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107. Ivan Jankovic: The Special Understanding of Entrepreneurship by Americans of the Austrian School

Austrian economics has always been on the leading edge of innovative thinking applicable to business. Back in the last century, there was a group of American economists of the Austrian school who greatly advanced theories related to subjectivism; that is, the role of human beliefs and preferences, and of the market as a process. Here are some of the insights they gave us about entrepreneurial business.

Download The Episode ResourceEntrepreneurship Drives Markets, Innovation, and Value Generation – Download

Key Takeaways & Actionable Insights

The function of entrepreneurship is the generation of new subjectively perceived value.

These economists got the name The Psychological School, because they understood that value is a function of human feelings, preferences and beliefs. The secrets to the successful pursuit of new value are not found in data and mathematics, but in human motivation.

The activity of entrepreneurs is the development and implementation of value-generation business models.

The twentieth-century economists we talk about on the podcast this week would probably never use the term business model. But their concept of the market as a process governed by subjectivism would embrace this modern term. A business model is a recipe for identifying value potential — an analytical outcome of understanding customer preferences — assembling a value proposition — a creative act of the entrepreneur — and enabling the customer to experience value, some of which can be captured by the entrepreneur via exchange if the business model is well-constructed.

Who are entrepreneurs?

Historically, some economists have debated whether entrepreneurs play the role of managers of the assets and activities of firms, or the role of owners establishing the asset base and purpose of the firm, or the role of capitalists providing the enabling financial capital. From the subjectivist point of view, it’s not a difficult question. Entrepreneurs are those engaged in the business of pursuing and generating new value. They might play one or more roles (manager, owner, capitalist) at different times in the pursuit.

Those in business firms who do not have an entrepreneurial role are the bureaucrats engaged in governance actions with no customer value, imposed by external influencers, usually government.

How do entrepreneurs generate value?

These economists understood the market as a process of individuals interacting to exchange. Therefore, they were able to establish that entrepreneurial value generation is a process and that it can be systematized (which is the essence of our Economics For Business project). A process has a beginning — in this case the identification of value potential, which requires a deep understanding of subjective value) and an end — the facilitation of value to the point where the customer can easily exchange for it, activate it, and experience it. It’s not necessarily linear, rather it’s recursive and dynamic, a continuous creative flow of knowledge gathering and learning and responding via innovation.

How are entrepreneurs compensated?

These economists realized that it represents a poor reflection of real life to identify the compensation of entrepreneurs solely with profit. On the monetary axis, they can just as well be paid in wages or dividends or other forms of monetary compensation. On the non-monetary axis, these subjectivists fully understood the concept of psychic profit: that entrepreneurs can do what they do for their own individually-perceived motivations, including achievement, fulfillment, the reward of serving others, and the purpose and meaning found via the entrepreneurial journey.

 

Additional Resources

Entrepreneurship Drives Markets, Innovation, and Value Generation (PDF): Download Here

Professor Jankovic’s Book, Mengerian Microeconomics: The Forgotten Anglo-American Contribution to the Austrian SchoolBuy on Amazon

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

Start Your Own Entrepreneurial Journey

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105. Per Bylund: Austrian Economics is the Science of Business Success

For any size and any type of business, the generation of value requires more than strategy, planning, and executional excellence.

It calls for the establishment, communication, and internalization of value-generation principles, solidly founded and consistently applied. This concept of the long-term, dynamic application of unchanging principles is the essence of the Austrian approach to business.

Download The Episode ResourceLong Term Value Generation As A Science Of Business Success – Download

Key Takeaways & Actionable Insights

In a podcast conversation, Professor Per Bylund reviewed and critiqued the popular business book The Science Of Success, and focused on these principles or guidelines.

Vision For Long Term Value

Vision in this context is not the transcendental futurism of a CEO-with-superpowers often envisaged in business school texts. This is Austrian vision: a deep understanding of what constitutes value and how to act to realize value over time, rejecting short-term opportunism.

Value, of course, is subjective, determined by consumers, and so businesses that generate long term value can be seen as creating value for society, a laudable ethical contribution to social well-being.

