 Okay, so I'm going to talk to you a little bit about firms, managers, and entrepreneurship. I would have wanted a cooler title to this lecture, just to get your attention, I don't know the awesomeness of awesomeness or something, to sort of prepare you for what I'm going to say. So when we talk about firms, managers, and entrepreneurship, you already know that Austrian economics is a little bit different from other traditions in economics. I'm calling this a curious perspective because the fact is that this could be a summary of how Austrians view the economy and the place of entrepreneurship and business firms and so forth in the economy. It is a curious perspective because it's nothing like other schools of thought in economics. It's very different. So let's see how many of you disagree with this statement that entrepreneurs create business firms to produce new goods, anticipating turn profits by serving consumers better than other entrepreneurs. Who disagrees? Okay, that's good. Well this is not really part of economics. Not real mainstream economics. It is of course core to Austrian economics and always was, so what we're going to talk about is that we know that business firms exist in the economy and it's necessarily a part of the market process, which means that they should have some sort of function. They're not just there. It's not just the legal implications of having an LLC rather than just being your own. There's something else. They must have an economic function. They must contribute something to the market process and we'll talk about that. So and of course it has to do something with organization by what it's an organization and what does that do to the market process. It's not that obvious. It's actually not obvious at all if you study mainstream economics because it's not mentioned in there at all. In Austrian economics though, it was there from the very beginning. So this is from Manger's principles back in early 1870s, the founding of the Austrian school and already there, he's talking about this stuff. He's talking about entrepreneurial activity and he explains it and it says that it's the obtaining of information. It's the economic calculation. Is this profitable? Can this be profitable? It's then the act of will of making it happen. It's the supervision of the production that has been established. It sounds pretty obvious, right? The fact is that if you study the gang signs in economics, you might have seen that, right? Supply and demand. There's no such thing as forming a firm and doing something. You've studied the theory of the firm in mainstream economics, it's the black box, right? It's something that makes outputs of inputs. Okay? Well, magic is not a very good scientific explanation. Neither is animal spirits, right? So we need an explanation for what business firms do, how they do it and why they do it. Why are there firms in some cases and why are there not firms in other cases? And of course, this takes us to the core problem in Austrian economics, which Keynesians seem to completely forget, is production. The production is the problem, and you've heard this in several of the lectures already this week, that it's all about production. It's all about how we can use limited scarce resources to satisfy more and greater wants. So we get more and more value out of our limited earth. And how we can figure out new types of products that satisfy our wants better, that satisfy future consumers in whatever situations they are in, and how can we get better and better and better? How can we raise the standard of living? What does the wealth of nations come from, sort of, that kind of question, okay? That's a question of economic growth. And it's at the core of the market process, right, that we're creating this standard of living, this wealth that we're all experiencing today and that is still nothing compared to what it will be in 50 years. We know, of course, also that production precedes consumption. Another thing that Keynesians tend to not really understand, they're in the habit of eating bread before they bake it, that sort of thing. But what this also means, of course, is in the market setting, your contribution to the whole economy is your purchasing power. You are either hired in the firm or you're acting as an entrepreneur, you're investing your labor into producing something. That contribution gives you a wage, a market wage, that is in some sense an approximation of your contribution to the value creation that happens, and that gives you a claim on or at least a right to buy things using that purchasing power. And that's also something that a lot of economists nowadays tend to dismiss or overlook or simply don't understand, or they say, well, let's say it's law and that's been disproven. Of course, that's also not true. There's a lot that is not true in economics, not also in economics, mainstream economics. And of course, we know that entrepreneurship is the driving force of the economy. What drives the whole process, the reason it is a process, is not that people change their minds in what they want to consume. It's because entrepreneurs create different things. Entrepreneurs try different things. They imagine different futures. They are in the business of creating our futures. And because they have different ideas and they act and react on what people have already done, like we talked about in the previous lecture, things will evolve and unfold and become better, hopefully. And all of this is really speculations into what will work, what will not work. And then if it doesn't work, well, you're out, because you've been weeded out. You suffer a loss, you're out. If you do it well, you earn a profit. And you can continue to invest, you can expand the business. Or maybe you think that this product is not going to make it. This is not going to cut it in the future, so I'm going