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Ask HN: do entrepreneurs serve as pawns for economic development?

13 points by TriinT 17y ago

My thesis is that entrepreneurs serve as pawns for economic development. This might sound a bit far-fetched, so please allow me to explain in the following lines. As a prelude, I claim that: 1) most societies need entrepreneurs to innovate, to grow, and to prosper. When the state is the sole agent of business innovation, mediocrity and inefficiency tend to reign supreme. 2) wherever there are business opportunities, there is competition. Thus, statistically speaking, entrepreneurs are destined to fail. The point I am trying to make is that societies need entrepreneurs to advance economically, even though most will fail. Hence, my claim that entrepreneurs serve as pawns (or canon fodder, if you prefer) for economic development. A happier metaphor would be to say that entrepreneurs are the shock troops of capitalism (as Schumpeter put it). For centuries, emperors and warlords recruited their soldiers with promises of land and loot. Are entrepreneurs today's useful idiots to be sacrificed for the advancement of the economy? The promise is no longer land nor loot, but a successful IPO, early retirement, etc. I know this might sound extreme. What do you guys think about it?

3- 17y ago
I think you're generally along the right lines. I can offer a different explanation. Most of my own thesis comes from reading Eisenstein's "Ascent of Humanity", though I've put a little of my spin on it. The basis of civilization - the good and the bad - comes down to our concepts of money and property. I'm only going to speak of the bad here. Money earns interest, hence if you have it you are compelled to hold on to it; as well, because it compounds, a quick cash grab may theoretically exceed the return of any sustainable venture. Property, on the other hand, makes us seek to control our world so that others can't. It started with land, but it's spread to just about everything, including abstract concepts. Most competitive forces can be attributed to this volatile combination. But the entrepreneur's motives may differ from competition; instead of grabbing money and holding on to it, or taking other people's land, resourcefulness and efficiency is another goal, and it is usually the one that produces the most successful businesses. What civilization has done is to use money and property as proxies for efficiency, which for the entrepreneur encourages all negative externalities, and for society as a whole causes a lot of deep rifts and strife. But I think that, ultimately, technology - by increasingly giving power to all individuals - is going to make the money and property concepts irrelevant. It's already doing so online, albeit with a lot of friction because we have to use side-channels to translate online "currencies" (popularity, utility, reputation) into money.
- IsaacL 17y ago
  That book sounds interesting, I had a look at the website. Has anyone else read it? I want to know if it's worthwhile (well-thought-out, researched, etc), or just another guy on the 'net with some opinions. Anyway, I agree with posters above - entrepeneurs are somewhere between very important and essential to economic growth. They're not pawns though, as that implies they are unwilling stooges being manipulated by higher powers.
- caffeine 17y ago
  The ascent of humanity Sorry, but Eisenstein's (the author of that book) ideas are bunk. He is just a guy on the net with opinions, which in itself is inoffensive. But they are terribly researched, economically laughable opinions, which he claims to back up with economic theories - and which therefore duly require debunking. His main thesis is that "we should make interest negative" - as though the time value of money were some sort of law by fiat! We set interest rates, yes - but that's like putting a dam on a river. Making interest negative is like making laws that water must henceforth flow uphill. He's also in cahoots with the Law of Attraction people (a slightly creepy new-age religious group), who use all sorts of pseudoscientific garbage to justify their existence. Quotes on Eisenstein's website by Bruce Lipton (among others) seriously call his credibility into question. (Bruce Lipton was a genuine biologist who fell off the rails in the early 90s and started writing a bunch of nonscientific mumbo jumbo about quantum theories of consciousness and evolution - published by Mountain of Love (!) publications). Eisenstein uses similar techniques - pseudoeconomics instead of pseudoscience. I don't know if you're quoting him, but "money and property as proxies for efficiency" is absolute codswallop. (The phrase "proxy for efficiency" is, so far as I can tell, completely devoid of meaning. ) We use money because it is _more efficient_ than e.g. goats as a unit of economic value. Before money was called money, it was called gold (and the ancient Japanese used rare seashells, and prisoners use cigarettes). Your final point is also incorrect - the possibility of monetizing the efficiencies gained through improved communication has driven the current wave of technology, not been replaced by it. Finally, technology absolutely does not give power to all individuals - at best, it confers advantages to those (often small) groups who adopt it. Please help debunk people like Eisenstein. Let's be honest: economics is hairy enough as it is without people spreading that sort of twaddle.
swombat 17y ago
