Markets and Entrepreneurs
Which came first, the chicken or the egg?
That’s easy, First, there had to be a market. Without a market, no matter how good the idea, how well capitalized the enterprise, how competent the management team, or how skilled the workforce; there can be no business.
So, where do markets come from? Markets seem to come in three forms. They may be found in plain sight, they may be hidden in a forest of commerce, or they may be foreseen and realized only by people of exceptional vision. All three forms are available in a wide range of sizes.
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Existing businesses, facing things like changing taste, obsolescence, … are obliged to always be looking for ways to expand their share of an existing market or for different markets to enter, and to always be on the lookout for new markets.
Entities and individuals considering starting a business might have a plan for capturing a share of an existing market, think that they have spotted a market not being well served, or have a new product idea that they believe will create a market.
So, how does this search for markets go down? Who are the diviners? A well-capitalized start-up will do market research; have a formal market survey done by professionals. Market Research is a highly developed science. The report will probably be highly confidential, provide great detail, and get really close to getting it all right. A Mom and Pop start-up may be more of the snoop, pry, and mostly dream type of survey. We see the Well-Heeled, the Mom and Pop, and everything between.
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What do we call these entities and individuals, and everything between, that start up a business? If they start up another Mom and Pop Pizza Shop; maybe Pizza Shop Opener? Or foolish? Round Table Pizza Restaurant; Franchisee. What if they start up a business that no one had ever heard of before? One that will provide lots of new jobs and save the Nation’s economy?
What’s that sound? It’s a bird! It’s a plane! It’s an Entrepreneur! The Nightly News Readers on Cable TV casually toss off the word while affecting their knowledgeable airs. High School Business Academy Teachers always speak the word with a little excitement in their voices. Entrepreneur — a french word loosely translated — describing either a contractor or someone who undertakes doing something, or both…
Webster says: one who organizes, manages, and assumes the risks of a business or enterprise.
Wiki says:
… a person who has possession of a new enterprise, venture or idea and assumes significant accountability for the inherent risks and the outcome. … is a term applied to the type of personality who is willing to take upon herself or himself a new venture or enterprise and accepts full responsibility for the outcome.
And, yes, the two are not the same.
… Or, … Jean Baptiste Say said, “one who undertakes an enterprise, especially a contractor, acting as intermediatory between capital and labour.” Or, … choose a level of personal, professional or financial risk to pursue opportunity.
Well that settles that.
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Innovator, from Latin, not french, a term less often heard, might be easier to get a handle on.
Webster says, to innovate is to:
intransitive verb: to make changes: do something in a new way
transitive verb: to introduce as or as if new
Wiki says:
Innovators are the persons or organizations who are one of the first to introduce into reality something better than before.
An innovator innovates. Someone like an inventor, a researcher, a futurist, an idea man, … Got it!
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Most Business Academy teachers don’t tell their students that SRO Hotels are full of entrepreneurs.; that being an entrepreneur is an extremely high-risk venture. That if the odds are one in a million of making a $million; don’t invest your life. In fact, don’t invest more than $1. That Jobs and Wozniak had a really big idea was much more important to Apple’s success than any willingness to risk it all. Musk has taken tremendous risks starting up Tesla, risk based on the considered conviction that electric cars were the future. Gates and Allen didn’t take the risk of starting Microsoft for the thrill of it. They did it because they, like Jobs, Wozniak, and Musk, were sure that they had glimpsed a future market. They saw the odds of success as being pretty good.
Which came first, the idea or the market?
this optimism is why republican claims that lower taxes will encourage business formation is never supported by the data. Yes, lower taxes should encourage new business formation but the impact never seems to be large enough to offset other factors that determine business formation. Real business formation peaked as a share of GDP under Democratic President Carter and has failed to make new record peaks despite several large tax cuts that were suppose to benefit new business.
With Washington Deadlocked on Aid, States Face Dire Fiscal Crises
NY Times – September 7
… Across the nation, states and cities have made an array of fiscal maneuvers to stay solvent and are planning more in case Congress can’t agree on a fiscal relief package after the August recess.
House Democrats included nearly $1 trillion in state and local aid in the relief bill they passed in May, but the Senate majority leader, Mitch McConnell of Kentucky, has said he doesn’t want to hand out a “blank check” to pay for what he considers fiscal mismanagement, including the enormous public-pension obligations some states have accrued. There has been little movement in that stalemate lately.
Economists warn that further state spending reductions could prolong the downturn by shaking the confidence of residents, whose day-to-day lives depend heavily on state and local services.
“People look to government as their backstop when things are completely falling apart,” said Mark Zandi, chief economist at Moody’s Analytics. “If they feel like there’s no support there, they lose faith and they run for the bunker and pull back on everything.”
States and municipalities are also crucial employers and spenders that keep the economy moving. “We run the risk of descending into a dark vicious cycle,” Mr. Zandi said.
State and local governments administer most of America’s programs for education, public safety, health care and unemployment insurance. They also provide a wide variety of smaller services, such as outdoor recreational facilities or highway rest stops, that improve the quality of life. The costs of many of these programs have spiraled because of the pandemic, which has at the same time caused an economic slump that has driven down tax revenues.
Collectively, state governments will have budget shortfalls of $312 billion through the summer of 2022, according to a review by Moody’s Analytics. When local governments are factored in, the shortfall rises to $500 billion. That estimate assumes the pandemic doesn’t get worse. …
… In May, the Federal Reserve offered to buy states’ bonds if terms in the municipal bond market become onerous. But most states think the Fed loans cost too much and have to be paid back too quickly to be of much help. So far only one state, Illinois, and one state authority, New York’s Metropolitan Transportation Authority, have taken the Fed up on its offer. New Jersey and Hawaii are exploring deals, according to the National Conference of State Legislatures, which tracks the states’ fiscal plans as they develop.
Public pensions have been a central point of contention in discussions over additional federal aid.
In April, with economic activity at low ebb, Illinois lawmakers sent a detailed wish list to their state’s congressional delegation that included $10 billion for the coming year’s pension contribution. They also asked for $9.6 billion for Illinois’s cities, which needed the money to “fund retirement systems for the police, firefighters and other first responders providing emergency services during this Covid-19 outbreak.”
The request drew scorn in Washington.
On a syndicated radio show, Mr. McConnell said Senate Republicans would “certainly insist that anything we’d borrow to send down to the states is not spent on solving problems that they created for themselves over the years with their pension programs.”
Glenn Hubbard, an economic conservative who was chairman of the Council of Economic Advisers under President George W. Bush, said he agreed that federal money should not be used to prop up failing state pension funds. But he acknowledged that the states’ cash needs were becoming urgent and said there wasn’t time for a complete overhaul of troubled state pension systems.
For the sake of speed, Mr. Hubbard said in an interview, Congress could send the states money with a simple, and probably breakable, rule that it not be used to reduce taxes or bail out pensions. Public pension reform, which would be grueling, could come later.
Or, as Mr. Hubbard said in an online seminar hosted by the Economic Policy Institute last month, “if an overweight person comes to the E.R. with a heart attack, you treat the heart attack before you lecture him or her about weight.”
One small nitpick. I don’t think there are “markets” that are distinct from one another. All markets interact with one another to a greater or lesser degree.
But in general, I think it is fairly clear that the more reliable social insurance is (whether that comes from the state or the family) the more likely one is to be able to attempt to start a business. Tax (being after the fact) has little to do with it – (I think it ultimately mostly impacts interest rates and rents – which will capture whatever tax doesn’t).