Entrepreneurship is the launching of surprisesPosted: 24 June 2013
Many years ago, I read Kevin Kelly’s New Rules for the New Economy, and that got me thinking seriously about building an internet business. Since then, I’ve found that all sorts of interesting people seem to point me back to his website for some interesting thoughts about interesting things. After one such pointing, I checked out his collection of sourced quotes and spotted one from George Gilder (I used the quote as the title of this post) pointing to this article about entrepreneurs and the creation of wealth. The internet is pretty cool.
I regularly find myself attempting to and failing to explain the importance of entrepreneurship and how entrepreneur means something different than business person or capitalist. Well, yes, entrepreneurs are often business people and might even describe themselves as capitalists, but seldom is a capitalist or a business person an entrepreneur. Entrepreneurs are, in fact, very rare and getting rarer.
One day a couple years ago, I got annoyed by so many people describing themselves as entrepreneurs–feeling that it dilutes the value and meaning of the career–that I tried to wrap some definition around the phrase. I much prefer the way Gilder characterizes entrepreneurship. It’s more than simply making new stuff work; entrepreneurship is about enabling prosperity.
I love how he differentiates between wealth creation and wealth extraction. Some wonderful excerpts:
The belief that wealth consists not chiefly in ideas, attitudes, moral codes, and mental disciplines but in definable static things that can be seized and redistributed—that is the materialist superstition. It stultified the works of Marx and other prophets of violence and envy. It betrays every person who seeks to redistribute wealth by coercion. It balks every socialist revolutionary who imagines that by seizing the so-called means of production he can capture the crucial capital of an economy. It baffles nearly every conglomerateur who believes he can safely enter new industries by buying rather than by learning them. It confounds every bureaucrat of science who imagines he can buy or steal the fruits of research and development. …
Entrepreneurship is the launching of surprises. The process of wealth creation is offensive to levelers and planners because it yields mountains of new wealth in ways that could not possibly be planned. But unpredictability is fundamental to free human enterprise. It defies every econometric model and socialist scheme. It makes no sense to most professors, who attain their positions by the systematic acquisition of credentials pleasing to the establishment above them. Creativity cannot be planned because it is defined by information measured as surprise. …
In the Schumpeterian mindscape of capitalism, entrepreneurial owners are less captors than captives of their wealth. If they try to take it or exploit it, it will tend to evaporate. Bill Gates, for example, already a paper decibillionaire, commented during his entrepreneurial heyday that he was “tied to the mast of Microsoft.”…
By focusing on incentives rather than on information and creativity, free-market economists have encouraged the idea that capitalism is based on greed, although, as we have seen, entrepreneurs cannot in general revel in their wealth, because most of it is not liquid. Greed, in fact, only motivates capitalists to seek government guarantees and subsidies that denature and stultify the works of entrepreneurs. The financial crash of 2007 and beyond reflected orgies of greed among crony capitalists awash in government guarantees and subsidies, sitting on their Fannies and Freddies, feeding in the troughs of Treasury privileges and government insurance scams. Greed leads as by an invisible hand to an ever-growing welfare and plutocratic state—to socialism and near-fascist corporatism … .
My takeaway is pretty clear: Let’s foster the development of more wealth creators and fewer wealth extractors.