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143: Per Bylund: How Austrian Entrepreneurs Succeed

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Successful entrepreneurs are Austrians, they just don’t know it yet. This is a famous assertion from Dr. Per Bylund, and we dissect its meaning in the latest Economics For Business podcast.

Key Takeaways and Actionable Insights

Success starts from a deep understanding of subjective value (see Mises.org/E4B_143_PPT).

What’s the value of a successfully completed Google search? What’s the value of the feeling of satisfaction that results from having cooked an excellent meal enjoyed by your family? What’s the value of the PowerPoint template you utilized to make a well-received boardroom presentation that may boost your corporate career?

Austrian entrepreneurs know not to ask the question in that form. First, value is not measurable; it’s a feeling or experience in the mental domain. It may have great intensity, it may have long duration, but it can’t be measured in dollars or with any other number.

Yet the generation of customer value is the entrepreneur’s goal. How can the goal be achieved when the understanding of value is so challenging and its measurement is impossible? This is the brilliant advantage of the Austrian entrepreneur.

The customer learns what a value experience feels like.

A customer can’t describe the value they are seeking or what goods and services will deliver it. The value process is not one of demand and supply. As Ludwig von Mises understood, customers feel a sense of unease — “things could be better” — and begin to explore possible avenues to relieving their unease. Of course, this exploration takes place within a complex system of needs: individual and personal goals, family comfort and security, job success and economic status. Customers sort through possibilities with incomplete information and in the context of uncertainty. The gap between feeling unease and finding the best good or service to address it is large. They might try multiple potential solutions with varied cost/benefit profiles before they arrive at one that seems best, or better than alternatives. In other words, they learn: value is a learning process.

The entrepreneur helps their customers to learn.

The customer’s value thinking is constrained: in the present, they can’t imagine a solution that they haven’t yet tried or that has not been available to them. The entrepreneur innovates around the constraint, by providing and communicating new means that the customer could utilize in the future.

Entrepreneurs can’t directly shape the customer’s choice. It’s a fallacy to believe that advertising or promotions or presentation of features and benefits can accomplish that. The customer’s context is too complex for such a simple mechanism to work. The entrepreneur creates a tomorrow in which the customer will feel better off, and provides the means to facilitate the experience, a means for the customer to learn what a better tomorrow feels like. They meet customers in a market that doesn’t yet exist.

Austrian entrepreneurs have a unique value generation tool.

The complexity of the customer’s value system — all the components of value interacting and changing in time — can be simplified with the use of a key that Austrians call the hierarchy of values. Every individual has a set of goals or values they pursue in life. Some of these are more important than others — we call them the highest values. For example, people who engage in sport and athletic activities may have several values for doing so: for fitness and health, for social reasons, for self-improvement, and so on. One value may be the most important in their own individual hierarchy — for many people it is the sense of achievement. By improving their speed or time of running or bicycling, by winning a tournament or a league or playing on a winning team, the individual can experience a sense of personal achievement that is rare, valuable, and fulfilling.

It is a commercially strong behavior to appeal to this highest value among customers. Nike does this for example with its “Just do it” appeal. To simply undertake the athletic activity is achievement: you’ve done something. And, of course, Nike wearables help the process of experiencing the highest value.

All entrepreneurs can appeal to customers’ highest values, and the Austrian entrepreneur has deeper insight into this action.

Austrian humility is a success factor.

So much of business success is projected as heroic implementation of superior strategy. Austrian entrepreneurs do not suffer from such hubris. They take a humble approach to business, understanding that the customer is often engaged in searching and learning without a clear outcome in mind, and that, therefore, the entrepreneurial business cannot be certain of any future results. Entrepreneurs humbly follow, letting the searching customer take the lead, and accepting the customer’s terms of service.

This is how entrepreneurs learn how to facilitate value — often from the harms they suffer from getting their value proposition out of alignment with the customer’s preferences. If the value proposition is wrong, or the price is too high, or the convenience not to the customer’s liking, then no transaction is made, and the entrepreneur must — humbly — adjust. The most successful entrepreneurs are able to maintain their attitude of humility at all points in the value cycle.

Austrian entrepreneurs take the role of fitting in to the customer’s value system. It’s a flow, not a plan.

