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Are Entrepreneurs Born or Made?

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10/05/2019

“At birth human infants regardless of their heredity, are as equal as Fords,” wrote Ludwig von Mises in his salient book, Theory and History: The Interpretation of Social and Economic Evolution. However, Mises contended that this is far from the reality of human action and how flesh-and-blood people operate in the market. While people may be born with particular talents and abilities, it does not mean they can ignore market preferences and what consumer’s value at any particular point in time.

Does it matter if entrepreneurs are born or made? Or if they are born in the right era in which their talents and entrepreneurial pursuits can flourish? Surely throughout the ages people have been born into a time where they were able to enter markets and employ their skills and talents unhampered. But for the rest, there were constraints. The constraint of what consumers want determines the means to a definite end. All entrepreneurs find it difficult to escape the reality of market limitations that the nonentrepreneurial population might never endure.

As Mises argued, ideas are displayed through human action. And as Israel Kirzner reasoned, the discovery of ideas and methods of production are manifest by identifying market opportunities. These manifestations of ideas and entrepreneurial discovery do not exist in a vacuum but in the market where a whole host of variables such as consumer preference, taste, competitors, risk, and uncertainty, are at play.

In The Free Market and Its Enemies, Mises wrote, “Even though you know everything about the past, you know nothing about the future.” This explains that the timeframe and economic constraints at work are vital to the expression of entrepreneurial talents or the willingness of entrepreneurs to bear the burden of market risks or market distortions. Some economic shifts favor the entrepreneur better in terms of their profit and loss. As the saying goes “timing is everything.” This rings true in understanding whether or not entrepreneurs are born or made.

Market constraints have affected many entrepreneurs in various genres and markets. These limitations were evident during the times of Vincent van Gogh and Rembrandt van Rijn. Did van Gogh and Rembrandt’s entrepreneurial expressions align with the values, taste, and preferences of the consumers of that day, or were their products more in demand posthumously? If so, why? Maybe artists are not born but made, but too fall victim to market forces.

Either way it is analyzed, there is a time and place for entrepreneurs’ skills. These skills can flourish or disintegrate if certain controls are affecting the market. If entrepreneurs are born, for example, that does not fulfill the obligation they have to deliver customer value. Being born with aptitude, skills, and natural ability does not mean entrepreneurs can produce something that is ready for the market. The natural abilities of entrepreneurs serve no purpose to consumers who are willing to exchange for the valuable skillset that turns raw materials into usable products. However, when the timing is right—for instance, when market conditions demand a particular value and when consumers are willing to pay for something—and when the entrepreneur’s skills and aptitude come together, one can feel confident that entrepreneurs are made.1

Kirzner was right in that both Mises and Friedrich Hayek saw the market as an entrepreneurially driven process. Mises saw the entrepreneur, born or made, as the person who acts in the midst of constant change in the market. Born entrepreneurs might, in the pursuit of market entry, make malinvestments and/or market errors in their efforts to use their naturally provided talents. Made entrepreneurs, according to Kirzner, are naturally alert and able to find that “profit opportunities were right under their nose!” as they become more aware of previously missed market opportunities where their talents could have been used.

Unfortunately, van Gogh and Rembrandt will never know the value of their art and the impact their entrepreneurial expressions have made and continue to make on art enthusiasts and connoisseurs because of the nature that market constraints have on entrepreneurs—born or made.

  • 1. Editor's note: for additional context, see Organizing Entrepreneurial Judgment: A New Approach to the Firm by Nicolai Foss and Peter Klein. Foss and Klein's (FK's) position, as summarized by John Dellape:
    Entrepreneurship is defined as "judgmental decision-making under conditions of uncertainty." Judgment is defined as "decisive action about the deployment of economic resources when outcomes cannot be predicted according to known probabilities." In this conception, the entrepreneur is an active, creative agent. He is not passively identifying opportunities that he is aware of, but rather creating new opportunities by his judgment. Decision-making under uncertainty is the qualifying function of entrepreneurship whether it involves imagination, creativity, and leadership or not. FK argue that there is no market for this judgment and therefore entrepreneurs must establish firms as vehicles to perform their function in the economy. The definition of judgment implies that entrepreneurs own and manage assets. FK draw most heavily from economists Frank Knight and Ludwig von Mises to explain entrepreneurship as judgment.

Raushan Gross is an Associate Professor of Business Management at Pfeiffer University

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