 All right, everyone. So it's 2 o'clock, so let's get started. So my student told me that I should tell you all that I'm on Twitter at Pear Bailand, and you should follow me. And so it tells me that I am a good follow, all right? So it's been endorsed. So in this lecture, what I'll do is talk a little bit about business and how business can make use of Austrian economics. In my other lecture on Thursday, I will get into the impacts of entrepreneurship on the economy. So that will be a little more theory. This will focus more on sort of the practice and how business people, businessmen, entrepreneurs can and often do apply Austrian economic ideas and Austrian economic theories when running and starting businesses. Okay, so I'll start by sort of bringing you gently out of the ivory tower and step by step taking you into the world of Austrians and then into terrible thing, but the world of practitioners. I mean, we like theory, right, so as Austrians, but theory has value because it can be put into practice. So we'll be getting there. But let's start with the theory, okay? So we'll start right here. And what is this? It's a black box, right? This is actually the firm. And you listened to Dr. Klein in the previous lecture talking a little bit about the firm and competition and monopoly and so forth. Well, this is pretty much how regular mainstream economics sees the firm. It's a black box. What the heck is going on in that black box? Well, who cares? That's their answer, right? So we don't really know and it's not really economics anyway. So why would we care about it? Well, it's really important if you're a businessman, right? So if you are actually running a business, if you're starting a business, you need to know a little bit about what is going on in your black box, right? So the way they see it is that while there are inputs, they get into this black box. It's more like a, you can think of it as a bag with stuff in it and you shake it up and then there's something else coming out and it's output, right? So obviously you have a function of the firm, the business firm in the economy and it is whatever lies between inputs and outputs. Something is going on there. Exactly what is going on in this black box? Well, this is what is going on, right? This is very helpful for businessmen. So if you're starting a business, well, Y equals AL raised to the power of alpha, K raised to the power of beta. Perfect. All you need to do now is just figure out what is A, right? And then there you go. So the other way of putting this then is that K and L, which means capital and labor homogenous things, right? So it's just dollar values, goes into the business and out of the business comes Y, the total value of your production, right? So basically your business is A, right? If you do math quickly, that's it. So how helpful is this? Well, not a whole lot, but if you look at it, this is the explanation then about what these things mean. So why is the total value of your production within the business? L is the labor, K is the capital, as I said. The alpha and beta are just fractions showing the combinations between labor and capital in the business. Of course, you can tweak this so you can maximize your business. Maybe you use 25% capital and 75% labor, whereas the other guy uses 40, 60, right? Maybe that is a better mix and you make more money as profit. This is totally unhelpful. This is, as in Dr. Klein's lecture, in equilibrium this might make some kind of sense, while the world is not in equilibrium as we know, right? The economy is always in this equilibrium. So there is a way of earning money. There's a way of making profits that is not really shown here in this simple schematic that I made up and the function that I did not make up. Okay, so what is the firm like here in this equilibrium world? Well, simply put, there's no entrepreneur. So no one really started. There's no management. So no one is really running the show. There's no heterogeneity except for K and L that's pretty much it, right? So you can't really, Joseph Schumpeter, as some of you might know, he was sort of a half Austrian. He talked about entrepreneurship as new combinations. Well, the combination is K and L, so the newness is just the fractions, right? There's no organization with something that more recent economists have added to the picture that you can actually have different organizational models and use people in different ways and maybe streamline the processes and things like that. I mean, any manager or strategist in businesses, they work with shaping the organization to cut out waste and increase profits, make people more productive and so forth. Well, that's not really in here. Okay, and there's no differentiation. Like you heard in the previous lecture, now the businesses do exactly the same thing. And of course, they're the size of zero, which doesn't make any sense at all. But this is what the firm looks like in equilibrium and it's still the basic unit. That's where production happens. How much sense does this make? Well, obviously this is not very helpful for actual businessmen and businesswomen. So if we then move one step away from this theoretical imaginary world of modern economists, you get into business administration, basically moving from the econ department to the business school, if you will. So what does that look like? Well, very different suddenly. So here we have all the entrepreneurs who starts the business, okay? The manager is who runs the firm. So the entrepreneur is sort of important in the beginning just to get things going and then, well, then the manager takes over or maybe the entrepreneur becomes a manager, it's the same person or something like that, right? Now the firms try