Conventional business planning is anathema to Austrian entrepreneurs. The linear process of producing and selling to generate transactions with the goal of meeting a targeted volume or revenue in a fixed period of time is not appropriate for the humble, learning, exploring business of entrepreneurship.

Entrepreneurial success stems not from good planning but from adaptively fitting in to the evolving value system we call the market — a system that is different for every individual customer, and into which many overlapping and competing entrepreneurial value propositions are also trying to fit.

Planning is not a good tool for this purpose. Creativity, imagination, and adaptiveness are called for. The dynamic of learning from the customer and adjusting to changing signals calls for responsiveness not plans. The entrepreneurial journey with the customer is a flow, sometimes through white water. In this context, the Silicon Valley concept of pivoting is appropriate, although not quite as the West Coast gurus see it. Their pivot is a one-time major shift in direction, perhaps to a new business model when the original one proves inadequate. The Austrian pivot is continuous and flowing, adjusting the boat to the subtle and frequent signals sent by customers.

Explore, Realize, Then Keep Exploring.

We’ve talked in the past about an “explore and expand” model for entrepreneurial value generation. The entrepreneur co-explores various paths to value with the customer, and when one emerges as productive of significant value, the entrepreneur can expand the allocation of resources to that path and drive revenue growth, through selling more to the same customers, or recruiting new customers or both.

Professor Bylund added some nuance to this: the entrepreneur never stops exploring. When an exploration results in substantial value realized, there remains a lot of further exploration to understand the value experience of the customer in greater depth and detail, and continuous monitoring of changes and adjustments in the customer’s system and value network. The entrepreneur is continuously tested.

The entrepreneurial ethic is an ethic of service; profit is a shared outcome of consumer and producer choices.

Entrepreneurial firms are in business to serve customers. This principle may be appropriately expressed via mission statements and expressions of purpose; it remains the core of all entrepreneurship. Profit is an outcome of two collaborative choices: the exchange price the consumer is willing to pay for the value they anticipate receiving, and the choice of costs the entrepreneur considers proportionate to the value he or she expects to generate for the customer. There are many entrepreneurs in the market for resources bidding on costs at the same time, and so the individual entrepreneur’s choices are conditioned by those made by others. Profits emerge from this system.

Cash flow is a better indicator of the capacity of the entrepreneur’s business model to convert resources into exchange value for customers (although not the artificial cash flows of engineered P&L’s — rather, the true cash flow of the customer’s eagerness to exchange for the newly produced offerings from the entrepreneur).

There’s a distinctly Austrian approach to entrepreneurial business.

In a famous paper called “Inversions of Service-Dominant Logic,” professors Stephen Vargo and Robert Lusch called for inverting “old enterprise economics or neoclassical economics” in favor of a new perspective. One of their proposals was an inversion of “entrepreneurship and the view that value creation is an unfolding, emergent process” to a position “superordinate to management”. Business schools, they stated, teach a management discipline rooted in the industrial revolution. There’s an emphasis on centralized control and planning. Vargo and Lusch sought to replace this approach with value creation as “an emergent process within an ever-changing context, including ever-changing resources; it is, by necessity, an entrepreneurial process”.

The distinctive Austrian entrepreneurship approach captures and expresses the emergent process, and provides entrepreneurs (and managers) with the tools and methods to help them shape thriving businesses as they discover new solutions to relieve customer unease.

Additional Resources

“Explore and Realize (and Keep Exploring): How Austrian Entrepreneurs Generate Value on the Path to Business Success” (PowerPoint): Download Slides

“Inversions of Service-Dominant Logic” by Stephen L. Vargo and Robert F. Lusch (PDF): Download_PDF

142. Murray Sabrin: How Entrepreneurs Beat the Fed-Generated Boom-Bust Cycle

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Entrepreneurial businesses acknowledge and understand the inevitability of boom-bust cycles in the Fed-manipulated economy. But they refuse to be defeated or even deterred. They find the profitable pathway through both the boom and the bust. Murray Sabrin has compiled a guide in his latest book, Navigating The Boom/Bust Cycle, An Entrepreneur’s Survival Guide

Key Takeaways and Actionable Insights

So long as we have central banking, entrepreneurs will experience boom-bust cycles. They adapt to this reality.

Entrepreneurship is, in its essence, focused on the generation of new value, producing betterment, growth, and improvement. While customer preferences and the nature of competitive offerings may change, and conditions such as pricing and contracts may vary, entrepreneurs work towards continuous enhancement of markets.

