Entrepreneurship and Change

It’s the ninth day of the ninth month.  I’m prepping for another two-week course and had a Zoom call with friends and colleagues.

We’re doing FinTech, and one of the inevitable questions is this: “I’ve got many ideas, but my boss always says ‘No.’  Why is that and what should I do?”

Let’s have a look at that through the lens of entrepreneurship.

Fun Conference Calls

Salesmen say yes to everything.  That’s both a blessing and a curse.

It’s a blessing as it ships the business in.

It’s a curse because the actual workers, who know well the limitations of their products or services, have to deliver what the salesmen have promised.

To wit, I was on a call two days ago to prepare for an upcoming graduate course for one of the vast universal banks.

I’ll paraphrase what my coordinator uttered: “Your job is to get the students to be fully prepared to speak up about their ideas while giving them all the financial knowledge they get from our courses.”

Luckily I’m too old and wizened to make a stink.  But ten years ago, I would have said, “No, it’s HR’s job to make sure they hire the right kids.  And by the way, I’m a trainer, not a friggin’ magician.”

Alas, here we are.

Why Such a Request?

With the advent of fintech, crypto, and DeFi, banks are positively shitting themselves.  They profited for decades – centuries, even – from the enormous, unearned privilege of receiving printed (legally counterfeit) fiat money from a central bank.

They then dole that out in the form of mortgages, loans, and other goodies for the public to pick up and be damn grateful that they did!

But bright idea people are finding other ways, and it’s wrecking banking profits.

Now, CEOs are positively screaming for the younkers to shout new ideas in old organizations.  

Of course, their managers, who’ve been around for decades, are none too pleased with the idea of being out-ideated.

This is the real problem.  And I don’t have a wand to solve it with.

Murray Rothbard put it well in Man, Economy, and State:

The reason that firms do not scrap their old methods immediately and begin afresh is that they and their ancestors have invested in a certain structure of capital goods. As times and tastes, resources, and techniques change, much of this capital investment becomes an ex-post entrepreneurial error.

What did Rothbard mean by entrepreneurial error?

What is Entrepreneurship?

Nikolai Foss and Peter Klein wrote Organizing Entrepreneurial Judgement: A New Approach to the Firm.

In the book, they look at the various definitions of entrepreneurship.  Entrepreneurship has been defined as:

    • Small-Business Management
    • Imagination or Creativity
    • Innovation (Schumpeter)
    • Alertness to Opportunities (Kirzner)
    • The Ability to Adjust (Schultz)
    • Charismatic Leadership (Weber)
    • Judgment (Foss and Klein)

Foss and Klein settle on this: Entrepreneurship is “judgmental decision-making under conditions of uncertainty.”

They further define judgment as “decisive action about the deployment of economic resources when outcomes cannot be predicted according to known probabilities.”

As I’ve written before, entrepreneurs don’t get paid to own capital.  They get paid to organize it.

Organizing capital using judgmental decision-making be the most challenging job in the world.

Ludwig Lachmann wrote this in his Capital and Its Structure:

We are living in a world of unexpected change; hence capital combinations, and with them, the capital structure, will be ever-changing, will be dissolved and re-formed. In this activity, we find the real function of the entrepreneur.

Lachmann is right to point out that mixing your assets is as valid a way of creating a new structure as creating new assets.

And this is another huge issue: monolithic companies will naturally have a more challenging time adjusting to change because of their size and complexity.

This puts companies out of business, or at least causes them to miss opportunities often.

Staying nimble and listening to your customers is the key to staying relevant.

Subjective Value and Consumer Sovereignty

Two rules I always try to teach graduates in this vain are the following:

    • All value is subjective, not objective, even if it has a discrete price on it.
    • The customer/consumer is sovereign. (You must sell.  They don’t have to buy.)

Subjective Value

This is the most groundbreaking lesson for me.  I remember sitting in an undergraduate economics class at Villanova, utterly confused.

The professor was going over his equations.

My question was this: “If the things you’re going to trade have equal value, why would you ever trade them?  What’s the point?”

Of course, those questions went unanswered.

That’s because of subjective value.  There’s no such thing as objective or intrinsic value, even if it’s got a price on it.

Warren Buffett will pay far more for a company than other people will.


Not because he’s stupid; it’s because the company is worth far more to him.  The control premium is paid when you control the cash, as he often does.

Assessing someone else’s subjective value of a good or service is a valuable skill.  Walking around a medina in the Middle East is an excellent lesson in how you can do that.

Consumer Sovereignty

The consumer is the boss.  It’s that simple.

You, as a business owner, must sell your services.

Your prospects are under absolutely no obligation to buy from you.  (If you’re selling a government-mandated product, you have a captive audience – and a good grounding in coercion.)

But let’s say you’re selling a service—not government-mandated.

You need to persuade, cajole, or convince another person to reach into their pockets to give you their money voluntarily.

And when they’re unhappy, you need to listen to them.  They’ll tell you exactly how to fix things.

Bill Gates once said, “Your most unhappy customers are your greatest source of learning.”

The Entrepreneurial Process

It’s the Never Ending Story.  Here are the five steps, and they restart for every idea.

    1. Discovery
    2. Concept Development
    3. Resourcing
    4. Actualization
    5. Harvesting

Discovery is finding the opportunity.

Concept development is building your prototype and understanding how to manifest your idea.  I think the most challenging thing in the world is bringing what’s inside your head outside of it.

Resourcing is finding the financing and human capital for your venture.

Actualization is making the goods or rendering the service and running the company.

Harvesting is realizing a profit (hopefully).  Then the entrepreneur must decide whether to continue investing in the firm or to sell it off.

Not surprisingly, this is hard work.  But I will do my level best to inculcate my graduates with these lessons.

Hopefully, you learned a thing or two reading this today.

Have a great day.

All the best,



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