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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.

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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.

Unsure Of Your Direction In These Turbulent Times? Entrepreneurship Can Provide All The Answers You Need.

2020 has been a strange year. My friend Ben always asks me, “Is the world crazy enough for you today?”  He knows I nurture the entrepreneurial spirit and he likes to challenge me: there’s too much uncertainty in 2020 even for those who typically embrace it, which is a good definition of entrepreneurs.

But, in fact, entrepreneurship is the answer in crazy times. Here are several reasons why.

Entrepreneurs are independent.

In times of turbulence, whether economic or political, global, national or local, many people can get confused. They’re not sure what to think, and they find it difficult to sort through competing claims or conflicting evidence. They look for the reassurance of someone else’s opinion to latch onto.

That’s not the case with entrepreneurs. They are independent thinkers. They rigorously seek cause-and-effect where it can be found, but they are also keenly aware that complex systems – when shocked with a pandemic, a disputed election, civil unrest, zero and even negative interest rates, significant changes in shopping and travel habits – can exhibit unpredictable and unstable emergent properties.

Entrepreneurs apply their own judgment based on the information that’s available to them and the insight that’s unique to them; they make a decision; and then they test it against reality by implementing it and adapting based on the results that come back. Independent thinkers are society’s best resource amidst turmoil.

Entrepreneurs are non-ideological.

It sometimes appears that we are suffering through a clash of ideologies, whether social or political or economic. Ideologies tend to be rigid and unrelenting, and those who hold one see opponents in anyone who holds another. Ideologies are not useful to entrepreneurs, and so they don’t include them in their assembly of resources. Ideological rigidity doesn’t mix with the pragmatism and adaptiveness that are keys to entrepreneurial thriving.

A non-ideological world sounds very attractive right now.

Entrepreneurs have no time for identity politics and political correctness.

Entrepreneurs are typically pursuing a finite goal with a finite amount of resources. They need the best people they can recruit to join their team, they need clarity of communication and a shared mission. The last thing in the world they have any time for is worrying about the political correctness of a choice or of a statement. They’ll listen to legitimate market preferences of course, but they won’t be distracted by meaningless noise. entrepreneurs don’t lie bout equality or unity. They assemble diverse teams – where the diversity comes from complementary competencies not divisive demographic distinctions – and they judge on passion for the task, performance, and results. 

Entrepreneurs are non-compliant.

A consequence of the pandemic is that a portion of the population has been beaten down into a state of compliance by authorities wielding mandates. Compliance is undesirable behavior when it is viewed through the entrepreneurial lens of innovation, betterment and economic growth.

We’re all better off when there is non-compliance: when Uber refuses to comply with the mandates n favor of taxis, or when AirBnB refuses to comply with pro-hotel mandates, or when medical researchers defy those who want to constrain experimentation and progress. Non-compliance is the right stance for society, and entrepreneurs can be counted upon to take it.

Entrepreneurs hold to the ethic of service.

In our current conflicted world, capitalism is condemned by some as exploitative and even evil. Some critics see profits that they deem to be extreme and extractive of the value that workers create, others see pollution and environmental damage. They are totally wrong and completely misguided.

The ethic of entrepreneurial capitalism is to serve others. The entrepreneurial market works when producers identify unmet needs and wants among their fellow-citizens who seek betterment and improvement. Multiple entrepreneurs compete to be the one chosen by consumers to meet that need, rivaling each other to come up with the highest quality / lowest cost solution. The ethic of entrepreneurial service has raised living standards across the globe and lifted billions out of poverty.

Keeping entrepreneurs unleashed will generate more and faster improvements in the future.

Entrepreneurs believe in liberty and property.

Entrepreneurship thrives only in favorable market conditions, with the right supportive institutions. The most important of the institutions is the legal framework to make it easy to start new ventures, favors innovation (Professor Michael Munger of Duke University calls the framework permissionless innovation), and imposes as few stifling regulations as possible, so that otherwise unrealized innovation is set free. Overall, we can think of the institutions of entrepreneurship as liberty – freeing creative minds and brilliant engineers and operators to follow their purpose to wherever it takes them in the pursuit of the profit that comes from consumer approval.

The second major institution of entrepreneurship is property. Entrepreneurs stake their own property in a bet that their business can succeed and grow. They take risks with their own property – and therefore need to operate in a framework that respects private property and their right to do with it whatever they will. When private property is restricted, limited, over-taxed, over-regulated or confiscated, entrepreneurship can’t thrive.

Liberty and property together are the institutions of entrepreneurship. 

Entrepreneurship Yields Meaning And Purpose.

At the bottom line, we all seek meaning and purpose in life. Meaning refers to our framing of the difference an individual wants to make in the world, the feeling that one’s endeavors are worthwhile. Purpose refers to the specific goal the individual pursues as in making that difference.