Their efforts are thwarted by governments, who can’t leave markets alone to function smoothly, and especially to central banks who aim overtly at manipulating markets through artificial credit creation. Austrian entrepreneurs are acutely conscious of this problem, since they understand Austrian business cycle theory. But they must nevertheless adapt to the boom-bust problems the central bankers bring about.

The first tool of adaptiveness is the recognition that there is the private economy and the public economy are different and separate.

Some economists talk of a mixed economy, but, as Mises pointed out, such middle-of-the-road thinking is socialist. The public economy is where the government trades, including trading in money, debt, and credit manipulation, and in the regulations that governments use as their management tool.

Entrepreneurs seek to establish a private economy where the government does not trade. The most important part of the market where the government is absent is the creation of customer value, especially in the form of innovation. Governments destroy value and deny innovation. When entrepreneurs can operate in the light of value generation, leaving governments in the dark, there’s room for profitable operations.

Entrepreneurs can further protect their safe haven with good anticipatory timing of the boom-bust cycle. There are signals that help.

Murray Sabrin’s book provides a long list of websites and links where relevant data is published that can help entrepreneurs watch the trend that might signal the timing of the boom-bust cycle.

The first signal is the so-called inversion yield curve, when short term interest rates start to elevate, and even get to higher levels than longer term rates. This is unnatural, implying that there is greater uncertainty in the short term than the long term. It can only happen when markets are fearful of the short-term consequences of government policies and interventions, even though they are confident of entrepreneurially-induced growth and improvement in the long run.

As a rule of thumb, according to Murray, the beginning of a recession can be anticipated roughly one year from the inversion of the yield curve. Of course, other factors can intervene, such as the government’s idiotic shutting down of businesses over the fake COVID-19 pandemic. Nevertheless, entrepreneurs should pay attention to the yield curve signal. They can monitor it at Mises.org/E4B_142_Fred.

Another signal for entrepreneurs to monitor in the overall economy is the unemployment rate. This rate declines during the boom, and actually starts declining as the recession is ending or a few months afterwards. There are variations in the pattern by industry, which Murray describes in detail in the book. He provides a list of 12 St. Louis Fed employment data series to monitor, covering sectors such as manufacturing, durable consumer goods, finance and insurance, and construction.

He offers many more signals — such as homebuilder stock prices — to monitor boom-bust timing. There is plenty of data for the savvy entrepreneur.

Strengthening value effectiveness and value security beats managing for efficiency.

The economics profession has been guilty of misguiding entrepreneurs with its focus on efficiency, i.e., managing for fewer inputs per unit of output, and eliminating “waste”. It can cause fragility, impede value generation, and slow down innovation and responsiveness to change.

One example is the management of supply chains. Managing them for maximum efficiency can also make them insecure, if, for example, there are no ready supplier replacements when one slips up. We are experiencing the impacts of supply chain fragility right now in the US. It’s for reasons extraneous to regular business operations, but the effects serve to highlight the need to keep supply chains secure under attack from government interventions. Entrepreneurial businesses that develop the strongest possible upstream supplier relationships and cultivate a richly connected value network may be able to perform better when boom-bust hits the supply chain.

Entrepreneurs fight the Fed on inflation.

The Federal Reserve insists on maintaining its 2 percent inflation target, which is economically destructive in many ways (see “Why the Fed’s 2 Percent Inflation Standard Is So Bad” by Ryan McMaken: Mises.org/E4B_142_Article). Entrepreneurs pursue deflation, always aiming to deliver better quality at lower prices. Why? Because it’s what customers want, and entrepreneurs are in business to serve customer needs. Entrepreneurs bring abundance. The Federal Reserve, taking the position that higher prices are good for the economy, promotes scarcity.

Entrepreneurs make their workforce a strong resource, rather than a source of cost-cutting in economic downturns.

The purveyors of so-called efficient management traditionally see the workforce as a cost, and urges entrepreneurs to cut costs by firing people in economic downturns. Entrepreneurs focus on effectiveness instead, and see their workforce as a resource and a source of ideas and initiatives for improvement and adaptation in all environments. A motivated frontline workforce is closest to customers and can bring back information, ideas, and new initiatives to make the business more responsive to customer needs and more capable of delivering desired customer experiences. This is the case whatever the state of the Fed-manipulated economic cycle.

