 Okay, good morning. It's my great pleasure to speak to you today about entrepreneurship and how it fits in with the Austrian tradition. I also wanna welcome you and add my welcome to those you've already heard about being, for you to be here at the Institute for Mises University. You know, when I heard last night that Tom Woods said he was very sad to miss the event because he had been at every Mises University since 2006, I thought to myself, oh, honey. 2006, I've been at every single edition of Mises University since 1988, if you can believe that. Thank you. And I've been giving lectures at the conference since 94. And I think your grandfather was in one of my early talks now that I remember. Like Joe Salerno and Jeff Deist, before I attended my first Mises event, which was after I'd completed my undergraduate studies, I had never met another living Austrian. I'd read some of the Austrian works on my own and I had some idea of what the main ideas were, but I never had any teachers or any formal training and there were no events like this that were available to people like me. And then I got to go to that first event in the summer of 88 out in California. I got to meet Murray Rothbard, Hans Hermann Hoppe, David Gordon, and Roger Garrison. Those were the four speakers at my first Mises University event. In the following subsequent years, I got to meet some of the lesser figures in the Austrian school, Salerno, Herbner, and sort of the rest is history. But entrepreneurship is another topic that I was sort of interested in but didn't know anything about as an undergraduate student. There weren't any courses or programs available in college to learn about entrepreneurs and what role they perform in society. Of course, that is totally different today, right? Entrepreneurship is a super hot topic. You've got, I don't know, hundreds, maybe thousands of books on how to be a successful entrepreneur, how to have a career in entrepreneurship. The university where I work, Baylor University, has a large number of undergraduate student programs. We have an entrepreneurship major, we have a minor, we have a grad certificate, we even have a doctoral program in entrepreneurship and we've got an entrepreneur club and we've got a venture network and all kinds of shark tank type competitions. Of course, you can watch shark tank in similar shows on TV. Everybody knows what entrepreneurship is about, at least from sort of a popular culture perspective. Even in, you see agencies like the World Bank saying that entrepreneurship is a path forward for economic development in emerging markets, more so than large scale industrial production or government funded dams and infrastructure projects and so forth. So lots and lots of buzz about entrepreneurship but being an entrepreneur. Even they say that if you wanna go into outer space, your best bet is to become a very successful entrepreneur. Not like in the old days where you'd become like an Air Force pilot and then you would work for the space program or whatever. Entrepreneurs get to do all the fun and cool stuff. Well, I mean, directing our lives in bad ways too but also getting to go to outer space. So if you go to your undergrad economics professor at a typical college university and say tell me about entrepreneurship, what does the entrepreneur do in your model of the economy? You probably will get a lot of blank stares. Like, you know, there's really not a place to put an entrepreneur or to put the entrepreneurial function in here. So entrepreneurship mostly gets ignored in the undergraduate economics curriculum. In fact, I pulled from my shelf one of the leading intermediate micro textbooks. This is the one by Hal Varian. And you notice the word entrepreneur isn't even in the index. I mean, so I'm not saying mainstream economists don't have a fully fleshed out theory of the entrepreneur. I'm saying they don't even mention the word, right? They don't talk about entrepreneurship or entrepreneurs playing any function whatsoever. So you might say, well, why don't I go to business school or look at the applied business literature? Maybe there I can find out about entrepreneurs and entrepreneurship. Well, the most famous definition of entrepreneurship from sort of a business practitioner perspective is the one that was offered by a man named Howard Stevenson who was the founder of Harvard Business School's Entrepreneurship Program. And he famously defined entrepreneurship and you see this in a lot of the textbooks today as the pursuit of opportunity beyond resources controlled. The pursuit of opportunity beyond resources controlled. So the emphasis there is on a person or maybe a group of people identifying some kind of a market opportunity. Something that we can do that will yield profits that will yield some kind of returns that we desire and we pursue that opportunity with a relentless passion with a drive and determination. And note, it doesn't matter that we don't have any money. Right, we don't have any machines, we don't have any inventory, we don't have any access to technology, we don't currently have any resources but that doesn't matter, right? Making stuff out of resources that you have according to this perspective that's not really