to beat each other, imagine that. They're trying to get unique valuable resources. If you just get your hand on this really highly valued resource that is also unique, then you become sort of a monopolist in a sense and you can make above normal profits, like it's called. So your task is really to figure out which resource is this unique one, make sure that you get it and then you just sit back basically and swallow the profits, they just fly into your mouths. And then of course the firms can internally through organization develop specific capabilities. So through routines, through specific processes, through playing off of and using people's human capital, their specific skills and expertise, you can develop capabilities that others might not have. It could also be in combination with the valuable resource in the previous point, right? And of course, they're trying to be a little different, okay? So by being different, you can exercise monopoly power. You can raise the price and thereby earn profit at consumer's expense. Doesn't really sound like a harmonious system, but okay. So what does this mean then in the business school when you get into different departments and different foci of what we study? Well, in entrepreneurship, we focus on studying how to start a firm, so very hands on type of business plans and things like that. We talk about who gets to start a firm or not who gets to, but who actually does start a firm and why and when does it happen and how is it successful and so forth. Now, in this field, there's really no place for economics at all, because economics can't help with starting firms because the firms are already there. And Bill Baumol is famous for saying that, well, the economics profession has sort of expunged the entrepreneur from economic theory. It's not there anymore. It's not that interesting because you can't really maximize or optimize entrepreneurship because that doesn't make any sense at all. Well, if you move on into strategy departments, they talk about how to position the firm with respect to the other forces and that's their word, right? So it's really economics flipped upside down. So when economics teaches us exactly how the economy can be efficient by competing away all profits and maximizing output and that sort of thing, strategy just flips this upside down and says, wait a minute, if the economy is efficient, how can I make profits? Well, I can make profits by making the economic system inefficient, right? If I just come out on top, then I can be the one to extract all those profits and compete it out, compete though the other ones, right? So as soon as you get away from efficiency, there is some profit that you can capture and that's all you need to do and figure out what that position is, right? So if your competitors are doing this thing over here and this thing over here, well, this seems to be a gap right here, okay? Well, I can take that space and if I'm the only one doing exactly this, it's an inefficient system, right? Because there are not numerous firms doing the same thing. So I can just take in those other profits, right? So the point is to seek sustained competitive advantage and that's what you do through getting those unique resources. So if I have a unique resource that no one else has that makes me profitable, then I'm gonna just get those profits, right? Okay, so in the management departments, you look into sort of the direction of people, the structuring of the firm and so forth, that really goes into psychology and leadership and things like that, right? So economics doesn't really have anything to say about this and listening to Mises, this is not really part of the economic realm anyway, right? Because psychology and stuff like that and then you have something weird called managerial economics and it's simply applying economic functions to the firm itself. So basically telling managers that, oh well, what you need to do is just charge a price that equals marginal cost and then you're maximizing. Well, that sort of assumes that you have a production function and so forth. This is really difficult because most firms do not actually have a production function. You don't have the math and you can't really do a partial derivative in order to maximize it either. So it's not very helpful, right? Okay, so where do Austrians stand in all this? Well, we're different in every possible way you could say, right? So we really stand out as unique and really as not at all economists in sort of the mainstream sense, right? So first of all, production to us, it's not the black box, it's entrepreneurial. It's trying to figure out how to produce more value than anybody else has been doing or create more satisfaction using the resources available, figure out a new way of doing it, the better way of doing it, figure out new ways to do it, all of these things, right? We talk about opportunities as the possibility of satisfying consumers in their future ones. So there's a time aspect too and we'll get back to that. So what we're doing here is looking at not the inefficiency of the system and the equilibrium and things like that, but rather aiming to a future point in time where we can be better than others at satisfying consumers. That's very different too. There's no time in economic models, right? Okay, economic goods is how we start out. We start talking about what an economic good is and from there we move on back, right? So that's where entrepreneurs start thinking about the good itself. What can I produce that is actually of value to people? And then how can I do that while earning a profit? Very different way of thinking about it. And the Salerno covered this economic good a little bit yesterday and he used this quote