An Entrepreneur Definition...

That Matters

by Arturo F Munoz

An entrepreneur definition that matters can be summed up in the following picture. Havana 1950 vs. Havana 2010 and Hong Kong 1950 vs. Hong Kong 2010. The point? Get the State involved in running things and it will run them down to the ground, because it will get in the business of controlling what economists call "factors of production" – the elements of capital. This is the stuff that products and services are made of.

capitalism vs socialism havana hong kong

Unlike an investor, the State has no vested interest in producing anything at the best price possible, because the State does not compete with anyone. The State dictates. But in a market economy there is one individual who does invest in factors of production to produce with them goods or services to be used in the further production of even more complex goods and services. This individual may be called the capitalist-entrepreneur.

Are you a capitalist-entrepreneur? If so, you're a blessing to mankind and don't let any State bureaucrat tell you otherwise.

Capitalist-entrepreneurs buy these factors of production, and do so today in order to fashion some good or orchestrate some service to deliver tomorrow. This willingness to do something today to gain from it tomorrow keeps the capitalist-entrepreneur on tippy toes. This person is alert to gaps in between what he can earn by letting money simply sit in a bank account instead of using it to produce some good or service for a group of potentially paying customers.

Without The Right Entrepreneur Definition, Society Becomes Destitute

This may seem trivial. But entire nations rise and fall in accordance to the number of people within its borders who may be willing to make this educated guess at profiting from these discrepancies in what may prove to be profitable uses of resources. This is why the capitalist-entrepreneur is such a blessing, and one major enemy to the statist among us.

Under this entrepreneur definition, if this individual did not see a likely profit to be gained from making use of resources that are undervalued and underutilized, there would be no incentive for him or her to initiate the act of innovation. Innovation improves the life of so many participants in the market economy and is driven by the stimulus of possible profit. This is the heart of capitalism.

Let as many capitalist-entrepreneurs enter a market and compete to exhaust the possible profitability in some area there, and this will prove to be a boon for all. New products will appear. They will be promoted and priced to sell and, with greater competition, they will move out in a wider circle of distribution through lower prices until all profit gets exhausted and everyone is better off - the entrepreneur, the consumer and society at large, which will feel richer having experienced innovation, i.e. a new product or service not available before.

But economies come in 2-flavor combinations, not just profit but profit and loss. Some entrepreneurs do not realize profits and, unless this is the result of witnessed fraud, the government is not to keep them afloat, no matter how much wealth they lose in the transaction. Economist Murray Rothbard explains.
A loss occurs when an entrepreneur has made a poor estimate of his future selling prices and revenues. He bought factors, say, for 1,000 ounces, developed them into a product, and then sold it for 900 ounces. He erred in not realizing that the factors were overpriced and overcapitalized on the market in relation to their discounted marginal value products, i.e., to the prices of his output.

Every entrepreneur, therefore, invests in a process because he expects to make a profit, i.e., because he believes that the market has underpriced and undercapitalized the factors in relation to their future rents. If his belief is justified, he makes a profit. If his belief is unjustified, and the market, for example, has really overpriced the factors, he will suffer losses.
So entrepreneurship is risky. How exciting can that be? What a privilege to be able to bring innovation to society while having to be thoroughly adept at planning and preparing for the unexpected!

destroy american capitalism communist sign

Just because it is risky to undertake an entrepreneurial venture is no reason to penalize the market process. Losses are important indicators of underperformance in decision-making. Somebody has to make mistakes to help others avoid them. And this is why it's so important not to interfere with these signals in the market and corrupt them with the use of arbitrary regulations and pressures from coalitions that prefer to avoid mistakes by having others pay for them through government fiat.

Losses can and should be incurred in proportion to the error that the entrepreneur makes and this ought not be condemned. It is part of the education process of a society. As economist Ludwig vos Mises put it:
Nobody has the right to take offense at the errors made by the entrepreneurs in the conduct of affairs and to stress the point that people would have been better supplied if the entrepreneurs had been more skillful and prescient. If the grumbler knew better, why did he not himself fill the gap and seize the opportunity to earn profits? It is easy indeed to display foresight after the event.

And so we must avoid giving heed to the advice of those who wish to sell us a heaven on earth, where imperfections are beyond the grasp of normal humans so long as we place our trust in the State and its purveyors - the technocratic elite.

Clearly it is through honestly legitimate work and not by way of political action, expropriation, and legislation that a capitalist-entrepreneur ought to gain access to productivity and the rewards thereof. When the work ethic is replaced by a political ethic, the economy declines as the bureaucrat replaces the entrepreneur. This was the aim of statists throughout the 20th-Century the world around. And it has not stopped today.

An Entrepreneur Definition Must Include The Purpose Of Productivity

Where does productivity come from? It originates from capital plus good resource management and good labor. As an entrepreneur, this is what you're aiming to achieve when you pursue for profitability. This is nothing short of social change, because in achieving productivity you've put the most valuable factor of production to meaningful use - human labor. Productive work gives meaning to man's life.

If as an entrepreneur you've not given thought to your function as a dynamo for social change, then it's time you took your job more seriously. By being a successful entrepreneur committed to involving others in your business, you are providing purpose and direction to lives that might not otherwise be directed with purpose. In the words of Rev. R.J. Rushdoony…
Meaning and purpose are basic to man's life; cynicism, skepticism, and ennui mark the death of a culture, and the disintegration of man. Ennui in English has come to mean boredom, but its original and basic meaning in French goes deeper. It is, according to Mitchener, "a sick emptiness which drives people to drink or drugs or travel or fornication in a desperate and unsuccessful search for distraction." Ennui leads to a distaste for life because it is seen as meaningless. As Julie de Lespinasse (1732-1776) wrote to Condorcet, "I feel that books neither instruct nor amuse me. And as for what I can write, I am quite sure that nothing is worth saying. What is the good of writing letters even to one's friends?" As she observed of Madame de Chatillou, "Her head is empty, and her soul is a real desert." Today, all too often, the souls of management and labor are a desert also.
Do not succumb to this definition of the heartless, callous capitalist-entrepreneur who cares none about a fellowman but for the fellow's pocket purse. This is not to deal honestly with all. It is not to ensure that a business be both profitable and charitable without coercion by statist diktats.

It is possible to accomplish great deeds today as a capitalist-entrepreneur even in the midst of an increasingly greater flood of State regulations. Entrepreneurs work around regulations and this is the American Way going further back than the birth of the nation. Bureaucrats set them up. Entrepreneurs find creative ways to give people what people want not what central planners require via diktats. For as long as there may be entrepreneurs there will be hope for an economy and a society. Play your part in it. Be an entrepreneur.

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