Entrepreneurship as a Nexus of Enterprise

0:00Well, I have the idea of this approach of research, in fact, because when I began to work in this business school, the Champagne School of Management, I noticed that, well, I believe that because I would work with people that would teach about business, that we would have the same mentality and the same approach to research. And in fact, I discovered that it wasn't the case, that in fact, well, sociology was well impregnated in Business Administration Teachings. And, in fact, they were even resurrecting a lot of, let's say, socialistic theory. And so I had the idea, well, what was the problem? Why didn't they, well, you, as Professor Klein said today earlier, well, you have entrepreneurship theory and a lot of people are talking about entrepreneurship now, but when you see they aren't really using, for example, the Austrian theory and I wanted to understand why, and I had to do a mea culpa anyway because it was true that there are many points that we aren't treating, in fact,

1:11which are related to entrepreneurship theory, but this doesn't, and so even if the arguments of these other theorists in, let's say, sociologists and so on, who are infiltrating business administration, education, even if they aren't maybe correct in our perspective, there are certain conceptual tools that we can use, in fact. We could develop them by ourselves, I believe so, but why lose time doing that? And it is much better to do counter-Gramscianism and use their own concepts for us and to say that we can also explain that.

1:57So, my point of departure is a praxeological model, so typical based on Rothbard and Mises. Well, we have the entrepreneurial agent who has means, okay, and well, he lives where we're affected by social conditions of action and natural conditions of action. Well, natural conditions of action, well, they are tackled by science. But the problem is the social conditions of action. The fact is that we, in fact, perceive, well, we receive this information and based on this information, as Menger would say, the knowledge or the belief of the knowledge that we have of how things work, well, we will use our means and interact with these social conditions.

2:45Social conditions that, of course, they are people. and other individuals. So we invest based on this information, okay? So we interact, the interaction is this investment, the engagement of means. And the problem is this, that the part... Of course, this takes time, no? And the fact that it takes time, it means that what? That when I act, there is always an unperceived information or misperceived or completely new information that I didn't have access to before. And this is what will imply either success and gain, or failure and loss. But it doesn't end there, because, well, we have then the concept that the sociologists use a lot, of reflexivity.

3:33No, whatever we do will then reflect on the social conditions in nature, well, nature maybe, well, earth is avenging itself against us, yeah. Well, our failure or success will then be reflected, will be assimilated by other agents, okay? And we will have to renew the cycle. In fact, we will always have this continuous feedback process going on. So, based on this, I refer to the conclusion that we have three dimensions defining entrepreneurial action, which are profit-seeking, we look for some gain, maybe let's say social, political, pecuniary and so on, but they are always economic gains.

4:25We have uncertainty bearing, the charge of losses, and the ultimate power of decision-making. decision-making. Are we concentrating on the first two? The ultimate power of decision-making is the one given by night, the power to stop everything. We have the power. Since I am the owner of this investment, my real power isn't just to combine things. No, the real power is to say, no, stop. I won't go on. Only the entrepreneur has this power, not and not even the manager has it. And, well, I begin them all with profit seeking them. And with this analysis, I will be concluding that, in fact, we must, in order to identify the entrepreneur, in order to use it to explain other, let's say, more social consequences of action, and in order to identify the entrepreneur to know what, How policy-making actually impacts enterprise-building?

5:31Well, we have to understand first how it works, how these dimensions work. So, I believe that, first of all, we have this, the non-entrepreneur and the entrepreneur. The non-entrepreneur, well, he gives initial or intermediate goods or higher-order goods, if you want, and the entrepreneur, well, pays him with capital funds. This will imply what? a symmetric and a synchronic price determination. It is synchronic because, well, they are determining the price within the exchange, and it is symmetric because they agree on the price, okay? Well, the thing is that while the entrepreneur will have his demand, it will be the same thing. The entrepreneur will sell intermediate or final goods or lower-order goods, and the demand will pay with money, which will be the revenue of the entrepreneur.

6:25The same thing again, synchronic and symmetric price determination. But the entrepreneur actually derives his net revenue from a diachronic asymmetry of utility, which will be the basis of a diachronic asymmetry of prices. So the entrepreneur is characterised by this diachronic profit-seeking or gain-seeking, not like a non-entrepreneur integrated in the entrepreneur's enterprise. So what this means in fact, the profit opportunity then, it isn't, well, obviously, the problem is what? Well, we have social conditions of action that are always mutating and we are reacting to them and we have to take into consideration demand, but it isn't just that.

7:18In fact, I believe that the profit-seeking question is socially situated, in which sense that, okay, entrepreneur is the guy doing this diachronic profit-seeking, but everybody does that at any moment in time. We are all entrepreneurs. Well, this is the conclusion of Mises and Human Action. But then, okay, it won't serve us to know how policy-making may impact this kind of enterprise or the other one, or about enterprise building. So the problem is who, under a given context, a given enterprise is the diachronic profit-seeking. And so the question then is to talk about opportunities.

8:07And the problem is, well, if we are going to see that, well, okay, everything is changing all the time and I act by the accordance To the knowledge I believe I have of reality, the thing is that opportunities will not be created, they will not be discovered, but they will be formed by interactions. Of what? Of demand preferences, of competitive supply, of the unintended consequences of contiguous actions. that is actions that aren't really aiming at our opportunity but they can in any way affect it.

