concept. It’s actually a good reason to not get an MBA at all because they teach that stuff. It really balances out any type of value you might get from any of the other courses because they teach you this BS, really. So I mean, the way to think about it is that when you start a business or when you pivot a business, you need to figure out who the customer is, which we already talked about, and how valuable the experience might be to this customer. From there, you can guesstimate a price that they will be willing to pay for this. And this probably shouldn’t be as much as possible as we often teach it and as economic models suggest. It should be a price that helps you sell the product.

Per:

We already talked about how the price is part of the offering, right? So the price could be really high if that adds to the product, or the price should at least be much lower than the value for the consumer. So the consumer… Well, of course, as you already mentioned, look at the balance, the trade off, okay? What type of value do I think I get from this company for this money compared to what they can get for my money elsewhere? And that’s perfectly subjective from their own point of view, and the entrepreneur needs to figure out what type of price is the best price for my niche or for my market segment, for my preferred customers. And then from that price, you need to figure out how am I supposed to produce something that gives them this experience, this value, where I can still keep my costs per unit produced lower than the price that I can charge for this. So in a sense, the only thing you can do as an entrepreneur is to choose the cost structure of your business. You don’t do anything else.

Per:

If you figure out who the customer is, because you already have an idea of what you want to produce and what you’re good at, perhaps, or what type of market do you want to be in and all of those things, but when you have figured out who to cater to, who is your customer, then it’s pretty straightforward in a sense that what makes these customers find real value in the experience. Well, that’s where you need to go. And then that gives you an indication of what price they’re willing to pay, and your job is to get them the experience at a cost that is lower in price. And, of course, the difference between those two, that’s your profit.

Hunter:

Yep. And there’s a surprising implication of that, Per, which you covered at Mises University 2020, which is to make those costs, to assemble the cost structure that they want, the best thing for the entrepreneur to do is rely on market prices, which means buying the components, the resources outside of the firm, and then just focusing on inside the firm the things that only that firm can do uniquely. So you got to make it inside, and that has huge implications for organizational design. So take us through that use of market prices for us, please.

Per:

Right. So one way that I think a lot of entrepreneurs… It’s a mistake that they make is that do you want to control everything? You want to make sure that you have things in house, because if something happens then you need to be able to just redirect resources or make sure that you have this guy on the staff so that you can use them more or whatever it is. And we all feel this, and this is sort of a human instinct to whenever something is uncertain we go for control. Well, control is pretty worthless. When you’re dealing with value generation and trying to create an experience of value to others, you will do this under uncertainty. There is no other way. And control is pretty worthless in this case. What you need to do is figure out how can you contribute as much as possible to whoever is on the other end; that is, your customer. So what you need to do is bear that uncertainty and make sure that you are focusing on where you contribute to value.

Per:

So the implication of this is to keep as little as possible in house. And this sounds counterintuitive simply because you want to control as many bits and pieces as possible so that you don’t stand at the end with only half a product or can’t complete your production and you can’t offer the customer everything that you wanted and so forth. But the thing is that the market has this fantastic mechanism for allocating resources toward the greater benefit for consumers, and it’s the price mechanism. And it sounds like very abstract economic theory and it is, but if you apply it what this means is that the more stuff in your business you can put on others and thereby contract them out, you outsource to others who are experts in those areas, the easier it is for you to focus on your core contribution. And today, most startups you wouldn’t hire an accountant. You also wouldn’t hire an IT guy. That’s not the first thing you do because this just seems like a waste of money. But if you really want to be in control of your books, if you really want to be in control of your technology, that’s where you should go. But now it’s become so obvious to all businesses that no, you’ll have an accountant and you just send your receipts that way and they take care of it, right? And the same thing was with IT.

Per:

You can buy consultant hours or you can buy services from there, and you might even get some service with the hardware when you buy it and things like that. That’s the way to think about your business, and that means that you don’t have to… The more you outsource you don’t have to struggle with or deal with potential problems with all those parts because you have already outsourced those problems in a sense to others and you’re just paying the bill.