entrepreneurship. Entrepreneurship is about seeing an opportunity and going out and grabbing it. You can always find people to give you money later when you need it. It turns out that that view of entrepreneurship has actually been expressed in the academic literature as well and it's most famously associated with one of the great Austrian economists, you can see his name up here somewhere, Israel Kursner. Kursner was a longtime professor at New York University and the one who helped to establish what was for several decades a vibrant Austrian program at NYU. He was a student of Ludwig von Mises and he wrote a book published in 1973 called Competition and Entrepreneurship that offered a theory of entrepreneurship that in many ways is very similar in spirit to the one taught at Harvard Business School. Kursner says, he defines entrepreneurship as that element of alertness to possibly newly worthwhile goals and to possibly newly available resources which is absent from the notion of economizing, the sort of mechanistic approach of the mainstream economists. The agent has some kind of utility function or profit function that is optimized. But this alertness is fundamentally present in human action and that's what he calls the entrepreneurial element to human decision-making. So entrepreneurship in this formulation is about being alert to or aware of or discovering opportunities for profit that have not yet been discovered and exploited by other people. You might have seen a well-known article that Kursner wrote, I think it was 1999, published in the Journal of Economic Literature, maybe 2000, I forget now, called Entrepreneurial Discovery and the competitive market process trying to explain the basics of the discovery approach to mainstream professional economists. Indeed, if you look at the academic literature on entrepreneurship, a lot of what's in the entrepreneurship textbooks that you would get in an undergrad class, the entrepreneurship research articles and so forth, you get a view that many of us, including myself, have labeled the opportunity discovery approach to entrepreneurship. This is the idea that entrepreneurship should be conceptualized as alertness to profit opportunities. In contrast to this sort of mechanistic notion of mathematical optimization or sort of deliberate systematic search, it's not that the entrepreneur thinks, oh, I could put a sandwich shop somewhere in Auburn, Alabama, and I'm gonna carefully evaluate all of the possible locations and do research on how much it costs to hire workers. Apparently, you can't get any workers now in a place like Auburn, Alabama, and perform all these calculations, run things through the computer, or run things through a spreadsheet, and the algorithm will tell me what to do. That's not what Kirschner and his colleagues and students have in mind by discovery. They have in mind something more serendipitous, right? You're just walking down the street, thinking about something else, and you notice a plot of land that has nothing on it, or an abandoned building, and you think, that would be a great sandwich shop. I wasn't looking for that, it just popped into my head, or you're in the shower, and all of a sudden this brilliant business idea just occurs to you, and you relentlessly go out and grab it. So key to this notion of entrepreneurship, and you saw that in the Howard Stevenson definition in particular, right, that it is distinct from resource ownership. The entrepreneur is completely different from the capitalist in this model. Entrepreneur doesn't have to be a rich person, doesn't have to own a bunch of stuff, doesn't have to have land, doesn't have to have cash in the bank, because remember, once you have a great idea, you just present it to the money bags types, and then they just write you the checks. Okay, that's the idea. So the claim here is that it's not sort of investment by people who have resources they're willing to put on the table. That's not what drives the market, what drives the market is the people who come up with these cool ideas that the investors can then support. There's a book by a very well-known entrepreneurship scholar named Scott Shane, called A General Theory of Entrepreneurship, which is really a fleshed-out version of this Kursnarian model, and he also links this sort of drive and passion to things like charisma and boldness, having a vision, and so forth. Okay, so is alertness to market opportunities, is that really the thing that drives the market forward? Okay, is it sufficient to have a cool idea, but no resources to back it up? Well, by way of answering that question, let me show you a clip from one of my favorite movies. The classic 1996 Cohen Brothers movie, Fargo, okay, so I'm not talking about the more recent Netflix series, Fargo, which is sort of a cheap imitation, but the original Fargo movie, it's a classic, it's a little bit rough, so it's not necessarily suitable for all ages, but there are a number of iconic scenes, including the one I'm about to show you. The main character is this sort of hapless, bumbling car salesman named Jerry Lindegard, and for reasons that are not made entirely clear in the movie, he's in some kind of debt, or he's in financial trouble. He needs a lot of