Virtue and Talents

It’s unusual to encounter the word virtue in a discussion of business. In this context, it applies to the selection and hiring of a team that will collaborate on the long term creative task. This requires dynamically melding people with the right values, skills and capabilities, and the capacity to develop skills and capabilities even further. Hiring becomes one of the most important and most value-generating business functions.

Knowledge Processes

Entrepreneurial value creation is a knowledge-based and knowledge-intensive process. Knowledge is actively pursued, curated, combined, and processed. Knowledge advantages may be available, where firms are able to craft uniquely superior processes, methods and technologies. Crucially, these are never permanent. They can always be competed away, and rendered redundant by changing markets and evolving consumer preferences, although some forms of knowledge advantage, such as brands and culture, can be more long-lasting. Knowledge processes must include not only knowledge management but also the creation of new knowledge.

Decision Rights

Business books often talk about organizational design, but less often about the details of the processes of decision making. Whether the organization is hierarchical or flat and networked, it must still be able to make decisions and have them accepted and supported and implemented. Putting people in the right roles with the right degree of authority and accountability is the business challenge. This is different from the mythical business school idea of “leadership”; it’s a more a matter of productive collaboration among multiple individuals and teams, all of whom have some authority. The concept of decision rights breaks the ties and the logjams and enables corporate dynamism.

Incentives

The idea that behavior is responsive to incentives is core to the science of economics, of course. The same is true in business, and it’s important to use economic reasoning to get incentives right and avoid adverse incentives. The proposition given in the Science Of Success is that people are rewarded according to the value they create. Thus, we come full circle, back to the vision of value that constitutes the first of these 5 principles. If a business is clear on its definition and understanding of value, then it can be successful in incentivizing its people to generate that value.

Additional Resources

Long Term Value Generation As A Science Of Business Success (PDF): Download Here

QJAE Special Double Edition on Entrepreneurship (PDF): Download Here

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.

Enjoying The Podcast? Review, Subscribe & Listen On Your Favorite Platform:

Apple PodcastsGoogle PlayStitcherSpotify

Empowerment Through Entrepreneurship.

[postintro]There are many reasons to elevate entrepreneurship as the institutionally-approved and institutionally-accelerated pathway to economic success for everyone. Community flourishing through self-help is one of them. I’m supporting the team behind Entrepreneur Zones, focused efforts for enhanced performance of small businesses in targeted locations in economically under-performing geographies  [/postintro]

2020 witnessed small businesses across the country struggling to adapt and survive during the government-imposed pandemic lockdowns. And while some were able to pivot their services and business model to serve an increasingly digital market, many were forced to shut down for good, leaving thousands jobless.

The closure of these businesses is one of this year’s biggest tragedies. The economic impact of these closures will continue to be felt for many years to come. If we have collectively learned anything this year, it’s that America relies on small business entrepreneurship to flourish and prosper. 

Entrepreneurship is empowerment

Nowhere is the empowering potential of small business entrepreneurship more prominent than in our small-town Main Streets and local communities. Even through the pandemic, we’ve seen small businesses all across the country step up and change the way they operate in order to help their communities. Via a quick search around the internet, you can find dozens of examples of small businesses doing their part: from local pharmacies doing Covid testing to distilleries manufacturing hand sanitizer and restaurants providing free meals.

These entrepreneurs and workers were faced with an existential crisis like they’ve never seen before. Their response? Do good for the community. There’s something about small businesses that is just so inspiring.

Ultimately, entrepreneurship is the backbone of these communities, and provides both residents and the local economy the opportunity to grow as these businesses grow. What’s more, entrepreneurship is not just for the rich, it is for everyone. Building a business from the ground up is no small feat, but it is something that’s achievable by anyone, regardless of background. Through entrepreneurship, people can pull themselves up and bring new economic value to their communities and to themselves.

The potential of Entrepreneur Zones

Heading into 2021, we need to place a renewed focus on encouraging entrepreneurship in our small towns and cities. The key to this could be Entrepreneur Zones –  targeted areas within economically-distressed communities where new entrepreneurship-focused initiatives can help local business get their start, and help those that have already started to thrive. Policy initiatives can include relaxed regulations, tax incentives to encourage investors, focused education and training, and the kinds of mentoring and interconnection that help businesses integrate into larger value-creation ecosystems. 

