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2.4. The Entrepreneur II: The Method

Schumpeter vs Kirzner

Schumpeter:

The entrepreneur is the disruptive element of a market that is in general in equilibrium.

Innovation drives creative destruction.

Kirzner:

The entrepreneur is the alert agent who creates opportunities and drive the market (in disequilibrium) closer to the true equilibrium.

Improving people’s life

How to be an Entrepreneur?

A process of effectuation

"6. New Means. To an entrepreneur, it always seems that 'if there is a will, there is a way'... There are always pathways or means to achieve goals... An alert entrepreneur is always listening, and learning something new."

"7. New Goals. When new possibilities emerge, new opportunities can emerge along with them. New tools expand the realm of possibility."

The entrepreneur's goal is obtaining a signal (money) that indicates that she is serving people's goals.

"Causation processes take a particular effect as given and focus on selecting between means to create that effect. Effectuation processes take a set of means as given and focus on selecting between possible effects that can be created with that set of means."

"Effectuation begins with a given set of causes, consisting of (mostly) unalterable characteristics and circumstances of the decision maker, and the focus is on choosing among alternative (desirable) effects that can be produced with the given set of means, thereby eliminating the assumption of preexistent goals."

4 Principles:

1. affordable loss, rather than expected returns;

2. strategic alliances, rather than competitive analyses;

3. exploitation of contingencies, rather than preexisting knowledge; and

4. control of an unpredictable future, rather than prediction of an uncertain one

"Not all business-people are entrepreneurs." EEE

"First, entrepreneurs innovate. Second entrepreneurs create customers." EEE

"An entrepreneur is a resource integrator. Inventions and innovations are combinations of existing resources.

"This is not about serendipity, and yes, chaos needs to thrive but it also requires a systematic approach to move ideas forward... Then, bring discipline to chaos to reduce uncertainties."

Arteaga and Hyland, Pivot

Saras Sarasvathy,

"Causation & Effectuation"

Remy Arteaga

F. Bastiat

Uncertainty & Complexity

The entrepreneurial element of human life

"Know Thyself"

The uncertainty of the market is the uncertainty of the world. Part of it comes form the volatility of people's desires.

Apollo is the God of prophecies.

"Innovation is about asking questions and finding answers through learning, because it is fraught with uncertainty." Arteaga and Hyland, Pivot

"The logic for using effectuation processes is: To the extent that we can control the future, we do not need to predict it." Sarasvathy

"entrepreneurs are the engines of economic growth."

EEE

"Business all over the world is becoming more free-market oriented and more entrepreneurial. Almost half the companies on the Fortune 500 list did not exist fifteen years ago. Emerging technologies, such as those on the internet, are not only creating rapid change but also fundamentally redefining how we truck and trade and how we interact with one another in every sphere of human action." Sarasvathy

Ethics: finding ways to improve the world.

Economy: finding ways to overcome scarcity.

Entrepreneurship: being alert of new ways to improve other people's lives in order to improve one's own.

"1. Who are we? This question can place realistic bounds on the space that the entrepreneur explores for invention and innovation..."

"2. What Do We Know? Also an important question to ask because it puts more realistic bounds on the space you explore for invention and innovation. "

EEE

Principle 3"exploitation of contingencies."

Sarasvathy

Apollo

Temple of Apollo at Delphi

Social Networks

"3. Whom Do We Know? Successful entrepreneurs are especially successful at using their network to bring together resources and lower risk."

"4. Interactions with other people. Once you have an idea of what you want to do, it is critical to get help... In fact, one of the key resources the entrepreneur integrates with other resources is people"

"5. Stakeholder Commitments. Entrepreneurs make commitments to stakeholders as they go."

"Principle 2. strategic alliances, rather than competitive analyses"

Sarasvathy

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