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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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99. Scott Livengood Reframes Entrepreneurship for New Audiences

Why isn’t everyone an entrepreneur? Perhaps we don’t explain it well enough or in language that lets everyone in on the wonders and the thrills of the pursuit of new economic value.

Scott Livengood chooses reframing — thinking in new and different ways about an established concept — to widen the audience for entrepreneurship.

Key Takeaways & Actionable Insights

Reframing entrepreneurship in the context of popular culture.

Scott recently published a multimedia e-book called The Startup of Seinfeld. In the book he articulates a comprehensive survey of concepts and principles of entrepreneurship, including the entrepreneurial mindset, risk and uncertainty, intellectual property, business models, planning, finance, and many more.

The cultural frame Scott selected is everyday city life as illustrated by the characters and situations and market interactions in 180 episodes of Seinfeld. In Scott’s hands, this is not a show about nothing, but about entrepreneurship.

The multimedia approach is facilitated by a series of links in the e-book to YouTube video clips of short scenes from multiple Seinfeld episodes that are illustrative of entrepreneurial concepts and principles. You’ll find the concepts of economic calculation, opportunity, product design, arbitrage, intellectual property, judgment, planning, uncertainty, and several more. The text accompanying the videos is an exposition of economic principles underlying these concepts.

There’s a lot to learn, and it’s fun! A major point to take away is that entrepreneurship is everyday life: people imagining new ways to serve others and meet their needs, and employing design and economic calculation, judgment under uncertainty and marketing and communications to facilitate a valuable exchange.

Reframing the teaching of entrepreneurship and strategy.

The philosophy underpinning the teaching method in the e-book has been forged in the university classes and seminars that Scott teaches, and for which he prepares meticulously and conducts comparative research into learning and teaching effectiveness.

He has found that embedding the principles of entrepreneurial economics and business strategy in cultural iconography illustrated via multimedia technology results in a significant increase in student engagement, participation, learning, and understanding. Humor, for example, is a language and a style that can draw students in, engage them at a deeper level of curiosity, and help to deliver the serious economic message.

This kind of approach helps students think of entrepreneurship as more of a normal life choice for themselves — a life of creative problem-solving. Students can think about their ends and the means open to them in a different way. If they are inclined to “social entrepreneurship”, they can learn that that simply means a distinctive identification of ends, without any attempt to operate outside the profit-and-loss system of sound entrepreneurial practice.

Reframing entrepreneurship for the disadvantaged.

Scott’s ultimate test for reframing entrepreneurship for a different audience in a different culture has been presented by his teaching for Education for Humanity. This is group associated with his university, Arizona State, and dedicated to helping displaced refugees. These students who are displaced from their homelands by war and conflict and find themselves in refugee camps in countries that are alien to them, like Uganda and Lebanon. Their prospects for further education are narrow. What are the pathways out of the poverty and restrictions of refugee camp life?

Scott’s chosen task is to teach them entrepreneurship. Where to start? The basis is empathy — digging deep to understand their situation, circumstances, and context, and understanding them as individuals and identifying their needs and wants. Language becomes critical — using concepts and examples they can relate to.

It’s contextually impractical to teach entrepreneurial finance in terms of bank loans and venture capital. But Scott can teach individual and family budgeting: how to calculate and manage income and expenditures, how to save, how to build up sufficient savings to make a capital purchase, and how to generate an income stream from that capital. The particular capital artifact may be a second cow for a head of household that uses the first one for feeding the family. The family has knowledge and skills in milking and animal husbandry that can be put to use in their new entrepreneurial business of selling milk and dairy products to other families, or bartering for other kinds of nourishment.

Eventually, the family may advance to the use of micro-loans or other forms of micro-finance and expand their entrepreneurial holdings. Scott can now teach about the trust nexus of paying interest and paying back loans, and about return on investment and capital accumulation. Progress comes quickly as a result of starting in the right place.

Entrepreneurial communities.

One of Scott’s realizations has been the power of entrepreneurial communities. In the refugee camps, family entrepreneurs collaborate, learn together, assist each other, and seek to raise the prospects of the entire community. Failure to pay back a loan, for example, would be a setback for the group, and group norms and institutions arise to guard against such a loss of trust.

Scott sees direct application of this learning about normative entrepreneurial community action in other parts of the world, including rural communities here in North and Central America, and in the inner city initiative of Entrepreneur Zones in the US.

By embedding entrepreneurship in culture, the collaborative service ethic emerges more clearly and emphatically.

Free Downloads & Extras From The Episode

Enjoy Scott Livengood’s book about the culture, concepts, and principles of entrepreneurship: The Startup Of Seinfeld: A Multimedia Approach to Learning Entrepreneurship: Get It Here

Read the work of Nobel prize-winner Edmund Phelps, mentioned in the podcast introduction, on Mass Flourishing and economic Dynamism.

