As vital as entrepreneurship is to the working of the market and the lives of virtually all working men and women, most schools of economic thought are silent on the subject. Peter G. Klein’s Austrian analysis breaks that silence. FULL ARTICLE by Doug French
Source link: http://archive.mises.org/12704/professor-klein-on-beating-the-odds/
Professor Klein on Beating the Odds
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Love it.
The first company I ever started was with a relative. It failed miserably and nearly wiped me out financially. After that experience I kind of gave up on the idea and found comfort in working for a large employer. Then in 1991, I took what I thought was a great job at a subsidiary of a large conglomerate. In 1993 I was asked to basically look the other way while the division President falsified documents and flammability test results to cover up a very bad manufacturing flaw. I quit on the spot. I remember waking up the next day and thinking to myself what the hell had I just done. Since the start of my career I had never been out of work and I went through all the self doubt and fear that sets in when you don’t have a job. That afternoon I started calling freinds and long story made short, my company was born that day and I didn’t even know it at the time. In 1999 I sold my company and retired until 2002 when the company that bought my company gave it back to me for $1. The company still exists today, although far smaller then when I sold it in 1999. I don’t think I could ever go back and work for anyone ever again. I probably will never make what the CEO of XOM or GS makes, but I know that being my own boss gives me a piece of mind and a sense of security that few in the workforce will ever have.
They see opportunities others don’t. They take financial risks that most people would consider unfathomable.
Read more: Professor Klein on Beating the Odds – Doug French – Mises Institute http://mises.org/daily/4344#ixzz0npCH4oFX
These two statements are, I believe, the crux of the matter. The first is what underlies the knowledge-based view of the firm, as well as of theories of entrepreneurship. It is axiomatic that knowledge (and perception) are heterogeneously distributed. It’s not that there is no objective reality, but we apprehend that reality (according to scientific realism, anyway) imperfectly. Some people have a better angle; some see things (or connections between/among things) others miss. Peter may evaluate as important/valuable things Paul evaluates as unimportant/valueless; Peter goes on to found a firm based on his evaluation and makes a killing (or loses his shirt).
It is true that neither “seeing things no one else sees” nor a taste for risk can be taught. However, as they say, “luck favors the prepared mind.” I believe there is value in getting practice drawing up a business plan, having some general exposure to the regulatory environment and the roadblocks it imposes, and the other mechanical elements of the entrepreneurial experience (much as it would benefit a baseball manager to play a few thousand games of Replay or Strat-O-Matic, to make the mechanics of it second nature).
That said, there are plenty of criticisms one could make against the current system of trying to teach entrepreneurship.
I don’t think entrepreneurship is something that can be taught as it involves more unlearning then learning.If you come from a family like most, where success is defined as getting a good education, job, home, family, etc, chances are you have been pre-programmed to avoid risk and to go for the sure thing. I often wondered why my best employees, that were far more capable then me, did not strike out on their own like I did. I came to the conclusion that while they had the technical and business acumen, they lacked the ability to deal with the uncertainty that comes with starting a business.
What I do think can be taught is how to be successful at entrepreneurship. I have mentored several entrepreneurs over the years and the biggest challenge they all seem to face is trying to do it all and save money by not hiring people. When they do hire people, they hire the cheapest person they can find and then wonder why things go wrong, which only reinforces their belief that they have to manage everything. The most amazing thing as an entrepreneur that you can experience is when your business takes on a life of its own. The only way that can happen is by hiring the best people you can afford that have the experience and knowledge to help you build your business to the next level. In other words, you have to be willing to give up some control and place your future success in the hands of others. Now that is real risk taking!
great point, frank. to cede (partial) control is hard to do, and no amount of reading texts will make this easy. emotional intelligence is not something that comes naturally to everyone.
I’m not sure if entrepreneurship can be taught, but I am certain that it can be learned.My father became the manager of a small business (with a single site) while I was still in elementary school. He expanded by adding a store about the time I went to college. A year or two after I finished college, he added a third store, and recently, he added a fourth.
Over time, he has gained a great deal of confidence and experience, learning the importance of advertising, pricing, customer service, etc… Interestingly, as he has learned entrepreneurship himself, his political views have become considerably libertarian.
One thing that I have learned from watching him is that there is no connection between entrepreneurship and age. Although some young people have revolutionary ideas and are able to start new businesses, most existing lines of business are managed by experienced adults.
I am certain that my father is a better entrepreneur now than when he started. The first expansion seemed very risky. Many people, including myself, wondered if it would fail. However, the next two seemed much less risky and far more calculated.
One fellow said to me: “An entrepreneur is the one who sees opportunity where others see risk.” That is, the entrepreneur, from his own standpoint, has whittled down the risk. Others think he’s taking a great risk, but he does not.
Thus, in this fellow’s view, an entrepreneur is not a great risk taker but in fact the opposite: an eliminator of risk.
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