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Friday, February 17, 2023

Why There’s No Such Thing as Being Your Own Boss

Even entrepreneurs are subject to someone above them.

Image Credit: Province of British Columbia - Flickr | CC BY-NC-ND 2.0

Entrepreneurship is probably one of the best things about capitalism. You can earn a fair bit of money if you know what you’re doing, and there is tremendous freedom from not having an employer telling you what to do. You can try new ways of doing things, invent and launch your own product, or simply provide good jobs and reliable service in your community.

Having said that, there’s a common selling point of entrepreneurship that deserves some scrutiny, and that’s the idea that you get to “be your own boss.”

The concept is simple enough. Rather than reporting to a manager, as an entrepreneur you are the one calling the shots. You submit to no one, the thinking goes. You have complete control over every aspect of your business. You don’t have a boss. You are the boss.

The difficulty with this line of thinking can be illustrated with a simple example. Let’s say you decide you want your company to make mud pies. Maybe you loved making mud pies as a child and always dreamed of turning your passion into a business. Your boss at your previous job wouldn’t let you make mud pies (he clearly didn’t see the potential). But now that you are your own boss, you have complete freedom to conduct your business as you see fit.

Or do you?

As it turns out, that’s not quite true. Sure, you can try selling mud pies, but what are you going to do if consumers don’t want to buy them? Presumably you have expenses to pay such as rent, supplies, and salaries. With no revenue, these expenses quickly pile up, and before long you’ll be forced to either pivot to a new line of production or go out of business.

So much for being your own boss.

Who’s Really in Charge?

The mud pie story raises an important question: who exactly is calling the shots here? At first glance, it seems as though entrepreneurs have all the power, that they are the bosses. But in reality, as we can see, they are completely beholden to their customers. As good entrepreneurs will tell you, this gig is about serving consumers, nothing more. They are the real bosses here.

The economist Ludwig von Mises spells out this idea in his treatise Human Action.

“The direction of all economic affairs is in the market society a task of the entrepreneurs. Theirs is the control of production. They are at the helm and steer the ship. A superficial observer would believe that they are supreme. But they are not. They are bound to obey unconditionally the captain’s orders. The captain is the consumer. Neither the entrepreneurs nor the farmers nor the capitalists determine what has to be produced. The consumers do that. If a businessman does not strictly obey the orders of the public as they are conveyed to him by the structure of market prices, he suffers losses, he goes bankrupt, and is thus removed from his eminent position at the helm. Other men who did better in satisfying the demand of the consumers replace him.”

Entrepreneurs may have a lot of power, but their power is completely conditional on their ability to satisfy consumers. If an entrepreneur fails to satisfy the wishes of their true boss, the consumer, they will promptly be fired and replaced with someone else. That’s what it means to go out of business.

Thus, while entrepreneurs are often regarded as “kings” of a business “empire,” the reality is quite the opposite. “The owners of the material factors of production and the entrepreneurs are virtually mandataries or trustees of the consumers,” Mises writes, “revocably appointed by an election daily repeated.”

This idea that entrepreneurs are effectively servants and that consumers are the ones ultimately calling the shots is known as consumer sovereignty. To put it bluntly, even as an entrepreneur you are still working for someone else. To be sure, there’s a lot of room for creative freedom. Consumers are not nearly as controlling as managers. But even as an entrepreneur your freedom has limits.

As the saying goes, he who pays the piper picks the tune.

Entrepreneurship Is Not about You

There’s an important takeaway here for current and aspiring entrepreneurs, and it’s one that often gets missed. The takeaway is that entrepreneurs who want to be successful should focus on meeting the needs of consumers, not on running the business they feel like running.

For many, this is a long-overdue paradigm shift. So many people start with a passion or skill they have and try to find ways to sell it. But this is completely backwards. What they ought to do—if they want to be successful anyways—is to start by looking for unmet needs in their community and then find ways to meet them.

This whole idea of “monetizing your passion” is alluring, but it isn’t what entrepreneurship is really about. Entrepreneurship is other-centered. It starts with what consumers want to buy, not with what you want to sell. It’s not about “being your own boss.” It’s about making the consumer your boss, and being rewarded in proportion to how much value you create for them.

“There is in the market economy no other means of acquiring and preserving wealth,” Mises writes, “than by supplying the masses in the best and cheapest way with all the goods they ask for.” You may find areas where your passions and skills overlap with consumer demand, and that’s great. Lean in to that whenever you can. But never forget that your job is first and foremost to meet that demand. An entrepreneur who becomes too enamored with their particular passion-project to the point where they neglect the wishes of consumers will soon find themselves out of business.

So yes, let’s celebrate entrepreneurship and creativity and self-direction. But let’s also remember that entrepreneurs do have a boss, the consumer—and what entrepreneurship is really about is figuring out what other people want and finding ways to give it to them.

This article was adapted from an issue of the FEE Daily email newsletter. Click here to sign up and get free-market news and analysis like this in your inbox every weekday.


  • Patrick Carroll is the Managing Editor at the Foundation for Economic Education.