Researchers John Bitzan and Clay Routledge of The Challey Institute have documented, based on deep research, how individuals’ belief in the free working of the entrepreneurial marketplace provides them with the sense of meaning and purpose they seek. Bitzan and Routledge call this feeling “individual agency” – the feeling of being free to act and capable of meaningful achievement in the institutional context of capitalism and free markets. Individual agency is the central idea of entrepreneurship.

90. Per Bylund On A New Austrian Business Paradigm: Facilitation Of Value

In our project to make a useful link between Austrian economic theory and business practice, we earlier introduced the Austrian Business Model. This is a recipe to make a profit – a template adaptable to any individual firm.

Download The Episode Resource The Austrian Business Paradigm – Download

Key Takeaways and Actionable Insights

What exactly do we mean by paradigm?

A paradigm is precedent to a business model. It’s the underlying way of thinking – a set of values, beliefs, concepts and practices that combine to constitute a distinctive entrepreneurial approach to business.

Per Bylund’s exposition of the principle of Facilitation Of Value leads to a new – Austrian – paradigm for business. Here is the framework:

The Purpose Of Business is to facilitate value for customers.

In today’s interconnected, fast-changing world, businesses are formed and managed with the intention of ensuring value experiences for customers. This challenge is fraught with uncertainty, because value is an emergent – and therefore unpredictable – property of the interaction of people, artifacts and behaviors in complex systems.

Customers, whether consumers or businesses, operate in their own system. They must fit everything they consume into their existing system – their life or their business processes and organization.

Customers experience value in their own systemic context. If they own a car, for example, they experience ownership value within a system of taking kids to school, commuting to work, and shopping, as well as in an intersecting system of service, maintenance, fueling, accessorizing and replacing worn parts.

Businesses interface with the customer’s systems from their own system of design, procurement, resource management, partnering, warehousing, distribution, payments, technological enablement, regulatory compliance, communications and many more elements. A business system facilitates value to realize the customer’s experience within their own system.

The value of any offering is positively perceived by customers when the fit into their system is felt to be a good one and the offering contributes to system improvement or enhancement in some dimension. Uncertainty is always present because the system improvement can not be predicted with certainty in advance.

Austrian economics provides the principles for entrepreneurs, managers and strategists to establish a unique, sustainable, profitable and scalable process to facilitate value for customers.

The end-user / consumer takes the primary role.

A business can not be an assembly of resources or an expression of core competencies or the implementation of innovation in isolation. It can’t be the result of a strategy to penetrate a market or disrupt a competitive set without first understanding the hopes and dreams and aspirations of customers. It can’t be a simplistic choice from a set of business models on the business school shelf.

A business must stem from giving the customer the primary role. The very purpose of a business is to please customers by serving their needs, and so their perception and preferences must define the business design. Since the needs of customers are subjective, idiosyncratic, changeable and context-dependent, methodological individualism – making the individual the unit of analysis, rather than groups or segments or markets or industries – is the indicated approach.

This approach is a lot different than ideas of shareholder value or stakeholder value. It is sometimes acknowledged in terms such as consumer-centricity or consumer-first. But those commitments tend to be tactical and implementational. Relentlessly and unfailingly taking the point of view of the customer is fundamental to the new business paradigm. It’s what make business purposeful and ethical, sustainable and responsible.

Value is determined by the end-user or consumer.

What consumers seek from business is value. Value is hard to define and challenging to quantify because it is a subjective experience of the consumer, within that consumer’s own individual context. What’s perceived as valuable by one individual consumer will not be the same as another individual, and any individual can change their perceptions or their ranking of what’s more valuable at any time.

Value, therefore, can not be created by a firm or a brand, despite the traditional use of that language. Value is formed in the consumer domain, as an emergent property of the consumer’s choices, behaviors and context. Take a laptop PC for example. The value experience changes depending on whether the user is a gamer, an executive in the financial system, or a video editor. It varies based on the software the user installs, the usage advice he or she receives from peers and experts, the quality of the user’s network, their preferences for in-use performance, and many more variables. You can examine the same value experience thought experiment for any good or service of your choice, e.g. the value of an Audi A8 to a family of 6 living in rural South Dakota compared to a family of two in Manhattan with a one-bedroom apartment and a single parking space. Value emerges in lived experiences within these varied contexts.

For a business to business enterprise, it is sometimes expedient to limit the value analysis to the final purchaser / end user. There are sometimes some special value considerations in these contexts. For example, business customers tend to evaluate every economic choice in money terms – does it lower costs or contribute to higher revenues? But it is also the case that a business customer is often, in fact, multiple users (whether a procurement committee or a department all using the same item), and so a group rather than individual assessment of value is appropriate. Nevertheless, value remains a subjective, idiosyncratic, changeable phenomenon.