8:55They are unintended because, for example, I am a researcher, let's say I am an oil producer and there was this residue I was not using. Then there is this other guy who was working in the textile industry, and, well, he discovered that this residue could be used as micro, you know, and, well, you see, and he began to imagine, well, this could be another, a new opportunity. So this unintended consequence of the residual production of oil refination will impact the apparition of opportunities. Then you also have intended consequences of contiguous actions, government action, for example, or even grassroots actions, grassroots organisations then changing things, or opinion formators changing things, the way people think, and, of course, entrepreneurial action.

10:01So, the next problem then, okay, so opportunities, they are social events, in fact. And why will they be the social events? What's the relationship with the entrepreneur? The fact will be, first, why we don't discover them or create them, because that would imply certain profits. Well, the problem is uncertainty, of course, and what is this socially situated uncertainty that will eventually characterize the entrepreneur? First, this is a problem of imperfect rationality. That is, we don't just have limited access to information. We are prone to error interpreting it.

10:46So we have the social and natural conditions of action where we find the real profit opportunity which is forming, okay, it doesn't exist per se, and we have the mind, we have our legged perception, our subjective knowledge, so here we have the Bergsonian concept of time perception and imagination, so we perceive the information imperfectly and we estimate then the profit opportunity, which will be the basis of our decision making. Another problem here is reflexivity. Yes, the same concept used by sociologists. Well, we have time and entrepreneurial action is what? Imperfect mind plus dispersed knowledge.

11:31And the other human agency occurring in our social environment is also about imperfect mind and dispersed knowledge. And when we act, we are generating information which feedbacks in other people's actions and the same thing is happening with us. And this results in what? Creation and obsolescence of information, a continuous and eternal process of creation and obsolescence of information. And that is uncertainty. So, entrepreneurial success and failure will depend then on what? On a presence and sufficiency of convergence between what? But the four factors which will form the real opportunity, if it will exist or not, so this is why I'm talking about presence, and the estimation made by the entrepreneur.

12:25He will invest based on his estimations, and if the convergence is sufficient, I'm not saying great, big or small, sufficient only, maybe he will have success, This also implies that we have two kinds of uncertainty affecting action. This is how we were going to talk about the nexus. We have general uncertainty environment and we have this. I believe that every enterprise has a specific uncertainty of convergence. What does this mean? The general environmental uncertainty is caused by what? The intended consequences of all actions in the general social structure.

13:11When I say social structure, I'm not meaning a body, a shmoo, college society. I'm talking about a network of individual actions, just that. And also organized according to institutions, customs, conventions, organizations, and so on. But it is a structure that we see. We consider it as entities and we act in regard to them. Well, we also have an intended one and they affect all enterprises and opportunities. But moreover, we also have this specific uncertainty affecting convergence. Caused by what? Well, exactly the four factors I talked about, but they are all specific to the social segment on which we are creating or creating our enterprise or our entrepreneurial projects.

14:03And it affects only the specific enterprise and the associated opportunity to it. So what are the uncertainty charges? Well, the entrepreneurial ones are the charge of the enterprise's specific losses and the integration of other agents into the entrepreneurial structure. So what this means that, in fact, who is the entrepreneur? Who is the diachronic profit seeker in a given social context or enterprise. It is simple. It is the guy who is integrating other people's actions, how, contractual revenues, and facing the specific charge of uncertainty of that enterprise. The other guy, since they are just integrated by contracts, so they aren't really facing that uncertainty.

14:53This doesn't mean that they aren't entrepreneurs in general. Yes, they still are, but in regard of this specific enterprise, they aren't. So they are still affected by general uncertainty and they also face a specific uncertainty related to their own enterprises. For example, as a wage earner, I have to face the uncertainty as a consumer. So what is the entrepreneurial nexus? So we have this environmental uncertainty which is caused by society in general, by individuals in the social network, and we have for example this enterprise, which has its specific uncertainty.

15:39We have the capital which is invested and affected by uncertainty in order to capture the opportunity. We have these other entrepreneurs too, they are doing the same thing. And the thing is this, I integrate them in my capital, I pay them, and I integrate now their services in my capital structure. The same thing, and how, by contractual revenue, the same thing with this guy here, okay? And so now, they aren't really facing my uncertainty, they are facing theirs. But they are still affected by general uncertainty anyway. And here you have this other guy, and again I integrate my enterprise in his enterprise by selling a product perhaps, I don't know, or services.

16:28And he pays me my contract. This contract may mean that it isn't necessarily long term, it can be immediate term. For example, a provider giving me his services or goods. And, well, we can have opportunity dependence. This is just to show that, in fact, the other enterprises, being, let's say, a demander, will, in fact, mold the opportunity of an enterprise. And so we can see that entrepreneurship acts as a nexus of enterprises. Just to finish, oh, time's up. Just to finish, then, what for? Simple. If we can identify the entrepreneur, if we can know who is the diachronic profit-seeker, uncertainty bearer and ultimate decision-maker in an enterprise, we can then answer, well, will policy-making, will this policy affect it or not?

17:24And the fact is, if we use this praxeological theory, which is compatible, I believe, with Gideon's, Bourdieu, Coleman's theory, well, we can know that, in fact, maybe this policy-making, and active intervention policy making will affect it negatively. Thank you very much.