Ms. Allen is a teacher-on-special-assignment in the Education Alliance of Pueblo, Colorado. Dr. Lee is Ramsey Professor of Economics at the University of Georgia.
What do you want to be when you grow up? was a question that adults regularly posed to all of us when we were young. Generally, even as children, we imagined ourselves becoming like those whose accomplishments we respected or whose qualities we admired. At a time when sports figures, Hollywood personalities, musicians, and even politicians vie for the hearts of the young, why not honor those among us who provide the energy and strength behind the invisible hand of economic progress?
Entrepreneurs are, in fact, heroic figures, and their accomplishments are worth celebrating. All of us are better off because entrepreneurs have been willing to attempt what others knew couldn’t be done, and then persist in the face of adversity. Their visions extend beyond existing horizons, and eventually expand the realm of the realistic, transforming one generation’s dreams into the next generation’s necessities.
Who Are Heroes?
Who is a hero? For some, a hero represents a person who embodies such age-old values as honesty, integrity, courage, and bravery. For others, a hero is someone who is steadfast or who sets a good example. To many, being a hero means sacrifice, even of life itself, for the sake of others. Increasingly, many people find heroic those who simply gain notoriety or attention.
However, Joseph Campbell, an expert on world mythology, would probably find all of these definitions to be incomplete. Campbell contends that every society celebrates heroes, and in doing so, honors the past, energizes the present, and shapes the future. In studying most known cultures, Campbell has discovered that though details of the heroic path change with time, the typical journey of the hero can be traced through three stages. In our view, the entrepreneur travels through all three.
The first stage involves departure from the familiar and comfortable into the unknown, risking failure and loss for some greater purpose or idea. The second stage is encountering hardship and challenge, and mustering the courage and strength necessary to overcome them. The third is the return to the community with something new or better than what was there before. Ultimately, the hero is the representative of the new—the founder of a new age, a new religion, a new city, or a new way of life that makes people and the world better off.
The Modern Entrepreneurial Hero
In our modern world, the wealth creators—the entrepreneurs—actually travel the heroic path and are every bit as bold and daring as the mythical heroes who fought dragons and overcame evil. With conventional virtues, the entrepreneur travels through the three stages of the classic journey of the hero to achieve unconventional outcomes and should serve as a model of inspiration and guidance for others who follow.
In the first stage of the heroic journey, the entrepreneur ventures forth from the world of accepted ways and norms. He asserts, There is a better way, and I will find it! Unlike those who are overwhelmed by the challenges of their immediate world, the entrepreneur is an optimist, able to see what might be by rearranging the world in creative and useful ways. The entrepreneur refuses to accept the conclusions of others about what is or is not possible.
In this first stage, risk-taking entrepreneurs are motivated by many factors. Some want to become rich or famous. Others desire to better themselves, their families, or their communities. Some seek adventure and challenge. Regardless, they are characterized by energy, vision, and bold determination to push into the unknown.
In the second stage the entrepreneur finds himself in uncharted territory. Everything is at stake. The entrepreneur sacrifices for an idea, purpose, vision, or dream that he sees as greater than himself. Comfort and security become secondary.
Entrepreneurial action is often controversial. An entrepreneurial educator, for example, might leave the state school system to find a better way to provide education to youngsters as an alternative to government schooling. Yet, former colleagues might see him or her as a traitor. Regardless of what the entrepreneur sacrifices during this stage of the heroic quest, he is impelled into risky, unfamiliar territory. He must be resilient in the face of mistakes or failure.
In this discovery stage, the entrepreneur often encounters those who have a stake in maintaining the status quo. Business opponents may even turn to the state, as Netscape has pushed the Justice Department to hound Microsoft for alleged predatory behavior. Professor Don Boudreaux, writing in the Wall Street Journal, sees this anticompetitive tactic as a serious abuse of the legal and judicial system in an attempt to prevent entrepreneurs from bringing new products and services to consumers.
The third stage of the classic heroic journey begins when the entrepreneur returns to the community with his product, service, or new process. By buying the new offerings, the customer acknowledges the entrepreneur’s success. The more profit that is generated, the greater the value of wealth produced. Thus, profits are the entrepreneur’s reward for increasing benefits to individuals in society. Serving in the capacity as wealth creator, the entrepreneur becomes a social benefactor.
The true heroic entrepreneur will continue to anticipate future challenges. He is no ordinary business person whose main priority is keeping one step ahead of his competitors and maintaining market share. Nor does he seek government subsidy or protection. For him, the quest is to venture forth again and again into the unknown to create and bring back that which other individuals value.
The Bold Quests of Individuals
Not all people who venture forth on such heroic quests succeed. Approximately 80 percent of new businesses quickly fail. But over three-quarters of all new jobs each year come from firms no more than four years old. Though large, well-established corporations are more visible, one finds the most entrepreneurial action and risk-taking activity in small business ventures. Hermann Simon, author of Hidden Champions: Lessons from 500 of the World’s Best Unknown Companies, argues that many little-known, super-performer companies made up of two, three, or more highly entrepreneurial folks have control over 50, 70, and even 90 percent of the world-wide market for their products. For example, St. Jude Medical has 60 percent of the world’s market for artificial heart valves. Today, those individuals (or small groups of them) who are embarked on the bold quests are the ones who are changing the face of society so rapidly. And we can look to the future with optimism, since opportunities abound for further entrepreneurial adventure.
