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

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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.

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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

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76. S-E-R-V-I-C-E Warriors and the Individual Economy, with Jeff Saperstein

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Entrepreneurship is the new strategy – for companies big and small, new and old, for individuals and particularly for regulation-compromised institutions like education and healthcare. Is the language of entrepreneurship adequate to communicate its powerful effect on driving economic growth, creating betterment for all, raising productivity and escaping bureaucratic sclerosis?

We worry about finding the right language to stimulate the newest generation to a life of entrepreneurship, and we experiment with some options.

Key Takeaways

There is a group of innovative thinkers in economics calling themselves i4j: innovation for jobs. They focus on an economic theme they refer to as the People-Centered Economy. When many innovators are exploring how to automate jobs and replace human with technology — especially the software called A.I. — they are exploring how to design the structures and incentives to make people even more engaged in the economic process of wealth creation, rather than less.

When thinking about the future of jobs and the people centered economy, we should think of entrepreneurs. In the future, everyone will be an entrepreneur. Entrepreneurship is the people-centered economy, or what we call practical economic humanism.

Is our language right?

Entrepreneurship is a tough word for young people to deal with. What does it mean? What exactly is entrepreneurship? What might be more inspiring for them is to focus on the ethic of entrepreneurship. That ethic is service to one’s fellow man — service that is designed to improve their lives. Customers indicate whether or not the entrepreneur is successful in improving their lives by buying or not buying. And it is through the lens of ethical service that they can understand the role of profit. Profit is not the reason people become entrepreneurs — it’s the emergent result. Profit is the signal that society judges that the entrepreneur is allocating scarce resources well. Without profit, the entrepreneur does not continue the service. Service without profit is unsustainable. The ethic of service to others and the emergence of profit as an outcome — a signal of approval — go hand in hand.

In this podcast, we experimented with a new language of entrepreneurship via the acronym S-E-R-V-I-C-E.

S stands for Service: practical economic humanism is entrepreneurs serving others and doing so for profit. It’s the Austrian version of service: I serve you because it is good for me, in every way (purpose, meaning and autonomy). Profit is the signal from the marketplace that the act of serving is positively viewed by customers.

E stands for Empathy. In order to serve, one needs to understand the subjective needs of others and to understand how to meet those needs on the user’s terms. Subjective preferences are idiosyncratic, inconsistent and emotionally based. Empathy recognizes this, and treats everyone’s preferences with respect. Empathy is the number one skill of the entrepreneur.

R stands for Resourcefulness — to meet others’ needs in ways that are new, different and better, the entrepreneur assembles resources and persuades others to contribute to the initiative — financiers, employees, partners, vendors. An assembler of scarce resources must convince others that this is the best use that could be made of them — make a business case. There’s a self-reliant resourcefulness in the virtuous character of the entrepreneur.

V stands for Value — creating value and facilitating a valuable experience for customers is the point of entrepreneurship. Value is in the mind of the person who experiences it — it’s a feeling, a satisfaction, the kind you get when a promise is kept. Taken together, all the people whom the entrepreneur serves constitute the market and the market is the judge of what is valuable. Firms and entrepreneurs don’t create value or add value, they make it possible for customers to experience value.

I = Investment, the action of sacrificing in the current time period in order to produce greater value in the next time period. Investment is the opposite of hedonism. It requires the long term view — if I make this sacrifice now, or this investment now, I am giving up alternative current uses of that money or those resources, but I am willing to do so because I see the possibility of a return in the future. Society needs entrepreneur-investors to create the future.

C = Collaborativeness; entrepreneurship requires the assembly and molding of a team, and synthesis of team ideas and contributions; finding the right way to collaborate by maximizing individual talents and perspectives. A supply chain is a collaboration. A factory is a collaboration. A beauty salon is a collaboration. A construction site is a collaboration. Man is naturally collaborative in bringing value experiences to others.

E = Ethical: successful entrepreneurship is moral action, with pure intentions. Any other approach will fail. The idea of exploitation in capitalism is so far wrong and it doesn’t withstand scrutiny. The entrepreneur needs the approval of customers and markets, including the market for labor and for partners. It makes no commercial sense to be unethical.