from Manger. This is from Manger's principles, right? So an economic good is something that is useful to us, that we have the power to actually use to satisfy our wants and that we don't have more of than we actually need. Okay, so in Salerno's lecture, he went through the four points that you need a human need and so forth, right? But the economic good is where everything starts out. That's the point of it all, right? Okay, so what this means then for the consumer in the market is actually a pretty complex picture. So this is my own attempt at sort of illustrating this but the consumer values of course a good for its ability to satisfy a want. That's number one, the core there in the picture. So imagine that you're an entrepreneur and you're producing a widget and then is this going to be valuable? Well, the first thing is you need to actually satisfy a want for the consumer. That's one thing, right? Well, that's not really how a consumer makes a decision because they're not buying anything that could potentially be useful to them. So you have to also be better offer more value than other goods that satisfy the same want, right? So that's your immediate competition. So maybe there are other widgets out there that can satisfy consumers in exactly the same way. Okay, well, you need to beat them. You need to offer a better deal than they do. Well, that's not enough either because the consumer has plenty of wants. So even though, say I'm hungry, that's my want. Even though someone offers me burgers, someone else offers me pizzas, they're trying to satisfy my same want but then there's something completely different. Maybe a bicycle that I find really attractive or something like that. That's a completely different want because I'm not trying to, or I'm not intending to eat the bicycle, right? Well, I have limited purchasing power as a consumer meaning I will choose what gives me the best return for my purchasing power regardless of the wants, right? And regardless of the products. I'm choosing between all of these products no matter what. It could be that if I'm really hungry that I'm just gonna never mind all this other stuff. I'm just gonna go for food, whatever. But if I'm not super hungry, I might actually go for the bicycle, right? So I still need to consider, and as an entrepreneur, I need to beat those other wants and provide a better deal than that. And of course the consumer always has the option to just say nah and simply go for something else later on, right? So saving for the future, saying that I'm not gonna do anything right now, I'm just gonna buy stuff a week from now or tomorrow instead. So I'm not super hungry, the bicycle is a little expensive, I'm just gonna hold on to my cash and I'll have a huge breakfast tomorrow instead, right? So you're also competing with their time preference in a sense. So when you're offering a good and trying to sell it to someone, you as an entrepreneur or a businessman, you have to provide sufficient value to beat all of those three, two to three, two, three and four through your one, right, so you have to offer a really good deal for the consumer or your screwed. Okay, we also have this time element. We know that production precedes consumption. This seems like a silly statement. This seems like something that's pretty obvious. Production precedes consumption, really. I thought I ought to ate the sandwich before I baked it. Obviously, well, it's not that obvious and I'll use an illustration from, I think yesterday or the day before online and you probably don't know the guy but he's a rather insignificant blogger. So this guy anyway, just to give you a little background, he blogs for the New York Times website. Sometimes he shows up in the actual printed newspaper too but it's not very important. I think he used to be an economist but that's not clear. Anyway, he commented on the lockdown saying that, well, the lockdown was annoying but sustainable. No big deal, right? So he says, well, many workers in some businesses were receiving enough in emergency aid to avoid hardship and we could have plugged the holes in that safety net that is more money to people, right? Making lockdown tolerable much longer. Well, that means he misunderstands the whole production precedes consumption thing, right? So I just called him out on it. So I said that, well, obviously this guy is a little loony and I said, well, I needed to explain myself because it's not always obvious on Twitter. I said, well, for those of you who don't see it, Krugman completely misses the problem of production. You can't eat money, sending people checks will not feed them, right? And you cannot buy what isn't being produced. Krugman completely overlooks this fact that, oh, everybody just stay at home and then we'll give you money and you can just buy whatever you like. Well, if no one is producing stuff, hey, are you gonna buy, right? So I said, production precedes consumption. I haven't heard from him, but I'm guessing that when he saw that he was like, darn it. I didn't think of that, but we'll see. Okay, so for us then, the main issue for business, which happens to be the same as in practice is to produce goods that facilitate consumer's consumption, because through consumption, we satisfy wants and thereby we become better off. The whole point of production is to get something that is consumable, right? And for the business itself, the point is to make a profit out of facilitating value for consumers. So it's very indirect in a sense that I'm putting all my own resources or my borrowed resources at risk producing something for someone else, hoping that this will indeed create enough purchasing power for me so that I can buy stuff and satisfy my own wants. Very