In fact, the changes we have witnessed in our lives since we were children are likely to pale in comparison to the changes we will see in coming decades. Yet, while entrepreneurs are essential for this progress, seldom are entrepreneurs hailed as heroes. To the contrary, typically they are ignored in textbooks, or castigated as robber barons. It’s no surprise, then, that most adults know far more about successful politicians than about successful entrepreneurs, and most admire the former more than the latter. How can a society continue to prosper when it views those who transfer wealth as more heroic than those who create it?
Why are entrepreneurs seen as looters and exploiters rather than as heroes? One reason is the political bias against them. As government control over the economy has grown, so has the incentive for politically influential interests to disparage entrepreneurs. Few, if any, economic forces are more disruptive than entrepreneurship. But while this creative destruction, in Joseph Schumpeter’s words, is essential to general progress, it harms some individuals and groups whose wealth is tied to the status quo. Each group wants to gain protection against progress that imposes costs on itself. The larger government becomes, the more it acts as a force against progress. While the entrepreneur with a superior idea can draw large numbers of customers from existing corporate giants in market competition, he can’t mobilize large numbers of citizens against government obstacles to that competition.
Of course, entrepreneurs can often overcome political obstacles, but such effort diverts attention and energy from the creative activities that propel economic progress. Moreover, political opponents of economic change frequently vilify individual entrepreneurs. Thus, instead of celebrating entrepreneurs who do the most to push back the frontiers of the possible, the public often seems to single them out for condemnation.
Another reason entrepreneurs are criticized is that the connection between their innovations and economic progress is often indirect and difficult for most to recognize. For example, few people understand the great contributions made by Michael Milken and Bill Gates. Special-interest groups with a stake in the status quo can exploit this lack of understanding to depict entrepreneurs as rapacious scoundrels.
Indeed, few people understand how capitalism works. Most tend to focus on the concentrated costs inflicted by market competition, while taking for granted the diffused benefits made possible by that competition. Trying to explain the workings of the invisible hand is not an easy task. Educating the public is made more difficult by intellectuals who use their positions in academia to criticize capitalism and the entrepreneurial energy that propels it.
Why Individual Entrepreneurs Matter
Even many staunch supporters of the free-market system diminish the importance of entrepreneurs. The economists who have developed the subdiscipline referred to as the new economic history have been among the most effective at explaining the causal links between the market and economic progress. Yet many of these new economic historians dismiss the role of entrepreneurs. For example, Robert Thomas of the University of Washington argues that individual entrepreneurs, whether alone or as archetypes, just don’t matter. According to Thomas, a successful entrepreneur is no more important to the economy than the winning runner in a 100-yard dash is to the race. The winner gets all the glory, but if he had not been in the race, the next runner would have won by crossing the finish line a fraction of a second later, and the spectators would have enjoyed the race just as much. Thus, if Henry Ford, Ted Turner, or any other successful entrepreneur had not made his pioneering contribution, someone else would have quickly done so. So, as Thomas tells the story, it is hard to justify special celebration of their accomplishments.
Thomas’s view is incomplete. Go back to his race analogy. The argument that a given entrepreneur’s accomplishments would, in his absence, quickly be achieved by others assumes an environment that encourages entrepreneurship. If the runners themselves, their training, and their efforts during the race are simply taken as givens, it is no doubt true that removing the winner of the race would do little to reduce the benefits of winning. But the identity of the runners and their preparation and efforts can’t be taken for granted. Competitors are influenced by treatment afforded the winner. When champion runners receive public esteem, those with the greatest talent are more likely to become runners, train hard, and run faster. Similarly, public attitudes affect the entrepreneurship process.
Of course, the entrepreneur profits financially if he is successful, which is one reason critics discount the role of public acclaim. Money is obviously important in directing his efforts into those ventures in which his talents have the greatest social value. But this actually strengthens the case for celebrating entrepreneurs. Failing to do so emboldens politicians, and their special-interest clients, who are constantly looking for justifications to tax away the financial gains of successful entrepreneurs. It is no coincidence that, over the past century, as public respect for entrepreneurs has eroded, so have the constitutional barriers against what is best described as the punitive taxation of economic success.
Thus, just as the society that doesn’t venerate winners of races will produce fewer champion runners than the society that does, the society that does not honor entrepreneurial accomplishment will find fewer able people engaged in wealth-creating activities. And that society will be less well off than the one which perceives the wealth creator to be a hero.
One last factor helps explain why entrepreneurs are seldom viewed as heroes. When defining a hero, people often focus on self-sacrifice, rather than benefits received by other individuals and society. Yet the vast majority of entrepreneurial efforts do fail, often with significant loss to the entrepreneur. And when the entrepreneur succeeds, he receives his reward only after having enriched everyone else even more.
Economists tend to focus on what can be seen—the measurable aspects of the economy and mechanical understanding of the marketplace as an efficient resource allocator. But abstract economic models seldom inspire. To paraphrase Schumpeter, economic efficiency is a poor substitute for the Holy Grail. In human entrepreneurs, in contrast, people, particularly the young, can see and appreciate those heroic qualities that continuously create a better world.
Some may criticize romanticizing the entrepreneur. But societies are shaped by the ideals they embrace. If one of our children or grandchildren wanted to emulate an entrepreneur who heroically struggled in uncharted territory and ultimately changed the world for the better, we would be proud.