money to get himself out of trouble, and I don't wanna, you know, if you've seen the movie, you know that he ends up coming up with this bizarre scheme by which he hires these guys to kidnap his wife, hoping that his wealthy father-in-law will then pay a ransom to get the wife back, and then the kidnappers are gonna kick most of that money back to him. That's gonna solve all his problems. Well, being a Cohen Brothers movie, spoiler alert, things go horribly wrong, and it makes for a very interesting two hours, but there's a scene near the beginning of the movie where Jerry, he apparently has become aware of or has discovered some kind of business opportunity. We're not told exactly what it is, but he's figured out some kind, he's got some kind of a venture, some kind of a scheme that will solve all of his financial problems, and then he won't have to hire these kidnappers, right? So he goes to his father-in-law, who happens to be some kind of wealthy investor, to make his pitch, hoping that he'll get the money from his father-in-law, whose name is Wade, so he has sent information to Wade and Wade's business partner, and they seem to like it, and so Jerry now thinks that all of his problems are solved. Oh. How are you, Stan? How you doing, Wade? Good to see you again, Jerry. These numbers are right, this looks pretty sweet. Oh, those numbers are right, all right. Bleemee. This is adorable. Congratulations, Jerry. Yeah, thanks, Stan. Well, it's a pretty... What kind of finder's fee are you looking for? Huh? The financials are pretty thorough, so the only thing we don't know is your fee. My fee? Wade, what the heck are you talking about? Stan and I are okay. Yeah? We're good to load in. Yeah? But we never talked about your fee for bringing it to us. No, but Wade, see, I was bringing you this deal for you to loan me the money to put in. It's my deal here, see? Jerry, we thought you were bringing us an investment. Yeah, right. Well, you're saying... What are you saying? You're saying we put in all the money and you collect when it pays off. No, no, I'd pay you back the principal and interest. Heck, I'd go one over prime. We're not a bank, Jerry. If I wanted bank interest on 750,000, I'd go to Midwest Federal, talked to old Bill Deal. He's a North Star. He's a... No, no, see, I don't need a finder's fee. I need finder's fees, what, 10%? Heck, that's not gonna do it for me. I need the principal. Jerry, we're not gonna just give you 750,000 dollars. What the heck were you thinking? If I'm only getting bank interest, I want complete security. Heck, FDIC. I don't see nothing like that here. Yeah, but I... Okay, I guarantee you your money back. I'm not talking about your damn word, Jerry. Geez, what the heck are you... We're not a bank, Jerry. Well, look, I don't wanna cut you out of the loop, but this here's a good deal. I assume if you're not interested, you won't mind if we move on it independently. Well, you can guess the rest. So look, poor Jerry, the hapless protagonist of this film, he has spotted a market opportunity, he thinks. Okay, he's pursuing that opportunity without regard to resources currently at hand. What happens? Okay, nobody's just gonna give him 750,000 dollars so he can pursue his harebrained scheme, right? So who's actually the holdup here? I mean, who will make the decision about whether this venture or whatever it is goes forward or not? It's Wade, or as they pronounce it in Minnesota, weed, okay? Jerry says, it's my deal here, Wade. Wade says, I don't care, I'm not, you know, I'm the one who's gonna make the decision, right? I'm the one who's got resources at stake. I'm the one who's gonna have skin in the game and I'm gonna tell you whether this thing is gonna go forward or not, okay? So, what does Ludwig von Mises say entrepreneurship is all about? Mises says, this is in human action, he says it is impossible to eliminate the entrepreneur from the picture of a market economy. Okay, we all agree with that, okay? The various complementary factors of production, land, labor, capital, et cetera. Salerno was talking about that a little bit this morning. Cannot come together spontaneously, okay? So to produce output, you need all these inputs to be arranged in a certain way. They don't just come together by themselves magically, right? They, these resources need to be combined by the purpose of efforts of men aimed at certain ends and motivated by the urge to improve their state of satisfaction. In eliminating the entrepreneur, one eliminates the driving force of the whole market system. But what is this driving force? Is it just having a cool idea? No, it's actually putting resources into play, right? It's arranging factors of production in ways designed to produce stuff that consumers wanna buy. Who will make that arrangement? Who will ultimately decide on what is arranged and how it's arranged? It's people who have access to and control of resources. It's not ideas, it's resources. Now notice for Mises, as with Kersner and other scholars, entrepreneurship is a pretty general feature of the market, right? It's not just about high tech startups or some sort of, it's not about space entrepreneurs or social media or whatever, though of course those might be part of