to produce something else. But because you exercise better judgment, you get to try again and with more funds, or just retire, if you wish, and just consume. Okay, so core to the economic production problem for any actor really, and the whole process itself is this equation. Now, you didn't think I was going to use an equation. Because Austrians can't do math, I've heard. But this is at the very core of how we have to think about the market process. And you've seen this, versions of it in previous lectures, right? The cost is lower than price, it's lower than value. The problem here is that production goes one way. Production has costs first, and then you have a product that you produce, that you offer at a price, and then there might be value for the consumer. But the valuation of the whole freaking thing goes the other way around, right? The value of the good is not decided until some consumer has already bought it and is using it. That's when the value is revealed to them, whether the consumer was right or wrong. And that also is their anticipation of the value is what determines how much they're willing to pay in terms of dollars or gold or Bitcoin or what have you. And that in turn, the guess of the price that you're able to charge as an entrepreneur is what limits your bids for the cost, the inputs that you use in your production. So valuation goes the other way around. And this, of course, is core to the economic calculation problem. This is core to understanding how the economy works. Without this equation, you can't understand anything. If things work out, and this is actually true, this is what you're gonna have. I'm sure you can see this. But the first two, cost is lower than price, that's the entrepreneur's profit. So whoever produces anything in the economy makes that sort of investment under uncertainty and can keep their costs lower than the price that they charge. Total revenue minus total cost, if that is a positive sum or positive amount, you make a profit. But there's also a profit for the consumer, right? The price that they're paying is lower than the value they get from using the product, so they earn a psychic profit. So this is when everything works out. If it doesn't work out, someone is a loser and they lose value, right? So if cost is higher than price, the entrepreneur is out of business. If the value is lower than the price paid, the consumer made a mistake and is probably gonna learn from it, then it's gonna act differently next time. Or it's gonna hate the seller or something. They're gonna change their minds, okay? Now this, of course, takes us directly to, what the heck is entrepreneurship? What do we mean when we talk about entrepreneurship? And it's, we can define it easily in one sentence, but there's little more to it than just the definition, right? So what is entrepreneurship to Mises? Well, he talks about entrepreneurship in the broad sense, which is how entrepreneurship is defined praxeologically. That is uncertain to bear, just in general. Of course, the problem with this is that it's freaking broad, right? It's any type of uncertainty that is born, that's entrepreneurship. So it means in any action, there's some form of speculation. There's some form of uncertainty, can be tiny, can be huge, but that part of it is entrepreneurship. So if I need to go to the bathroom, that's an action. There's some uncertainty involved. I might not get there in time, I might not find the way. I might have miscalculated or misjudged how long I have before I have to go to the bathroom. There's uncertainty involved, there's not a whole lot. Cuz I have quite a bit of experience of doing it the right way. And I'm pretty confident that I can succeed in this endeavor. But there is uncertainty involved. So that part of it is entrepreneurship. That doesn't really help us a whole lot, though. If we talk about anything from creating an iPhone in the beginning, versus me going to the bathroom, that's all entrepreneurship. Yeah, okay, the market process then, what is that? Somewhere in between, right? Now, before we get to the core of it, market entrepreneurship is not my going to the bathroom, right? Market entrepreneurship has something to do with the production in the economy. It has something to do with using factors one way or the other, using inputs in order to create outputs. So it has something to do with consumers. And of course, if it's a market, it means that the consumer is probably someone else than the producer. So we have to separate these two roles, right? When I go to the bathroom, the producer and the consumer are the same person. Robinson Crusoe is not all that interesting. But when Friday enters the picture, that's when it gets interesting. Of course, division of labor means that we can specialize much more intensively, and learn and become experts on something, and then trade with others. That can relieve us, that is not a reference to going to the bathroom. Believe us of the uncertainty of production, because we know a whole lot more. And we can trade with others, and we can choose to trade with different people. So if my preferred supplier does not deliver, I can choose another one, because there's redundancy in the marketplace. Now, the narrower case of entrepreneurship is not all kinds of uncertainty, it's rather the driving force of the economy. It's what Mises referred to as the entrepreneur promoter. It's not only businessmen, those who create businesses, and run businesses. It's narrower than that, because it has to have a function in the market process. It has to be some sort of innovative, disruptive force that creates difference. And it is the true driving force of the economy. Any economic action is not really driving the economy. It's part of the process, sure. But it doesn't drive it forward, it doesn't point out the direction of it. So let's look at what