Hunter:

Yeah. And it seems like today, the world is catching up with that kind of applied Austrian theory because the interconnectivity that you can get through the internet to global supply chains and other kinds of suppliers and buying in resources that others have made, and so on. That’s very contemporary, so Austrian economics was ahead and will keep ahead with this business model of new thinking about organizational design.

Per:

Yeah. And it’s really fantastic when you have a really good theory that is universally applicable and it’s not really sensitive to different times of civilization or the market or the economy or the world, of course, but it always applies. It is held in very general seemingly abstract terms, but it should be always applicable. And then that’s the case with Austrian economics, and that’s why [inaudible 00:24:14], like you said, it’s valuable to apply it over and over again because it provides insights into any of these situations even if the situations are different.

Hunter:

Yep. And technology enables more and more application, right? If that’s the right way to say it. The internet wasn’t around when Carl Menger wrote his principles, but today you can apply them in an internet-powered world.

Per:

Oh, exactly. And I mean, the more information and communication technology we have the closer we all are, meaning that we can outsource more and more, meaning that we can do less and less and focus more and more narrowly on our value contribution.

Hunter:

Which brings us to the next point. It’s overlapping, but it’s about Austrian capital theory which says that your capital structure should reflect the way in which you best serve the customer, and the assets that do that will be the ones that generate your customer revenue, and you should be constantly inspecting them and perhaps changing them up as customer preferences change. So you got to examine your assembly of assets and keep inside the ones that are most contributing to customer service. Is that the right way to think about it?

Per:

Yes, it is. And I mean the way you use resources right now, you bought them for a reason, you put them in place for a reason, and so forth, so the best approach to adopt an Austrian Business Model when you’re already up and running a business is to think about it probably in terms of investing and divesting. So when you’re buying new, if it’s machinery or computers or moving to a new location, whatever it is, all of these investments, you should think as an Austrian would think of the customer first. How does this contribute to the consumer’s value experience and can I do this differently so that I contribute even more to the consumers’ value experience? Because if you can change up your business by investing in different types of capital, which just means any type of resources but basically [inaudible 00:26:33] labor and you can enhance the consumer’s experience by doing this, it’s not impossible to raise the price. You can very easily sell your product, let’s say, and it’s a next-generation enhanced type of product so you can raise the price there, but you should always direct everything using your own customer, that targets customer, as your guiding star. That’s where you should always direct everything you do by that person’s value experience.

Hunter:

Right. And just one last point on that, Per. The other thing that strikes me that Austrian economic theory makes us think about is the dynamics of the economic situation, and there’s no equilibrium. Things are always changing, and the entrepreneur and the firm that they’ve set up need to be set up for those dynamics. Everything is going to change all the time, your competitor, your consumer, your environment, and so setting up for dynamics is one of the pieces of direction that Austrian economics can help with.

Per:

Absolutely. I mean, it’s important to be agile and be flexible and be able to adjust to changing circumstances, and it’s your job as an entrepreneur to figure out what those changes might be. So it might not be wise probably ever to maximize resource usage at any point in time. Sometimes you might need to do that in order to satisfy your customers but maybe temporarily, but it’s often a good idea to have additional resources, have a plan for pivoting your business because you expect something to happen. So as an entrepreneur, you should always think ahead and think of how can I satisfy customers in a better way. That’s your job as an entrepreneur. You’re not supposed to run the business as much as figure out how this business can satisfy the consumer in a better and better way.

Hunter:

Yeah. I recall Jeff Bezos at Amazon saying that now his job is thinking three to five years ahead and leave the everyday execution of the business model to others.

Per:

Exactly. And I mean in Austrian economics, we distinguish very clearly between the roles of the entrepreneur and the roles of the manager. It doesn’t mean that you as an entrepreneur has to do only the entrepreneurial things and you should never manage. It could be the same person, but those are two different roles with two different purposes and two different goals that they’re trying to achieve.

