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

Chapter Nine: P31W: Enter the Entrepreneur! 216 This rapid rate of change is both creative and destructive, according to Schumpeter. One big business of the not-so-distant past, Blockbuster Video, was creatively destroyed by Redbox and Netflix. Barnes and Noble (and most retail bookstores) are similarly on borrowed time as digital books are increasingly taking market share, and they are forced to innovate (such as offering in-store coffee houses) or die. While good for the consumer, producers and their employees are continually at the mercy of the changing tastes of consumers. The message is clear: continually innovate, or you too will be creatively destroyed! Serve the consumer well, however, by presciently foreseeing their future desires and changing your business as necessary, and you will be rewarded! Apple Computer is probably today’s best example of a producer that continually redefines itself and its products in anticipation of consumer needs. From its original computers to creating the iPod, the iPhone, and the iPad, Apple continually innovates to meet anticipated consumer demand. But markets continue to wonder, can they keep it up? We can see the benefits from this creative destruction in the PPF shown in Figure 9.2 . With creative destruction, the entrepreneur is shifting the entire PPF curve outward—she is creating something new and adding to the total stock of production possibilities. Yes, the destruction part is taking production possibilities away, but only if the new possibilities are more highly valued by consumers. Notice that this is different from the Kirznerian alert arbitrageur, who may simply be rearranging productive assets to make the existing production more efficient. This entrepreneurship is creative in nature, although hopefully efficient as well. ENTREPRENEURIAL ATTRIBUTES We have reviewed entrepreneurial functions— what they do to enable the market process—and now it is time to think about how they do it. What are the attributes that make someone an entrepreneur? These attributes are also different than motivations. Some may be entrepreneurial solely to get rich, while others may just want to serve mankind. Altruism or greed can both be motivating factors for entrepreneurship, but they are not the attributes that will make an entrepreneur successful. I’m reminded of this saying: there are three kinds of people in the world: those that make things happen, those that watch what happens, and those that say, “what just happened?” Entrepreneurs are clearly in the first category—they make things happen. For our discussion, I am also thinking about the characteristics of sustained entrepreneurship. Steel Corn B A Figure 9.2, Creative Destruction Shifts the PPF. When an entrepreneur creates a new product or innovation, this has the effect of shifting the PPF outward.