 I'm going to go in a different direction from Ryan and bring things down to the business level, to the level of companies and managers, to talk to you about why Austrian economics and how Austrian economics can make managers better. Most of my academic and professional work is sort of at the boundary between economics and management. I'm trained as an economist, as an Austrian school economist. I teach in a business school and I teach mainly courses in entrepreneurship and management. And for example, I teach the global strategic management capstone course in our executive masters program. And it may not surprise you to know that some of the students in that MBA program, are somewhat skeptical of the claim that economics can help them be better managers. Why? Well, maybe they remember the economics courses they took back when they were students, right? And they didn't get much out of this training that they thought would help them very much in their professional roles. Or, you know, here's economists telling you about firms, right? There you are. The firm on the left-hand side, this diagram tells you exactly what to do to be profitable. You know, and to be fair, economics is not always taught especially well at the high school undergraduate or even graduate level. You know, many people remember a class like this. You know, anyone, anyone, anyone. Bueller, Bueller, Bueller. Now, you know, in full disclosure, economists have not always been very sympathetic to the profession of management. Economists often think management is sort of silly and trivial. It's about, it's about emotions, understanding emotions at the workplace or, you know, the secret to being successful as an entrepreneur, as a professional manager, is to have a lot of charisma or to, to have the right power pose. Remember the power poses, you know, how many books and lectures and TED talks have been devoted to teaching firms and managers how to increase their profits, right, by holding their arms in a certain way. Most economists are not very sympathetic to the management consulting industry, right? There was an interesting book by two writers from the economist on the consulting industry called The Witch Doctors, which I think summarizes the view of many professional economists that the consulting business is sort of a scam. It's kind of a puzzle as to why companies would throw good money, what would, you know, write these big checks to McKinsey and Bain and so forth. Maybe it's some kind of strategic signaling. You're trying to indicate to your competitors that you have so much cash to burn that you can waste it, you know, on a McKinsey project. Not completely clear, but the point is that, you know, it's not obvious to many participants on either side of this conversation whether economics has anything useful for managers. I mean, look at the popular management books that fill the shelves of the bookstores, not the Mises bookstore, but, you know, if you go to your local Barnes & Noble or you go to Amazon and, you know, look at the management section or the leadership section or the entrepreneurship and innovation section and, well, I mean, I haven't read all of these books, but, you know, I'm certainly familiar with the genre and, you know, most economists would perceive this literature as extremely fluffy, right? There are a lot of people selling, you know, trying, there are a lot of people shilling books and coming up with a kinds of goofy, you know, fattish concepts and lingo or whatever, but there really isn't much substance there. There certainly isn't anything that would be especially useful to the practitioner. Now, there's some exceptions to that. Within mainstream economics over the last decade or two, there have been some more serious attempts to grapple with managerial and organizational issues from the perspective of, you know, basic economic theory, very influential textbook by the later Nobel laureate Paul Milgram and John Roberts applies kind of basic neoclassical economic principles to a variety of managerial issues. I used to use as a textbook this book called Economics of Strategy, which is actually not bad and has a little bit of Austrian content in it, not as much as I would like. The economists, Nicholas Bloom and John Van Rienen, Van Rienen, sorry, have published a series of empirical studies on what they call management practices within manufacturing companies and service companies as well, doing these sort of large-scale surveys to try to find out if, you know, giving incentive pay to workers, having more effective forms of performance evaluation and so forth, you know, in very large samples of firms in different countries can yield efficiency gains or performance improvements. And they found some very compelling evidence that better management practices do improve profitability at the corporate level and also what the sort of national economic level. But what about the Austrians? What about the Austrian school? What can the Austrian school say specifically that is relevant for management and useful for managers? Well, let's go back to the origins to the founding of the Austrian school with this gentleman, Karl Manger, who published his Magnum Opus, The Principles of Economics, the Grundsetze in German in 1871, which by the way is also available in this wonderful Mises Institute edition with a foreword by one of my favorite authors. It's probably too small for you to read it, but it's me. You know, Manger's book introduced an entirely new way to think about economic systems, to think about economic action, to think about and understand how prices are determined, how goods and services are produced and so forth. And Manger's work, which I'm sure you're all familiar with, really heralded a new and different way of thinking