Mises said here from Human Action. It's a long quote, but you can look at just the highlights. And he admits, to begin with, that the notion of the entrepreneur promoter cannot be defined with praxeological rigor. This is, I think, when Mises probably took a break, he cried a little bit. And then he went back to work and said, let's screw this, I'm gonna move on. Because what he says in the second highlight is that economics cannot really do without the promoter concept. Now, how much does that suck? Right? This is so important that economics, the whole science of the economy, can't do without this concept that we can't define. It sounds a little bit like animal spirits, right? Like this magical box, the black box of the firm. Yet Mises is actually clear, but clear in a vague sense, comparatively speaking. Because he's talking about how it is the driving force of the market. And the promoter is the element tending toward in-seizing innovation and improvement. That's the promoter who does this. It's not just entrepreneurship in general. It's not businesses in general, it's the promoter. That specific function, that specific role, that the entrepreneur promoter has in the economy. Now he refers to this several times in human action, even though praxeologically, he can't really derive it from the action axiom. He talks about, as you saw in the previous quote, un-seizing innovation and improvement. He talks about the pioneers of economic improvement. He talks about the great adjustments of production. Not just tinkering a little bit in the edges or tweaking this product here and tweaking that product there or starting another dry cleaning shop in the city. That's not really driving the economy, right? That's not the driving force. Instead, it's something that really determines the structure of the economy overall. So we can think of some of them, Henry Ford or Steve Jobs or someone like that. Their innovation is so great that it changes how we behave. It changes business forever, that sort of thing. Those great men of industry, something like that. That's not really praxeologically defined though, right? They talk about, well, you know it's big and that's good. But what we can say is that it's definitely different from Kersner's view of entrepreneurship as alertness, being alert to price discrepancies, basically. Just seeing an opportunity that, wait a minute, price over here is low, price over there is high, so I'll just buy here and sell there and there's profit. Even though, of course, the pure entrepreneur to Kersner, all they need to do is just see that the prices are different and there's profit, magic. Because if you actually buy something, well, then you're exercising labor and you're also a capitalist because you have the inputs that you're investing and so forth, the pure entrepreneur doesn't own any capital, which seems a little weird, right? The promoter probably owns capital. It's also different from Hayek and Hayek's view of the economy. And we can argue whether Hayek had a theory of the entrepreneur at all. But if you look at his 1945 article, the use of knowledge in society, there's entrepreneurs involved in a way. But they're all responsive. They're all responding to changes in prices that magically appear from somewhere. And that's also not driving the economy. The market process is not driven by people responding to change that happened. Rather, it's the change that happened that drives the economy, right? Well, that's the promoter. That's gotta be the promoter. It's not about just correcting errors. It's about envisioning and imagining a future and creating it, making it happen. Okay, so where do we go from this? This is super interesting, super exciting. It's core to economics. There's no definition. Well, I would argue that there is a definition and we can define it praxeologically. We just can't define it the way that Mises thought you had to. So I publish an article and you can look at the article. I'm gonna just kind of rehash the arguments here. But the top one is where I show how you can actually define the promoter. And the second one is applied on the market process. Because the promoter actually, if we can define it, the change is how we view the market process. It's not this smooth flow that we tend to think of when we apply Kersner and Hayek and others. Instead, if we look at the promoter, it's a very different type of process. And in fact, alertness and so forth, it's not really as important anymore. But let's move on. Entrepreneurial production with the promoter is not about correcting errors. It's not about responding to prices. It's about bringing something new about. It's about revolutionizing. And here are two examples. It's Henry Ford at the top with a black background. And this is a quote that apparently he never said, but it's an awesome quote, so I'm gonna use it anyway. And he never said, if I had asked people what they wanted, they would have said faster horses. Because as an entrepreneur, and most entrepreneurs know this, and those of us who can't do, we teach, we teach it too. That you can't really just ask people what they want and then provide it to them because they will have changed their minds and they don't really know, people don't know. So had Ford actually asked his customers what they wanted, they would probably have said faster horses, or maybe a little more comfortable cart behind the horse, or something like that. But he had a different vision. He thought that, well, how about a cart without a horse? Now had he said this to his potential customers, they probably said you're nuts. We're talking about no neighing on the road. It's really weird, but of course it turns out that he was right. That he could offer something that consumers realized at that point that, well, this is actually pretty worth, this is worth my money. And this is much better than the