Entrepreneurship

Writing over 300 newspaper and magazine articles about business, technology, and culture, I have interviewed very many entrepreneurs. Perhaps my personal favorite was "The Business of Musical Theater: The Dough behind the Do-Re-Mi" for the New Mexico Business Journal.  I have met all kinds of successful entrepreneurs and all kinds of not-so-successful. "All kinds" describes both the limitations and the potentials. In other words, there is no formula. The Austrian School of Economics has worried this problem for over 75 years. As the leading advocates for laissez faire capitalism, the Austrians have never agreed among themselves what entrepreneurship "is."

Part of the problem is that we were raised in schools to want short definitions that are easy to memorize, like Orwellian newspeak.  The very complexity of enterprise works against that.  The Concise Encyclopedia of Economics from the Online Library of Liberty offers this multi-faceted explanation:

“An entrepreneur is someone who organizes, manages, and assumes the risks of a business or enterprise. An entrepreneur is an agent of change. Entrepreneurship is the process of discovering new ways of combining resources.”  Entrepreneurs also increase the value of the resources under their control. “Schumpeter stressed the role of the entrepreneur as an innovator who implements change in an economy by introducing new goods or new methods of production. In the Schumpeterian view, the entrepreneur is a disruptive force in an economy.” (Read the entire article here.)

Peter Schumpeter, Israel Kirzner, and Frank Knight are among the Austrian school economists who have thought through entrepreneurship.  Of course, Ludwig von Mises and Friedrich A. Hayek also addressed it, but their focus was on other problems and their treatment of entrepreneurship was undeveloped. Even though they were passionate advocates for the open market, they did not study the differences between capitalism and enterprise, innovation and invention, market efficiency and marketing.  

“Kirzner's procedure is based on an analogy, or parallel, between what he calls the entrepreneurial element in individual decision-making and entrepreneurship in the market interaction…He isolates the entrepreneurial element by contrasting routine optimizing behavior with what he claims we can know about true individual action …  Individuals spontaneously discover means of satisfying their wants. … Another term he uses is alertness to hitherto undiscovered opportunities.”  This is not mere “economizing” but a deeper insight. “Third, he identifies what he regards as a crucial kind of action in a market economy -- arbitrage. He associates entrepreneurship in the market economy primarily with this action.” Arbitrage is the engine of efficient allocation. (See “Kirzner” by Prof. James Patrick Gunning, Feng Chia University, Taiwan, on Constitution dot Org here.)

 A more subtle approach is being pursued by Nicolai Foss, Peter Klein, and Mario Rizzo who follow Frank Knight and Ludwig von Mises on the entrepreneur’s judgment of uncertain future market conditions.  “Judgment is exercised in the act of investing in  and allocating resources to specific time-consuming production processes that are organized and controlled by the entrepreneur until the completion and sale of the product.  For Foss and Klein the entrepreneur is therefore a capitalist and owner.” (See “Klein Versus Kirzner” by Joseph Salerno on the “Bastiat”pages at Mises dot Org here.)

Traditional college classes in economics teach that markets move toward “equilibrium” that some magical point exists where supply meets demand at a price.  This is not mere observation, but an implicit worldview.  The goal is a static social world of sustainable predictability.  The Austrian school has a different weltanschauung.

Anousheh Ansari of the
X-Prize Foundation

 “I think it is highly useful to think in non-equilibrium terms, to be open to the possibility of change and surprise. You certainly cannot do good economics without understanding the role of surprise. But if one pursues this to the point where the surprises tend to overwhelm the regularities, then I don't believe you have a science that reflects existing realities. … Entrepreneurship is not always equilibrating. …  The idea I reject is this: there is successful entrepreneurship, there is unsuccessful entrepreneurship, and it's a toss-up which is going to outweigh which in the end. … The fundamental Misesian insight into human action is that it involves a tendency to be right rather than to be wrong. People have an interest in being right. …  This does not guarantee "equilibration always." And certainly a permanent equilibrium is out of the question. It would be incorrect even to imply that in any given time period, the changes we observe are necessarily equilibrating. But there are tendencies which tend to overwhelm disequilibrating forces in the market, most of the time.”(Austrian Economics Newsletter, Interview with Israel Kirzner, Spring 1997, Volume 17, Number 1 here.)  (See also "Supplies and Demands" here on Necessary Facts.)

