Knowledge Archives - Hunter Hastings

Business success is a function of knowledge — the right knowledge at the right time applied in the right way. But knowledge is always scarce and incomplete and sometimes wrong. It is best to regard knowledge as a process: continually gathering changing knowledge from a wide range of sources to integrate into decision-making and action. Austrian economics can provide that integration, helping businesspeople with sense-making in a complex, ever-changing world of knowledge. Yousif Almoayyed joins Economics For Business to share his knowledge journey and the ways in which Austrian Economics provided him with the required integrating theory.

Key Takeaways & Actionable Insights

Business knowledge is gathered from multiple sources and multiple disciplines.

Gathering knowledge that’s relevant for business success is a process, a journey, and an exploration. It’s not limited to business subjects. A rounded businessperson studies economics, of course, but also history, psychology, languages, culture, computer science, political science. Why are these all relevant? Because business is a social science, concerned with how people think and perceive and interact, and how they adapt to new knowledge and changes in context and changes in choices. All the knowledge disciplines impact business.

There’s an exploratory phase in every knowledge journey, where we cast our knowledge net wide.

Yousif Almoayyed describes how his early years of schooling included multiple schools both in his native Bahrain and in the US and other countries. He started to gather comparative knowledge of different countries and cultures. He decided to continue the process by traveling to and studying in China. He developed an elevated capacity for the critical business skill of empathy: seeing things as others see them, through others’ eyes, or rather, through others’ mental models. People who grow up with a different cultural and philosophical and religious and linguistic and institutional background develop different mental models. The facility to discern, analyze and understand those mental models helps businesspeople in their interactions with customers, competitors, employees, partners, and suppliers.

The exploratory phase of knowledge gathering doesn’t require us to think about applying that knowledge in business at the time of gathering. It’s building up a knowledge inventory.

Different fields of knowledge can yield different business skills.

Yousif told us how he studied computer science and developed a deeper understanding of the clarifying explanatory power of logic. Via the discipline of computer programming, which requires efficient navigation to an answer that is both right and elegant, he was able to gather principles of logical reasoning that are highly applicable across disciplines.

He studied history and — by combining these studies with empirical observations in China and Cambodia and Africa as well as the Middle East — he was able to develop his skills in causal reasoning. What causes can be credibly and realistically and logically linked to what outcomes? What he observed on the ground did not always comport with what is taught in history books, since historians may use flawed or biased logic or incomplete knowledge. Best to construct your own reasoning chain and your own web of causality. This skill is highly applicable in business.

Linguistics helps with understanding the meaning that people intend when they speak. It helps with nuance and idiom, and with assessing people through their spoken words — another critical business skill.

Austrian economics is the system of thought and logic and insight that can integrate all this knowledge into a cogent way of understanding and explaining the business world.

Yousif felt that, even with his wide range of multidisciplinary knowledge and multicultural experiences, he still did not understand people and their decision making sufficiently for business. Yousif discovered Austrian economics by reading its definitive treatise, Human Action by Ludwig von Mises.

He told us that he found the insights in Human Action, derived from theory, were highly confirmable in the real world via observation. Anyone can make the same discovery. Over time, for example, you will be able to build more and more confidence in your understanding of how people make their decisions, as well as in your own decision-making about the future. By understanding how individuals’ value systems drive economic decision making, you will be able to interpret and anticipate their economic choices. You’ll deduce the theories or mental models through which people see the world, and analyze their actions that way.

Value systems are at work in firms, also. When a firm has a value system of trust and collaboration, there will be an alignment of interests among everyone who works there, and with suppliers and partners. If you take such a firm as a customer, you can apply the same values-based approach to building a strong business relationship.

Running your own business is an original and customized application of principles of Austrian economics.

You can’t read a book about how to run your own business, Yousif told us. Your analysis, using the principles, must be original. He gave the example of applying price theory in his domestic market of Bahrain. It’s an island, so it’s possible to track price fluctuations in inbound commodities — a special economic case. There are unique seasonal business patterns. Trading in oil has a disproportionate effect on economic conditions, and the oil industry is government controlled, so oil prices affect government spending. Boom and bust cycles are very real, and there is observable monetary distortion of firm-level accounts.