alternatives I have, right? And Steve Jobs, he said something similar and realized the same thing that you can't really ask people what they want. So he's commenting here on Focus Group and it says it's really hard to design products by Focus Groups. A lot of times people don't know what they want until you show it to them. So it's not only having an idea for a product and telling them about the idea. You usually have to produce the whole freaking thing and then present it to them and then they say, nah. And then you go to, or you change the product, right? That's why a lot of entrepreneurs they go through with prototyping and so forth and minimum viable product and all these terms that might have heard. In order to present something quickly that the customer can sort of touch and play with a little bit and then you can get some feedback and you can get sort of an idea of whether they're willing to pay for it or not. And then you can go and actually produce it. So you minimize uncertainty in that sense, okay? Now, this is a different view of entrepreneurship, looking at the promoter, right? Because it's suddenly about the imagination of the entrepreneur who steps ahead of where consumers are at, showing them and leading them the way to how they can satisfy their wants. It's necessarily speculative, right? Of course, it takes time because you have an idea and then you go about producing it and you can't really get any feedback on it until it's already done and you already invested all these funds into producing it. And well, if it doesn't work out, you're all screwed. If it really works out, everybody else is screwed in production, right? Because you're gonna out-compete them. Much like Apple did with all the other, like Nokia and Samsung phones and all those flip phones, they're pretty much gone now. Why? Because people like smartphones so much better, right? This, of course, means also that the future of the market is always uncertain. Because the future of the market, what it looks like, is created by these entrepreneurs. But it's always approved by consumers. And what will consumers choose between all these goods that they're offered? Well, consumers don't know. Okay, so how could anybody know? We can't, so it's just impossible to plan the economy, right? Okay, so how do consumers choose then between these products? Well, it's not that easy. I mean, this is one way of trying to illustrate it. I'm not sure it's a very good way. My wife calls it the onion model, which is not very helpful. But there's the consumer, of course, assesses the product when the product is ready. And you offer them the product. The consumer says, oh, this might be worth something. But that's not all, right? If this product is worth more than the money to me, that's not enough for me to buy this product. It's enough for me to buy this product if that's the only product. That's not the case though, right? There are other products, so that's the second circle there is other goods available that will satisfy the same want. Because you value the good based on the wants that you think it can satisfy. But there might be other goods satisfying the same want. So if you're hungry, there isn't only McDonald's. There are other types of food, and you might eat rocks too, who knows. You might try whatever, just fill up your stomach. And they will satisfy you in different ways. So you will choose whichever is better given how much money you have and what you can afford and that sort of thing. But there are other wants as well. So there are not only the substitutes with respect to that want, it's also other wants that you can satisfy that might actually be valued higher to you. And if a product is available at that point in time that might satisfy that want, you might choose that instead. Especially if the price is low enough, right? And it could also be the case that, nah, you really want to put that money into a better future. You want to buy something nice for your wife, for your wedding anniversary. Or maybe you want to put money in the college fund for your kids or whatever it might be. Maybe that is worth more to you than consuming right now. So there's also the temporal aspect of it, right? And all of this is how consumers make these decisions, which makes it really hard for a entrepreneur to figure out how to satisfy consumers, right? Because you're necessarily competing not only with other entrepreneurs producing goods satisfying that want. You're competing with all entrepreneurs producing anything for the consumer and what they expect from the future. Now that's uncertainty, right? It's really hard to even let error correction enter this picture. Price discrepancies might matter, sure. But how this has nothing to do with the driving force of the economy. Instead, you have to be imaginative, you have to be innovative. You can see from this, too, that if everybody's innovating around you, or at least one can potentially be innovating. You can't rest on your laurels, you can't just continue producing what you produce because they're gonna undercut you or produce more value. So you have to renew yourself, you have to be entrepreneurial. So entrepreneurship is necessarily part of any business really, any production in the Austrian market process. This takes us to economic calculation, while economic calculation is so darn important. And these entrepreneurs of course set the prices of the inputs that they're using and that's how the economy overall can rationally calculate what to do and what not to do, how to use these scarce resources and so forth. Of course, the problem is that within the firm, there's really no bidding for resources, there's bidding for resources to become part of the firm. But within the firm, it's managerial direction. The manager points and orders, if you will, resources to do different things. And it's based really on