  

Felicia Day:
Acting as Entrepreneurship

Moreover, traditional business management classes teach that the unremitting failures of inventors and early adopters prove that they are wrong.  Success, the B-schools claim, comes from following the wreckage to where the markets are now ready for a mature product or service.  

The modern history of computing echoed much of the early history of railroading in America.  Failures and successes both combined to re-direct existing capital (whether trackage and rolling stock or software and hardware) and did so to attract ever larger investments.  (See The Man Who Found the Money: John Stewart Kennedy and the Financing of the Western Railroads by Saul Engelbourg and Leonard Bushkoff (Michigan State University Press, 1996).  In the days of railroading, the term “venture capitalist” would have sounded redundant. 

ALSO ON NECESSARY FACTS
Venture Capital
Engines of Creation
Objective Intellectual Property Law
Open Secrets
The Genius of Design

Nerd Nation 4.0

The young woman cutting my hair said that she likes science, and is pretty good at chemistry based on the licensing requirements and corporate training for her trade. Maybe that is an anomaly and she is an outlier. But The Best American Science and Nature Writing 2010 includes an article from GQ. As trendy as you can be with your 3-day beard shadow, greasy locks and sultry pout, if you don’t know science, you are not getting laid.

When the Facebook initial public offering did not break all (or any) records, hands were wrung and one of my libertarian colleagues spun a link to a claim that the White House was behind the failure in order to gain control of the Internet.  Twenty years ago, there as no http://anything.at.all. 

Today the US Department of Justice prosecutes hapless capitalists who fall victim to its jaws for collusively selling things that did not exist when they were born.

In one sense, it is an old story. Carolyn Marvin (see here) is famous for When Old Technologies Were New: About Electric Communication in the Late Nineteenth Century.  In the late nineteenth century, although telephone, radio, and the potential of television promised much, the compelling paradigm was the entrepreneur, not the technician. Edison’s success was measured in his millions of dollars of earnings.  In our time, we expect that brains bring profits.  When that fails, we believe that something is wrong. 

We reward intelligence with profits from IPOs. …… and a strong fan base… or we like to think we do.

From the Necessary Facts archives:

Felicia Day
 Gregg Barak, Young Kim and Donald Shelton found, broadly, that in fact, the "CSI Effect" is really just a "tech effect." 


One of Danica McKellar's three math books for girls
Successful actresses have Erdös numbers.


Natalie (Portman) Herschlag co-author of two peer reviewed scientific journal articles
"How Dungeons & Dragons Changed My Life" by Ethan Gilsdorf.

Nerd Nation: Natalie Portman, Danica McKellar, and Felicia Day

In their ground-breaking papers on the so-called “CSI Effect” Kim, Shelton, and Barak identified a general social “tech effect.” About 28% of Americans have bachelor’s degrees.  The master’s is the new bachelor’s.  Complain as we might about public education – including nominally private schools that lockstep along – the fact is that college and university education are the baseline for acculturation.  So, it is not surprising that droves of divas have degrees.  Competition being what it is, brainiacs nestle among today’s working actresses.

Padmè Amidala has an
Erdös number of 7

Natalie Portman (Princess Padmè Amidala in Star Wars; but a slew of credits, including producer and director) was co-author on two academic journal articles before she left high school.  Her real name is Hershlag. 

