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66. John Tamny On America’s Uniquely Productive Entrepreneurial Flywheel

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The flywheel is a robust and powerful mechanism so long as restrictive regulation by government and failures of imagination by capitalists do not slow it down.

John Tamny speaks articulately with Hunter Hastings about the uniquely American entrepreneurial flywheel in Economics For Entrepreneurs podcast #66.

Key Takeaways and Actionable Insights

A growth business is what John Rossman, in episode #50, termed a flywheel. Using amazon.com as an example, he gave us this simple image.

Flywheel Economy Diagram

The flywheel looks simple, but in reality it’s quite nuanced. Lower prices and a great customer experience will bring customers in, Bezos reasoned. High traffic will lead to higher sales numbers, which will draw in more third-party, commission-paying sellers. Each additional seller will allow Amazon to get more out of fixed costs like fulfillment centers and the servers needed to run the website. This greater efficiency will then enable it to lower prices further. More sellers will also lead to better selection. All of these effects will come full circle back to a better customer experience.

John Tamny sees the American entrepreneurial economy as a beautiful and productive flywheel.

Why are Americans so entrepreneurially focused? We descend from “the crazies” – the other thinkers who came from around the world, dissatisfied with their lives, and willing to cross oceans and borders to get to a place that offers no security but offers freedom. They took the ultimate entrepreneurial leap. We got the nut cases. Steve Jobs, for example, was of Syrian descent. Could he have started Apple in Syria? No.

John Tamny's Entrepreneurial Flywheel

Click on the image to Download the PDF

Entrepreneurs lead us to a better place.

John’s definition of an entrepreneur is someone who has a vision that everyone else thinks is ridiculous, yet they follow it anyway. They have no time for the way things are done today. They want something different. And to win consumer acceptance, what’s different must also be better. So they quite literally lead us to a better place. Horse-drawn carriages weren’t enough, so Henry Ford gave people something different. Everyone wanted Blackberry phones when Steve Jobs brought out the iPhone, and he quickly demonstrated its superiority. Every entrepreneurial act is speculation – there is never certainty that people are going to want the new product. That’s what is so important about entrepreneurs.

Entrepreneurs need to attract intrepid finance and intrepid financiers.

Silicon Valley is littered with VC’s who turned down Facebook, and turned down Amazon. Founding entrepreneurs think differently and have a vision that is far out of the norm, and they need to be matched with financiers who can be strong supporters and collaborators on the path to a better place. Irrespective of whether it is from Wall Street or Sand Hill Road, or from visionary friends and family, it’s critically important that we figure out a way to get financing to brilliant people. Government restrictions on entrepreneurial activity are certainly barriers to growth, but so is failure of imagination on the part of capitalists.

Intrepid lending takes place far away from banks. Unspent wealth is the source, and the more unspent wealth one person has, the more risks they can take.

We tend to complain about the antiquated and sclerotic banking system, but it has nothing to do with entrepreneurs and innovation. Banks make loans to entities they know will pay them back. Entrepreneurs fail 90% of the time. Banks want nothing to do with innovation.

Those with unspent wealth are the most crucial people in the economy when they match their unspent wealth with entrepreneurial talent and vision. The more unspent wealth they have – and the less the government takes away from them in taxes – the more intrepid they can be in investing it. When we tax away the wealth if the richest, we tax away the most important wealth of all. – that which has the highest odds of being directed towards new ideas that, while they look promising, have high odds of failure.

More and more of us have the opportunity to become entrepreneurs, if we harness the flywheel of original ideas that attract intrepid capital.

One of John’s many books, The End Of Work, describes how we are all now so enabled with interconnectivity to resources that we have the chance to make money by doing what we love. Our passion can become our job. If we are able to imagine a future place that is better – that improves the lives of individuals – we can create a growing business. The more of us who can do this, the more we grow the whole economy – which, after all, is made up of individuals. If we can also attract that intrepid capital that John refers to, growth becomes faster and higher.

Besides The End Of Work: Why Your Passion Can Become Your Job, John’s books include Popular Economics: What The Rolling Stones, Downton Abbey and LeBron James Can Teach You About Economics, and Who Needs The Fed: What Taylor Swift, Uber, and Robots Tell Us About Money, Credit, and Why We Should Abolish America’s Central Bank.

