The scientific method has served us well to date. The entrepreneurial method, informed by the principles of Austrian economics, can take society much further. Dr. Saras Sarasvathy joins the Economics For Business podcast to distill the essence of the value generating and wealth producing method.
Download our knowledge graphic for the Entrepreneurial Method: Mises.org/E4B_131_PDF
There is an entrepreneurial method — a systematic way to achieve the unpredictable.
The scientific method aims to discover universal laws that make the future predictable. If we have enough scientific understanding we can, for example, build bridges that we can predict will not collapse. We can construct an entire scientific infrastructure in our society.
The entrepreneurial method aims higher, at human flourishing. It aims at discovering how we can all work together to achieve our human purpose, including new purposes that we all agree are worth achieving. We can construct an entrepreneurial structure to build a better human life and a better society.
Entrepreneurs choose a control strategy that’s appropriate to uncertainty.
Some people fear entrepreneurship because its outcomes are uncertain. But this is worrying about the wrong things: outcomes are outside your control. Entrepreneurs are more discerning about what can be controlled: means.
Dr. Sarasvathy lists several control strategies:
The Bird-In-The-Hand Principle: work with what you’ve got and can control, which she sums up in the questions: Who Am I? What Do I Know? Whom Do I Know? What resources do I own or control now? This is the first principle of control.
Affordable Loss Principle: Entrepreneurs can control their downside, making it affordable and limiting uncertainty, by asking “What one value generation project would I undertake even if I risk losing everything I invest In it?”
Crazy Quilt Principle: How do entrepreneurs control the uncertain process of identifying the right partners, including hiring the right people? They don’t try to predict the results of hiring and pitching. Instead, don’t hire, don’t ask. Just talk to people — those who fit best will self-select into your project.
Lemonade Principle: Don’t fear the unexpected. Welcome surprises. All unexpected happenings are opportunities and can become resources. Leverage contingency, and make lemonade out of lemons.
The Pilot Is The Plane Principle: Everyone on the plane is a pilot, co-engaged in shaping history. The plane will reach a destination, the exact nature of which is unclear, and everyone on the plane contributes to getting there.
There are some guidelines that entrepreneurs have established over time.
Non-Predictive Action Is The Driver
Everything in the entrepreneurial method is driven by action. Or, more completely, action, interaction and reaction. Things you care about, things you can actually do, things we can do together, and how we handle surprises. Interacting with the environment with a sense of purpose, and thereby changing it in some way.
Our aspirations and the outcomes we experience may not be symmetrical. Not succeeding is not the same as failing. Even if a new idea does not work out, what is the worst that can happen? We shouldn’t make decisions just because we can’t predict the future. Embrace the unpredictable but make sure the downside is under your control.
The great productivity of entrepreneurship comes from intersubjectivity — two or more people can interact and come up with something neither one had actually thought about or dealt with or considered or contemplated before. Intersubjectivity is more than interpersonal and beyond negotiation. It’s a question: “I am doing this. What do you think?”
The Entrepreneurial Method leads to social good and a new role for business in society.
A side effect of everyone in society learning the scientific method was the emergence of the middle class, defined by income. Science brought productivity which enabled a large swath of society to earn enough money to escape poverty. Everyone was able to harness science.
Let’s teach everyone the entrepreneurial method. Let everyone start companies, grow companies, invest in companies, all with no thought of prediction. A middle class of business will emerge, defined not by income but by venturing. This middle class will produce more jobs and more enduring, more stable companies, embedded in strong communities, with greater well-being and less churn. The fruits of creativity take root in endurance and durability — not in Schumpeterian creative destruction — and contribute to stability and the taking on of bigger challenges. Decade after decade, the middle class of business will generate value and produce wealth, employing lots of people and educating successive generations to take the entrepreneurial method with them into a better future.
“The Entrepreneurial Method” (PDF): Mises.org/E4B_131_PDF
Among the innovations planned for the Economics For Business platform is a series of encapsulations of important research papers. Here is a sample:
Effectual Entrepreneurship (PDF): Mises.org/E4B_131_Book
“What Makes Entrepreneurs Entrepreneurial?” (PDF) Mises.org/E4B_131_Paper
“Entrepreneurship As Method: Open Questions for an Entrepreneurial Future” (PDF): Mises.org/E4B_131_Article