No Free Lunch: Economics for a Fallen World: Third Edition, Revised

Chapter Nine: P31W: Enter the Entrepreneur! 211 what is this term “A?” “A” can be thought of as technological knowledge: the knowledge of the best ways to produce things—the knowledge of how to produce with an assembly line, or with lean manufacturing for example. In other words, “A” represents the best knowledge of how to make use of existing resources. So when Henry Ford initiated the assembly line on a massive scale, he didn’t make more labor, capital, human capital, or natural resources. But he did figure out a better way to use of the resources we already had. This broadened concept of the production function, with its formula including technological knowledge, unlocks the secret of how the entrepreneur is able to shift the PPF outward without having to sacrifice consumption. This is because in a production function, entrepreneurship can be captured in the technological function “A,” which determines the best ways to use available resources. No reduction in consumption is required (as would be the case if additional savings were needed); we just need to work smarter and more alertly. While one might think that entrepreneurial alertness is rather rare, in fact, it’s everywhere. I love watching those makeover TV shows that take the “diamond in the rough” and transform it into something spectacular. We have Overhauling for car makeovers, Extreme Makeover: Home Edition for houses, and What Not to Wear for people makeovers. And while these may not be for profit, there are many people that do the same thing for profit. Barrett-Jackson takes cars that were originally sitting heaps and auctions them off once people restore them, hoping for a profit. Photographers like Ansel Adams see something that you and I don’t, and are able to capture it and present it in a way that is amazingly beautiful. You and I could have taken the same picture…but we didn’t. There are many examples of famous people who didn’t get discovered at the earliest opportunity. The Beatles were originally rejected by Decca Records rather than given a fat (expensive) contract. Decca Records obviously didn’t know what they didn’t know (in terms of the lost opportunity). Several record companies rejected popular contemporary country singer Taylor Swift before an “alert arbitrageur” at Big Machine Records eventually signed her. In perhaps one of the biggest surprises ever, and certainly one of the most heart-warming, Susan Boyle rocked the world with her unexpected voice on Britain’s Got Talent. This middle-aged, slightly overweight woman walked on to the stage and, overcoming all the prejudices of what an up-and-coming singer ought to look like, wowed us all with an amazing performance. Watch the video here: Susan Boyle - Britain’s Got Talent