Growth entrepreneurs think expansively at all times.

Entrepreneurs create new value for customers, and they don’t call a halt to their pursuit of value just because of the macro-economic data that’s being reported in the mainstream media.

They understand that customer preferences, or the order of those preferences, may well change in a boom or a bust time, and they maintain their vigilance in monitoring and responding to these changes. These are the signals to which they respond, not the economic headlines. Entrepreneurs look for the opportunity to introduce new goods and services at all times, and not just at the “right” moments in the economic cycle. They’re always looking for new ways to deliver more value. Perhaps, in a downturn, there’s a greater call for service and repairs on existing equipment than for buying new equipment. Entrepreneurs can adjust and recombine their assets to provide more repair work and thus make up for lost sales revenue.

Entrepreneurs are great cash flow managers, and tend to keep cash on hand or available for those times when this level of money can be utilized for expansion. One potential application in this book is the acquisition of assets from other businesses in a downturn, when business operators who are less savvy run out of cash and offer assets for sale at low cost. Murray calls this “picking up the pieces”.

There may also be the opportunity to expand geographically into new regions. There’s always growth somewhere.

In sum, the answer to the boom-bust cycle is value agility.

In the 4Vs business model on the Economics For Business platform, the fourth phase of the value cycle is value agility. We use this term to indicate the speed of responsiveness that successful entrepreneurs exhibit in response to customer feedback. Murray Sabrin uses the same term in his book, and defines it as “a process where entrepreneurs… adapt and adjust to continue to meet consumers’ perceptions of value your business delivers” (p. 111).

He asks, “do entrepreneurs stick it out when the economy is in a slump or wave the white flag and close the doors?” Mastering value agility means never being faced with that agonizing decision.

Additional Resources

Purchase Navigating The Boom/Bust Cycle, An Entrepreneur’s Survival Guide at the BEP Web store Use promo code BOOM20 for 20% off.

See a preview of Murray Sabrin’s book at Download PDF

“The 4Vs Business Model” (Video): Watch the Video

The Economics For Business platform: Econ4Business.com

“Why the Fed’s 2 Percent Inflation Standard Is So Bad” by Ryan McMaken: Read it on Mises Wire

10-Year Treasury Constant Maturity Minus 2-Year Treasury Constant Maturity (Chart): View/Download

139. Fabrice Testa on Super Entrepreneurship

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Entrepreneurship is a method, and it’s also a mindset. Fabrice Testa has written a book that brilliantly integrates the two: he calls the integration “Super Entrepreneurship,” and his book title is therefore Super Entrepreneurship Decoded. He has the appropriate credentials as a proven super-entrepreneur who has created and nurtured numerous great companies (and successfully sold a couple of them).

Fabrice knows the true meaning of the phrase, “The day before something is a breakthrough, it’s a crazy idea”.

Entrepreneurs are animated by their purpose. Super entrepreneurs embrace a massive transformative purpose.

The motivation for entrepreneurs is to help others — to solve problems for others, as we sometimes phrase it. Super entrepreneurs, in Fabrice Testa’s language, are those who choose to dedicate their businesses to solving the biggest problems. By setting big goals, they attract many like-minded partners, collaborators, and employees. By targeting transformation, they aim to change the world in a significant way.

In making this choice, super entrepreneurs are delving deeply into their own personal story to understand their own drivers and their own passionate commitment. There’s a major self-discovery component.

Having set their MTP, super entrepreneurs develop a systematic approach to the pursuit of their goal.

Fabrice Testa recommends that super entrepreneurs combine what he calls CRAZY thinking with a relentless sense of purpose. CRAZY is an acronym for elements of entrepreneurship that Testa calls the Five Secrets. We agreed not to give them away, but they add up to a five-step method entrepreneurs can follow, and a checklist that they can use to assess the market power of their own concepts and business models.

The context for the 5-step method is the exponential rate of growth of available and applicable technologies for entrepreneurship, and the convergence of those technologies that results in a compounding of productivity. When, for example, sensor-based data collection can be combined with A.I. and robotics, whole new fields of automation open up, potentially helping billions of people.

A relentless sense of purpose is a major element in the super entrepreneurial mix.

Super entrepreneurs are highly motivated. They display high levels of ambition and drive, and they generate strong momentum. They seek change, and aim for breakthroughs. They love to set the bar high.