indirect, but that's how the economy works, right? And then we facilitate this through exchange and through trade by having different wants and also producing different things. So what does this mean then? Well, in terms of entrepreneurial production, we've been there all along, right? So this is from Manger, 1871, it's a magnum opus. While economics textbooks do not, as you heard from Dr. Klein yesterday, economics textbooks do not include the word entrepreneur. Well, here we have Manger, the founder, talking about, oh yeah, by the way, this is the entrepreneurial process. This is what entrepreneurs and businessmen do. And he specified it, right? So he said that, well, first of all, they started by collecting information about the state of the world and the state of the economy and what do things look like. Then they engage in economic calculation, his words, right? And trying to figure out, is there a sort of a profit opportunity here? Can I use these resources in a better way to satisfy consumers by producing this other good? Or maybe it's the same good as others are producing, I don't know, but in any case, I'm going to fill some kind of gap for consumers, make them better off, right? Then there's the act of will, just bringing it about, starting the damn business, putting those resources in place, hiring people, starting the production process, making sure that it runs smoothly enough and then starts sales, right? And of course, I have to supervise the execution of this process too. It's not enough to just step in and say, oh yeah, yeah, those resources here, resource one, resource two, resource three, just put them together, right? And then that's a good, that's not enough. There's a production process that is very practical and that we need to probably tweak and we probably need to pivot a bunch of times before we actually find a good way of selling this thing or a good thing to sell. I mean, most entrepreneurs do not end up selling what they thought they were going to sell. They pivot a bunch of times. Okay, so when we talk about entrepreneurial production, we talk about first the imagination of something because it doesn't exist yet, right? We're producing something new in some sense, exactly in what sense? Doesn't really matter, does it have to be super new? No, it doesn't. It might just be taking a good that is being offered somewhere else and offering it in a new place where it's not been offered before. It could be as simple as starting a, this is gonna sound really innovative, but a new dry cleaning place. Right? But in a town where there was none before. That's entrepreneurial too, right? Because you're providing something new to consumers. They don't have to travel 15 miles to do their laundry and stuff like that, right? But you have to imagine this new way of doing something, this new way of satisfying consumers. That's what you have to do as an entrepreneur, right? It's also always a speculative investment. And it's speculative, of course, because you can lose your money, but it's also speculative of what consumers might actually want. That's not obvious. And very often we think of entrepreneurship theory and so forth in terms of just figuring out what it is that people want. And of course, we do teach people that they should survey their customers. Say, well, how much would you pay for this? And would you pay for this? And how much is this worth? And would it be better if it's pink, those things? Well, what people say doesn't really matter all that much because when you actually offer something, their response might be completely different, right? And some people have realized this, and I have a couple of quotes here of people whom you might have heard of saying things to this fact, the fact, right? Henry Ford, who apparently actually did not say this, but it's a good quote anyway, he said, if I had asked people what they wanted, they would have said faster horses. So he had to imagine a new type of good for consumers, right? Yeah, of course he could have surveyed people back in the early 1900s, said, so what do you want me to do with all these resources? I can sort of do wheels and carriages and stuff. What would you prefer? Well, they would have said, I already have a carriage, but how about a faster horse? Well, I have no idea how to breed faster horses. And probably the same for Ford. So he said, well, I think it's better with a carriage without a horse. Because that would be more reliable and that would be cooler, and you can get it in all types of colors as long as they're black, all these things, right? So he imagines that people would be better off with a carriage without a horse, as people were focused on the horse. And we know that people's imagination about what they want and what they imagined they will have in the future. It's always sort of what they have, but a little different. They're not actually taking a step forward much. So if you read comic books from the 50s, how would they perceive the future? Well, they would still have the huge Cadillacs, but they were flying and stuff like that. Well, it's basically taking what they had and said, well, maybe in the air. Well, that's not actually what happened, right? Cars look very different today and they don't fly, not yet anyway. Okay, and the same with Steve Jobs, basically saying that screw customers, they don't know what they want. But often what you have to do is show them something and then they go whoa, right? What tells you something about the message that you actually have to communicate to them that you're providing them with something good and potentially valuable to them. So you have to, as an innovative entrepreneur, you actually have to educate your customers, making it pretty damn