It's quite extreme and overly simplistic... The danger, as always, is that there is some truth to what you say, but that truth is stretched and blurred in various direction so as to be mostly meaningless. Almost every high-reward human endeavour, from drug dealing to movie stardom or stock trading, generates large amounts of competition. That's one of the main reasons a free market is a productive way to allocate resources - it places high rewards on things of high value, and allows anyone to compete, so that more people will provide these high-value things, thus driving their price back down. In that way, your suggestion is true. However, there are three implicit assumptions in your thesis that are very, very shaky. The first and least harmful is the idea that "being a pawn" is somehow implicitly bad. You haven't established that at all. There is no absolute "bad", so you must be implying that it is worse than something else. I'd be curious as to what that thing is, in your mind. Perhaps, if you dig, you might find that actually, being an entrepreneur (pawn or not) is quite a good deal, better than most others. The second false premise is that there is some kind of specific group of people who are deciding this, manipulating this system for their benefit. There is no such group. Or rather, there is - this group is all of us. We all benefit from a system which encourages innovation and competition and rewards it. There is no conspiracy to exploit entrepreneurs by somehow making them compete against all odds. Nobody sat down and thought "I wonder if I can get all these useful idiots to start lots of innovative businesses so that... what?" The third misconception is the idea that entrepreneurs are somehow being manipulated by this system beyond their understanding. If anything, I'd say it's the opposite. Entrepreneurs set out to shape the system around them to provide them with rewards. The fact that some types of businesses have high failure rates (I still don't really believe those 95% business failure rates... I strongly suspect very shoddy statistics that have a very poor definition of "success") doesn't mean that somehow most entrepreneurs are being suckered into starting business. I think you need to rethink this idea from the ground up, carefully examining your assumptions as you go along, and maybe talking to some entrepreneurs too. You will, I believe, find it has no substance in reality.
- CyberFonic 17y ago
  Agree with swombat's carefully worded response. Would like to add a couple of points. Entrepreneurs volunteer and are not forced to be "pawns". They are the inventors. People in general are content with the status quo, entrepreneurs on the hand are "unreasonable", they see better ways of doing things. It is through this process of optimisation that society has progressed. Trying anything new and/or different is inherently risky and thus there is the ever present chance of failure. But failing to fail is worse, it means that you haven't tried hard enough. Probably the most mistaken concept of entrepreneurship is that they do it for money. That is what bankers and VC's do. They don't have any vision of their own, instead they fund the visions of others. Entrepreneurs do things to OPTIMISE, the money is merely the consequence of getting it right, in other words, people are prepared to pay money for the convenience, benefit, VALUE of the entrepreneurs' innovation. Columbus wasn't told by his Queen to discover another route to India, he asked for money to embark on discovering a new route to India and failed ... he discovered a new land instead, created an avenue for trade. That is the typical failure of entrepreneurs, they dream big and fail by achieving something greater. Anyone who sets out to be an entrepreneur solely to make money has failed before he has even started.
johnnybgoode 17y ago
You can think of an "entrepreneur" as someone who has chosen to take higher risk for the potential of a greater reward. People should of course be free to choose a lower risk pursuit, but the potential reward is also lower. You're saying many entrepreneurs fail and that this sucks. But your post kind of assumes that who is an entrepreneur is predetermined. Instead, as I said, people should be free to choose the amount of risk they're willing to take, and yes, many of the people who choose to take big risks will fail. That's how it's supposed to work. Also, obviously each person doesn't have to make this choice once for their entire life. They can fail and try something else.
brk 17y ago
What do you guys think about it? I think your theory is without merit. Most entrepreneurs fail because they take on an endeavor they are not cut out for. Additionally, it is not like the government randomly selects people and tells them they must go try to start a business. Generally speaking, entrepreneurial types go into the battle knowing that the odds are stacked against them, but for whatever reason, they feel this is a better approach than a more "safe" career working for another organization. Even in the tech startup world, there really is no "recruitment" of entrepreneurs, VCs typically reject meetings rather than go out and try to drum up business.
- TriinT 17y ago
  My detailed reply to yours and other people's responses can be found here: http://news.ycombinator.com/item?id=646616 http://news.ycombinator.com/item?id=646616
jganetsk 17y ago
By the definition of capitalism, we are all pawns of the invisible hand of the market, as much as we are the benefactors.

