Liberty and the Entrepreneur; P. Gresham

Francis Amasa Walker, Economics Professor at Yale and later President of M.I. T., met the "iron law" theo ries of Malthus, Ricardo and Mill head on. He demonstrated with stunning clarity that new opportu nities do not derive from dipping into some imagined "wage fund" or from exploiting the workers. Walker iden tified the entrepreneur as the sig nificant factor in economic develop ment-especially in times such as his or ours. Dr. Gresham is President Emeritus and Distinguished Professor, Bethany College, Bethany, West Virginia. 580 David Birch and his M.1.T. col leagues startled America by their study of nearly six million firms re ported in Dun and Bradstreet. They concluded that small companies, each with fewer than one hundred employees, created eighty-two per cent of the new jobs in the United States economy during the period 1969-76. These small companies are the realized insights, dreams and formulated plans of action on the part of entrepreneurs.

The Complex Motives of the Entrepreneur The entrepreneur in America can be truly classified a rare bird. He dif fers from the conventionally defined businessman in many ways. The en trepreneur's motives are not merely to avoid loss, turn a modest profit if possible, defend the organization, maintain a position, and win ap proval for exemplary conduct. The LIBERTY AND THE ENTREPRENEUR 581 entrepreneur is possessed above all with drive, insight and ingenuity. Adam Smith assumed the eco nomic motive to be "a drive to better one's own condition." Ludwig von Mises refined this viewpoint as "an attempt to substitute a more satis factory state of affairs for a less sat isfactory one." The entrepreneur, however, has more complex motives. The will to power is a basic factor in human psychology, and many eco nomic motives derive from this will the entrepreneurial drive included. Possessions often bring power and position. George Gilder, however, re minds us that individual economic motives need not be altogether self ish. Henry Ford not only sought profit, but hoped to provide trans portation at low cost for the people of America. John and George Hart ford, who created the Great A&P Tea Company, sought to better their con dition, but also to supply the Amer ican people with better food for less money. The old service club slogan, "He profits most who serves the best," is true.

Emulation, nevertheless, is a prime factor for each entrepreneu rial venture. When other people are making substantial profits, the en trepreneur wishes to do the same thing. Risk Factors The speculative aspect of entrepre neurship has been emphasized by Ludwig von Mises in his great book, Human Action. Israel Kirzner, in his timely book Competition and Entre preneurship, acknowledges the spec ulative character of business inno vation, but points out that the wise entrepreneur is alert to the fact that "opportunity for profit does exist." He goes on to say, "All human action is speculative; my emphasis on the element of alertness and action has been intended to point out that, far from being numbed by the inescap able uncertainty of our world, men act upon their judgments of what op portunities have been left unex ploited by others." One of the neglected philosophical aspects of economics has been the ac knowledgment and understanding of the principle which the philosopher, Charles Sanders Peirce, called Tych ism. The very smallest particles of the universe exhibit a random per formance which can be actuarily de scribed for purposes of rough predic tion, but cannot be assumed to exhibit the kind of absolute causa tion that made many of the laws of science and, to a lesser extent, the social sciences seem capable of flaw less prediction. The economic deter minism of Karl Marx must go the way of all absolute determinism. The word "Tychism" derives from Tyche, the goddess of chance. The Latin name for this fair mythological maiden is "Fortuna." She is, indeed, the goddess of the entrepreneur.

582 THE FREEMAN October Some people have native capacity to take risks. As Gilder points out in his The Spirit of Enterprise, "whether sorting potatoes or writing software, they are movers and shak ers, doers and givers, brimming with visions of creation and opportunity. They are optimists who see in every patch of sand a potential garden, in every man a potential worker, in ev~ry problem a possible profit." These are people who take the pIunge to create new enterprises, build new businesses, revitalize old ones. They struggle, flounder, work day and night, sometimes succeed and often fail; but they are resilient and they keep coming on. The Compleat Entrepreneur I shall not attempt to describe the compleat entrepreneur as Izaak Walton made glamorous "the com pleat angler." I shall, however, out line a few characteristics of the nu merous entrepreneurs who are building America out of the ruin of some of our traditional beleaguered and subsidized industries.