Free Downloads & Extras

“John Tamny’s Entrepreneurial Flywheel”: Our Free E4E Knowledge Graphic
Understanding The Mind of The Customer: Our Free E-Book

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 Podcasts, Google Play, Stitcher, Spotify

What’s A Good Entrepreneur To Do? Make A Profit, Thereby Serving Society In The Best Possible Way.

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A January 2020 Forbes Magazine article titled “Why Doing Good Is Good For Business” clearly left out critical information: who is the good or bad entrepreneur? According to the author, good entrepreneurs are doing good if their primary objective is not to make a profit. And bad entrepreneurs are doing bad if their primary objective is to make a profit.

Basically, the author suggested that, to be good, a business should not pursue profit and, along with it, customer satisfaction. Ignoring the profit motive is deemed more important than the entrepreneurial reward of profit that comes from providing a service or product to customers who demand value. The bad entrepreneur is only concerned with making money, surviving in the market, and serving consumers. The bad entrepreneur pursues charitable deeds but not at the cost of what consumers demand. You see, being the good entrepreneur only helps a few concentrated groups but ignores the diffuse effects of many consumers, profit rewards, and potential failure. What is the good entrepreneur to do?

Let’s be honest. If the entrepreneur is not primarily motivated by profit, what happens if the business fails or can no longer service its customers due to profits invested in nonmarket activities that do not serve them? Unfortunately, there is a public perception that does not allow entrepreneurs to pursue a profit motive only, because others must choose for them—they call them good entrepreneurs. They call them good if they subordinate the profit motive to lofty, nonmarket, eleemosynary endeavors outside the scope of producing consumer value.

Professor Walter Williams wisely advised: “Profit guides resources to their highest valued uses as determined by people’s wants and desires.”1 Should entrepreneurs disregard the profit motive, making it secondary, and replace it with nonmarket motives? What would the effect of nonmarket motives be on the entrepreneur and the customer? When Coca-Cola changed its formula, said Williams, it was because of customer preference. Consumer preference was a warning sign to the potential loss of profit which brought back the original formula! Actually, good entrepreneurs focus on nonmarket motives—endeavors that are outside their division of labor in the first place. Ludwig von Mises once asked, “What is the good entrepreneur to do?”2

Shouldn’t the primary goal of entrepreneurs be to remain profitable so that, at a minimum, they are able to run their businesses and continue production, which then serves customers who choose to buy their products and services? Don’t entrepreneurs deserve to earn a reward for taking risks and putting their livelihoods in jeopardy to procure materials and goods to bring to the market? To eliminate the profit motive is to ask entrepreneurs to provide their vital service to consumers perhaps at a higher cost than they would otherwise. Profit is not only the reward given by satisfied customers, but is also a market signal of what to do more of and what to do less of. You see, the good entrepreneur, not having a profit motive, primarily focuses on motives that do not serve customer needs.

Market Customers Are Ignored

For example, your local pizzeria owners generally do not know you personally, but they know that you want hot delicious pizza. That’s their motive. Fortunately for pizzeria owners, there’s a reward for preparing that pizza for you. But if your local pizzeria owners do not make a profit, they will no longer exist in your community to serve pizza. End of story.

Therefore, we must ask: are good entrepreneurs, motivated not by profit but by nonmarket issues, likely to be successful and stay in business? Why is there an expectation that entrepreneurs run a business without a profit motive? They can’t. The good entrepreneurs are nonmarket oriented and put profits into nonmarket endeavors aside from producing value for their customer; these nonmarket motives are placed before the profitability of the business and a value-added process for customers.

Having a motive other than profit poses a critical problem. Mises asked, “How can a conscientious entrepreneur persuade a banker or a capitalist to lend him money if he himself cannot see any prospect of a profitable return on his investment?”3 The good entrepreneur, in fact, must ignore customers and forgo profit for nonmarket activity, in which the entrepreneur has a great chance of failing due to financial instability and loss of customers.

What Is the Good Entrepreneur to Do?

When the profit motive is taken off the table as a primary objective, there are several consequences. There ceases to be a way to reward the entrepreneur over and above the costs of doing business. Someone must bear the consequence if the business isn’t profitable and struggles financially. Customers leave.