the entrepreneurial process. It's much more general than that. So what is it that these entrepreneur investor owners are doing, people like Wade, for example? Well, you already heard in Salerno's talk this morning about how production works from an Austrian perspective, right? You have inputs that are combined into intermediate goods, which are then combined into other goods and so forth until eventually you get final goods and services. Salerno showed you the vertically stacked version of the structure of production. You also see it in some of the literature sort of rotated 90 degrees as a sort of a triangle on its side, but this is the same idea, simplified version of that layers of production model that Joe showed you this morning. And the point is there are lots of different ways that we can combine factors to get outputs. It's not just one way that you can do it, then the problem would be trivial, right? There's lots of different ways to build a mousetrap, even something simple like a sandwich shop. Of course, you've got to choose which piece of land it will, you'll build it on or maybe it'll be all online and virtual. Will it be counter service or will it be table service? Will you use delivery? Will you do the delivery yourself? Will you do DoorDash? What kind of machines will you use? How many workers relative to machines? Some of the restaurants that we often patronize in back in Texas where we live recently switched from table service to counter service because of the so-called labor shortage, right? Because of the stimulus program which is paying people not to work. A lot of restaurants are struggling to get labor so they changed the production method from one method to another. And of course there's all kinds of different kitchen equipment and there's different kinds of workers you can hire and so forth. So somebody's got to figure all that out. We also know that production takes time and so entrepreneurs, they make decisions about what factors they'll buy and what factor combinations they'll try based on how much it costs to get those factors, the prices that they pay in factor markets, right? And they're comparing that to the value on the margin of that factor once production is complete and goods and services have been sold, right? So how much am I willing to pay for one hour's worth of labor for a particular type of worker? Well, I have to calculate how many more sandwiches that worker will be able to produce in an hour, what we call the marginal product of labor, right? I multiply that by how much revenue I expect to receive from selling those additional sandwiches which gives me the marginal revenue product of labor. I have to discount that based on time preference but that marginal revenue product or discounted marginal revenue product for the use of a factor for a certain period of time tells me the most I'd be willing to pay to acquire the services of that factor, right? I don't want to pay more than the discounted marginal revenue product because then I lose money with every unit of that input that I use, right? I want to get inputs at a price that's much lower than what the marginal revenue product will eventually be revealed to be so that I can have something left over, some residual. And of course, because production takes time, there's uncertainty, right? I don't know what the final prices will be when I set up shop. I sort of, you know, I make an educated guess but I don't know for certain. So imagine, think of it this way, in a kind of equilibrium state like what Mises and Rothbard called the evenly rotating economy, a state of affairs where everybody knows exactly what's gonna happen in the future. Entrepreneurs know exactly how much consumers will demand and what prices they'll be willing to pay. I know everything about technology and market conditions and so forth. Then we would have a world in which each factor of production gets paid exactly its discounted marginal revenue product no more, no less. So, you know, people who own and manage companies, they get some kind of a financial return as like a reward for their managerial service, right? The opportunity cost of their labor is factored into the revenues that they receive. People who lend money to firms to get started will get some kind of an interest return. But guess what? There's nothing left over, right? All the revenue that comes in is paid out in terms of payments to factors, a little bit left over to compensate the manager, owner for managing any interest payments that go to lenders and that's it, right? Why? Because if there were something left over, there was some economic profit left over. Well, then other entrepreneurs would wanna enter the market and try to get a piece of that profit for themselves, thus competing away the thing that attracted them into the market in the first place. So once all that has been sorted out and everybody's just sort of repeating the same actions day after day, that residual is eliminated. You say, well, wait a minute. I thought Austrians don't deal with kooky equilibrium constructs with goofy assumptions like everybody knows exactly what's gonna happen the next day and people keep repeating the same actions over and over again. Yes, you're right, okay? But