Perhaps we could communicate the acronym S-E-R-V-I-C-E and the cogent set of ideas behind it, the integrated concept of what entrepreneurs do and what entrepreneurship is.

The mental model is that of SERVICE WARRIORS. Energetic committed people, combating need and want and dissatisfaction. Organizing people and resources in the fight to establish new improved value, to raise standards, to lead the way to a better place.

Models to Graphically Communicate Complex Ideas and Concepts

Another part of my discussion with Jeff Saperstein concerned the design of simple visual models to clarify complex processes and concepts. One example to which we referred was that of the Individual Economy. With today’s technology, any individual can become a Service Warrior entrepreneur, integrated into the larger ecosystem of economic services through interconnectivity, networks and global exchanges and supply chains. The idea of the individual economy is explained in Chapter 2 of our book, The Interconnected Individual: Seizing Opportunity in the Era of AI, Platforms, Apps, and Global Exchanges (Check it out on Amazon). See also the action model of “The Individual Economy”. It identifies a process and a journey, with a starting point, key structural elements, relationships and dynamics. That’s a complex system about which authors could write white papers and books — but a simple graphic can capture its essence in one page.

Each week at Economics For Entrepreneurs, we offer such knowledge graphics and models as free downloads. Recently, for example, Dr. Mark Packard offered his groundbreaking theory of marketing for the 2020s in a series of five podcast lessons. We captured the essence of his “Value Learning Process” in one process map: View/Download PDF.

Trini Amador presented the essence of three decades of learning about how to build and nurture powerful and effective brands for any kind of business: Listen Here. We captured this expertise in our “Brand Uniqueness Blueprint” – View/Download PDF.

74. Raushan Gross on The Inspiring Life and Beneficial Impact of Entrepreneurs

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Raushan Gross is one of the outstanding writers on the subject of entrepreneurship. In his latest e-book, The Inspiring Life and Beneficial Impact of Entrepreneurs, he establishes the ground rules of the complex system of entrepreneurial innovation in seven principles.

Key Takeaways & Actionable Insights

1) Consumer dissatisfaction is transformed into innovation by alert entrepreneurs.

The fuel that powers the engine of innovative progress is consumer dissatisfaction. The creativity of entrepreneurs transforms the fuel into the energy of innovative ideas, positive change and economic growth.

2) The engine keeps running because entrepreneurs continuously compete for customer approval.

Consumers and customers accept the latest innovation and keep seeking the next one. This relentless search inspires entrepreneurs to out-do each other in trying to bring the next improvement to market. We call it competition, but it’s really the entrepreneurial engine that never stops.

3) Entrepreneurs are empowered by their continuous learning from a constantly changing marketplace.

Some call the entrepreneurial process “trial and error”. Error should not be viewed as a negative concept — it’s learning. The entrepreneur gets smarter with every learning occasion. Learning is continuous because the market is constantly changing.

4) Entrepreneurship is the foundation of a productive society.

A productive and progressing society is the result of consumers seeking betterment and entrepreneurs seeking to serve them via innovation and improvement. There’s no alternative, if what we want is progress. All regulation and intervention impede the system. The worst kind of intervention — socialism — destroys it entirely.

5) Entrepreneurship flourishes most where there is a supportive history and culture.

To preserve and encourage entrepreneurship and to avoid the descent into a sclerotic interventionist economy, we need to weave recognition of the role of the entrepreneur into our culture and institutions. We need to teach it in our K-12 schools and discuss it around the family dinner table.

6) A world without entrepreneurs would be pretty grim.

Economics often sheds light via thought experiments. Here’s one: imagine a world without entrepreneurs. No innovation. No progress. No automobiles and no iPhones. It doesn’t take long to realize the losses we would suffer and the quality of life we would lose.

7) The post-pandemic world is the perfect time to observe the impact of spontaneous agility and adaptiveness.

There is a tendency for us to focus on the destruction that resulted from the pandemic and the politicians’ misguided imposition of lockdowns. Raushan Gross looks in the other direction: what an opportunity to marvel at entrepreneurial adaptiveness at work in the economic recovery.

Free Downloads & Extras From The Episode

To download Raushan’s latest ebook, The Inspiring Life and Beneficial Impact of Entrepreneurs, visit E4EPod.com/Raushan.

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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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