Hunter:

So let me sum up the elements of the business model that we’ve covered, and then perhaps I can ask you to summarize the implications for business people and entrepreneurs.

Hunter:

So we’ve said that the model is distinctive in its understanding of value, in helping entrepreneurs construct a value proposition, to design a production capability that delivers that value proposition. We recognize that values and experience and delivering end to end completely in depth that extended experience. We’ve got a differentiated understanding of pricing. That cost is an entrepreneur’s choice after the customer has chosen the price, and we’ve talked about the implications for organizational design and embracing and managing for change. So we’ve got the elements of a model. Let’s have you talk about the implications for people in business from this new way of looking at things.

Per:

One is to always think about the customer and then really be obsessed with the customer. Another is in entrepreneurial terms to think of how can you best serve the customer, and that should be a decision for the whole business and, of course, all the parts, too, but the whole business. Can this business and all those investments made in this business serve customers in a better way doing something else? Well, then you should probably pivot the whole business even if you are in a profitable situation, even if you have a reputation, and so forth. If you can do something much better elsewhere, if you can do something much better for a different customer segment, whatever it is, maybe you should consider doing that. And that’s sort of the role of the entrepreneur in the whole market system is to direct resources to the better value experience for customers.

Per:

So it’s really your job as an entrepreneur to do this, to figure out how to best serve consumers overall by figuring out which consumer do you with your special skills and expertise can satisfy in the best way possible. And then in the business, of course, when you have already established what the business’s goal is and how the business satisfies consumers, then you have management of this sort of collection of resources and employees. And in that business, the role of management is really to try to strengthen the value proposition, trying to tweak it one way or the other, trying to tweak all the parts, figure out some changes here and there, make some adjustments in order to make sure that what you’re offering is as highly valued as possible. It’s not really about pivoting the business anymore when you’re doing it.

Per:

So the role of the manager is really to take the idea from the entrepreneur and try to make as much as possible out of it. And of course, part of this is efficiency, trying to operate as efficiently as possible. Don’t use any resources that you don’t actually need, don’t have any waste, [inaudible 00:32:52] cut that off, don’t have extra overhead. And those sort of efficiency things that managers do are also important, especially for profitability, but those are important only after you have as an entrepreneur figured out what the actual value is.

Per:

So there are plenty of implications by applying Austrian economics in the business, and it allows you to think about the business in a different way and it also takes all those parts fit together in a very different way. And we talked about before the role of the price mechanism in the economy actually has a role in determining what we as scholars would call the boundaries of the firm, meaning simply how many different things are included in the firm that are under the manager and how many are you buying from others in the marketplace? Excuse me. And very often, this is sort of whatever the manager feels like, but also economics teaches us that well, no, you should probably use the price mechanism as much as possible because that gives you an indication of both where your actual value contribution is because if you can outsource all these other things that is not your value contribution. If you can do those things more effectively and cheaper than others can do in the marketplace, then maybe you should get into that business instead of that business that you think that you are in now. And it allows you to focus on where you contribute real value and get rid of all the other things so you don’t have to try to solve so many problems all the time, but only focus on your actual contribution.

Hunter:

Good. Excellent. Well, thank you, Per. As a team with your help and input, we’re going to try and capture the Austrian Business Model in a graphic. We don’t do mathematical models, but we do graphic models that help people with process and design and decision making and, as you say, resource allocation, organization, management, principles, and so on, and we will provide a first version of that along with the release of this podcast and we’ll attempt to refine it with the input of all of the economics business community.

Hunter:

So thank you for helping us to think this way, and it’s really exciting to see how the Austrian Business Model, the application of Austrian theory in business, is going to help our community of entrepreneurs succeed. So thank you as we started out for your generosity in helping with that. We appreciate it very much. Thank you.