Austrians do use those constructs but we use them in a particular way. We use them as mental tools, right? Imagine a world in which, and then I describe something that is not, doesn't describe the actual world, how would it work in that world? Ah, okay, now how does the actual world, how does the actual world differ from that one? To help me understand what's really going on, right? What neoclassical economists do is they come up with the imaginary model and they say that's what we want and then they try to use government intervention to make the actual market look like the fantasy version that they concocted in their heads. Austrians don't do that. Austrians say this unrealistic imaginary world can help me, thinking about it, can help me understand some features of the actual world. In particular, when we're outside this evenly rotating economy equilibrium state, you don't know exactly what people are gonna do tomorrow. I don't know for sure how many sandwiches customers will want to buy. I don't know for sure how much they'll be willing to pay for sandwiches, okay? I've got a belief, I make some kind of a conjecture or estimate and then I hire workers, I buy a plot of land, I buy or rent a building, I get equipment, tools, I set up shop, right? In anticipation of the revenue stream that I think will obtain. In other words, I have beliefs about several different things, right? I have beliefs about the present, you know, what technology is required to make a sandwich, I guess in consistent with the previous lectures, a ham sandwich, okay? Like how do you actually make one? I've got some engineering knowledge or culinary knowledge, I suppose. I know what kind of resources are available, I know what kind of ham exists and where you can get it and so forth, what kind of bread you can buy or make, et cetera. Then I've also got these beliefs about the future, what consumers will demand, what kind of institutional conditions be like, you know, will there be another COVID stimulus program? Will there be ham sandwich regulation? You know, who knows, will the economy be in recession? And I've got some beliefs about what other, what competitors might do. Maybe you notice right next to the Institute, there's a place called Mama Goldberg's Deli, which is a local joint, a local chain. And then of course we've got Jimmy Johns and what do we have for lunch today? Jersey Mike's and Subway. I've got to kind of imagine how they'll respond to me establishing this sandwich enterprise, right? Based on those beliefs, I act. Or maybe I don't act, right? I choose to set up the sandwich shop, make sandwiches of a certain type in a certain way and offer them for sale. Or I decide maybe to pass and not do it. And then if my conjectures, my beliefs were accurate and I were motivated by those beliefs in pursuit of earning money, what happens? I have money left over, I made a profit. Okay, if I correctly anticipated that consumers would be willing to pay a certain price and would want my sandwiches and I was able to hire the labor and get the other factors for less than what that total revenue stream would be, I have money in my pocket. I have a residual, I have economic profit. Of course if I'm completely wrong, I way overestimated the demand, I didn't properly account for what Jimmy Johns would do in response, maybe I end up with a loss, okay? So the point is profit and loss can only exist in a world where you don't know exactly what's gonna happen tomorrow. If everybody knows exactly what's gonna happen tomorrow, then everything is kind of sorted out where there's no residual income, no profit or no loss once actions have been taken. You would never be surprised, oh gosh, consumers aren't willing to pay what I thought they were, because by assumption in this world of this evenly rotating economy equilibrium, you already know exactly what's gonna happen tomorrow. In other words, profit and loss can only exist under conditions of uncertainty. What drives profit and loss is uncertainty and the fact that entrepreneurs do not know the result of their actions in advance. It's not that they're acting blindly, right? But they don't know for certain. Gee, that sounds a little bit like human action in general, doesn't it? Purposeful human action as Mises calls it. Mises says the term entrepreneur as used by economic theory means acting man exclusively seen from the aspect of the uncertainty inherent in every action. So the entrepreneurial aspect of human behavior is the idea that we act under conditions of uncertainty. We don't know for sure what's gonna happen tomorrow. Now when Mises uses the term uncertainty, he doesn't mean what you might have heard described as probabilistic risk, like in gambling, right? Like if you throw a die, a six-sided die, you don't know what number's gonna come up. But you know if it's a normal die that there are six possible numbers and each one occurs with probability one-sixth, right? So you can form sort of like a probability distribution. You can calculate an expected value and so forth. Mises uses the language from the School of Probability called the Frequentist School, the terms that they use are case probability and class probability for what you sometimes here described as