about economics. And Manger's followers, disciples and students, formal students or otherwise, including Bombavirk and Wieser and of course Mises, Hayek, Rothbard and so forth, really changed the way we think about economics. Manger, of course, was a professor at the University of Vienna, hence the term Austrian school, which was a label given to Manger and his colleagues and students, not by his friends, but by his enemies. As you may know, in the German-speaking world at that time, you know, to call someone or something Austrian was a little bit of an insult. It meant, you know, provincial, backwoods. It'd be like calling someone a redneck now, I guess. But the label stuck, and of course the Austrian school ended up changing the world and certainly changed our intellectual world for the better. It is sometimes forgotten that Karl Manger, before he wrote his great treatise and before he became a professor at the University of Vienna, was a journalist. He was a financial journalist, writing for a number of prominent Austrian newspapers, including the Wiener Zeitung, where his job was to report on, document, analyze and explain what was going on with prices. Commodity prices, prices of manufactured goods, real estate prices. So Manger's curiosity about how markets work and how prices are formulated did not arise from just sort of abstract speculation, but from his trying to understand the real world, trying to understand why prices were, why price movements were what they were in Vienna. So that led Manger to develop his theory of marginal utility, his understanding of how the value of factors of production, values of factors of production, are imputed from the values of the consumer goods they're used to produce, where the value of consumer goods is determined subjectively by the preferences and expectations, beliefs and actions of market participants. Hence, we sometimes use the term causal realist economics to describe Mangerian, Misesian, Rothbardian economics. We call it causal realist because unlike the mathematical versions of market analysis propounded by other schools of thought, and now in sort of within the mainstream of the economics profession that emphasize sort of characterizing equilibrium states with very sophisticated mathematical expression, the Austrians were always interested in cause and effect, right? How does human action cause changes in prices and quantities and other market phenomena? We call it realist, causal realist, because again coming from Manger's professional background, Manger was not interested in describing abstract hypothetical states like the perfectly competitive general equilibrium, but rather was interested in explaining real economic states, right? Real conditions, what's going on in real markets? Why is this piece of land on the market and trading at this particular price? Why does this commodity become more expensive or less expensive, depending on market conditions? So any approach to economics that focuses on causality and is interested in real economic phenomena ought to be useful to practitioners. It ought to be useful not only to us as scholars and thinkers and scientists and people interested in understanding the world from a political or cultural or social point of view, but also to those of us who make a living, right? Acting in the marketplace. Let me be a little bit more specific. So I mean, you know, the fact that you're here at the Mises Institute's 40th anniversary conference indicates that you've probably spent a lot of time studying economics. Reading all the classic works and you know Mises human action from front to back, if I were to call out a page number, you would immediately tell me what's the main contribution on that page. So you already know kind of what the distinct contributions of the Austrian school are. But just to remind you sort of at a high level, what I already mentioned, the causal realist approach to price formation is widely heralded as a distinct contribution of the Austrian school. But there are others as well. As this came up a little bit in Patrick's talk this morning, if you're familiar with the Austrian theory of the business cycle, you know that the Austrians place great emphasis on the capital structure of the economy, right? How goods, so to produce consumer goods and services, they're not, they don't just sort of appear magically in one step, right? There's what Menger referred to as the orders of production. There are higher order goods, raw materials and natural resources and so forth, which are transformed into intermediate level goods, which are transformed further into other intermediate goods and so forth until you finally get to consumer goods and services. The Austrians emphasized that these intermediate products, capital goods or resources or factors of production, if you like, are not identical to each other. They're not perfectly substitutable, right? Hence when, you know, the government expands the monetary money supply, we get increase in, we get credit expansion and what Hayek described as a lengthening of the structure of production. We cannot, you know, that has important distortionary effects on the production system and so when interest rates change, you know, investments in higher order goods and capital goods that were made in anticipation of a particular set of consumer demands in the future and facilitated by low borrowing costs now become unprofitable production plans that were made in the past are no longer feasible. Capital goods must be reallocated to other uses but because capital is specific or at least partially specific heterogeneous, it's not always possible to allocate, reallocate capital costlessly, thus leading to, you know, the classic bust, leading to the distortions that we see in the bust