hard. And also, it also means that you really have to know people in order to do this right, okay? And then we have the Krugman point, production takes time. So that's why we have to be imaginative and think about what things would be like in the future because no matter what we produce, we will not instantaneously have things to offer, right? And even if we would have those things to offer, we would still need to seek out the customer and make sure that the customer shows up or whatever it is. Okay, and because things take time, the whole market will have changed in different ways. So someone else might have the same idea as I do, which happens to a lot of entrepreneurs, right? So when I'm teaching an entrepreneurship course, students always have ideas for new products but always, I mean always, this is something that other entrepreneurs have already been at for a year or two trying to realize because they're thinking in the flying Cadillac kind of thing, that type of thinking they're taking one step whereas as the entrepreneur in order to bring it about to make it happen, you need to take it at least two steps forward, right? So, and of course, people's views might change as well and people's views change, their valuations change depending on what others are offering. If you remember the blue figure before, if someone else has offered different goods that were never offered before, what they're actually gonna want and rank those different ones, it's gonna be very different. Okay, and then of course, economic calculation, we rely on market prices that are formed by entrepreneurs bidding for resources based off of the price they think they will be able to charge, right? So, any individual entrepreneur will calculate, hmm, based off of what they believe they will be able to charge and what the prices are but entrepreneurship, the function, has made those prices happen through bidding for those resources, right? Based off of the prices they think they will be able to charge but this does not really hold within the firm though, right, so within the firm it's different and this is how Rothbard illustrates the firm and he says that because the firm integrates more than one stage of production, you're sort of blind to whether either stage or any stage is actually efficient because you don't have prices between those stages within the firm and that's one way of putting it, right? But the firm is the entrepreneur's creation. You create it for a reason, right? So it's not simply a mirror image of the market, that doesn't make any sense. Why would you go from having prices to not having prices? So you're obviously doing something different or it wouldn't be a firm. Within the firm, the entrepreneur establishes sort of the boundaries and what the offering is supposed to be and then you hire the manager. The manager tweaks what you're already doing making sure to cut away waste and become more effective in that production process but the entrepreneur decides basically whether they should be a firm or not. That's the decision that the entrepreneur makes. Okay, and this is Mises talking about how the manager is really a junior partner of the entrepreneur from Human Action and it doesn't really matter. He says what the contract is with the manager, still a junior partner. It doesn't matter which manager either. They're all hired in the firm. Okay, so the way I think of it seeing the firm as an island of specialization where you create those new stages of production and we'll get into this again on Thursday and I'll explain what this means but within the firm you're attempting something that is not doable in the market. If it was doable then why wouldn't you just rely on market prices instead? That way you would be efficient sort of automatically. So why would you take it inside the firm instead and be blind to whether you're efficient? Makes no sense at all. So you're doing something beyond what the market can coordinate in one form or another and I elaborate on this in this one of my two books and it's available downstairs and in the online store as well. And I think the price is actually a whole lot lower in the Mises store than anywhere else. So depending on how much you wanna pay you can either visit the store or buy somewhere else. Okay, so what is going on here? Let's then move from theory to practice where we've already taken a few steps but let's get a little closer. Well, in terms of the theories out there, economists are, I'm being nice, calling them semi-useless. But mainstream economics is really not useful at all. Even managerial economics is pretty useless because equilibrium simply does not apply, right? And most entrepreneurs fail most of the time, let's say truths, right? So they're not a whole lot of businesses that survive many years. And why is that? Well, my explanation is that it's because they're not Austrians and I'm not kidding. We'll get back to that, okay? Successful businesses are really in the business of creating our futures, right? So yes, production takes time. They have correctly imagined how they can provide value to consumers. And so much value that consumers are more than willing to pay the price that they're charging, right? So any business, it doesn't matter if it's existing, if it's big or small, if it's a new one, they always have to pursue consumer satisfaction. That has to be the goal. Or, well, there is no war, that has to be the goal. Okay, so experienced entrepreneurs I've noticed when you talk to people who have started a bunch of firms who have experience of both failing and succeeding and so forth, they're Austrians. They just don't know it, okay? So they develop this gut feeling or sort of an intuition for how to run a business and