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Thursday, 7 January 2021

How Entrepreneurs are Made

Entrepreneurs occupy a unique place in modern society. Due to the risks associated with starting a new business, the entrepreneur is admired for their ambition and richly rewarded should their startup succeed. These innovators aren’t celebrated only by others in their field, but by non-entrepreneurs as well. That’s because the best entrepreneurs make whole populations better off. Successful entrepreneurs explicitly seek to increase their own prosperity, yet they often improve general welfare along the way. Hence why their progress is encouraged in the West with secure property rights and open markets.

How did this model come to be? It’s more common for business literature to answer this question on the individual level, but historians have a lot to say about societal changes as well. In the early modern era, developments in the West allowed for the shift from an aristocratic deal (“do as I say and I’ll let you work”) to a bourgeois deal (“leave me alone and I’ll make you rich”). Traditional bourgeois folk such as shopkeepers, merchants, and innovators went from being suspicious outcasts to the drivers of progress. Working in one’s own interest changed from being a sign of poor character to a standard expectation of anyone trying to make it commercially.

What happened to the world as a result? A sharp increase in global wealth and standard of living. Global poverty has declined a great deal over the past two centuries. 85% of the globe in 1800 lived on less than $2 a day, but only 9% did in 2017. That change comes in spite of the massive increase in global population over the exact same time period. In the US specifically, the national poverty line went from including 22.4% of the population in 1959 to 10.5% in 2019. These reductions in poverty meant an increase in the standard of living for Americans. Today, 90% of modern American households have air conditions, and the average household owns nearly 2 cars. Things that would have been exclusively for the rich decades ago are commonplace today thanks to the work of entrepreneurs.

Liberty and dignity for entrepreneurs make societies rich. Higher income levels occur when people are encouraged to innovate, and innovators can only see the success they desire in an environment that lets them retain the profits of their blood, sweat, and tears. Government controlled economies that allow monopolies to prosper and stifle innovation often disincentivize entrepreneurs from pursuing their dreams. Certain regulations on the free market can reverse society’s trajectory and return us to the aristocratic deal.

Free markets are important for prosperity, but they aren’t enough on their own. Recognizing every individual’s right to self-author requires society to extend liberty and dignity to everyone. Prosperity can’t reach everyone unless everyone is empowered to innovate. Women and people of color can find liberation in creating in ways once barred to them. They’re able to embrace the maxim of an entrepreneurial culture: “we are rich because we are free.”