There is a spirit to super entrepreneurship, an intangible spark of super energy and boldness that sets the best entrepreneurs apart and powers them to unusual levels of achievement.

There’s a plan, but it’s not fixed.

Fabrice Testa identifies a master plan for the activities of high-achieving entrepreneurs, but it’s not the restrictive plan of the business school strategist. One term he used was Roadmap: there’s a goal to get from A to B, but it’s OK to visit C, D and E along the way, and to learn and double back and embrace recursive procedures to reach the targeted end-results. The key to success is keeping the goal in mind with flexibility on the route to get there.

Let the customer be the guide.

Testa subscribes to the protocol of involving the customer early and often in the process of designing and building a product or service or a company. Entrepreneurs are always working with assumptions, and, at minimum, must validate them with customers.

He introduced us to the “Starbucks method” of customer validation. Park yourself in Starbucks, order a beverage of your choice, then look around for likely-looking people who might be open to a brief conversation about your idea or proposal or even prototype. It’s easy to engage people, they’re willing to help, and you can offer to buy them a coffee to lubricate the relationship. A few hours investment of your time and a few dollars invested in coffee will result in a deep, broad and rich set of reactions and responses and a meaningful feedback loop.

Success is more about fitting in than it is about timing.

When writers and historians are trying to analyze the unusual success of a particular business, they often attribute a lot of the cause of the outcome to timing — the product or service or technology came along at just the right time. This is a misinterpretation. The happy correspondence of a new offering with a receptive context is not timing but fitting in.

According to Fabrice, to fit in in a big way is to fit in with the zeitgeist of the era. The dictionary definition of zeitgeist is the general intellectual, moral, and cultural climate of an era. What Fabrice is pointing towards is a heightened ability to sense the movement of the time, and the direction of its flow, and to step into that river at the right point.

Entrepreneurship is everywhere, and can be achieved at multiple scales.

Super entrepreneurship is not limited by the scale of resources, but it can certainly be augmented wherever resources are abundant. That’s why we seek to encourage entrepreneurship for individuals, teams, and firms of all size, including the largest corporations. Big companies under-perform at entrepreneurship for two reasons. First, they spawn bureaucracy, which is a form of organization that is counter-entrepreneurial. Second, they have existing businesses to defend and fear the consequences of self-disruption.

The solution is to change the purpose of big corporations so that they can become super-entrepreneurial. The purpose would be to create new businesses with no bureaucracy and separated from the defense mechanisms of existing business units or divisions.

Additional Resources

Super-Entrepreneurship Decoded: 5 Secret Keys to Create Breakthrough Businesses that Change the World by Fabrice Testa: Buy It On Amazon

“Super Entrepreneurship” (PDF): Download PDF

137. Murray Sabrin’s 7-Point Entrepreneurial Solution to the Medical Care Crisis

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Entrepreneurs solve problems for customers. There are few problems bigger than the horribly perverse medical care system under which patients suffer in the US. The system has evolved over time, with the stimulus of bad decisions, bad actors, and bad incentives. Entrepreneurship can solve the system problem with specific actions at the component level, each of which are practical and do-able, and can interact to create a new outcome at the system level.

Murray Sabrin has studied both the system and the component solutions, and he joins the Economics For Business podcast to enumerate his proposed actions.

Key Takeaways and Actionable Insights

Healthcare is a consumer good, and a consumer responsibility. Medical care is a provider proposition.

Consumer sovereignty is a cornerstone concept in Austrian economic theory. Consumers determine what is produced as a result of their buying or not buying. Does this principle apply in healthcare?

To answer requires us to differentiate between healthcare and medical care. Healthcare is an individual choice and a personal responsibility: we do everything we can to maintain a healthy lifestyle of eating and drinking, exercise and sound physical and mental health practices. In the internet age, there is plenty of knowledge available to help us in our decision-making. Medical care is what we turn to when sound healthcare proves to be insufficient to keep us off medication and out of hospital.

How do consumers realize value from medical care providers? To do so is very challenging due to (among other barriers) price fixing, price opacity, price inflation, monopolistic and duopolistic market structures, the misuse of insurance, bureaucratic management, perverse incentives, government intervention, and barriers to entrepreneurial entry.

