80. Clay Routledge and John Bitzan: Entrepreneurship Brings Meaning and Purpose to Life

The entrepreneurial life is a life of meaning and purpose. We believe that strongly, and our belief is anchored in the ethic of entrepreneurship: to serve others, making their lives better, and thereby improve one’s own life, making an entrepreneurial profit, both economic and psychic.

In episode #80, we review some deep research support for this linkage between entrepreneurship, free-market capitalism, and meaning in life.

(Full episode transcript available here.)

Key Takeaways and Actionable Insights

An intersection between psychology and economics.

Clay Routledge is a social psychologist, with a focus on human motivation: what gives us the energy to pursue our goals and aspirations.

John Bitzan is an economist who has taught courses on international business and international economics. He fully understands the huge role played by economic freedom in elevating people out of poverty and making lives better. He now leads the Challey Institute (full name: Sheila and Robert Challey Institute for Global Innovation and Growth) that is focused on looking for ways to unleash the power of the private sector to create economic opportunity.

John and Clay collaborated on the research we discuss on E4E #80.

What is meaning and why is it important?

Meaning is defined as people’s perception of the coherence, significance and purpose of their lives. We are all trying to find a place in the world where we function, and we have a desire to be significant, to play a role in society, and to have a purposeful existence.

And people understand this about themselves. They have a good subjective sense of what it means to have a meaningful and purposeful life. They have a greater sense of meaning if they play an important part in the lives of others. Meaning embraces a contribution to someone else — to family, to community, to society — beyond just making a contribution to your own welfare.

The strong link between meaning and motivation.

People who see their lives as meaningful tend to live longer and healthier lives. Why? Because they are more motivated to live healthy lives. They make the choices that reduce the risk of mortality. They eat healthier, exercise more, avoid harmful behaviors like drug and alcohol abuse. When people have a purpose in life, they take better care of themselves.

Meaning is a motivational force. And that’s how it connects to economics.

Existential agency, capitalism, and entrepreneurship.

According to Clay and John, existential agency is the extent to which people believe they have the ability — it’s in their power — to pursue and maintain meaning in their lives. And people’s beliefs about meaning and existential agency influences a range of economic beliefs.

Clay and John researched the connection between people’s beliefs about existential agency and their views towards capitalism and entrepreneurship, both on the macro or institutional level regarding their role in solving important problems, and on the micro or individual level of their own entrepreneurial aspirations. They researched over 1200 Americans and asked questions including both their general views towards economic freedom and their motivations to become an entrepreneur.

The survey revealed that people who have more existential agency, i.e. a greater belief that they can obtain and maintain meaning in life, were more likely to have positive view towards capitalism, about entrepreneurship, and more likely to be motivated to start or run their own business.

It’s not self-interested, it’s pro-social.

Clay also emphasized how much meaning in life and existential agency are associated with pro-social beliefs, attitudes, and behaviors. For these people, motivation is not focused solely on their own wellbeing and their own life outcomes. Part of the motivation is to serve a community and serve society. Entrepreneurs are motivated to solve problems for others: entrepreneurship is pro-social. It can solve the major challenges of society, including macro problems like climate change or poverty.

The existential vulnerabilities of our current world.

The opposite of existential agency is the feeling of a lack of ability to play a meaningful role, or to take on a meaningful challenge or to see the opportunity to make a direct contribution via one’s own efforts.

Clay and John worry that young people are being educated to believe they have no control over their lives, and don’t have the ability to overcome obstacles that they face. They are told that problems are systemic, and discouraged from thinking about ways they could make a meaningful contribution, or make a difference. They are indoctrinated with a cultural world view that undermines existential agency. Symptoms include a decline of faith in capitalism and its institutions, and a sympathy for socialism.

A focus on meaning is especially important now, when people are told that they need to rely on the state to improve their situation, and are provided with negative work incentives via supplemental unemployment payments that make not working a better financial choice than working.

And Clay and John emphasized that the meaning-motivation axis applies to all social groups, including minorities. It’s important that we give all people — especially the young and minority groups — the message that they have the ability, through the agency of entrepreneurship and the institutions of free markets, to make a difference, contribute to something beyond themselves, and play an important role in society.

