The Missing Entrepreneur in Economics

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"You can't connect the dots looking forward; you can only connect them looking backwards. So you have to trust that the dots will somehow connect in your future. You have to trust in something - your gut, destiny, life, karma, whatever. This approach has never let me down, and it has made all the difference in my life."

-- Steve Jobs

Current economic research denies the innate characteristics of the entrepreneur. Rather than attributing economic growth and innovation to personality traits, economists would rather advocate a form of economic determinism: if an aggressive personality dominated an industry, economists try to explain the characteristics of the industry that made aggression a successful strategy. Economic models are contrived to remove the personality from the entrepreneur, to make all entrepreneurial decisions predestined, given enough time. However, to deny Bill Gates’s or Steve Jobs’s role in economic history is equivalent to denying Hitler’s role in creating a Nazi Germany or Castro’s role in creating a Communist Cuba. Claiming that history or economics is deterministic is silly. Entrepreneurs are people who make decisions; their decisions need not fall out of dry economic models, just as no literary model could predict the words of Shakespeare and no historical model could predict the future. However, we must be systematic in our approach to identifying entrepreneurial characteristics and not fatuously assert that entrepreneurs drive economic change. Instead, we must link specific entrepreneurial tasks to specific entrepreneurial traits with the goal of understanding how these traits crucially affect the evolution of a business from a startup to Fortune 500 company. This paper will explore current economic views of the entrepreneur and assert that there are common entrepreneurial traits that affect both the decision to become an entrepreneur and the level of entrepreneurial success.

We must first debunk the idea, advocated by Knight and Mises, of the entrepreneur as risk-bearer (Peter Swoboda, 1984). Aside from making every stock market participant an entrepreneur, this definition simply does not describe actual entrepreneurs and must be discredited. In Amar Bhide’s 1989 study of Inc. 500 companies, where an Inc. 500 company grows its sales on average by 170 percent per year from 1983 – 1988, Bhide found that they have a low scale fo...

... middle of paper ...

...t write business plans, and have only a college education. The successful entrepreneur will have a high propensity to start a business if his opportunity costs of doing so are low, if the business has a very small-scale of profitable operation, and if the potential entrepreneur has a high tolerance for ambiguity. The level of entrepreneurial success in the first few months will depend on whether or not the entrepreneur possesses the decisiveness and open-mindedness to adapt business strategy to the prevailing market needs while at the same time monitoring his own ideas for validity and promoting his ideas as truth. The successful entrepreneur is an arbitrageur facing a “heads I win, tails I don’t lose much” scenario, and his success crucially depends on his personal characteristics.

Works Cited

Bhide, Amar V. The Origin and Evolution of New Business. New York: Oxford, 2000.

Swoboda, Peter. “Schumpeter’s Entrepreneur in Modern Economic Theory.” From Seidl,

Christian, ed. Lectures on Schumpeterian Economics. Berlin: Springer-Verlag, 1984: 17-29.

Steve Jobs Quote Web 17 May 2015.

http://www.brainyquote.com/quotes/authors/s/steve_jobs.html#6jkcqSuPsa8gQ0XS.99

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