Are there potential solutions in the face of this systemic dysfunction? Yes: solutions that come from the best countervailing source — entrepreneurship.

Entrepreneurial Solution #1: Direct Primary Care — Restoring the doctor-patient relationship.

Murray Sabrin recalled the $5 doctor visit of the past, characterized by a personal relationship with no bureaucracy or insurance forms. Entrepreneurs are now re-establishing that relationship via Direct Primary Care. DPC is retainer fee-based access to unlimited doctor visits, including office-based testing and additional services, with no insurance forms. DPC doctors have fewer patients in their practice and can consequently provide more time and attention. Stronger relationships are built, which is the essence of entrepreneurial value-generation.

Entrepreneurial Solution #2: Transparent versus distorted pricing.

Pricing is one of the most important bulwarks of free markets. In medical care, pricing is opaque to the point of invisibility, distorted, and inflated. It is unresponsive to the normal choice-based supply-demand mechanisms, and not indicative of value.

Some entrepreneurs are acting to change these pricing conditions via what is termed fee-for-service: transparent pricing for specific services. An often-cited example is Surgery Center of Oklahoma, where specific prices for specific surgical services are openly posted on their website. Other members of the Free Market Medical Association provide similar price transparency.

One of the results is revelatory price comparison: Murray told the story of a DPC practice patient who identified a 75% price reduction at Surgery Center of Oklahoma compared to a local South Florida hospital.

Entrepreneurial Solution # 3: One stop shopping at local non-profit clinics.

Murray described the launch and success of several non-profit local and regional clinics, including one for which he was the founding trustee. These are philanthropically established and funded local clinics with volunteer staff, providing a range of services. Equipment and pharmaceuticals may be fully or partially donated by the manufacturing companies. The combination of direct primary care doctors and specialists can make these clinics one-stop shopping solutions for patients seeking quality medical care. With a little philanthropic assistance, they could eliminate the need for Medicaid.

Entrepreneurial Solution #4: Direct Contracting.

Insurance companies purposefully inflate medical care prices to fund their business model. Murray told the story of a large (4-500 employees) company that contracted directly with a service that brought a vehicle with an MRI machine to the employers location, and charged $400 per MRI to the employees. The same vehicle was utilized by a nearby hospital that charged $6,000 for the same MRI. Direct contracting saved $5400 per unit cost, or 90%.

Direct contracting has the potential to significantly reduce costs in the Medical Care system, while opening access and increasing convenience.

Entrepreneurial Solution #5: The 3-tier household medical care budget system.

Murray has a well-constructed and eminently practical household medical care budget system. There’s a version for families with at least on member in employment and an alternative for those on Medicare today. There are three elements:

  • Direct Primary Care for a monthly fee, covering unlimited office visits and routine tests.
  • A Health Savings Account to cover costs of specialists, prescription drugs, medical equipment, major tests and brief hospitalizations.
  • Catastrophic insurance coverage for major operations and hospitalizations and long term care.

Greater detail is provided in Murray’s book, Universal Medical Care From Conception To End Of Life.

Download our corresponding PDF, which features an adapted table from Murray’s book: Download the PDF

In a system of personal responsibility, we would all manage our household medical care budgets with these kinds of tools.

Entrepreneurial Solution #6: Voluntarism And Mutualism.

Voluntarism has a long tradition in America. Mutual aid societies were prevalent before the New Deal. Ethnic, religious and trade groups joined together for mutual support. The Federal Government co-opted these functions and now people look to Washington DC to solve their problems.

But young people today are more interested in voluntarism and non-political social activism. 30 years ago in the Wall Street Journal, Peter Drucker argued for the non-profit sector to replace the welfare state. Creative and innovative people find ways to surmount institutionally-erected barriers in all phases of life, and medical care is certainly one of those. There’s a liberating and energizing sense of acting as the custodian of one’s own life and helping others who need it. It’s the entrepreneurial ethic.

Entrepreneurial Solution #7: Distributed Knowledge.

There is so much available knowledge today about healthy life habits and about the symptoms and characteristics of various medical conditions, and about options for treatment. We as individuals are free to explore, and responsible for gathering our own store of knowledge. The outcome of the research may not be definitive, and we may find ourselves making a choice between alternatives. But doctors and hospital administrators make choices too, and they are not infallible. It may be possible for an individual to gather more knowledge about their own specific condition from the internet than any single doctor can know, simply as a consequence of concentrated effort. Each of us can take responsibility for our own life.