phase of the business cycle. I had a great conversation at the breakfast table this morning about the automobile industry with one of our participants who was in that industry and, you know, before 2000, before 2020, many people had not heard of the term supply chain. Okay, but now everyone understands supply chains. We're talking about the, you know, the fact that you see this if you've shopped for a new car or a used car lately and you know all about the chip shortage and other supply chain distortions that has severely reduced the number of new and used cars, new cars available and hence prices of used cars have gone way up. But, you know, failure to understand that cars or any goods and services, you know, again, aren't just sort of spit out in one stage but have to be produced through this lengthy and complicated production structure or supply chain. Failure to understand that leads to the mistaken belief, which of course most government officials have, that you can just sort of turn off the economy for a few months and then you just sort of turn it back on. Right? Well, we're going to send people home for six months, make them work from home, we'll pay them not to work and stay at home, you know, for pandemic reasons and then we'll tell them all to come back and boom, things will just pick up where they left before. But of course the economy is a complicated, you know, interconnected lattice work of different kinds of production and exchange with lots of different market participants. The complexity of the economy's capital structure means that you can't just turn off one piece and then turn it back on and have everything work the way it did before. This is, you know, this is sort of a common wisdom to anyone who's involved in pretty much, you know, any form of production or exchange, but completely unknown to the majority of professional economists outside the Austrian school, right, and government officials. So this emphasis on the supply chain on the lengthy structure of production is another unique attribute of Austrian economists in the Austrian school. And third, the Austrian school is rather unique in the central role it gives to the entrepreneur in the production process. And a lot of my own writings are on the entrepreneur and how entrepreneurship is essential for, you know, to have a well-functioning market economy, what kinds of institutional conditions are required to allow entrepreneurship to flourish. Again, this is something that I would argue is a distinct contribution of the Austrian school. So, okay, what does that mean specifically for managers and for management? What are some distinct Austrian implications? Implications of Austrian economics for managers and for management? Well, you know, one unique insight of the Austrian school is that competition, right, is not a process of, you know, sort of establishing a superior market position that you can protect forever with a moat, you know, around your castle. So unlike the conventional approaches and strategy based on the thinking of people like Michael Porter, which teach entrepreneurs and managers that they need to establish and exploit their market power, right, Austrian economics teaches that competition is a continuous process of rivalry among entrepreneurs and managers, right, where as long as a firm does not have legal protection against potential competition against entry, there's always the threat of new technologies, new companies, new business methods on the horizon, possibly competing, you know, as actual or nascent competitors. And that with this dynamic process-oriented understanding of market competition, Austrian economics teaches that the secret to success, to competitive advantage, is continuous innovation, right, engaging in entrepreneurial behavior, being being alert to and aware of potential trends and threats on the horizon. And again, rather than seeing competition as a static state, thinking of competition as a process of rivalry helps to direct managers' attention towards the things that they need to do to maintain, to achieve and maintain a strong competitive position. The Austrians, as coming from Carl Manger, emphasize the role of demand, right, it's ultimately consumer demand, subjectively perceived and expressed through action in the marketplace that creates, that is the value that entrepreneurs, managers, companies are trying to capture by offering goods and services that consumers will want to buy. Market power does not allow you to impose output on the market, right, value does not come from the resources that you use or from the position that you have in the market, value comes from consumer willingness to purchase the goods and services that you offer. Understanding consumer demand, having a continuous emphasis on satisfying the consumer, again, is a distinct attribute, it is an insight that comes from the Austrian way of thinking about value and exchange. As I mentioned before, entrepreneurship understood broadly not only as new venture formation or proprietorship, right, but as dealing with uncertainties, taking bold and decisive action to assemble resources and combine them in different ways in the face of a constantly changing world. Having that emphasis on one's business plans provides benefits and that is something that comes, again, from thinking about Austrian economics. Understanding the business cycle from an Austrian perspective can be extremely useful for professional managers. And finally, what I'd like to spend the rest of my time today talking about is some Austrian implications for organizational design, how companies are structured, organized, governed, how employees are incentivized, who has the authority to make what kinds of decisions, how is performance evaluated and monitored. So that's