Free Downloads & Extras From The Episode

Challey Institute Research Briefs: Download Brief 1Download Brief 2

Challey Institute Research Report: Download Report

Clay Routledge on Why Meaning Matters For Freedom And Flourishing: Download Paper

“The Austrian Business Model” (video):

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70. Per Bylund: How Entrepreneurs Build Businesses That Are Beautiful Islands Of Specialization

Per Bylund discusses the distinctive Austrian theory of the firm on this week’s Economics for Entrepreneurs podcast. He captures his unique business strategy construct in the metaphor of Islands of Specialization.

Key Takeaways and Actionable Insights

How do creative entrepreneurs design and build new businesses, new products and new services that grow and succeed? You’ll make a big difference for your own venture if you follow Per Bylund’s advice to Think Better, and Think Austrian. One step in the right direction is to clear your head of thoughts about competitors to fight, markets to invade, beachheads to take, or moats to construct around your business and your brand.

The alternative way of thinking is to envision your business enterprise, your brand or your offering as an island of specialization. What you create, launch, build, grow and sustain is something that is so special that your customers experience a deep and rich feeling of value that they can’t possibly get anywhere else. For your customers, it provides the business equivalent of a visit to (and eventually permanent residence in) a comfortable, amenity-laden resort on a beautiful tropical island, where the staff recognizes and caters to their every wish. There’s nothing else like it.

How can you create one? There are four principles that successful entrepreneurs follow to build their island.

Tropical Landscape Cartoon

Click on the image to download the PDF

Aim To Please. That’s not the kind of advice you’ll find in business school or textbooks. Yet it captures the core of our Austrian approach to business. The customer is the reason for you to be in business. Aiming to please them is the right way to think about strategy. Aiming to please is a process of observing, listening, studying and empathically sensing what will please customers the most. You aim to understand their ecosystem and their logic, their hopes and their dreams. Your offering is the way you indicate to them that you can fit in to their ecosystem and contribute to their goals. Your business model is the way you arrange your activities to please customers once you’ve fully understood their preferences and desires. Competition, cost, resources and other considerations are secondary.

Don’t copy — move beyond. Military business metaphors depict competition as conducting wars over business territory, or fighting for customer attention. In Per’s Austrian way of thinking, there is no new value for customers when a firm merely copies what is already offered by others. There’s no point — no value — in fighting over market spaces. Value emerges from what’s new and better and different. Smart entrepreneurial island builders assess the current landscape, predict where the customer will be in the future, and navigate to that place to build a new island.

Build from strength. Entrepreneurs distinguish what is unique about themselves, their partners and employees, their processes, their brand and their resources that can be of benefit to customers. Much of the uniqueness is subjective — the owners’ or the business’s identity, their unique knowledge and expertise, their relationships and interconnections that can co-ordinate the assembly of specific solutions. It’s not about arraying more destroyers on the battle lines than the opponent; it’s arraying a set of uniquely desirable and attractive brand features and attributes that are attractive to the customer.

Maximize value not output. The island builder keeps on building. Not for scale or market share or maximizing output. The direction of growth is to maximize value. Value is a feeling of satisfaction in the customer’s mind. Maximization, in this view, refers to higher levels of satisfaction, over a wider range of experiences, for more customers on more occasions. Maximization is not a quantitative or mathematical concept, to be compared with rivals to ascertain who is “winning”. It’s a qualitative concept — what quality of value has been experienced, and how can it be improved.

The four guiding principles — aim to please, in unique ways, based on your own identity and strengths, always thinking about the value that’s experienced by customers — lead to beautiful businesses. If you are developing visual island imagery in your mind’s eye as you read this, think of a balmy climate, vibrant flowers and trees, bubbling streams and distinctive animals and birds. Let your imagination run free in conjuring up beauty — that’s what entrepreneurs do as the start, grow and sustain their businesses.