Summing up: Murray Sabrin’s prescription:

  • Eliminate employer-based insurance.
  • Make a single exception for the case in which the employer pays the direct primary care fee for the patient.
  • The resultant employer savings are deposited in employees’ health savings accounts.
  • Employees determine their best medical care options.
  • Phase out Medicare and Medicaid.
  • Let young people create super health savings accounts so that they don’t need Medicare in the future.
  • Hospitals price at realistic market pricing, not insurance-inflated prices.
  • All prices are transparent.
  • Get the government out of medical care — it’s none of their business.
  • Free up resources from the medical-pharmaceutical-insurance complex and redirect them to savings, investment and philanthropy.

Additional Resources

Read Murray’s book, Universal Medical Care from Conception to End of Life: The Case for A Single-Payer System: Buy It On Amazon – It’s self-published and all proceeds go to charity and non-profits.

“Individual Single-Payer Alternative For Employer-Based Insurance” (PDF): Download PDF

Surgery Center Of Oklahoma: surgerycenterok.com

Forward: goforward.com

Direct Primary Care Coalition: dpcare.org

Volunteers in America: vimamerica.org

131. Saras Sarasvathy On The Entrepreneurial Method

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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

128. Matt McCaffrey: Austrian Business Strategy (Part 2): Principles

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Austrian economics helps entrepreneurs to develop and implement more effective business strategies, and to open up streams of continuous innovation. As Joe Matarese, CEO of Medicus Healthcare Solutions, said about Austrian economics in relation to business: It just works.

In episode #127, Matt McCaffrey outlined the Austrian strategy process of Explore and Expand, and its logic development. This week, he helps us dig deeper to identify the principles of Austrian economics that underpin our distinctive approach to business strategy.

Key Takeaways & Actionable Insights

Realism: real people, real markets, real entrepreneurs in real firms.

Mainstream economics has never been able to help business, because of its focus on math, models, and prediction. Real people and their decisions and interactions and motivations and emotions can not be captured in equations and mathematical functions.

Austrian economics has carved out a particular area of focus in the behavior of real people in its study of entrepreneurs and entrepreneurship. Austrians examine real entrepreneurial decision-making day-to-day; they highlight real people experiencing value and entrepreneurs’ role in generating that value. From this base, Austrian economics investigates how individual actions and choices and interactions lead to the formation of markets.

Dynamism: The market is a process.

Austrian realism sees the market as a dynamic process, continuously unfolding in interaction and innovation and change. Mainstream economics, with its preference for the greater mathematical tractability that comes with abstraction, has no capability of dealing with this real-world dynamism. The embrace and study of dynamic processes gives Austrian economics much of its applicability in business. The business world is never static. It can’t be understood in abstractions. It’s real and messy and changeable and unpredictable.

Uncertainty and complexity: embrace emergence.

Uncertainty is a keyword for Austrian economists. It’s a term that describes the real world in which entrepreneurial businesses operate. They can never know for sure what comes next; they can’t anticipate all of the interactions between competitors, changing customer preferences, technological advances and social and economic trends. There is no sure-footed way to plan for the future. Austrians recognize uncertainty and help businesses think about how to cope with it, how to narrow it, how to accumulate knowledge to lighten it, how to weigh decisions in the environment of uncertainty.

The new scientific term for uncertainty is complexity: in any system, the interactions are so many and their results are so unpredictable that modeling and forecasting are impossible, and outcomes are defined as emergent (i.e., outputs happen in a way that is not predicted by merely combining inputs). Austrian economics helps businesses deal with emergence.

Subjectivism: People are people, both as consumers and as providers.

One of the realistic principles of Austrian economics is to deal with people as people: we are all subjective in our valuations and judgments and emotions. We are not homo economicus: perfectly rational (in the mainstream economists’ definition of rational) in objectively weighing benefits and their opportunity costs. If all we are doing in producing goods and services for consumption is trashing the planet, then we can’t be rational, in their eyes.

In order to understand business and understand entrepreneurship, it is absolutely necessary to begin with subjectivism. Consumers’ subjective values ultimately determine what is produced; if consumers don’t value something, producers won’t make it. On the producer side, entrepreneurs’ subjective valuations of the resources they have available to them to assemble in a production process affect the value of their business.