what decisions are made in the firm rather than on what the market prices turn out to be. Which of course takes us to what the heck is a firm? Now we already said that the firm is the entrepreneur's creation. It's created for a purpose. It's created in order to bring about this imagined product, this imagined production structure that will bring us the product, that the entrepreneur imagines will satisfy consumers. That's the point of the firm, to try to make this happen. If the entrepreneur can rely on only market means, there's no reason really to just gather all these resources together and then bear the uncertainty of the whole freaking thing. It's better to sign contracts with different suppliers and then just put everything together and have it ready. Because it will shorten the time. It will distribute the uncertainty and everything like that, right? Now within this firm, where you're putting all these resources together in order to try to figure out how to produce this imagined product that doesn't exist yet. The entrepreneur hires the manager. And of course Mises puts it this way in human action. It says the manager is a junior partner of the entrepreneur. And it doesn't really matter what type of contract they have. It's always the entrepreneur decides that this is worth pursuing. This is worth investing capital into. This sort of good I think consumers will really like in the future. Therefore, I will start this line of production. But someone will need to handle employees and handle the production process and go through all these details and tweaks and everything necessary. I, the entrepreneur, will just recognize that there is an opportunity here, at least I think so. I imagine this new product to be valuable. It makes the investment. I hire the manager to run it for me within the narrow bounds of what I think the opportunity is, right? This line of production. And the manager can do different things. And you can see there's an article of mine in the entrepreneur magazine where I say the same thing. I tell entrepreneurs that hey, the manager, you, entrepreneurship and management are different things. You might not have to always hire a manager. You can play that role yourself. But you have to recognize that those are different things. The entrepreneur will imagine the value that is possible that can be created. The manager will make it happen in just hands-on production. Okay, so what this means then, of course, is that the entrepreneur focuses on the value creation. And then has some sort of idea of can this be profitable, based on market prices for inputs? But is it a maximizing endeavor? No, it's not. Because you don't even know what revenue you might get from this undertaking. You don't know until after the fact. So there's no way you can maximize this. But you hire the manager to make sure to not waste resources in the process. You hire a manager to cut costs and tweak production to make sure it's streamlined and everybody's doing their job, that sort of thing. Which tells us about the economic function of the manager. But it is different from the entrepreneur. The entrepreneur focuses on value and makes sure that the value is at least expected to be higher than the cost. Hires the manager to make sure that the cost is lower and gets lower because when you have produced the product once, you can do it probably better the second time and you have to tweak the product. And you can get rid of those lazy employees and hire some effective ones. You can probably use other types of inputs that might be cheaper. So you can shop around a little bit. But what they're doing is trying to make the entrepreneurial endeavor, the entrepreneurial undertaking more effective, that's what they do. So in the sense they're extending the profitability of the entrepreneur's vision. That's what they do. Okay, so what is the firm then in the economy? Well, my conception of it is that it's the implementation of this novel line of production, a new type of structure production that you cannot use the market for. So you cannot just sign contracts with different people and basically just sit at home and do nothing but email contracts back and forth. Instead, you have to try to figure this out in the process. You have to establish a new division of labor, if you will. New lines of specialization, figure stuff out. There's a trial and error process, necessarily. Now this means that whatever it is that you're putting together, I mean it is not supported by the market yet. It cannot be supported by the market yet because it's your novel creation. It's something that you establish and you lead, you even hire a manager to make it happen. And therefore it is necessarily separate from the market overall. And therefore we can identify it as a firm. This is of course different from the legal definition of a firm. And LLC is an LLC just because the law says it is. But I can create a bunch of LLCs that mean nothing at all. They have no impact whatsoever on the economy, right? I can have a thousand LLCs in my name that do nothing at all. What is the impact on the market process? Well, most likely nothing at all. But I can also create a new type of production and invite others to join me without necessarily having contracts with them. Making it a sort of cooperative exercise if I would like to and I wouldn't. But if I would like to, I could do it. That would be different from the market overall. So that would be because conceive of this as a firm and it's a vehicle for the entrepreneur to bring about a type of production that wasn't really compatible with the market structure the way it was already. And I think now we can see that how the promoter drives the market process in terms of production, because they're establishing a new type of production. It wasn't really possible before, but they had a vision for how to do it and they