Good or bad entrepreneurs, if they wish, can be motivated by other things than profit. But the question remains: what cost are they willing to pay to keep the business from failing? Surely, there are other motives that can come into play, but does the entrepreneur who decides not to do what’s in vogue become a bad entrepreneur? Survival of the business comes first; serving consumers comes next. If good entrepreneurs fail, who subsidizes them? If bad entrepreneurs survive and continue to provide value, are they not doing what they are rewarded to do? Bad entrepreneurs can choose what they want to do with their profits, as long as it does not interfere with market exchanges and customer satisfaction.

There is nothing better than to support one’s community and do good deeds for others. However, we must examine a simple fact. If an entrepreneur is not driven by profit first, then a profit-driven entrepreneur will come along, do things better at a better price, and obtain a greater market share. This is a fact of the market process. The problem comes when the good entrepreneur is asked to be guided by nonmarket activities, as Mises stated. He said that entrepreneurs are viewed as “hard and selfish” if they are guided by a market position instead of a nonmarket position and asked, “What is the good entrepreneur supposed to do?”4

Market Consequences

How soon we forget that, as Mises noted, it is “consumers and not the entrepreneurs that determine the direction and scope of production”? In order to serve customers, entrepreneurs must maintain a profitable operation—this is what a good entrepreneur does. If the entrepreneur chooses to disregard the profit motive, customers will not be served. If they are served, at what cost?

Some expect to interfere with an entrepreneur’s business endeavor to pressure them to provide nonmarket outcomes. Basically, they expect the entrepreneur to run a business without a profit. But the same people demand products and services from the entrepreneur. The nonmarket profit motive does not work.

The entrepreneur operates in a market economy, where consumer signals regulate the production or service offerings of businesses. Is it feasible to ask that entrepreneurs use their privately-held resources for nonmarket endeavors notwithstanding the profit motive? Should I ask my favorite pizzeria owner to not be motivated by profit, yet demand he keep making those hot, yummy pizzas? Whatever motive the entrepreneur decides to assume, there surely will be a market consequence.

Nonmarket pressure groups demand that good entrepreneurs only be motivated by what they think is important or the latest nonmarket trend. The fact is, as individuals, entrepreneurs can decide what motivates them and pursue the means to that end. The main concern should not be whether the entrepreneur is primarily motivated by profit or not, but the diffuse effects on customers. Further examination is needed as to the costs in the market.

How do motives that are not based on profits bring results in a market economy? Does a secondary motivation other than profit negatively affect the survival of the good entrepreneur and/or consumers? If so, then we can assume that “the wishes of customers can be safely ignored because there’s no bottom-line discipline of profits.”5

Are you the good entrepreneur?

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  • 1.Walter E. Williams, More Liberty Means Less Government: Our Founders Knew This Well (Stanford, CA: Hoover Institution Press, 1999).
  • 2.Ludwig von Mises, Interventionism: An Economic Analysis, ed. Bettina Bien Greaves (Irving-on-Hudson, NY: Foundation for Economic Education, 1940).
  • 3.Mises, Interventionism.
  • 4.Mises, Interventionism.
  • 5.Williams, More Liberty Means Less Government.

Photo by Brooke Cagle on Unsplash

The Entrepreneurial Advantages of Building Human Capital While Young.

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While you were young, did you gain knowledge and learn skills that gave you the human capital necessary to become an entrepreneur or a small business owner? Human capital consists of the knowledge and habits developed as a youngster that form skillsets that later in life can be used in the business world. These skills are developed either through the family unit, culture, or regional location and determine the success or failure of entrepreneurial pursuits and performance. In the young, the development of skills and knowledge are applicable to future ventures in entrepreneurship or small business ownership.

Everything you learned from family dinner conversations and your culture served to build your human capital. Across the globe, the people of various regions cultivate certain skills that enable individuals to consider entrepreneurship as a viable choice of work. Some of you never had the social or family setting that gave you entrepreneurial insights. Some people get this while they are young, and some do not. Acquiring human capital at a certain age bolsters the chance of entering entrepreneurship or small business ownership. If human capital or business insights are not embedded culturally or acquired at a certain point, some individuals will never consider entrepreneurship or be successful at it.