• “A Simple Method To Demonstrate the Enzymatic Production of Hydrogen from Sugar,” Ian Hurley, Natalie Hershlag, and Jonathan Woodward, The Journal of Chemistry Education., 1998, 75 (10), p 1270.
• “Frontal Lobe Activation during Object Permanence: Data from Near-Infrared Spectroscopy,”  Gaudette T; Kagan J; Baird A.A; Walz K.A; Boas D.A; Hershlag N., NeuroImage Vol: 16 Issue: 4

Abstract - The ability to create and hold a mental schema of an object is one of the milestones in cognitive development. Developmental scientists have named the behavioral manifestation of this competence object permanence. Convergent evidence indicates that frontal lobe maturation plays a critical role in the display of object permanence, but methodological and ethical constrains have made it difficult to collect neurophysiological evidence from awake, behaving infants. Near-infrared spectroscopy provides a noninvasive assessment of changes in oxy- and deoxyhemoglobin and total hemoglobin concentration within a prescribed region. The evidence described in this report reveals that the emergence of object permanence is related to an increase in hemoglobin concentration in frontal cortex.

The OrgTheory blog here had a “nerd-off” between Felicia Day and Danica McKellar.  I am easily the last person in the world to have not watched Buffy: the Vampire Slayer, but I found Day because of The Guild.  I discovered the gamers while surfing for Dragons and Dungeons.  (The True Dungeons live action role-playing game - LARP – is played at Gen Con Indy and they use money-like tokens to keep track of potions, weapons, etc.  I wrote them up for the Numismatist.)   

Felicia Day did not take to being passed over for roles after being Vi in "Buffy" so she built her fan base from online social interaction.  Her production of The Guild was an award winner. (Here is her Codex award montage.)   The sociologists at OrgTheory were hot on Day.  Her homepage (here) 

Dragon Age

 recommends getting your facts about her career from Wikipedia and IMDB.  "Felicia Day had a dual major at UT Austin, mathematics and music, graduating at the top of her class with a concentration in violin performance." (She alludes to being a violinist in The Guild.)  Day immerses herself in the fantasy culture and appears as a guest of honor at cons.  Her coming appearances include:

• San Diego Comicon: July 21th-24th
• Chicago Comicon: Aug 12-14th
• DragonCon Atlanta: Sept 2-5th
• NYC Comicon: Oct. 13th-16th
• Blizzcon Anaheim: Oct. 21rst-22nd
• Long Beach Comicon: Oct. 29th-30th

Danica With Hair

We knew Danica McKellar from The West Wing where she played Elsie Snuffin,the half-sister of NATO brat and speechwriter-with-game Will Bailey.  When I read the “nerd-off” on OrgTheory, I traced her over the web and was deeply impressed.  McKellar majored in mathematics at UCLA.  She has an Erdös number of 4 for being a co-author on “Ashkin–Teller models on Z^2” by L Chayes ,  D Mckellar ,  B Winn, Journal of Physics A: Mathematical and General Volume 31 Number 45 (1998).  You can read the paper on her website here. 

For a region of the nearest-neighbour ferromagnetic Ashkin–Teller spin systems on Z^2, we characterize the existence of multiple Gibbs states via percolation. In particular, there are multiple Gibbs states if and only if there exists percolation of any of the spin types (i.e. the magnetized states are characterized by percolation of the dominant species). This result was previously known only for the Potts models on Z^2.

Danica McKellar also wrote three books, generally targeted to girls.  Note the different locations here at the Ann Arbor District Library.

• Math Doesn't Suck, New York : Hudson Street Press, c2007. (Youth Y510 McK)
• Kiss My Math, New York : Hudson Street Press, c2008. (Teen 510 McK)
• Hot X: Algebra Exposed, New York : Hudson Street Press, c2010. (512 McK)

Also on Necessary Facts:

She's Such a Geek! - You only need to be better to be considered equal
Nerd Nation 4.5: Miyiam Bialik

Nerd Nation 4.0: Even GQ Says Smart is Sexy

Nerd Nation 3.0: How Dungeons and Dragons Changed My Life