really the part of the broader Austrian contribution to management that I want to emphasize this morning. Why? Because like everyone else, I'm selling a book. A book on management that just was released Tuesday of this week, it's called Why Managers Matter? The Perils of the Bossless Company. So it's framed as a critique of this theory that bosses aren't important, that managers aren't important, and that we should have these sort of radically flat hierarchies without any sort of central coordination within the firm. But it's really more generally a book about how sound thinking on economics, Austrian economics, specifically, can inform managers. I'm not going to go through the book in great detail because, you know, I'm not that tacky unlike some of our other speakers, Ryan McMakin. But I will give you a discuss a few broad themes that are in the book and encourage you to find out more at the bookstore. Again, sort of what we're positioning our argument against is the view that you get in this genre of literature from management thinkers like Gary Hamill, who say, you know, we need to fire all the managers. Shakespeare said kill all the lawyers. Hamill says fire all the managers. The Australian management thinker Tim Costel says we need to make everyone a chief, right? We need to reimagine management and making everyone a chief is a good place to start. Elon Musk famously told his employees that anyone at Tesla could contact anyone else at Tesla, including Elon Musk, right, to discuss an issuer problem. There's no need to go through a middle management layer. You just go straight to the person you need, including the CEO. You've probably heard of companies that have famously flat management structures like Gore that makes fabrics and a number of other materials. Morningstar, the tomato company in California, the online retailer Zappos, the video game platform, developer and platform Zalv, Valve, Chinese company Hire, Danish hearing aid firm Otacon. These are companies that have been written up and widely touted in the business press for their radically decentralized or disaggregated management structures. I love this quote from the CEO of Hire. The system that they use for their highly decentralized system, which is called Rendan High Yi, is described by the CEO. He says, with this model, we move away from being like an empire with a traditional closed pyramid, you know, the traditional managerial hierarchy, to be more like a rainforest with an open networked platform. Every empire will eventually collapse. A rainforest, on the other hand, can be sustained. Now, I don't know exactly what that means, but it has that new agey vibe that characterizes a lot of the boshless company literature. You might have heard of a management model called Helocracy that was famously adopted by Zappos, but then later dropped. So the idea with Helocracy is instead of this sort of traditional model, like you have depicted on the right, where you have the CEO and then the middle managers on down to the staff and so forth, people are organized into fluid and constantly forming and reforming circles to solve specific tasks and an ad hoc circle will come together and then it will be dissolved and reformed without the sort of central direction that comes from the traditional managerial hierarchy. Some thinkers have referred to this with praise as rather than a bureaucracy, we should replace the bureaucracy with an ad hocracy, meaning putting people together in ad hoc groups to solve specific problems as they arise. Spotify, which most of you listen to, where a lot of you get your music, I'm sure, also has a sort of a new agey kind of a model where they divide employees into what they call squads and tribes and trios and alliances and guilds. Some of this is really just sort of branding. It's relabeling of this actually a fairly conventional matrix structure, which firms have used for decades, if not more. But again, within the new age, you get sort of a cute way of describing it. Okay, hold on, you say, isn't one of the primary lessons from great thinkers like Mises and Hayek when writing about socialism, for example, that bottom-up means of organizing are better than top-down? Isn't that, I often get asked, isn't that a central lesson of Austrian economics? Wikipedia is better than the Encyclopedia Britannica because Wikipedia is created bottom-up and the traditional Encyclopedia is top-down. Lots of books, including books by prominent executives, argue that we need these more decentralized sort of market-based systems over the traditional hierarchical ones. Well, our argument in the book is essentially the following. First, flattening the hierarchy is not a new concept. Firms exist with a variety of structures and formats. It's been that way for a long, long time. Go back to the old cooperative movement of the 19th and early 20th century, putting the workers in charge, letting the workers run their own firm. That's not an information age idea. It's a very old idea and there are a lot of good reasons why it's very rare for firms to adopt this model of organization and be able to carry it out successfully. A lot of the evidence that is presented for this sort of new narrative, namely that all firms should adopt a radically flat, you know, disaggregated structure, is really sort of cherry-picked. Most of the ostensibly bossless organizations really aren't. What they do is they substitute for formal sort of, you know, statutory authority, a kind of an informal amorphous authority that is just as strong and sometimes even more difficult to navigate. Oh, sorry. I'll say something about Wikipedia in a second. A lot of times these ostensibly flat organizations are really dominated by a charismatic leader. Like, this is Tony Shea, who was the