We cannot all become successful entrepreneurs, especially if only a few of us come from a cultural background that rewards an ethic of hard work and related values versus a cultural background in which achieving entrepreneurial success is never even thought of.1 What is valued in the family unit and what is rewarded or praised contributes to our future entrepreneurial skills. Ludwig von Mises noted, “the inequality of men, which is due to differences both in their inborn qualities and in the vicissitudes of their lives, manifests itself.”2 The region of the world in which one lives and the context of the acquired human capital skills are equally vital to having an entrepreneurial skillset.

We hear from many entrepreneurs, and those who are not entrepreneurs per se, that much of their education occurred around the family dinner table, or that they lived in a place where small business activity was plentiful.3 Human capital that is based on family, culture, and regional differences has consequential effects for many considering entrepreneurship.

Cultural factors are critical in developing entrepreneurship. Often these cultural factors are overshadowed by the technical aspects of operating a business—the seen versus the unseen. Parents and the elderly pass on their values to their children, values such as taking risks, being independent, challenging uncertainty, etc. Children who are rewarded or not rewarded will either be encouraged or discouraged to pursue entrepreneurial activities in the marketplace. If a child is never taught to be independent, how is he or she able to systemically think of and identify potential profit opportunities and bring opportunities to fruition?

Habits form over time, and many are culturally based. In some cultures, some children spend up to twelve hours a day playing videogames and entertaining themselves on social media. In other cultures, children are expected to work long hours helping mom and dad with their business or studying to earn the best grade. These youths may work at an uncle’s garage learning all about vehicles or attend college to gain business knowledge. In either situation, these youths are learning about private property, e-commerce, revenues, profit and loss, bookkeeping, and so on—gaining skillsets and knowledge in order to run a business of their own in the future.

Generally, whatever is cultivated in the family unit and culture will manifest and have consequences in the marketplace. Children who acquire a work ethic and values related to entrepreneurial success will have an advantage over their peers who have not had the same experience. The children who have not learned these things will have a much later start or never acquire the skills and the know-how needed to pursue entrepreneurship or small business ownership.

Not everyone has an equal opportunity to become an entrepreneur, as some must acquire a collection of basic skills, knowledge, and habits that may take decades to develop. Taking risks, working longer hours, and making critical decisions require a certain upbringing. Entrepreneurs are not created overnight but over time. However, ten years of working with mom, dad, or an uncle as a youth, gaining practical knowledge, surely provides advantages later in life.

We cannot disregard the location and region in which we lived during the time of our early human capital acquisition. Being located in one region of the earth versus another can surely impact our ability to develop a predisposition or entrepreneurial insights needed for entrepreneurial behavior. Perhaps we live in an area where several industries exist. Being surrounded by these industries allows us to either work for or start a business in a vein that is familiar to us.

As with any location or local market, our human capital can be stymied in a region or location where a product or service is not valued or not supported although it might be highly valued in another market (i.e., if one has to take their product knowledge to another region where the consumers have higher subjective valuations of their productive goods or services).

Unfortunately, the opportunity to attain the same human capital at the same time and place that leads to entrepreneurship is not equally available to everyone. Without the requisite human capital, one can only dream of becoming a successful entrepreneur or business owner. Families and family cultures vary among peoples across the globe, and so does the dissemination of knowledge at the family dinner table. We all come from backgrounds that either reward or punish certain behaviors that later transform into predispositions and values that underpin our ability to, at a minimum, think like and be an entrepreneur. Ludwig von Mises said that entrepreneurs “owe their position exclusively to the fact that they are a better fit for the performance of the functions incumbent upon them than other people are.”4 An interpretation of Mises on this point is that the skills and knowledge develop over time that enable entrepreneurs to uniquely perform the production of products and services for the consumer.