3- 17y ago

OK, to be honest I've been looking for someone to actually debate this with. First of all, "proxy for efficiency" is my own terminology and seems quite sensible to me. We talk about productivity in terms of GDP per capita. Implicit in that is the assumption that money is its own value, which it isn't - money is at best a marker of value. But we reward people with the marker, not the value. Second, your point of money being more efficient than other goods as a unit of value doesn't go anywhere. It does not get at the point Eisenstein presents, which is that the concept of trade exists because of ownership of scarce resources. If nobody owns anything, trade is nonsense. Third, the Eisenstein thesis doesn't mention interest. Negative interest is mentioned in the form of demurrage in one of his closing chapters, as another way to define money. But his overall thesis is non-economic: that we have set ourselves up, in a variety of ways, to battle against nature and against each other. "Separation of self" is the term he uses, along with a variety of colorful New-Agey terms. I'm focused on the economic points in part because I hold a B.A. in economics myself, and there are some solid points made about economic systems outside our mainstream viewpoint - particularly with respect to prehistoric gift economies. Your claim that the current wave of technology - by which you presumably mean online communications - was driven by monetizing efficiencies....that one seems a bit faulty. The Internet started as a military/academic project, not as an attempt to build a consumer market. As well, most open source software isn't built with a monetization in mind, but rather is a way for others to reduce their costs. In general the market doesn't build the technology, the market commercializes the technology after it becomes self-evident. The reason we have zillions of web startups is that the web still has so many new concepts to explore that everyone can be a do-gooder and monetize at the same time. The fact that a lot of people aren't monetizing the things they do online(for example, HN being free and user-driven) is the interesting part. That's a huge reversal of so much of history. Your statement of technology not giving power to individuals seems incredibly wrong. The Industrial Revolution was organization-driven, but our current revolution, whatever you might call it, is acting to take apart organizations. Blogs vs. newspapers. Social media vs. mass media. Central office vs. virtual office.