uncertainty versus risk. So true uncertainty describes situations where we don't have a mathematical function to tell us all the possible outcomes and the weights that we should attach to each one informing an expectation. The way Mises, in Mises language, these sort of numerical probabilities only apply where you have like the thing you're considering, the specific action you're considering is one element of a set of many other almost identical actions, right? Each individual throw of the die is just one member of a class of throwing the die, right? And so even if I couldn't figure out just by looking at it, that the probabilities are one sixth, say I'm in Austria and I'm not good at math, right? I could actually just roll the dice 10 times, 100 times, 1,000 times, a million times and just keep track of how many times does it come up one, how many times does it come up two and so forth. And in the mathematical limit, each of those numbers will occur with frequency one sixth. So we're not talking about that. We're talking about situations where, to use Mises terminology, each event under consideration is a unique case, right? I can't run the experiment of opening up my sandwich shop 1,000 times, holding everything else constant and see in how many of those states of the world do I earn a profit? So like, you know the kind of stuff that Nate Silver does when they forecast the election, so the 2016 election being the classic example where Hillary Clinton was predicted to win by, I don't know if anybody remember the exact number, the probability of Trump winning according to Nate Silver's calculations was like less than 10%. But Nate Silver correctly pointed out, well the fact that Trump won did not falsify my computation because I said in my computer simulation, we ran a million of these elections and Trump won in 10% of them and then the reality that obtained happened to be one of those, okay? The point is if you think about it, that's really not the right way to think about anticipating election results. That's not something you can simulate on a computer because we only have so many presidential elections. We only have them once every four years. We can't repeat them in a laboratory and see how many times does this person win, how many times does that person win? Each election is a unique case. So if I wanna try to figure out, gee, what do I think will happen in the next presidential election? I need to think like a historian. I need to apply my intuition, my understanding, my deep knowledge of particular circumstances and so forth. I can't just do a computer simulation. Okay, so you might say, well gosh, this sounds like just human action in general. And I think if you want to think of entrepreneurship in this very broad sense, we're all entrepreneurs because we all make decisions under conditions of uncertainty or case probability, without knowing for sure what's gonna happen and sometimes we guess right, sometimes we guess wrong. But I find it more useful to think of a narrower kind of commercial sense of entrepreneurship, meaning doing this, bearing uncertainty, but in the specific context of buying and selling factors of production to try to earn financial profit, okay? Combining and recombining productive factors in pursuit of money profit, or I don't know if it's like a so-called social venture maybe there's some other kind of psychological profit you're pursuing, but the economist Ludwig Lachman put it this way, he said, we are living in a world of unexpected change, hence capital combinations will be ever changing, will be dissolved and reformed. So a world of unexpected change, i.e. true uncertainty, okay? In this activity, combining, recombining, changing, dissolving capital combinations, resource combinations, we find the real function of the entrepreneur. So the real function of the entrepreneur is bearing uncertainty in the context of combining and recombining productive factors, land, labor, capital, et cetera, to try to earn money profit and avoid money loss. Notice to do this, the person making these ultimate decisions has gotta own some resources. It's not the Jerry Lindegard's who are making these ultimate decisions, it's the investors, it's the lenders, it's the venture funders, it's the stock market investors, right? It's the capital owners, okay? So what exactly is it that these resource owners are doing if they're not using mathematical probability models because each event represents a unique case? What, well, how do they do it? Well, this is something that mainstream economists have a hard time with. The famous economist Frank Knight, not an Austrian economist, but an economist who is famous for thinking about uncertainty and probability, he used the term judgment to describe what entrepreneurs do. He said, judgment is a kind of decision-making about the future that is neither blind guessing at one end of the spectrum, throwing darts at a dartboard, nor is it solving a mathematical computation. It's something intermediate. Call it intuition or understanding. The Germans have a great word for this. They use the word forstehen, which is usually translated into English as understanding, but it means like a really kind of a deep fundamental understanding. In