The Entrepreneurial Virtues: My Lecture In Bratislava

Here is the video of my speech last night at CEQLS, in Bratislava.  I had to speak rather slowly because it was being simultaneously translated into Slovakian.  So it's a little frustrating to listen to, because there are lots of pauses.

But it was  a fun talk to give, and a great audience!  Thanks to Dr. Peter Gonda and the M.R. Stefanik Conservative Institute for doing such a wonderful job of sponsoring it!

Weird Companies that Work

Four companies with strange but successful marketing plans.

Including "Goose Masters."  Now, Angry Alex, before you go moving here to Raleigh, you have to understand they are talking about big aquatic birds.

That's Not Entrepreneurship

A remarkable claim, a remarkably naive, dangerous claim, by Mr. Obama and Co.

"New health law encourages entrepreneurship."  To the extent that people are able to work for themselves, that may even be true.

But the law itself encourages rent-seeking, the pursuit of artificial gains without creating any actual value. An example:  Physician-owned hospitals will make out like bandits.  Because the new law actually encourages them to behave like bandits.

I knew entrepreneurship.  Entrepreneurship was a great concept.  Entrepreneurship was a friend of mine.  Mr. Obama, you are NO entrepreneur.  Entrepreneurship is a virtue.

Nod to Kevin Lewis for the links, not the interpretation, which is no one's fault but mine.

We Get Letters!

An email exchange from today....

TP:   Dear Dr. Munger,  I enjoyed your video, "What Do Prices “Know” That You Don’t?"  The title reminds me of something that Bill Gates said to me.  I created the prediction markets project within Microsoft in 2003 and I was asked to brief Bill on them.  He immediately understood how prediction market prices work and then said that the reason they might help him was because [paraphrased], "If the market prices differ from my own beliefs, then either they know something that I don't know or I know something they don't know, and either of those may need remedy."   Cheers, TP

MM:  That's very cool, and an interesting difference between economists and entrepreneurs.  I assume you know the joke about the economist and the entrepreneur.

Economist and entrepreneur are walking down a street in San Francisco.  The entrepreneur sees a $100 bill, and generously offers to split the “found” value with the economist.

The economist refuses, saying that it’s not possible.  “After all,” the economist announces, if there had been a $100 bill in the street, someone would have picked it up.  In equilibrium, there are no arbitrage profit opportunities!”  

The entrepreneur shakes his head in scorn and pockets the full $100.

So, the economist sticks to the first part of your formulation.  For the economist, "they" always know everything, and that's embodied in price.  But entrepreneurs
know that prices are wrong, often, sometimes by a lot. 

That means the entrep's pick up the $100, and the economist turns out to be right after all.  But only because smart people go around looking for wrong prices.

UPDATE:  Scott Ainsworth writes.... A story from Georgia - When walking with economists in front of the econ/business buildings on the Georgia campus, I noted that there was a lot of money lying around the ground - pennies and dimes mostly. The obligatory equilibrium jokes followed. One of the economists said that picking up pennies was not worth his opportunity costs. I admitted that I still picked pennies up. More than one person looked askance at me - until I stated that I was the shortest person in the group. Opportunity costs survived and equilibrium was restored. For the economists, it was a very big day - and I was 23 cents wealthier.

Entrepreneurship, Change, and Extreme Events

A recent empirical study. Don't get me wrong, empirical studies are good. Here is the summary (courtesy of new papers superstar Kevin Lewis):

Entrepreneurship: The role of extreme events

Tilman Brück, Fernanda Llussá & José Tavares, European Journal of Political Economy, forthcoming

Abstract: We use aggregate country data as well as individual surveys to uncover, for
the first time, the effect of extreme events such as natural disasters and terrorist attacks on entrepreneurial activity. We find that natural disasters and terrorist attacks influence individual perceptions of the rewards to entrepreneurship and, more surprisingly, extreme events affect entrepreneurship rates positively in a robust and significant way.

"More surprisingly"? Really? Consider what Hayek said about information and change:

If it is fashionable today to minimize the importance of the knowledge of the particular circumstances of time and place, this is closely connected with the smaller importance which is now attached to change as such. Indeed, there are few points on which the assumptions made (usually only implicitly) by the "planners" differ from those of their opponents as much as with regard to the significance and frequency of changes which will make substantial alterations of production plans necessary. Of course, if detailed economic plans could be laid down for fairly long periods in advance and then closely adhered to, so that no further economic decisions of importance would be required, the task of drawing up a comprehensive plan governing all economic activity would be much less formidable.

It is, perhaps, worth stressing that economic problems arise always and only in consequence of change. So long as things continue as before, or at least as they were expected to, there arise no new problems requiring a decision, no need to form a new plan. The belief that changes, or at least day-to-day adjustments, have become less important in modern times implies the contention that economic problems also have become less important. This belief in the decreasing importance of change is, for that reason, usually held by the same people who argue that the importance of economic considerations has been driven into the background by the growing importance of technological knowledge.

"Extreme events," by definition (I think) are unexpected changes. Of COURSE entrepenership increases in the aftermath of extreme events. The "more surprising" bit can only be explained, as Hayek explained it, by the nonsensical insistence that technological knowledge and not entrepreneurship is the driving force of capitalist economies.

Of course, it would be possible to document that the relationship between large unexpected shocks and entrepreneurship is direct and predictable, from many works by Kirzner, or Mises, and others. But Hayek's paper was in the A.E.R. Don't you people read? I recognize that it is easier to claim your theory is novel if you constantly pretend that all previous work doesn't exist. But this is egregious.

Markets in everything: earthmover edition

In the shadow of the Vegas strip, you can pay $400, get 10 minutes of instruction, and then get turned loose to operate earth-moving equipment in a vacant lot.

Really.

The company is called Dig This. Their website is here. The AP story is here. Sharon Zukin could not be reached for comment.