Dale G. Caldwell of Fairleigh Dickinson University’s Rothman Institute of Innovation and Entrepreneurship notes, “To accelerate small business employment, government could provide entrepreneur grants and issue small business bonds through the Small Business Administration specifically for the businesses in federally approved entrepreneur zones. These programs would not be a burden on taxpayers and potentially lead to an injection of billions of dollars into businesses…that desperately need a lifeline to survive.”

As more than 11 million people look for new opportunities, these small businesses could help provide the jobs needed to both keep food on the table for struggling families and spur economic growth at the national level. 

Further, many in the growing pool of unemployed Americans are skilled workers who have been through the training and education for their jobs. The talent is there, what is needed is the capital to invest in these businesses.

The future lies in small businesses

We’re dealing with a once-in-a-lifetime crisis, and we need to work to establish apolitical policies that support our nation’s small businesses. Nearly 50% of America’s GDP output and nearly 50% of all American workers are employed by small businesses. It’s time that we began to recognize and reciprocate the values and utility that small businesses provide to this country.

And it’s not just local, it’s global. For example, Scott Livengood of Arizona State University is part of a team offering Education For Humanity – a program of education, and entrepreneurial skill training for conflict-displaced refugees in countries like Uganda and Lebanon. Entrepreneurship provides a pathway out of not only America’s distressed inner cities, but out of distressed environments of all kinds, all over the world. Over the past half-century, we’ve seen that entrepreneurial and educational expansion into underdeveloped regions and markets is one of the best ways to raise people out of poverty and equip them with the skills and resources they need to prosper.

Across the world, we see just how important creating avenues for entrepreneurship is to keeping economics vibrant and resilient. In 2021, one of our top economic priorities should be to create more of these avenues.

 

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

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

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

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

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

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

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

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

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

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

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

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

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

Take A Job? No, Make A Job.

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

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

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

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

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

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

Reframing how we think of the structure of the economy.

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

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

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

A life of production versus a life of earning.

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

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

Division of labor and division of knowledge.

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

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

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

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

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

Division of knowledge is more empowering than division of labor.

Measure your own performance.

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

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

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

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

100. Jeff Deist: Animating Economics to Serve Real People and Real Businesses

Economics is treated by many as an arid field of mathematical modeling. Human beings are treated as data in the model, almost the way physics regards atoms and molecules. This approach to economics doesn’t help people much; it doesn’t help us understand the world, and isn’t helping us build a better future.

Economics is an animating science. Austrian economics is humanistic; it treats humans as people, pursuing their hopes and dreams, frequently changing, seldom predictable, and never acting like data in a model.

That’s why we see our brand of economics as animating: helping people to understand better how to identify the best means for their chosen ends. For businesspeople, that translates into knowledge, processes and tools to help businesses grow and thrive.

Download The Episode Resource Entrepreneurial GPS – Download

Key Takeaways & Actionable Insights

The role of the entrepreneur

Entrepreneurship is the animation of business. It’s action; the exciting process of turning business knowledge and market signals into commercial solutions with the application of imagination, insight, creativity, resource assembly, and agile adjustment.

A big part of what makes Austrian economics different and better for business application is the understanding of the role of the entrepreneur and the entrepreneurial function in the economy. Jeff Deist articulated this role as a nexus between capital and markets, and the entrepreneur as the individual taking risk, employing their own property and having skin in the game. It’s an exciting role.

Entrepreneurship and value

Entrepreneurial business is the intentional pursuit of new economic value. The pursuit requires a deep understanding of the concept of value, an understanding that Austrian economics provides. Ever since Carl Menger established the concept of subjective value, Austrian economists have been deepening their understanding still further. Today, we recognize more than ever the role of the customer in value creation; since value is their experience, they are active collaborators. Entrepreneurs harness this collaboration. Think of an iPhone. Apple designs and assembles it, and then a large part of the value experience comes from the user adding apps, composing and sending and receiving messages and e-mails, choosing videos to watch and podcasts to listen to, eagerly contributing to the value experience that they themselves enjoy.