Free Downloads & Extras

The Two Kinds of Knowledge Entrepreneurs Must Have: Our Free E4E Knowledge Graphic

For a full-length essay by Per Bylund (“Make Your Startup an Island”), download our latest free e-book, Austrian Economics in Contemporary Business Applications: (PDF): Our Free E-Book

For a shorter essay, see Per’s article, “Forget the Moat and Make Your Startup a Tropical Island”: Click Here

For a full exposition of the Austrian theory of the firm and the concept of islands of specialization, see The Problem of Production: A New Theory of The Firm: Click Here

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68. Steve Phelan Explains Why Entrepreneurial Intelligence Beats Artificial Intelligence

Artificial Intelligence promises cognitive augmentation for business practitioners. Professor Steven Phelan’s research reveals that Entrepreneurial Intelligence is far more important and far more likely to influence business success. He explains Entrepreneurial Intelligence and why it will always beat Artificial Intelligence on this week’s episode.

Key Takeaways & Actionable Insights

What is Entrepreneurial Intelligence?

For Steven Phelan, “It’s all about the spark” — the moment of inspiration in combining disparate elements together to develop a new solution. Humans draw on “the fringes of consciousness” to create new constructs.

Entrepreneurs also take risks, investing time, talent and treasure in their venture in hopes of gain, yet understanding that they could lose something of value to them in the endeavor.

Entrepreneurial Intelligence vs Artificial Intelligence

Click on the image to view the full PDF.

How do we contrast Entrepreneurial Intelligence and Artificial Intelligence?

First, we need to differentiate between the narrow and general forms of AI. Narrow AI is software that can solve problems in a single domain. For example, a Nest thermostat can raise the temperature or lower it in a room according to a pre-set rule. “If this, then that” is the general rule for this kind of intelligence. The parameters are designed by the programmers.

For the unstructured problems of life and business, a truly intelligent computer would have to figure out for itself what is important. Part of the problem is that understanding or predicting human motivations — as entrepreneurs do — requires a “theory of mind”, an understanding of what makes humans tick. Entrepreneurs need empathic accuracy — unavailable to AI — to anticipate the needs of consumers. A sentient computer would need self-awareness or consciousness to truly empathize with humans, and have a set of values with which to prioritize decisions.

What’s the role of machine learning?

If you work in a business that generates a lot of data, it can be mined by data scientists for patterns, and those patterns might indicate a better way to respond to customer needs. The richest source of data is behavioral — like choosing songs to listen to on Pandora. Machine learning can detect a pattern of what kinds of sings a user chooses most. A human interpreter can translate those patterns into preferences — in other words, motivations are embedded in behavior and machine learning can help entrepreneurs extract them.

So, the entrepreneur’s best resource is entrepreneurial intelligence.

The psychologist Howard Gardner helped us to recognize many types of intelligence, including math, language, spatial, musical and social. There are two types that might be indicative of entrepreneurial intelligence: EQ (Emotional intelligence) might be associated with intensified empathic skills and empathic accuracy; CQ (Curiosity Intelligence) is linked to the kind of creativity that finds solutions by combining elements on the “fringes of consciousness”, as Hubert Dreyfus puts it.

Can entrepreneurs and business owners assess their own entrepreneurial intelligence?

There are scales to measure EQ and Creativity. Here’s a link to an entrepreneurial quotient assessment:

And here is a more action-oriented self-assessment we developed for E4E:

The bottom line:

Entrepreneurs need knowledge of how to profitably satisfy customer preferences given the resources at hand. This is not a trivial requirement. It is not possible to pre-state all of the uses for a given resource nor to compute the payoff for a given application. Current computational methods are thwarted without a complete list of entrepreneurially valid moves and the payoffs from such moves. No amount of growth in processing power, data communication, or data storage, can solve this problem.

The late Steve Jobs is often held up as the epitome of a successful entrepreneur. His founding of Apple, ousting by his own board, and subsequent return to rescue the company, and then make it the most valuable publicly traded company in the world is the stuff of legend. One of the apparent secrets of his success was to understand that “people don’t know what they want until you show it to them. That’s why I never rely on market research. Our task is to read things that are not yet on the page.”

This ability to “read things that are not yet on the page” lies at the heart of the concept of empathic accuracy. Empathic accuracy is “the ability to accurately infer the specific content of other people’s thoughts and feelings”. Until AI can do this, Entrepreneurial Intelligence is a better tool for the innovating entrepreneur.

Free Downloads & Extras

Insights Statement Template: Our Free E4E Knowledge Graphic
Marking Platform Tool: Our Free E4E Knowledge Graphic
Understanding The Mind of The Customer: Our Free E-Book

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