I tend to fall into the Kirznerian camp, in that what Kirzner describes as "alertness" to opportunities certainly exists and, I believe, is the key to what entrepreneurship is about.
Kirzner's focus on alertness being the essence of entrepreneurship rather than entrepreneurship being mostly about risk taking, I believe, is a very important insight---Nobel Prize worthy .
Pay attention to the very end of Kirzner's speech. During the Q & A, Kirzner makes it most clear when he states that he believes that it is an error that college professors emphasize risk as the key to entrepreneurship. Indeed, if you think of the major players that have created massive wealth for themselves, from Steve Jobs to Donald Trump to Carl Ichan to Sheldon Adelson to the Koch brothers and the Forbes family, it is hard to think of these people as people who simply roll the risk dice and see what comes up. They are very calculating men, who although they can make errors, generally act when they believe they are alert to an opportunity that others don't see---and the less risky that opportunity the more they are going to jump at it.
I bring this discussion up now because in tomorrow's The Robert Wenzel Show, I start off with a discussion of entrepreneurship with Steve Forbes. In his new book he states that the key to a free market economy is John Maynard Keynes' view that it is about "animal spirits". Forbes, incorrectly, states:
The motivation of individuals and companies to solve problems and meet needs ---what John Maynard Keynes called "animal spirits" --- is the heart of free enterprise.Keynes' comment was about throwing alertness and calculation to the winds ( a terrible thing) and, according to Keynes, the key being simply ignoring risk in manner similar to one were to decide to venture to the South Pole. Here's Keynes in his own words (my bold):
Even apart from the instability due to speculation, there is the instability due to the characteristic of human nature that a large proportion of our positive activities depend on spontaneous optimism rather than on a mathematical expectation, whether moral or hedonistic or economic. Most, probably, of our decisions to do something positive, the full consequences of which will be drawn out over many days to come, can only be taken as a result of animal spirits—of a spontaneous urge to action rather than inaction, and not as the outcome of a weighted average of quantitative benefits multiplied by quantitative probabilities. Enterprise only pretends to itself to be mainly actuated by the statements in its own prospectus, however candid and sincere. Only a little more than an expedition to the South Pole, is it based on an exact calculation of benefits to come. Thus if the animal spirits are dimmed and the spontaneous optimism falters, leaving us to depend on nothing but a mathematical expectation, enterprise will fade and die;—though fears of loss may have a basis no more reasonable than hopes of profit had before.Thus, I present Kirzner's lecture below as a prelude to my discussion with Forbes, that will be posted tomorrow, and also for those who may want to understand from a scholarly perspective the nature of entrepreneurship. And, further, I post this for those who may desire to be entrepreneurs, so that they understand that entrepreneurship is not about blindly rolling the dice and hoping things come up right, but about looking for opportunities where profit is right in front of you.