Value is what users make it.

Individualism and diversity

Entrepreneurial economics recognizes the role of the individual. It respects and honors the individual choice. Each individual, in the role of both consumer and producer, exhibits different preferences, personality, and psychology; we live in different places and in different contexts; we each have different needs and wants.

There are many favorable outcomes from individualism. One is the vast global diversity of the marketplace, whether exhibited on amazon or Alibaba or Grainger.com for industrial supplies. Another is economics as an engine of humanity and peace, which is the context for entrepreneurs providing goods and services globally to customers.

Specialization, achievement and satisfaction

Economics For Business aims to help all businesses and all entrepreneurs to find their specialization in this global ecosystem. We apply the economic principles of the specialized division of knowledge and division of labor. We all have knowledge that is unique to us, and we can all find an application of that knowledge in business.

Bob Luddy, who has been a guest on our podcast, founded CaptiveAire, a company that specializes in restaurant ventilation systems, providing benefits of safety, comfort, clean air and regulatory compliance to a broad range of foodservice customers. Bob stresses the value of specialization to become the leader in a category – a share leader and a knowledge leader and an innovation leader. And he’ll tell you that the non-material rewards of economic specialization are delightful, including satisfaction, achievement, earned respect.

CaptiveAire is a great example of considered specialization – it’s not in a high tech category (although there is a lot of tech incorporated in CaptiveAire’s product and service bundle), or an internet business or a software business. Find your customers, find a need that is not being filled, and build from there.

Big data versus big empathy and big insights

We live in an era where more and more data is being collected, compiled, processed and analyzed by producers (as well as non-economic actors such as governments, of course). As the sources of data, many of us have concerns about this trend. The economic principle that is more important for businesses, however, is that, no matter how “big” the data sets are, they do not have value (they are not causal data) until they provide or reveal some qualitative understanding of customer feelings, motivations or attitudes. These are the data that are genuinely useful to businesses. The Economics For Business method to develop this understanding is empathy, and we have a full toolset to help entrepreneurs apply it.

MBA-ization versus products, people and active learning

Jeff quoted Elon Musk on the subject of MBA-ization of business: too much focus on financial modeling and spreadsheets, and not enough on deploying engineers on the factory floor to develop, introduce and continuously improve great products that provide the customer with a delightful experience. Jeff concurred that MBA programs and business schools have become bogged down with a lot of dead weight, and have obscured some of their market-facing functions. They don’t provide the value they ought to provide for the tuition charged.

Economics For Business can provide the 20% of business school knowledge that’s actually valuable, and add new content – informed with Austrian insight – that’s even more relevant, plus the methodology and tools to apply the knowledge in business practice.

This approach is based on the educational science of active learning. In this view, learning is not achieved via books and lectures (which are necessarily backward-looking) but via the receipt of tools and methods and techniques, applying them oneself in real-life situations, and learning from the feedback received from people and markets and business results.

Building experience and sharing experience.

Active learning is the accumulation of experience. It is the unique experience of entrepreneurs and their teams gained from the operation of their businesses that constitutes the division of knowledge flywheel that continuously reinforces their advantaged position in the marketplace.

There is a time value to experience; it takes time to accumulate. On the Economics For Business platform, we’ll aim to identify ways to share experience to speed up the experience-gathering timeline. Q&A and discussion within our entrepreneurial community is one way. Another is mentoring, whereby experienced business people can share what they’ve learned over time.

Economics as a route to work and life satisfaction.

In his book Dynamism, Economic Nobel prizewinner Edmund Phelps tells us that, according to individually reported life satisfaction scores (e.g. Pew Research Center surveys and other similar surveys), the greater part of life satisfaction results from production activities rather than consumer activities. The purpose and meaning of taking on challenges, achieving results, making discoveries, self-reliance, and success in meeting goals are found in participation in the production side of the economic system. We hope to play our part in the stimulus of those satisfactions via the Mises Institute’s Economics For Business project.

Free Downloads & Extras From The Episode

Economics For Business utilizes a journey metaphor for the entrepreneurial process. Take a look at our visual summary: Download the PDF

“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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