bring it about. Just having a division doesn't matter, but if you actually do it, that's different. So one way of conceptualizing this is to think of it as islands of specialization where the entrepreneur sort of steps ahead of the market's division of labor and extends it in a sense. And I write about this in my book, The Problem of Production. Now one way of summarizing what I've said is with a picture. The picture says more than a thousand words, right? So here we have the entrepreneur to the left, he's the guy with the light bulb. The first thing that happened is that this entrepreneur has a vision. He imagines, he or she, or they. Imagine a new type of product that the consumer will probably really happy to see. They will satisfy their wants in a certain way to create new value. So this entrepreneur sets about creating a firm, investing in these resources, putting them together in different combinations, creates a production structure that will make it happen, which is the firm. Hires a manager to run the firm. Produces the product, which usually, we know empirically, it's not really what was imagined, but it's something close to it. Okay, it depends on how hands on the entrepreneur is, right? And then at that point, the consumer decides whether it's actually valuable. Of course, in that situation, the consumer is in a very different situation than that consumer was in when the entrepreneur started. Which is why the fact that production takes time is so important, right? Because the actual assessment, the actual evaluation of the product produced, it's not until it has been produced. It's not until it has been made available to the consumer. And that's when the entrepreneur will discover, whoops, I did something wrong. I'm gonna lose everything I did, or I need to change things quickly. Or holy crap, people really like this stuff. So now I make loads of profit. And now I can invest in ramping up production, creating new generations of this product, or whatever it might be. I'm changing the world, okay? So let's look at this in practice. Because the Austrian business, I argue, is different from how business is generally thought of by others. So if you take business classes, for instance, it's thought of in a very different way. But I think in Austrian economics, it is part of our economic theory. And if we apply our economic theory, the view of the market process, and the role of the entrepreneur, the manager, and so forth, we get a different view and a better feel for how to run the business. And of course, it begins and ends with the consumer. Because that's where value happens. That's where the valuation of what you produce happens. The consumer is sovereign. You can't do anything about what the consumer wants, what the consumer likes. You can, of course, influence the consumer, which also tells us that, well, what is it that you're offering? It's not the thing itself, it's the whole package. It's the whole experience. And what is part of the experience? Advertising, sure, but even mainstreamers recognize this nowadays. The price, right? The price is part of the experience. So you as a consumer usually will expect more of a product that has a higher price tag than a product that has a lower price tag. And why is that? Because the price signaled something, right? So you will hold the entrepreneur and the business to a higher standard if you pay more for it than if you pay less for it. And there are plenty of examples of this from the empirical market, where pricing a product the wrong way, or at least printing the wrong amount on the price tag changes the perception of the product in such a way that you fail, which means you really need to think of the consumer first and place the consumer first. Because if you can put yourself in their shoes and think about the product the way they think about the product will, then you will figure out how much they're willing to pay and what that means to them as well. And I'm not talking about just saying that any price that ends with a nine is better than one that ends with a zero, but rather picking the level of price is super important. But it's the entire experience that matters, including customer service after the fact, including advertising before the fact, including advertising after the fact. Because much of, say, premium products, much of the advertisement is not to get you to buy it, it's to get you to feel satisfied with the product after you bought it, right? Is to remind you why you bought that Mercedes is because, well, look at that, yeah, look at the successful life of this guy who has a Mercedes. Yeah, I have a Mercedes. I am pretty successful after all, right? Much more than I thought. I mean, it ties back to your feelings when you bought the product and extends the value process, the value, the extent of the value you see in the product and using the product. Now, there's one thing that I sort of, I have a strike through here, I crossed it out. And it's the cost plus pricing, I really hate cost plus pricing. It's something you learn when you take MBA courses. It's a core to learn to an MBA program. And it's also the reason why an MBA is never worth your money. Because what? Sorry, Connor. But the reason is this, right? If you price your products based on input cost plus your markup, what price are you going to end up with? It's not a price that reflects value of the product. It's not a price that reflects the consumer situation or the consumer's expected valuation, right? It's based off of the cost that you have. Well, if you are a promoter, if you are a good entrepreneur, you will create more value than the resources represent, right? Because other entrepreneurs have already decided the value of those inputs in your business. The reason you're starting the firm is that you think that those resources can be used in more valuable ways. So why the