My “What Entrepreneurs Can Teach Us All About Life” was published in The Wall Street Journal. Here is a PDF version of the article:
“We often think of entrepreneurs as larger-than-life characters. They take big risks. They make their own rules. They innovate and experiment, questioning things everybody else takes for granted.
“It can almost seem like entrepreneurs are a breed apart. But they’re not. All of us are born with the ability to take risks, think creatively and challenge the everyday way of doing things. And as hokey as this can sound, we would all do well to tap into those traits in both our lives and our careers, whether we work for ourselves or not …”
Read the article at the WSJ site here or as PDF here.
Also in Portuguese, Spanish, and Polish translations.
Related: “What Business Ethics Can Learn from Entrepreneurship” [pdf]. In Journal of Private Enterprise, 24(2), Spring 2009, 49-57. At the Social Science Research Network. Amazon Kindle e-book version. Serbo-Croatian translation by Alma Causevic. Spanish translation by Walter Jerusalinsky [PDF]. Portuguese translation by Matheus Pacini [PDF] or [html]. Audio edition in MP3 format and at YouTube.
A discussion between a socialist and a capitalists
It’s not about economics, but what it means to be human
While the terms socialism and capitalism only expressed a superficial understanding of reality and are even obsolete if we take into consideration our modern knowledge, they are the only basic concepts taught and known by the new generations. I will use them to start a conversation between those two antagonists and then expend to show what’s wrong with the knowledge we have today. I know my history and know that those attempts are useless, for socialists do not accept the concept of falsifiability. It means that if you ask them what will prove their theory wrong they won’t answer. They only engage in a conversation to prove that you’re wrong or a bad person and that there can be no doubt about it. They have no humanism, no consideration toward those who do not endorse their political view, because it’s more than just ‘a view’, it’s a way to define what it means to be human. Let’s do it.
Socialist’s story of exploitation
The conversation starts with a factory, its owner, and the workers of that factory. The value of a product is defined by the labor of workers, socialists say. Without them, the owner of the factory would have nothing and yet most benefit goes to the owner. Without the workers the machines the factory would be worthless. It’s unfair and that’s why socialism is good and why the workers should rule, they are the central piece of any economy. That reasoning is the one that every socialist and communist consider being true… somehow. That story is sold to workers since the end of the 19th century. It’s a piece of fiction for them workers and a set up for those who oppose socialism to label them capitalists, or the enemy even if they are poor and own nothing. The answer of economists like Mises, Hayek, Friedman, Sowell for the last 100 years is always the same. Socialists failed to understand the entrepreneurial spirit, which explains why the story has nothing to do with reality.
What’s that the entrepreneurial spirit?
Top abilities, risks taker, value creator, and price of things
For a start, the story never mentions that the owner is himself a worker. The choice of machines is not random but the result of a carefully thought organization based on an idea. The owner is above all a project manager, it’s another kind of work, but nonetheless a work. Socialists fail to grasp that concept the same way, they will state that everyone is creative. Beyond that there is a deep belief that everyone is the same (that’s why they don’t recognize bosses as workers and everyone is a creative person), we are all blank slate and justify to believe in the equality of outcome (or result). If you’re not an owner it’s because someone has taken that possible future from you, something unfair happened to you. Not only do we know that’s wrong but that’s a lie because despite we can now prove it, the oppression story is still used. This is the question of Nature vs Nurture and it has been answered. Not only do the socialists failed to acknowledge it, but they show an incredible inability to handle the complexity of the answer which is not binary.
