Some Insightful Entrepreneurs Planned for a PandemicTags The EntrepreneurEntrepreneurship
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Does a pandemic trump entrepreneurial foresight? Many in business will say yes, “nobody saw this coming.” Lack of customer demand and government lockdowns are “no fault of their own.”
But Penny Chutima, co-owner of the Lotus of Siam restaurant, did see it coming. Chutima and her mother, Saipin, have operated the off-Strip Las Vegas staple for years. Saipin opened the original location with her husband in 1999. Yelp gives the northern Thai eatery 4.5 stars with over fifteen hundred reviews, which typically start with something like “OMG, WHERE DO I BEGIN.”
The food is great. The wait can be long but worth it.
Saipin is a James Beard Award–winning chef and also pays attention to what’s happening in China. So, in January “I probably ordered about 1,000 masks for my employees at that time,” daughter Penny told the Las Vegas Review-Journal’s Heidi Knapp Rinella, who writes that Chutima also stocked up on hand sanitizer, Clorox wipes, and other supplies. “She launched the new policies around the end of January. Employees were required to wear masks. They ramped up sanitizing practices, including wiping down each menu after every use.”
COVID-19 will likely take down more restaurants than any other type of business. Eateries have gone from being forced to close, to only offering curbside service, and ultimately will likely be forced to shrink indoor seating capacity by two-thirds. Selling food, drink, and ambience is done at razor-thin margins with no barriers to entry. Resturantowner.com reports that 23 percent of startup restaurants fail within the first year in the best of times.
Murray Rothbard explained in Man, Economy, and State that the successful entrepreneur
saw better than his fellows, however, and acted on this insight. He reaped the reward of his superior foresight in the form of a profit. His action, his recognition of the general undervaluation of productive factors, results in the eventual elimination of profits, or rather in the tendency toward their elimination. By extending production in this particular process, he increases the demand for these factors and raises their prices.
While government leaders had their heads in the sands of hope in January, the owners of the Lotus of Siam knew they didn’t have that luxury. “So we were aware,” Penny Chutima said. “We were following it constantly: ‘Hey, this is pretty serious.’”
For now, Ms. Chutima isn’t waiting for a virus. Rinella writes, “She’s talking to a company about installing a thermal-imaging camera to screen anyone who enters the restaurant and planning pickup lockers for takeout orders. People on the waiting list will be able to wait in their cars, with a text telling them when a table is available.”
In fact, the market tends to reward its efficient entrepreneurs and penalize its inefficient ones proportionately. In this way, consistently provident entrepreneurs see their capital and resources growing, while consistently imprudent ones find their resources dwindling. The former play a larger and larger role in the production process; the latter are forced to abandon entrepreneurship altogether.
“We can’t tell how the market will change,” Chutima tells the LVRJ. “We’re probably going to limit our menu and do a single-page printout.”
Recognizing alertness to change in entrepreneurship is a uniquely Austrian school insight. Peter Klein and Nicolas Foss write, “Israel Kirzner's concept of entrepreneurship as alertness to profit opportunities is one of the most influential modern interpretations of the entrepreneurial function.”
If the emergence of COVID-19 or the government’s response illustrates anything, it’s that uncertainty in this world abounds and entrepreneurs must adjust to it to be profitable and stay in business. Plenty of marginal business owners will use the plague as an excuse for their failure. But the successful will be nimble and resourceful, adapting and changing.
Foss and Klein point out that entrepreneurs grasp and respond “to profit opportunities that exist in an imperfect world.” This is not an equilibrium world, and Kirzner recognized that it was the successful entrepreneur who flourished in a market of permanent and ineradicable disequilibrium.
The restaurant business may never return to what we now imagine as normal. But it’s a good bet that the Lotus of Siam will survive and thrive postplague.