heck would you use those prices to set the price of your product? That doesn't make any sense. So either cost plus will set the selling price of your product too low. Which means, yeah, you will sell it. But it means that you will not get the profit that you deserve and you could have gotten, or it will set it too high. So you will not be able to sell the product because you've made something wrong. You should start the other way around. You should start with the consumer, with the valuation, which gives you an indication of the price and then you choose the costs. If you do cost plus pricing, you're sort of tricked into believing that, well, anything is profitable if I can just sell it. Because the choosing of the cost doesn't matter, right? Because you just add the markup anyway. Well, that's not it. What entrepreneurs do is they imagine an output that is highly valuable, that they think that they can sell for a price that is based off of the consumer's valuation, then they choose the cost structure. The decision whether to start the business, whether to produce this at all, is based on the cost structure that you will choose based on the value. That is the price. Well, if it will cost plus, you're turning everything upside down. You're doing everything backwards. It doesn't make any sense at all. So don't get an MBA. Okay, so the Austrian business, in practice then, the Austrian business prefers market prices. We know why, right? Because with market prices, you don't have to bear the uncertainty of that part. If you can buy something in the market rather than do it yourself, yeah, good, because you don't suffer the incalculable chaos that exists within the firm when it's based on your direction. So if you can outsource something, do it, right? The more you can outsource, the more you can focus on the core contribution. If there is already all these services available in the market economy, so you can buy them from an external partner, well, then you already have the market's valuation of those services. You don't have to bother with that, right? You don't have to do it internally, even though you might think as an entrepreneur, it's better if it's under my control, probably not. Because it just means you have to bear more uncertainty. And as we know, if you integrate several stages of production, you don't know which one is actually contributing to your profits. You don't know where the cost is. If you can place it on external partners and pay the market price, then you know, you know whether it's worth it or not. So outsource keeps your business small and keep it smaller. The more you work in the market, the more the market catches up with you, more of your business can be outsourced. You can focus on that core contribution, that is your actual value contribution. Now the main task, of course, as I mentioned, of the entrepreneur is to figure out the value. You look at, how can I satisfy consumers? What is the value that I bring to the table? And the table being the world, right? What kind of value can I produce that no one else is producing? And that I think I can do better than anybody else. That's it. After that, you choose, you try to figure out, can I produce this at a cost low enough, and things like that. But you bear the uncertainty of that whole endeavor. And so you have to follow your gut, your experience, use whatever information that you can, fine. But it's still your ass. So to summarize that in just in a couple of questions, to how to understand the market process in terms of the entrepreneur, what is the role of the entrepreneur? And what is the role of the manager? Because they are different. Well, they answer different questions. And I think that is a good way of keeping them apart and understanding what they actually mean. So the entrepreneur answers only the question, how can I best serve consumers? Consumers decide what is valuable. Consumers decide what to choose, how they will spend their money, everything. How can I produce something that is of the greatest value possible? Can I satisfy consumers? And how much? If you believe in that, well, if you can do it, fine. You're an entrepreneur, do it. Management, though, answers other questions. They don't answer what is the greatest value. Well, maybe in terms of profits, but profits are different. It's not the actual value. It is rather, how can I strengthen the firm's value proposition to the consumer? So the firm already exists, the production already exists. How can you increase the value of that production that already exists? Well, some tweaks here and there, changing the color of the product, making it a little smaller, a little more efficient, whatever. It's the same type of value that the entrepreneur already established. And how can I make the firm run more profitably? Meaning tweaking the product, making it a little more valuable, expanding it so that it's valuable to more consumers. So you can sell more units of it. And cutting costs, keeping the average cost as low as possible, and lower and lower with time. That will extend that business profitability over time. That's the role of the manager. And all of this, we really learned just from praxeology, from driving it from the action axiom. And it gives us these insights, which you don't get in mainstream economics, and which you don't really get in business schools either, because they look at what businesses do in the interview people. And people rarely know their function in the overall economy. They have experiences of what they do and what worked and what didn't work. But whether that is actually true is different matter. But we have these tools, and we have the answers to these questions. We can point out exactly what do you do in certain role? What do you do in another role? So Austrian economics is super powerful, even in the practice of running a business. Thank you.