The second point is their misconception about money. When socialists consider you as a capitalist, they always consider that you already have the money for any project. When Henri Ford wanted to build cars based on a revolutionary production method, he hadn’t the money to do it. Where does that money come from? From an idea and the will to take a risk and the responsibilities that go with it. The bank loans him the money, not because of their good heart but because they see an opportunity to make money on the back of a worker’s idea, in that case, Henri Ford. Again what the socialist fiction doesn’t tell you, is how many workers failed compare to one who succeeds, hundreds if not thousands. There are so many things that can go wrong that nobody can control the risk and that what real risk is, the lack of control. Many so-called capitalists who have failed will have to pay for years if not decades the risk they took. Nobody talks about them, but they nonetheless exist and change the socialist story. To the question would they do it again? Most will answer yes. We just saw that the entrepreneurial spirit is based on having top abilities and being a risk-taker and manager. For a society, the consequence to have an entrepreneurial spirit is to add value to products. The socialists do not believe in an economy that adds value. This is expressed in modern terms in the difference between a zero-sum economy (socialist) and a non-zero-sum economy (capitalist). They believe that wealth only changes hands.
The last difference between socialists and capitalists introduced by my little fiction is that they cut the value of a product from its cost (materials and energy). By doing so you end up by defining the prize of an object only by the value a potential buyer is ready to give. Nobody contests that it is one of the parameters of the final prize, but not the main parameter. Things cost something. The exchange of the concept of cost by value, cut people from the reality of the economy and you end up with citizens wanting ‘free stuff’ because they think it’s a right to have it, to own it. The elite tricks people by selling services, because you cannot own services. When you pay for things you become an owner and that’s precisely what socialism does not want.
The reward system shows up once again
Curiously enough those ‘free stuff’ don’t belong to those who get them, the big corporates that offer the ‘free stuff’ really take care of that little details. Again the non-collectivist economists have linked property to liberty. When you accept ‘free stuff’ you give away your liberty, that’s what the socialists economy is all about and when the contract runs out by taking you those free stuff, hell awaits you. From a Darwinian perspective, those who want to pay for their stuff show a far better ability in a mechanism called delayed satisfaction. This is linked to better control of their reward system, which interestingly also seems to goes along with risk-taking, responsibility, and individualism. How many of those who choose collectivism have a lack of control over their reward system? We want everything now and we are entitled to have them!
The scribe against the merchant
I have given a reasonable explanation about the socialist story, fairy tales would be more appropriate, but no matter the quality of that kind of argument, it doesn’t change the mind of any socialist. This has motivated people to look for a deeper but also older explanation. The first thing to do is to bring to the forefront the missing protagonist of the story, the one who tells the story which is not the worker. It’s often an educated person, a teacher, or one of his students. We have seen this pattern in the 1960s revolution. F. A Hayek thought that we have to deal with the old conflict between scribes and merchants, which is as old as our civilization. Hayek wrote, “Activities that appear to add to available wealth, ‘out of nothing’, without physical creation and by merely rearranging what already exists, stink to sorcery” (book: The fatal conceit, chap. The mysterious world of trade and money).
For the socialist of the scribe type, the workers are the ones who produce wealth – they are behind machines, they manipulate the machine and something concrete comes out of the machine. They deny the owner of the factory that his idea, his project, the choice of machines, and how he organizes them is what produces wealth. In old times it was sorcery, today it’s an abstraction, but they still deny that that abstraction has anything to do with the production of wealth. For the scribe, this is hidden knowledge and he denies its existence. The entrepreneur is creative in wealth production, but that capability cannot be transformed into tangible knowledge and that impossibility makes the scribe unable to become an entrepreneur. No matter how smart he is, no matter how hard he tries, he will never be an entrepreneur and this creates resentment, a strong and bitter one, to the point that he enrolls workers to go after the entrepreneur.
I think we can link the antagonism of the scribe toward the merchant, to the conflict of the primitive tribe against the civilized tribe. The latter promotes the autonomous individual which by his actions produces order. The primitive tribe is incapable to understand how this can be possible, it’s sorcery. How can order been produced if everything is not controlled and planned? That’s why the conflict of the collectivists and the individualists, that existed between Athens and Sparta, between the English and German world, is also the conflict of the merchants and the scribe.