Empathy for customer dissatisfaction is the starting point for business development.

Dissatisfaction with the status quo – Austrian economists sometimes call it unease – is the raw material for business development. The genius of consumers is to always sense that their experience could be better than it is.

Empathy is the diagnostic skill of observing and analyzing behavioral data and deducing emotional drivers for change and innovation. A customer searching online for more efficient home heating solutions may be dissatisfied with the ambient conditions in the home, or with the level of his or her gas bills. An individual interview can determine which of these – or other alternatives – applies and point the way to a desired solution. The entrepreneurial practice is to focus empathetic attention on the inner drivers which are manifested in observable behavior.

There is no shortage of customer dissatisfactions to be addressed by businesses. The skill of empathy is to advance beyond taking the point of view of the consumer and to feel the experience that the consumer feels, and to identify the feelings that really matter. This is counter-factual – it’s not actually possible to feel what another human being feels – and is therefore an act of imagination. Imagination provides the energy for consumers’ dissatisfaction (they imagine a better future) and for entrepreneurs’ creativity (they imagine what dissatisfaction feels like for the consumer, and they imagine solutions to that dissatisfaction).

Empathic design

To advance from imagination to a business plan is an act of design. Design can be captured as a process in which an innovating business creates a blueprint for a good or service or technology or other artifact that presents a practical solution to a customer. There are many design process alternatives. The shared design principle is to start with an identifiable customer with a problem to be solved, and progress towards a solution with which the customer can interact and can evaluate.

Early prototype solutions should be adequate to share a resonant imagination between entrepreneur and customer, and to stimulate realistic responses from customers regarding features and attributes they do or do not find valuable, and flexible enough to accommodate frequent iterative adjustments based on those responses.

Uncertainty exists as a barrier to be overcome in the delivery of new solutions to customer dissatisfaction. Adaptiveness is the entrepreneurial response to uncertainty.

Uncertainty is integral to the business paradigm. Uncertainty can be experienced as the impossibility of predicting the future because of the extreme complexity of the interactions of customers, entrepreneurial offerings and potential solutions, opportunity costs, transaction costs, environmental factors and other system elements. The response to uncertainty is adaptation: making a change in a business offering and monitoring the resulting change in customer acceptance, customer behavior, customer interactions or other consequential results. Favorable changes are preserved, unfavorable ones discarded.

Continuous dynamic change then becomes the norm for businesses in an adaptive system. There is no equilibrium, no stasis, no predictive planning, no stable combination of assets or resources. There are no system-imposed or structural boundaries to a firm’s activities, just the subjective entrepreneurial judgment about interaction with customers to facilitate customer value. In complexity theory terminology, customer value is the constraint to the system that can shape change and emergent outcomes (think of Steve Jobs constraining his designers to “no buttons” on Apple devices).

Businesses accumulate capital as a result of the flows of income from customers.

The measure of business effectiveness is the flow of income from customers. Insofar as entrepreneurial actions set in motion a flow which is projectable into the future, a business is in a position to make capital investments both to expand its capacity to generate income flows and to create new innovations to stimulate new flows.

Current flows are subject to change at any time when customer preferences change, or their environment changes or there are shocks to the customer’s system. Entrepreneurs must develop accurate appraisals of which of their assets – in what specific combination – are most responsible for generating income flows, and establish them in such a way as to be flexible in rearranging them and recombining them in response to (or in anticipation of) market change.

Future flows from investments in innovation are uncertain and unpredictable. Entrepreneurial skill in identifying productive investments (foresight) differentiates more successful from less successful firms.

Free Downloads & Extras From The Episode

The Austrian Business Paradigm (PDF): here.

“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:

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The Epic Calling Of The Entrepreneur.

Many of us feel the pull of contributing to something “bigger than ourselves”. It could be a cause, a charity, a movement, a great project. It could be mentorship in a collaborative organization. Some people even claim that working for the government qualifies: representing (or regulating) the people.

But doing something “bigger than ourselves” does not have to be interpreted purely as a collectivist principle (sacrificing the rights of the individual for the common good), nor as altruism (living for others and not for oneself).

Almost 250 years ago, Adam Smith pointed out that it is not out of benevolence that the butcher, the brewer and the baker provide customers with dinner. Rather, it is out of self-interest. Which is an 18th century way of describing the entrepreneurial ethic of service.

Ethic of service

In an entrepreneurially driven market, customers – by buying or not buying, repeat purchasing or not, subscribing or not – determine what is produced. To be successful, businesses serve customers. They spend an enormous amount of time and money to understand customers and their preferences and needs, and expend all of their resources in an effort to meet those needs in the way that gains approval. Customers are rational seekers of betterment – they buy what will make their lives better, from their own perspective. They seek happiness. That’s what entrepreneurs deliver: better and happier lives.