whether this makes sense or not on behalf of consumers. Will this actually satisfy people's wants? That's the question we would ask, right? That's not the terms they would use. Well, they sort of have this intuitively through experience, but they don't have the theory that we have, they don't have the context, they don't have the terminology. So they just sort of know tacitly through their experience. Okay, so if we look then at the Austrian business, which I just defined as the successful business, then it begins and ends with the consumer because any production is just a means to an end, right? It's a means to the consumer's end. It's a means to satisfying consumers' wants. Of course, this means the consumer is sovereign just like Mises put it in human action, right? You as an entrepreneur or as a businessman can only produce goods, make them available to the consumer and then hope that they say yay and give you the money, right? Maybe they said yes for the five to six years it took you to develop a new model car. They said yes, yes, yes, and they were like, ooh, ooh, ooh, sounds really cool and I'm gonna buy it and then when you finally have it, they go, eh. They're in the right to do that, right? And that's your problem. They're making it your problem, even though it's simple because you listened too much to what they were saying, right? And you have to focus as an Austrian businessman on the entire experience. It's not the case that we're selling products, we're not selling services, we're selling a complete experience to consumers. This includes the advertising, maybe creating a warm fuzzy feeling in their hearts or whatever it is, or information about how to use something. It includes the pricing of the good, it includes the different colors, the different shapes, where it's located, it includes absolutely everything, right? So you can produce different business models and different firms where you offer different levels of service, right? So some businesses have terrible service but they're cheap, other businesses offer exactly the same thing but much better customer service to complete the different products, to complete the different experiences and different consumers will choose different products, right? So the selling price is super important, it's part of the product. So the way to price a product is to first, and the way to start a business overall, is to first imagine that, oh, this is a one that I can satisfy for people. This is going to be super valuable to people using the blue illustration from before, right? So this is going to be so valuable that they're willing to pay a price, they're more than willing to pay a price. They will consider it a great deal to pay a price this high because their value is this high, right? So this is subjective, this is an objective in dollars, doesn't matter because they will subjectively value both of these, right? The dollars they give up for the product, they will look at what else can I get for those dollars and they will see your product and they will go, tch, I'm just gonna buy it. I'm not even gonna think about it because this is a great deal for me, right? So that's where you start the price is really defined by the consumer, by the consumer's willingness to pay for this product and eagerness to pay for it even, right? Your job as an entrepreneur is really to choose the cost. That's what you do. You imagine how to satisfy consumers, then you choose the costs given the price. So you imagine the good, you guess or guesstimate the price that you will be able to charge and then you choose the cost structure so that you can get something in between. And if you're wrong, then the cost will probably be higher than the price that you can charge, okay? This is of course, this last point that you see with the strike through, that's a pet peeve of mine. So if any of you would, God forbid, get an MBA, that's a crappy education. They will teach you that the way to do it in big businesses is to prize goods is cost plus. So they will do exactly the anti-Austrian thing or in the anti-market thing. They will say, we should have a new detergent with strawberry flavor or something, right? So we'll sell that. How much does it cost us to produce this thing? Okay, well we require 15% profit margin, so we'll take the cost, add the 15% and that's the price. We'll see what's wrong here. This has nothing to do with consumer wants. So you're losing out no matter what, right? Because either that price that you calculated based off of cost is too high, meaning you will not sell enough to cover your costs or it's too low, meaning you're just leaving money on the table, because consumers would be willing to pay a much higher price for the same good because you're satisfying your real want, right? It doesn't matter which way it goes, you're still losing. So it's crazy, cost plus method, that's stupid. Okay, so also what you should do as a businessman is to prefer prices. That sounds a little weird, but what I mean by that is that you should focus on your core value facilitation in the business. So why have your own sort of accounting department or IT department or whatever it might be in the business if you don't have to? The entrepreneur should leave as many things as possible to the market, because that means that you're paying market prices for those things. So you can first of all focus more on where you're actually contributing value and you can calculate much more easily whether you are doing it efficiently and effectively because the market has set the price for the service, right? If you integrate everything in your business, you're just blind, right? It's better to focus on where you're actually providing value. So outsource as much as