caffeine 17y ago
I agree that money is a proxy for value. That still does not justify the unsupported claim that it "encourages all negative externalities", and causes "deep rifts and strife." I agree that economic activity can have negative consequences - but how is this caused by the mere existence of money? Being rewarded with the value is not more helpful than being rewarded with the marker - most people appreciate using their paycheck at their choice of restaurants, rather than simply trading code for hogs at the local bazaar. If nobody owns anything, trade is nonsense. Barring slavery, nearly everyone owns their time. Thus people own something. Until a startup solves death, that remains a scarce resource. The existence of scarce resources with ownership is thus fundamental to the human condition. Much (most?) trade involves the exchange of labor for "markers." Any time you do a favor for anyone, it's trade. Sometimes, they do you a return favor by giving markers. We can rename money to markers and trade to favors, but that's what it is. As for physical resources - their "ownership" is basically just a way of prioritizing access. So - you might prefer other ways, like waiting in line, or lotteries. When people have tried those ways, they've found that letting the guy with the most markers have the resource works out for the best. Obviously, you know this - so what do you think works better as a means of resource allocation? Third, the Eisenstein thesis doesn't mention interest He mentions several times (I'm referring primarily to his videos) an enthusiasm for instituting money that "decays," like bread, so that we are tempted to spend it more quickly rather than attempting to save it. I can't describe this idea as anything other than crazy, so I'm glad that you reject it as well. Monetizing efficiencies....that one seems a bit faulty It's true - I expressed myself poorly, and indeed the idea was unclear in my mind at the time. I think neither of us was right in our characterization of this so far. Technology and markets are, to me, each the seed of the other. Yes, technology creates new markets - but markets capitalize new (usable) technologies. You don't have to call them markets - you can call them patrons, such as those that financed da Vinci. Once again, however, markets appear to do a better job than feudal patrons. Increasingly, groups of patrons acting with good information can do a good job as well - but it remains a market, just a better-informed one. Our current revolution (/me degrades into general rant:) ... is not a revolution at all. The "Web2.0" line of innovation seems quite trivial - office online instead of offline, social voting - these are simply efficiency improvements on existing organizational memes. It's probably impolite to post such a comment on a YC board, but nonetheless - does anybody seriously think that this stuff is earth-shaking? Culturally, it might be; but technologically, it's just variations on a theme. Go check out the stem cell labs in Singapore; they're innovating.

TriinT 17y ago

Thank you very much for your insightful response. Having worked for a couple of hi-tech startups, I am a little bit acquainted with the entrepreneurial world. Since both startups failed after a few painful years, I am also acquainted with failure and burn-out. No complaints. I knew how slim the odds were ;-) I am fully aware that my thesis is quite ludicrous indeed. It may be a metaphor, but it is also an overly far-fetched one. All in all, I entirely agree with everything you wrote. Allow me to explain where this heretic thought of mine comes from: I come from Europe. My country is literally dominated by interest groups. With the end of European imperialism, my home country declined both in influence and affluence, as many others. Most people still live in the grandiose and glorious past, and haven't realized the world has changed. The country no longer produces much, and there's no longer an empire to supply the home land with resources at an affordable price. Some "bright politicians" (pun intended) thought of a solution: to create a clone of Silicon Valley in their land. As a result, there are tons of government-funded "innovation agencies" whose goal is to pro-actively promote entrepreneurship. Moreover, successful entrepreneurs show up on TV as rock stars. The old bankers inherited their wealth from their families. These guys are self made men, and since the country hasn't had many of those, they are admired. There really is an effort to promote entrepreneurship, as it is perceived as the one and only salvation to the impending economic debacle. I would not call it a conspiracy (what an over-charged word!), but everyone in positions of power is promoting the idea that the country needs startups. Politicians, business leaders, distinguished academics. The meme is that starting a business is almost a patriotic duty!! Serve your country!! Found a company! No joke. Overall, I believe this is good because the country needs to renew itself. However, I think the risks are being left out of the propaganda. These people are luring kids with the promise of fame, a comfortable lifestyle, and a meaningful career. Most of the kids being "brain-washed" will fail, though they haven't yet realized it. Of course, the rich kids are still going into politics, law, management consulting and banking. It's the middle-class kids who are being lured into this. Again, I know this is an over-stretched metaphor, but to me it looks a tiny bit like those war-time recruiting ads for the military where they emphasize the "adventure", but minimize the grim survival statistics. Once again, thanks for your input. It did put things in perspective :-)

johnnybgoode 17y ago
Now I see why this problem is on your mind. In my original reply to you (http://news.ycombinator.com/item?id=646561 http://news.ycombinator.com/item?id=646561), I made the point that people should be free to choose how much risk they want to take. If your government is using propaganda and other methods to encourage people to take a bigger risk than they would otherwise, then it's not surprising that there are bad effects.