“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

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

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

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

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

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

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

Institutional Entrepreneurship

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

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

Regulatory Entrepreneurship

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

Social entrepreneurship

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

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

Cultural Entrepreneurship

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

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

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

Entrepreneur Zones: Teaching People To Fish In America’s Abundantly Stocked Economic River.

Entrepreneurship has not been valued the way it should be.

Sure, we read about and hear about the outliers of venture-capital funded unicorns, and the spectacular wealth of entrepreneurs like Jeff Bezos and Elon Musk. But the most important entrepreneurship is represented by the tens of millions of so-called small businesses in the US. As a group, these businesses are the biggest employers (over 99% of employer companies are small businesses) and the leading job creators. They are the energy and dynamism of our economy. They have made the US into the richest country in the world. More critically, small business entrepreneurs provide the economic backbone of cities and local economies, providing the employment, income, and prosperity that make for thriving families, neighborhoods, and communities. Entrepreneurship is not only the foundation of a strong economy, it’s the best generator of social improvement.

Dr. Dale G. Caldwell of Fairleigh Dickinson University’s Rothman Institute of Innovation and Entrepreneurship is an expert on the impact of entrepreneurship on social improvement, both in the US and worldwide. He has applied his analysis of entrepreneurship data to create an entirely new set of entrepreneurship policy initiatives.

“The quickest way to turn around low-income communities is to create new jobs that provide previously poor households with the income they need to pay their monthly bills on time”, he states in a white paper. The most effective way to create the jobs is to provide the tax incentives, regulation relief, and financial support that local entrepreneurs need to help them increase profitability and employment in the local community.

To implement such a policy, Dr. Caldwell introduces the idea of Entrepreneur Zones. These are designated areas within urban neighborhoods with the highest joblessness rates, where an increase in successful new businesses can significantly increase local employment, providing the jobs that local residents need to work their way out of poverty. Dr. Caldwell has outlined principles of legislation that would provide for lower state and local business taxes and relaxed state regulations for businesses located in Entrepreneur Zones and employing local residents. The businesses would receive tax credits based on the number of new employees they hire who live locally.

These businesses also need to be investable – they must be able to attract and accumulate the capital that supports growth and success. Dr. Caldwell suggests that lenders and investors receive favorable tax treatment for loans and investments provided directly to Entrepreneur Zone businesses. Governments could make these financial investments attractive by providing tax credits or possibly tax deductions similar to those received for contributions to nonprofits.

Most decidedly, Dr. Caldwell’s proposal is not welfare. In fact, it could be construed as counter-welfare. He points to “safety net” programs like free and reduced price lunch programs and temporary income and housing support that are “band-aids” but do not lead to the elimination of the educational achievement gap that means that kids who eat better at school and go home to federally-subsidized housing still end up living in poverty when they are adults.

But if programs can “teach a person to fish”, they can break the cycle of systemic poverty. Research has indicated that children who live in communities with high levels of poverty have weaker neural connections in their brain, affecting judgment and ethical and emotional behavior. They may have difficulty focusing, communicating effectively and making good decisions about work, school and life. Dr. Caldwell calls this condition Urban Traumatic Stress Disorder (“UTSD”), drawing the parallel with Post Traumatic Stress Disorder experienced by soldiers after serving in war zones.

Entrepreneur Zones would avoid the problem of welfare that traps people in multi-generational poverty and contributes to UTSD. Rather than a safety net, they would be a trampoline, enabling people to bounce up into society to become productive, financially independent citizens. Importantly, Dr. Caldwell’s program focuses on household income, which is more important than the hourly wages of individuals in determining real poverty. The creation of additional jobs via entrepreneurship will reduce poverty even if there is no increase in the minimum hourly wage. Dr. Caldwell cites study data demonstrating that the household living wage index (LWI) can predict improved academic performance in school, the reduction of crime, and lower health care costs.

Entrepreneur Zones are a highly targeted, highly specific solution to the problem of urban poverty. The “Empowerment Zones” of the 1990’s were unsuccessful because of weak investment incentives and a lack of focus on creating jobs and supporting entrepreneurs. The “Opportunity Zones” created in the 2017 Tax Cuts And Jobs Act are aimed at spurring real estate investment, not entrepreneurial businesses in poor communities. Entrepreneur Zones build on past learning to craft a better program design.

Dr. Caldwell has originated a whole new policy pathway: entrepreneurship policy. Job creation is the most effective social program, and job creation is what entrepreneurs do. We are reminded that Dr. Martin Luther King’s March on Washington in 1963 was actually called the March On Washington For Jobs And Freedom. It was economic activism, as well as political and social activism. Economic activism – teaching more people how to fish in America’s rapidly flowing and abundantly stocked economic river – can be more productive on more fronts than protest, social justice campaigning or welfare legislation.