  • 1.See Thomas Sowell’s The Quest for Cosmic Justice. In the section titled “Freedom versus Equality,” he discusses equal performance and social barriers.
  • 2.See Ludwig von Mises’ Planning for Freedom.
  • 3.See Ryan McMaken’s article “Three Economics Lessons I Learned from My Dad.” For example, three lessons that he learned were: lower the cost of doing business, politicians drive up the cost, and the world is always changing.
  • 4.See Ludwig von Mises’s Human Action on the Entrepreneurial Function.
Author:

Raushan Gross

Raushan Gross is an Associate Professor of Business Management at Pfeiffer University

54. Steve Mariotti: Teaching Entrepreneurship as the Universal Route to a Better Life.

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Can entrepreneurship be learned? We’d like to believe it can, since entrepreneurs drive economic growth – creating tomorrow as Per Bylund puts it – and betterment for their individual customers and for society.

Key Takeaways and Actionable Insights

Emergent circumstances placed Steve Mariotti in the position of teaching entrepreneurship to boys and girls in the nation’s toughest high school. After some trial and error, here’s what he established.

There’s a universal desire for the fruits of entrepreneurship. Steve classified this desire as a drive to escape poverty.

You are restricted from ownership, and all the feelings of pride and fulfillment that come with it, when you are poor. Ownership – what economists call private property – is an exciting prospect. If entrepreneurship provides a route, people will take it.

Steve’s innovative entrepreneurship curriculum generated intense excitement.

He had difficulty in commanding attention for English and Math, but the same students who resisted conventional learning were stimulated and energized by the subject of entrepreneurship.

The open door to learning entrepreneurship is understanding market pricing.

Steve started the entrepreneurial journey for students with thinking about pricing of an everyday product – in his case, wristwatches. Why are there so many prices for wristwatches? Why are there so many kinds of wristwatches at different price points? Why is it that one person would pay a high price for one kind of wristwatch and another person would refuse, preferring an alternative at a different price? Just thinking about pricing in this way was a revelation.

Thinking about pricing can lead to an understanding of unit economics.

Entrepreneurs need to know two prices – the one the buyer will pay and the one that represents their cost. Steve quickly established that this knowledge is harder to establish. Is there a profit in the priced transaction for the entrepreneur once all costs – of time, money, effort and alternatives – are taken into account. This requires an understanding of sourcing and supply chains, wholesalers and vendors, direct and indirect costs and overhead, as well as personal preferences (do you really want to spend all the time and effort that the business will require of you?)

High schools are resistant to teaching entrepreneurship, and Steve’s students were constrained by regulation and authority.

“You may not talk about money in the classroom.” These and other restrictions were typical of the barriers Steve faced – and faced down. Entrepreneurship is one of the most relevant skills to impart to high schoolers, and yet the subject was viewed with disdain.

Steve emphasizes practicality as the critical foundation for teaching entrepreneurship.

He taught his kids unit economics, profit and loss, simple accounting and the practicalities of starting, growing and managing a business. No theory. Everyone in his class succeeded with a starter business. Many went on to greater entrepreneurial success.

Steve has taught entrepreneurship all over the world, and found that culture matters a great deal.

In post-communist Russia, young people could not grasp supply and demand, entrepreneurial profit and unit economics. The labor theory of value had been brainwashed into them.

In post-communist Vietnam, in contrast, people thronged to his teaching and eagerly pursued all the behavioral changes he advocated, both at the entrepreneurial level and the government administrative level (like adopting low, simple tax schemes). Theirs was a more receptive culture.

Items Mentioned In This Episode

Steve’s Book Goodbye Homeboy –  Click Here
Steve’s Book Entrepreneurship: Starting and Operating A Small Business – Click Here
Austrian Entrepreneur’s Journey Course – Click Here

Free Downloads & Extras

The Role of Knowledge In Entrepreneurship: Our Free E4E Knowledge Graphic
Understanding The Mind of The Customer: Our Free E-Book

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 Podcasts, Google Play, Stitcher, Spotify

53. The Entrepreneurial Ethic: What Drives Entrepreneurs to Create the Future?

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Non-one has thought more deeply about the entrepreneurial ethic than Per Bylund. The subject is critical for understanding the source of energy in the free market system, the sources of economic growth, the creation of value, the making of a just and moral society, and the success of individuals and firms who make the commitment to entrepreneurship.

This week on Episode #53 of the Economics for Entrepreneurs Podcast, I talked to Per about these deeply important subjects.