founder of Zappos. He passed away a few years ago. And essentially he ran the company the way he liked, but he advocated, he described it, articulated it as something radically flat. Many employees who worked at Valve have described it as like a high school. There's the cool kids who have all the power and make all the decisions and then there's, you know, the nerds who get bullied. And none of this is written down in an org chart, right? But it's very real and actually as a less transparent kind of a hierarchy, it can be much more difficult to manage. Another way that bossless organizations aren't completely bossless, and this is an important theme of our book, is that, you know, take Wikipedia, for example. Wikipedia does have a boss in a sense. It's this gentleman, Jimmy Wales, former student of our own, Mark Thornton at Auburn University who, according to Mark, read Hayek's use of knowledge in society in Mark's class and recognized the potential benefits of harnessing tacit knowledge and had this idea to create an online information source that grew into Wikipedia. Well, what Jimmy Wales and his co-founders did is they wrote the code for Wikipedia, right? The code that allows the entries to be displayed in a consistent format. The code that allows them to be revised and for you to track the revision history and for disputes about Wikipedia entries to be resolved and so forth. So Jimmy Wales didn't write all the entries in Wikipedia, but he did design the system within which Wikipedia entries could be created. That is a kind of management. That is a kind of bossing, if you like, not command and control, but creating systems and processes and procedures. And again, strong decentralization can work in some cases, but not in every case. Now, let's listen to Mises on this topic, writing about entrepreneurship and its relationship to ownership and authority. Mises says, the real entrepreneur is a speculator, a man eager to utilize his opinion about the future structure of the market for business operations promising profits. This specific, anticipative understanding of the conditions of the uncertain future defies any rules and systematization. It can be neither taught nor learned. The entrepreneur sees the past and the present as other people do, but he judges the future in a different way. So the entrepreneur, the characteristic entrepreneurial function, according to Mises, is this faculty of judging the future in a unique and idiosyncratic way. How does the entrepreneur put that judgment into effect? Well, according to the American economist Frank Knight, writing a little bit before Mises, Knight says, the only risk which leads to a profit is a unique understanding resulting from an exercise of ultimate responsibility which in its very nature cannot be insured nor capitalized nor salaried. In other words, this exercise of ultimate responsibility is the way that the entrepreneur puts his judgments into practice. How do you exercise ultimate responsibility through ownership by owning resources and assets? And some of my colleagues and I have developed the concept of what we call ownership competence, referring to the skill with which the ownership function is exercised. Why is this important? Because what the owner of enterprise is doing is assembling factors of production and combining them in unique ways to produce valuable goods and services. So again, what Mises, Hayek, Rothbard and others are, what they're arguing in their critique of socialism is not that there should be no ultimate responsibility, not that there should be no managerial authority in how resource assembly and so forth is done, but rather that it should not be in the hands of one single actor for the entire economic system, right? Mises argument is that in the absence of private property, you don't have exchange and therefore prices, you can't, you don't have a system of generating prices among factors of production for which entrepreneurs can engage in exchange and economic calculation. It's not a critique of authority per se, it's a critique of state centralized authority. Okay, one last quote and then I'll stop. You know, Hayek is well known of course as a critic of central planning along with Mises, but Hayek points out in ordinary language we describe the word, we describe by the word planning the complex of interrelated decisions about the allocation of our available resources. All economic activity is in this sense planning. This is not a dispute about whether planning is to be done or not. It is a dispute as to whether planning is to be done centrally by the state, by one authority for the whole economic system or is to be divided among many individuals. And those individuals include owners and managers of businesses and of companies. So the key managerial function in this understanding, right, is figuring out how to assemble productive resources, how to combine them in different ways to produce value to consumers. And in a complex multi-person system of production, the manager, the entrepreneur, the owner has to figure out how to organize people. When actions of different persons and groups within a productive system are highly interdependent, there is often a role for coordination by a managerial team where those interdependencies are weak, a flatter kind of a structure with more autonomy delegated to lower levels of the organizational chart can also be very effective. So our message in the book is that there is no one-size-fits-all solution for how to organize and manage companies. And certainly all companies do not need to be radically decentralized or disaggregated with a flat hierarchy. The traditional managerial hierarchy does have an important role to play even in our modern, knowledge-based, networked economy. Thank you very much.