Monday, July 10, 2017

Nassim Nicholas Taleb on Entrepreneurship

I have had several debates with economists who hold the view that capital must be at risk for someone to be considered an entrepreneur. I do not hold this view, in part, because I have done deals where I have not put up any capital but have made significant amounts of money and at the same time doing almost nothing in terms of labor. In fact, I am working on one project now, where my capital contribution is zero. I spend about two hours a week on the project---mostly on the phone giving orders to others. In a couple of years, there will likely be a seven-figure payout for me.

It can be done. In fact, I see more potential projects than I could possibly do on my own. They are out there.

That said, I have generally gotten the sense that the economists I have debated simply don't think you can get projects off the ground without one's own capital involved. That's the mentality you end up with when you spend your life in anti-capitalist academia. It's a kind of Stockholm syndrome.

But I digress.

Nassim Nicholas Taleb, who probably understands that an entrepreneur can launch a firm without having his own capital involved, tweets (emphasis in the original).

I am the first to agree that in this period of aggressive Federal Reserve money printing that a lot of mad schemes get launched but I don't think you can leap from the idea that if one launches a business with the goal to relatively quickly sell it or take it public that such a person is a "fake entrepreneur."

If you start a project and create a proof of concept with success and it is the type that can be rolled out nationally, well, then a quick sound early sale can be made. That is big time entrepreneurship.

The problem comes in with the Federal Reserve creation of the boom-bust business cycle. It trips up businessmen all the time. It's a roller coaster ride which makes it difficult to understand who is good at entrepreneurship and who is not. Thus, new money, naive money, without serious long-term guide posts and understanding comes in during the boom phase. This is the money that ends up in all kinds of the wacky schemes that would never emerge if we had a stable economy without central bank money manipulations.

Rather than thinking of it in terms of fake entrepreneurs, it should be thought of as a Fed created fake economy. Many investment schemes and trends are not sound but the entrepreneurs are not the problem, they are supplying the types of schemes that Fed money printing promotes.

End the Fed money printing madness and the crazy schemes will go away.



  1. I have found myself immersed in debates (and WAAY over my head) between Peter Klein of Mises and Israel Kirzner regarding entrepreneurs. If an entrepreneur has an idea, AND his own investment in the venture, he fulfills two distinct roles: a CAPITALIST (risk money), and ENTREPRENEUR (vision thing).
    In other arrangements, the roles could be assigned to separate individuals, the money guys and the idea guys.

  2. If someone listens to my idea and follows my suggestions so together we make money, then at a minimum I've invested my time, and I guess my labor, which has some subjective value to me at least. What's the relationship between time and money? Is time money? Doesn't it come down to choices? And I risk using it in this Venture as opposed to some other venture, opportunity cost? So haven't I risked capital I could have been used elsewhere?

  3. I thought the definition of an entrepreneur is one who identifies a need in the market, and fills it.