Mises' writings on historical analysis, particularly in his book, Theory and History, which you can find downstairs, Mises used, as he often does, an idiosyncratic term. The term Mises used was called thymology, T-H-Y-M-O-L-O-G-Y, thymology. And thymology is, Mises described it as sort of a tool of historical analysis, where the historian immerses himself in the details of the relevant case, knows all the theory that might be important, economic theory, engineering, principles, whatever, if it relates to, you know, say, producing food, the relative important, you know, scientific principles of, you know, the soil and so forth. You have all the technical knowledge, scientific knowledge, plus really deep familiarity with the particulars of the case. From interviewing people, from reading documents, studying historical records in great detail, you can think of entrepreneurship as being similar, in that the entrepreneurs also applying this kind of deep intuition, we sometimes call it gut instinct, gut feel, this deep knowledge that is used to anticipate the future, it's not just random guessing, right? But it's based on familiarity with the underlying principles and facts on the ground. And it's something that not everybody can do and that is not easy to do, right? Mises also used the word judgment. Mises said the entrepreneur judges the future in a unique way. Mises says the entrepreneur sees the past and present as other people do, but he judges the future differently. So judgment is this act of perceiving the uncertain future and then acting on it. Other very smart and good-looking economists like Peter Klein have also used the term judgment to describe this particular view of entrepreneurship. And notice there's another important element too, this idea of market selection, right? So there's competition in the market. You say, well, okay, entrepreneurs apply their intuition, their judgment, but how do we know they're right? Don't they get it wrong a lot of the time? Yeah, sure they do, right? So after they have decided to act, then the market competition plays itself out and the ones whose intuition, whose understanding was correct reap profits, those whose understanding or intuition was incorrect or less correct than that of other people were in losses, right? And so the ex post profit and loss mechanism is what kind of distinguishes between those who are good at exercising entrepreneurial judgment and those who are not so good. I've used a diagram like this to describe the sort of model that I have in mind. So, you know, we've got the objective conditions of reality, prices of the distant past and the immediate past, you know, what were people paying yesterday for a sandwich? How much did it cost to hire labor yesterday, scientific and technical knowledge? Combined with the entrepreneur's subjective characteristics or attributes, preferences, beliefs about the future, interpretation of the present data or the past data, right, based on those objective and subjective characteristics, the entrepreneur forms an image of what the possible future might be, right? So I think if I act by creating the sandwich shop or whatever, I can bring about a future state of affairs in which, remember how Mises would put it, in which I have reduced felt uneasiness, okay? So in this imagined future, I've been able to earn profits, I have a successful sandwich venture, I franchise it, I become the next Jimmy Johns or whatever. It's Peaty Pete's instead of Jimmy Johns, right? And so, and if I believe that, I can bring about that future through my own actions, then I act and I create the sandwich shop. That's my imagined future. But then, to use the baseball metaphor I like to use, reality bats last, okay? So it turns out that maybe my judgment was poor, my intuition was off, and it turns out my thing is a colossal failure, right? So I compare the actual outcome with the future that I imagined, right? And if they're in sync with each other, then I keep on keeping on, right? If actual reality is totally different from what I imagined, well, then I gotta go back to the drawing board, right? Either I learn that something about my business model was wrong, I start over, call that learning, or maybe I run out of capital. So now I'm out and I have to go do something else, like be a college professor, I'm sort of selected out of the market. So that's really the model of the uncertainty bearing entrepreneur that Mises really has in mind. Mises also uses another word in his writings, what he calls the promoter. And Mises says the entrepreneur, what he has in mind by the entrepreneur promoter is a special type of entrepreneur that has existed in history, right? So according to the formal definition of Mises, any human actor who is involved in purchasing and combining factors of production, putting them into use to try to produce, you know, economic profit and avoid loss is acting as an entrepreneur. But that's not the way we always use the word in everyday language, right? Mises says, and even in economic theory, Mises says economics also calls entrepreneurs those who are especially eager to profit from adjusting production to the expected change in conditions, right? Those who are like really disbursing at the