Kirzner correctly identifies alert ness to new opportunity as the prin cipal factor in entrepreneurship. The person who fails to see an opportu nity is disqualified. A wise old Af rican observed, "Anybody can see a seed in an apple; the wise person can see an apple in a seed." Only optimists transform the econ 0my. The optimism must be disciplined, and cannot give way to gloom. The turn of mind which set tles for Murphy's Law is doomed. To build upon my earlier figure of speech, the pessimist is a person who can see a bellyache in an apple blossom! Boundless energy is a great aid to an entepreneur. Very few people suc ceed in life without sizable reser voirs of energy. The pioneer who starts a new business may very well wind up working at it all hours of the night. Entrepreneurs make money the old-fashioned way: "they earn it!" Lack of fiscal discipline encour aged by government and somewhat by huge corporations is the enemy of business innovation and successful development. The young Turks who have learned their habits from bu reaucracies, whether public or pri vate, may argue the maxim, "You've got to spend money to make money."

My experience is that most who urge this action are more adept at the spending than the making. The en trepreneur who starts in his base ment then mortgages his house and works on a shoestring is much more likely to succeed than is the person who takes out a huge loan and at tempts to live up to his presumed status as a businessman. The entrepreneur, moreover, must be able to face failure and be re sourceful enough to learn from it. Some of the most successful compa nies in America are the result of 1985 LIBERTY AND THE ENTREPRENEUR 583 early entrepreneurial failures. The imaginative and creative business person learns by failure, as well as by success. A talented entrepreneur must have a better-than-average sense of timing. When Shakespeare wrote "There is a tide in the affairs of men, which taken at its crest, leads on to fortune," he provided the maxim for the modern American entrepreneur.

My friend Richard Cramer exempli fies the possible accomplishment of a genius entrepreneur who acts at the right time and in the right place. I quote a paragraph from his letter: I left IVAC Corporation in May 1972 and founded IMED Corporation in September of 1972. I brought with me from IVAC, etc. engineers and marketing people who had been with me all the way back to my start in 1962. IMED proceeded to con tinue to develop products in the IV con trol area and developed the first truly volumetric IV pump, which allowed, in turn, the development and use of a wide range of IV solutions, and the expanded use of IV therapy in patient care. IMED grew very rapidly and very profitably by concentrating on these nurse related in struments, that positively affected the stabilization and recovery of patients. In 1982, I sold IMED to Warner Lambert company for $465 million cash. This, in cidentally, was the largest sale of a pri vate industrial corporation in United States history.

The cybernetic revolution is of con siderable benefit to the aspiring en trepreneur. The ease with which relatively inexpensive computers can aid in the prediction of outcomes is of great importance to the daring in novator. Ford and Carnegie had to do it the hard way. The Social Economic Climate Our present business climate has negative aspects for entrepreneur ing. The inevitable competition may be fierce; business and union monop olies have erected formidable bar riers to progress, but the brave and the daring succeed! The greatest enemy of the entre preneur is government intervention. The do-good motives which prompt politicians to pass laws and erect bureaucracies not only restrain the pioneer, but mobilize formidable ob stacles in the form of unnecessary regulation and discriminatory tax ation. The daring, innovating entre preneur is well-equipped for the struggle, but the government holds a frightening advantage: it has a monopoly on violent force!

Noone, however, can thwart the insight, initiative, imagination, drive and determination of a true en trepreneur. While economists are de scribing the impossibility of the project, and the government is reg ulating against the success of the en terprise, and the unions and associ ations are mobilized to thwart progress, the truly intrepid are win ning fortunes and providing employ ment for unnumbered multitudes. @J Clarence B. Carson FREE ENTERPRISE: The Key to Prosperity FREE ENTERPRISE is widely ac claimed in the United States. Poli ticians, generally, declare in favor of it; editorialists frequently laud it; Chambers of Commerce have writ ing contests about it; even automo bile stickers praise its virtues. Yet much of our enterprise is restrained, restricted, hampered, regulated, controlled, or prohibited. As an old saw has it, "What you do speaks so loud I can't hear what you are say ing." By our practice, we say that we believe in free enterprise-except . ..