Key Takeaways And Actionable Insights

The role of the entrepreneur is vital to economic growth, individual well-being and social cohesion. But individual entrepreneurs are not trying to grow the economy or promote a better society. Their goals are individual – to serve one customer by improving their lives with better service and innovation directed at meeting their needs and wants.

Entrepreneurs create the future…

Tomorrow will be different. Tomorrow is created by entrepreneurs. From the high street store owner introducing new inventory to the high tech founder introducing new features, entrepreneurs actively participate in changing the future to the way they want it to be.

…and thereby change the world.

Real change happens through value exchange in the marketplace, facilitated by real entrepreneurs. Changing the world is a matter of responding to customer dissatisfactions, and not false impulses like so-called “social entrepreneurship”.

The Entrepreneurial Ethic Infographic Sample

Click on the image to download the Full PDF Infographic.

To create tomorrow, follow the entrepreneurial ethic.

The entrepreneurial ethic is the belief in taking action to deliver an experience of value to the customer. Customers always feel that things could be better in some aspect of their lives. Entrepreneurs are people who bring that betterment. They do so voluntarily, without fraud or coercion, or deception. Their ethic is to improve the lives of one customer at a time, and then eventually a whole segment of customers, and ultimately of all customers. One entrepreneur serving one customer leaves resources available for another entrepreneur to help another customer. It all rolls up to a better society.

The mechanism of the entrepreneurial ethic is customer betterment.

Entrepreneurs decide on principles for their business – how are they going to facilitate value – and then seek mechanisms to implement their principles. They put theory into practice, operationalizing the Austrian economics idea of the economy as a process for getting to customer satisfaction. For example, they apply Austrian Capital Theory by always making sure that any investment they make in their business contributes to customer betterment. If it’s not important for the customer, they don’t make the investment. If it is, they do. Customer sovereignty is the theory; always asking what the customer will think of any action the entrepreneur takes is the practice.

Betterment is decided by the customer.

The entrepreneurial ethic is that the customer is the boss. The entrepreneur seeks to understand the need for betterment. It is a feeling on the customer’s part, sometimes inarticulate. Customers can’t tell entrepreneurs exactly what they want, but they can express dissatisfaction with the status quo. The entrepreneur gives form to the customer’s dissatisfaction by developing a new value proposition for a new service or product. Do they always get it right? No. The customer’s inarticulateness makes accuracy difficult, and the customer dynamic is continuous change, always rebalancing preferences. The entrepreneur submits to the customer’s decision.

The entrepreneur solves uncertainty, for themselves and society.

Future uncertainty can sound like a burden or a barrier. Entrepreneurs solve this problem. Firstly, they recognize uncertainty. It exists: no-one can know the future. Entrepreneurs break down uncertainty by process. Step-by-step, they set out a pathway to their goal of bettering customer’s lives, knowing that there will be changes along the route as customers change and competitors bring even more change. The mechanism here is learning. Each step reveals new knowledge about whether the entrepreneur has imagined the goal and the path accurately. There will be lots of pivots before reaching the market. The earlier and more frequently the customer value learning can be incorporated, the more accurate the pivots. Entrepreneurs are reflective about every step.

When one individual benefits, there are no losers.

When an exchange does take place, and the world changes as a result, there are two beneficiaries – the customer, who experiences value and the entrepreneur who facilitated it. But no-one loses. There is a false anti-business meme that the success of an entrepreneur can somehow be interpreted as a loss for society. Especially if that entrepreneur becomes a billionaire by helping an especially large number of customers. It’s just not logical. A gain by one individual can not be a loss for society.

The entrepreneur experiences their own kind of value.

A few entrepreneurs become billionaires. Most don’t. They may or may not make more income than they would if they took a corporate job. But the experience of value for the entrepreneur is subjective, just as it is for the customer. They may be pursuing a feeling of self-reliance or a sense of achievement. Importantly, entrepreneurial goals are long-term, often intergenerational. Many individuals start businesses that they can pass on to their children or generate the funds for their children to attend college and become doctors or lawyers or economic professors – positions that the entrepreneurial effort of the parents made possible. Other entrepreneurs set up charitable foundations that can deliver benefits for decades.