seams to do this, those who have more initiative, more venturesomeness and a quicker eye than the crowd, the pushing and promoting pioneers of economic improvement, okay? Mises says, he says, Mises proposes, let's reserve the word entrepreneur for the purely formal act of bearing uncertainty in a commercial context. And then the people like Steve Jobs, you know, the people who are like really good at it, who really devote their lives to it and come up with big ideas and they create products and services and companies that change the world, let's call them promoters instead. What does he mean by promoter? Someone who invests a lot, a lot of capital, financial capital or physical capital, someone who has a lot of what Israel Kershner described as alertness, someone who's really good at spotting these possible market opportunities. So notice for Mises, alertness to, you know, conditions in the world, that's not part of the formal definition of entrepreneur. You don't have to be alert to be an entrepreneur. You might not be a good entrepreneur, but you can be an entrepreneur merely by the act of engaging in judgment about the future. But of course we recognize some people are, wow, you know, I would drive right past that plot of land and not even think of a sandwich shop, but someone else would immediately have that come to mind. People like Steve Jobs, great charisma. Actually Steve Jobs was a real blankety blank hole if you've read the Isaacson biography or anything about Steve Jobs, but really driven, you know, really passionate. So notice this is not a formal praxeological definition. This is a more loosely defined sort of historically contingent notion. So Mises says promoters are really the ones who are making the world go around, but they're just a special class of entrepreneur. It's entrepreneurship per se is investing resources under conditions of uncertainty in an attempt to produce outcomes. So remember, going back to Jerry Lindegard, it's not enough just to have an idea. Good ideas are dime a dozen. We all have ideas that we think are brilliant and will change the world. As Rothbard once put it, you know, ideas like that without money are just games. Just speculation, it's just a classroom exercise, it's a fun conversation. It doesn't become entrepreneurship until somebody has skin in the game until there's money on the table in pursuit of trying to bring these, you know, ideas to play. So last thing I wanna point out just to kind of inspire you a little bit is that while, you know, a lot of these ideas about entrepreneurship have not yet made it into the mainstream academic economics literature, they have become quite well known in the business school management literature. So there's been a huge growth in entrepreneurship courses and programs and scientific writings and so forth. I mentioned before a lot of schools like my own have undergraduate programs in entrepreneurship. And in the mainstream entrepreneurship research area, there's quite a lot of sympathy for Austrian perspectives and names like Mises and Kirsner are quite well known and, you know, there's not like a audible, you know, gasp that goes through the crowd when someone mentions the Austrian school or Mises, you know, these are considered important thinkers within the entrepreneurship literature. So the leading scholarly professional association for management professors, business school professors is called the Academy of Management. It's like the American Economic Association, but for management scholarship. And I mean, this is a panel that will be at this next month's edition of the Academy of Management on Austrian economics. I'm on it, payers on it. You might know some of these other folks too, but Austrian theory is very mainstream within the academic entrepreneurship tradition like the entrepreneurship, there's an entrepreneurship division of the Academy of Management. Hunter Hastings podcast called Economics for Business interviews some, you know, self-professed Austrians like myself, pair and so forth, but also quite a few mainstream entrepreneurship scholars who don't identify as Austrians, but consider Austrian ideas to be part of the mainstream tradition within entrepreneurship. You know, there are a lot of issues still to be dealt with and these are research opportunities for you. If you're looking for a term paper or a thesis topic or, you know, a dissertation topic someday, you might look at more about how we conceptualize entrepreneurship. Is it an abstract function of uncertainty bearing as Mises describes? Or should we limit it to certain cases of high growth firms or self-employment? What's the relationship between entrepreneurship and you know, sort of the operational performance and strategic success of companies? What's the relationship between entrepreneurship and economic growth at a more macro level? And what should government policy do to help entrepreneurs or you might say, what things should government avoid doing to get in the way of entrepreneurs? These are great research topics that, and we need bright young people like you pursuing these topics and adding your thoughts to the accumulated body of knowledge on entrepreneurship from an Austrian tradition. Thank you. Thank you.