It is entrepreneurs’ subjective evaluation that results in the identification of new uses for a resource, and the introduction of new innovations. Subjective values lie underneath every new business relationship with customers, from streaming movies to google searches to online travel booking. Subjectivism is everywhere in the economy and in business.

Time: How to plan in the present to satisfy customers in the future.

Austrians are unique in their understanding of the economic role of time in business. Entrepreneurs deal in future time. They imagine better futures in which customers enjoy greater satisfaction, and then they imagine how to bring it about and act on their imagination. Production — getting from imagination to consumption — takes time. Entrepreneurs are dealing with buying decisions in the present (such as hiring and buying inputs) for selling decisions in the future. They can’t know future prices or future customer preferences, so it’s a bet.

The consumption decisions customers make today reflect entrepreneurial decisions that were made weeks, months, years or decades in the past. Austrian economics helps entrepreneurs manage the contingencies of time.

Time makes the customer the boss.

Austrians utilize the concept of consumer sovereignty as an analytical tool. It means that consumers are the ultimate decision-makers in all economic systems, because what they buy or don’t buy determines what is produced. Their power is a result of the time it takes to produce. The value of resources that entrepreneurs assemble today depends on what consumers think and feel in the future.

Forecasting is tricky and best avoided, but patterns can be recognized.

A consequence of time and consumer sovereignty is the fragility and inaccuracy of forecasts. How is it possible to forecast consumer tastes in the future? There are some exceptional entrepreneurs who get it right. What’s their secret? Austrians’ understanding of dynamics and complexity can help point to the processes most likely to be associated with success, without attempting to forecast it.

One alternative to forecasting is pattern recognition. Jeff Bezos said that consumers are unlikely in the future to ask for higher prices, lower quality or slower delivery. That’s pattern recognition. It’s generalized and broad based and lacking in precision and specificity. But there is a consistency to some patterns that entrepreneurs can recognize and act upon, adding their own idiosyncratic insights and guesses to shape the actual value propositions they will make to consumers.

Out of all this emerges the Austrian entrepreneurial method.

We’ve all been educated in the scientific method. It’s utopian: experiments conducted with strict controls will yield the truth.

The entrepreneurial method is different, but with equal status, and greater applicability in open — i.e., human — systems where control is not an option.

It’s a bit messy and hard to characterize with precision, but it’s nonetheless real. It starts with imagination — imagining a future in which customer dissatisfactions are addressed and resolved. Their world is made better. This is proactive creativity on the entrepreneur’s part, triggered by existing highly dispersed knowledge, including tacit knowledge, held by the entrepreneur and others.

The entrepreneur designs a business model that might be able to resolve the identified customer dissatisfactions in the future and assembles resources that he or she believes, in the right combination, could accomplish the task. There’s no correct way; the entrepreneur draws on the realism of Austrian economics to best understand the challenges and how to address them.

The entrepreneur then advances with her or his own form of experiment. It’s not controlled in a closed environment. It’s a hard commitment of resources in a definite format to make a value proposition to customers. The experiment consists in ascertaining the customer’s response: like or dislike, buy or not buy, use and enjoy or use and reject? The experiment does not end there. It is continuous — receive the result, decide on how or whether to change the proposition, and try again.

Gut feeling or intuition or personal subjective heuristics all have roles to play in entrepreneurial decision making. Austrian economics captures these phenomena in the concept of judgment under conditions of uncertainty.

Organizing for the exercise of judgment.

Since judgment is the ultimate generative energy in producing value for customers, and since it’s personal and individual, how do firms grow? If judgement rests with a single entrepreneur, such as a founder, growth can’t scale, and will quickly reach its limits. Austrians have the organizational design solution: delegated judgment. Austrian leaders are able to design and implement non-hierarchical organizations in which every employee is empowered to exercise entrepreneurial judgment.

They do so by substituting value codes for authority. Value codes are the unwritten codes (although they might be found in the employee handbook) and conventions of “how we do things around here”, how we generate value for customers, the mission and purpose and internal methods of the firm.

Additional Resources

“Austrian Entrepreneurial Principles” (PDF): Download PDF

Austrian Perspectives on Entrepreneurship, Strategy, and Organization by Nicolai J. Foss, Peter G. Klein, and Matthew McCaffrey: But It On Amazon