The reward for utilizing today’s resources in ways that generate the greatest future improvement to society is profit. It is society’s way of pointing to where entrepreneurs should direct their best efforts. The ethic of service is sustained by reinvesting profit into more investments that benefit customers.

The epic calling of entrepreneurs is to join and accelerate this cycle of service, betterment, profit and reinvestment. 

Ethic of Innovation

The market in which customers have all the power is highly dynamic. The genius of customers is to be never satisfied. Betterment is their goal, and betterment never stops. There is always something better in the future, and always a new entrepreneurial market entrant or new R&D team to design it and offer it. 

The result of this dynamic is a continuous stream of innovation – new and better products, services, techniques, delivery systems, restaurants, food, payment systems, movies, TV’s, computers, smartphones, and V/R headsets. It’s better service at every store from the high street to the mall, and every dry cleaners and every nail salon and every gas station and repair shop, because innovation includes treating people better while serving them better. The dynamics of the market means that a customer who receives good service from any provider makes that the standard in judging all others. The momentum in the dynamic entrepreneurial economy is always forwards and upwards, towards betterment. 

Ethic of digitization

Digitization brings rapid betterment at an ever-increasing pace. It’s exponential. Entrepreneurs both initiate this phenomenon and harness it. Entrepreneurs brought us the internet and websites and search engines and e-mail and online shopping. They made almost infinite amounts of information available to us – certainly much more than anyone can consume or use. The digital economy brings abundance, the opposite of scarcity, which is what economists have told us is the norm in markets. Under digital abundance, all choices are going to become richer and richer, the cost we pay for things we value is going to become lower and lower (irrespective of what governments do to their fiat money – amazon.com is going to offer more and more choices and deliver better and better quality at faster speeds whatever the state of the dollar; we may pay with a different currency).

Entrepreneurs employing digital means to serve customers better will operate in this new world, pursuing and exploring the digital challenge: what are the boundary conditions of higher quality at lower cost? How can they bring digital betterment to everyone in the world? 

The emerging standard of digital betterment is that new services need to be 10X better than whatever is already in the marketplace in order to get customers to turn their heads, pay attention, and change from their current services, which are already excellent. The resultant compounding of improvement will rapidly elevate our life experiences.

And, in fact, digitization puts customers even more in charge – interactive technology brings more empowerment and control to customers than ever. We can compare prices more easily, benefit from the experiences of others who supply ratings and reviews, perform more tasks more quickly and easily, and orchestrate our own system of services and experiences in exactly the combinations we prefer. Customers will decide which digital providers they choose to allow into their lives. Only the best will qualify, and entrepreneurs will strive to be in that group.

Ethic of private property

It has been pointed out, most notably by Ludwig von Mises, that the entrepreneurial system requires acknowledgment and protection of private property to operate. Investors are free to invest in projects they judge to have the potential for high returns, founders are free to allocate their own time and resources to their innovative ideas, and customers are free to spend their own money on offerings that please them. This private property-based entrepreneurial system has brought the world increasing standards of living and quality of life for roughly 250 years, lifting billions out of poverty and squalor. Today’s entrepreneurs preserve that progress, despite the efforts of socialists to reverse it and replace private property with state ownership and bureaucratic control. No calling is higher.

Better world, better society

There is no shortage of pessimists who see the world through the lens of decline. Most of this is partisan politics, which is, indeed, descending to new lows. Some of it is politics combined with scientism (as in climate change fear). A good antidote to this pessimism is Hans Rosling’s book, Factfulness, which compiles hard data from impeccable world sources demonstrating the incredible, consistent and ongoing global progress in fields like life expectancy, child mortality, reduced incidence of poverty, growth in living standards, levels of education, elimination of disease and even reduced pollution. 

Entrepreneurship makes all of these possible via positive thinking, ideation, innovation, organization, and analytics. But, beyond these functions, entrepreneurship is the dominant force for good in the world. Entrepreneurs are optimistic (because they see the opportunities for progress), polite (because they value relationships), collaborative (to make relationships productive), law-abiding (the wrong side of the law is unprofitable), non-violent (violence is also unprofitable), and civil (because community building contributes greatly to success).

Epic calling

In Yu-Kai Choi’s book Actionable Gamification, which is an insightful analysis of human values, Epic Meaning & Calling is the core drive that is in play when a person believes they are doing something greater than themselves. Entrepreneurs experience that calling. Whatever their individual firm, invention, project or initiative, they feel the higher calling of betterment, and they derive part of their psychic profit from responding to that calling. They feel different and special because of their role and their contribution. 

And their contribution is, indeed, special. They are the drivers of the free market economy that raises everyone’s potential and attainment. They are the pillars of a collaborative culture of achievement and accomplishment. They are the creative catalysts of change. Society is better the greater the role and influence of entrepreneurs.

More of us should respond to the epic calling.