Yousif is able to plug these real and highly specialized data into his command of Austrian price theory to arrive at not only price decisions, but a wider range of decisions about when to build inventory and when to deplete it, and when and how to refresh his capital base, replacing older high-maintenance machines with new high-reliability upgrades. Theory is applied in practice in a very real way and in very real decisions. The results have been impressive: a turnaround of a firm to become a growth business and a market leader.

This is our aim at Economics for Business: applying economic principles to help you to improve and accelerate your business.

Failure is a misnomer if we are referring to the human action involved in an entrepreneurial pursuit. A commonly held, although misleading notion, is that entrepreneurs often fail within the first few years in the marketplace. Often, I wonder why and how it happens that entrepreneurs fail only after a few years in the market if they envisioned a profitable opportunity where none had existed beforehand and was visually unapparent to others. In a non-metaphorical sense, let us think about this: Entrepreneurs discover and invest in producing and distributing goods for those who demand them the most, thereby creating downward pressures on consumer prices via their purposive action. With that said, why is it that at one point, the entrepreneur discovers effectual ways to satisfy consumer demands, and only within a few years is the entrepreneurial reported to have failed? I do not buy this one bit, and I believe this belief is all wrong. Here is why: Firms measure “success” or “failure” via profit and loss. How do we measure the entrepreneur’s contributions? One way we might measure the entrepreneurial function is by their compounding effect on future developments for human flourishing.

Instead of, as some might think, that entrepreneurs quit too soon, the reality is that entrepreneurs are often negatively affected by distortions and interventions in the marketplace. Not to mention, entrepreneurs are subject to the ongoing competition between existing and emerging institutions. Institutional competition is a result of what has been and what will be. Nevertheless, Institutional conditions serve to attract the unknown persons with specific knowledge who are incentivized and motived to contribute to the knowledge fund of the marketplace.

Some have said that entrepreneurs do not pick the right people for their team, their purposes are directed toward the wrong endeavor, and somehow, they lack commitment, persistence, and all the rest. I do not buy it. We must look at the effects of various institutional changes, distortions, and interventions, that play such a significant role in the assumed failure of nascent or incumbent entrepreneurs.

It boggles the mind how failure is attributed in many cases only to entrepreneurs’ characteristics instead of the distortions and interventions placed in their way that obstruct the signals that are widely used to make decisions. Institutions like money and price act as entrepreneurial signals that reflect the known knowledge needed to produce and distribute consumer goods and services, particularly those economic goods valued most by market participants who consume and are satisfied by them.

Even the thought of an entrepreneur’s failure is somehow self-inflicted is udder nonsense. Who would discover a profitable opportunity only to fail at it knowingly? Moreover, the same people who attribute failure to the entrepreneur have the antidote for fixing their failures. Ha! We got entrepreneurial failure all wrong. It is no doubt true that sometimes entrepreneurial projects do not cut the mustard. However, according to Murray Rothbard, no one else knows their market and the workings of their market better than the entrepreneur. Therefore, there must be some external factors creating situations conducive to failure. As you see, commentary about entrepreneurial failures seems to face inward – failure is the entrepreneurs’ fault – of course. I beg to differ. Firms may fail, but entrepreneurs do not. Entrepreneurs shape our future only by adding to the entrepreneurial stock of knowledge. The steamboat, airplane, vehicles, ice manufacturing, light bulbs, umbrellas, pens, food and food processing, digital apps, just technology, in general, are all outcomes of an accumulation of knowledge from previous entrepreneurs that took place over decades and in some cases even centuries.

Here is a thought experiment: If entrepreneurs functioned under a designated entrepreneurial sector, I presume they would “fail” less often. We know that institutions shape individual’s decision-making and, in the entrepreneurial sector, risk tolerance. An entrepreneurial sector as a “fund of knowledge” creates conditions for entry and learning from previous entrepreneurs’ accumulated experiences.

Institutions of Entrepreneurship invites the effectual conditions for human flourishing – the spontaneously grown institutions where wealth can be created ex nihilo. You see, the marketplace is not anthropomorphic; it is a means by which individuals can pursue their end.

You see, “failure,” as implied by those who do not realize it is one of those misleading words concerning the function of entrepreneurship in a market economy. We cannot look at failure as such. Intervention and distortions and institutional shifts have a more significant effect on entrepreneur success than the personal characteristics attributed to their “failure.”

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156. Yousif Almoayyed: How Austrian Economics Helps Me Make Best Use of All My Business Knowledge