Items Mentioned In This Episode

Mises For Business: Mises Institute Economics For Entrepreneurs Podcast Archive –  Click Here
Our Austrian Entrepreneur’s Journey Course – Click Here
Per Bylund on Twitter – Click Here
E4E searchable archive of podcasts and free tools – Click Here

Free Downloads & Extras

The Entrepreneurial Ethic: Our Free E4E Knowledge Graphic
Understanding The Mind of The Customer: Our Free E-Book

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 Podcasts, Google Play, Stitcher, Spotify

52. Mark Schaefer: The Future of Marketing Is Austrian – How Human-Centered Marketing Can Fix A Business Function That Has Lost Its Way.

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This week I spoke with Mark Schaefer about his iconoclastic and deeply insightful book Marketing Rebellion, in which he expounds the solution to modern marketing’s failures, via an approach he calls Human-Centered Marketing.

Listeners to Economics For Entrepreneurs and aficionados of Austrian Economics will recognize the close overlap between Austrian Economics and Human-Centered Marketing.

Key Takeaways & Actionable Insights

Marketing has lost its way – in its current state, it’s no longer a useful business growth tool for entrepreneurs.

  • An obsession with technology has eclipsed the focus on people and human values.
  • A mania for measurement has obscured emotional connections with customers.
  • “Marketers hide behind their dashboards” and are not conducting conversations with customers.

The solution, says Mark Schaefer, lies in the principles of Human-Centered Marketing. Austrians can easily recognize these principles as our own.

Austrian Principles vs Human-Centered Marketing Principles

Click on the image to download the full PDF

The customer-sovereignty perspective yields actionable truths.

  • Customers don’t need ads – they don’t see them, they don’t hear them, they block them.
  • Customers are rebelling against the interrupt-and-annoy approach of marketers.
  • The customer is in charge.

What do customers want from marketers? The answer for Mark Schaefer lies in Core Human Truths – what Austrians call Highest Values.

  • They want to feel loved.
  • They want to be respected
  • They want to belong
  • They want you to advance their self-interest
  • They want proof that a firm or brand is contributing to their community

These are deep human needs that don’t change. Whatever the speed of change in market, these values are constant. Humanism lets marketers hold on to what is not changing, rather than being overwhelmed by change.

Marketing mantras like “loyalty” and “engagement” are false.

  • Customers don’t want to be loyal; they want freedom and choice – they like shopping around.
  • Engagement does not result from clicking on an e-mail and downloading a white paper or a coupon.
  • These are dashboard measurements, not human values.

Mark’s recommendations are grounded in humanism.

Customers respond to shared meaning and shared values – so long as the sharing is authentic. Businesses must be loyal to consumers, never let them down, always be consistent. Live on their island.

Seek trust. Marketers have burned through trust. The Edelman Trust Barometer shows trust in business and brands and advertising going down for 11 straight years. Now brands must transcend the public’s mistrust.

Flip your branding. A brand is not what you tell customers. A brand today is what customers say about you to their friends and peers. People trust other people.

Let customers create their own value. This is pure Austrian Economics: customer value is an experience that takes place entirely in their domain. Brands and businesses facilitate – but can’t create – the customer’s value experience. Customers hire your brand or business or product or service to help them create value.

Marketing is promise management.

  • Choose the promise you make to customers carefully – is it one they really want from you and will they trust you when you make it?
  • Ensure that you have the capabilities to deliver on the promise. Don’t over-promise.
  • Keep your promise every time, with no exceptions ever.

BONUS: Small and medium businesses have an advantage in human-centered marketing.

The larger the business, the harder it is to connect to customers on an individual, emotional level. Small business has an advantage in showing its face, demonstrating its personality and exhibiting trustworthiness.

Items Mentioned In This Episode

Mark Schaefer’s Human-Centered Marketing Manifesto is here. 
For comparison, our Menger’s Manifesto, from Principles Of Economics, is here. 
Find Mark’s book, Marketing Rebellion, here.
Mark’s website is https://businessesgrow.com 

Free Downloads & Extras

Accounting From An Austrian (Misesian) Perspective: Our Free E4E Knowledge Graphic
Understanding The Mind of The Customer: Our Free E-Book

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 Podcasts, Google Play, Stitcher, Spotify