possible. Don't outsource when it's costlier, of course, but make sure that it actually contributes value. Very often, I think managers especially and some entrepreneurs, they integrate things because they wanna be a little central planner, right? Small scale central planner. And they want to be in control of things. Well, you're not more in control of things because an employee is doing it sitting in your office than if you have a contract with a business firm specializing in that service. That's an illusion. And you should use the market pricing mechanism whenever you can because you're better off, it's easier for you to actually provide value and you're actually contributing to the economic systems efficiency as well, okay? So the main task of the entrepreneurs is to imagine how to satisfy consumers and reimagine how to satisfy consumers because it might be the case that you think things will change. Well, then you don't stay the course. Then you pivot, you change what you're doing. Maybe just pull the plug on your business, whatever it is. You choose the lowest cost. So often when we're talking about, say, the next iPhone or whatever, people take it apart and they look at the components and they calculate what the cost is and what the profit is. Well, that's exactly the wrong thing to do, right? What they should do in Apple is not simply take all those things and then, huh, let's see here. But rather, if I produce a good like this that you can use for these purposes and satisfy these ones, they will be more than willing to pay, how much is an iPhone, 35,000 or something? They will be willing to pay this for an iPhone and then that allows me to put all these materials in there, make it seem much more luxurious or whatever, right? And then I can have this higher, this more memory and this other services in there just to bring this experience to the customer, right? That's the way to think about it, okay? So you choose your costs, you choose how you produce it, you choose everything else based off of the price that you believe that you will be able to charge. Okay, so what does this mean then in the business? Well, it means that the entrepreneur really answers one question. How can I best serve consumers? This should not be a super surprise for you guys, but it is a surprise for non-Austrians. And this is something that all entrepreneurs with experience, they know, they know that the consumer is sovereign, the consumer is king, right? So they will not attempt to push something onto consumers that they might not like. They will instead adapt to what consumers like more because that's the higher value, that means the higher price, that means it's easier to cover costs, right? And for management, you really have two questions. First, how can we strengthen our value proposition? And the value proposition is the offering, right? That's the good that we're offering, the whole experience. Note the word strengthen. I'm not saying change, that's the entrepreneur who does that, right? The manager asks, how can we strengthen it given what the entrepreneur that function has already imagined or figured out is the actual contribution? The manager takes what has been put in place and figures out better ways of doing it. And how can we operate more effectively? How can we get more outputs for these inputs? Can we tweak the production process perhaps? Can we put people in different places? Can we use different types of shifts? Can we use different types of human resources? Can we use maybe a different type of machine, different location? Any tweaks to the production process? But you're not changing whether you're doing that type of business or maybe we should have a different type of product. Well, that's the entrepreneur's realm, right? The entrepreneur is bearing that uncertainty. Okay, so that's not supposed to be there. Finally then, there's a lot to be done in applying Austrian economics to business practice. And it's a lot to really matchmaking between the experiences that businessmen and women have and the theory that we have. And we haven't really gone into this a whole lot in Austrian economics. So we don't have the tools, the sort of models that we can offer to business people, but we can develop them. And that's part of what we're doing. And one of those projects that the Mises Institute is involved in is Economics for Business. It's an initiative that we're running. Part of this is the Economics for Entrepreneurs podcast, which has over 70 episodes so far. And I think the standard rule is that every other episode is sort of an Austrian theory applied to business and every other is a practitioner, a real entrepreneur, who's talking about how it applied to their experiences. Okay, there's more. We recently published an e-book on Austrian economics in business or Austrian business or whatever you wanna call it, which is available for free at mises.org slash e4b underscore e-book. And it has chapters by prominent Austrians, such as Dr. Klein, Dr. McCaffrey, Michelle Gupta, Mark Packard and others who have featured in the podcast as well. And of course, there's a forthcoming special issue of the quarterly journal of Austrian economics on entrepreneurship, trying to bring not only Austrian theory and practice together, but also entrepreneurship theory, mainstream entrepreneurship theory. So those three, putting those together in one issue, seeing what are the gains from trade basically between these three? So there's a lot to be done here. We already know a lot and we can, which is a very good grade in a sense for Austrian economics, we can apply what we already know and just expand it a little bit because we're right, it does apply and practitioners know it, all right? Thank you.