CHAPTER 4

The Entrepreneur Economy

“For what is the use of new knowledge if it doesn’t lead to novel behaviors?”

—Yuval Noah Harari¹

• The future economy will enable more opportunity for individual contractors, enterprises of one, and small groups operating a business.
• We will no longer think of “small business” but of innovation-driving entrepreneurs finding new and better ways to serve consumers.
• The individual or small group will be vastly augmented by knowledge, access, reach, and technology.
• All enterprises can have global scale and global efficiencies.
• Opportunities for collaboration will be unlimited, barriers and costs raised by intermediaries will be reduced, and new organizational forms will be open to anyone who can contribute to an enterprise or project.

Entrepreneurs Create the Future

The new economy is driven by people who play two important roles: consumers and entrepreneurs. As consumers we decide what gets produced, which products are best sellers on amazon.com, what prices prevail in the marketplace, and what service standards must be provided to retain our loyalty. Our attention is the most valuable property in the digital economy. The trend toward personalization in goods, services, and communications increases our individual economic power.

As consumers, we live in the present. As entrepreneurs, we live in the future.

The future is uncertain. Entrepreneurs bear that uncertainty, and attempt to resolve it. As entrepreneurs in business, we are called upon to predict what consumers will want, but do not yet have. Once we make that prediction—an informed bet, really—we must organize our business offering to deliver on that future consumer demand. Economists call this process the rearranging of factors of production. We can think of it as a period of entrepreneurial sacrifice with the prospect of earning entrepreneurial rewards. The sacrifice comes in steps: taking some savings (ours or those of investors or lenders), using these to develop a new product or service or feature or business model, and testing the new item with consumers to validate or disprove the idea, with iterative improvements until launch.

Opportunities for entrepreneurs to successfully apply their insights to bring products and services to consumers are exponentially increased by platforms, apps, global exchanges and the use of AI. Now entrepreneurs can have the right data, at the right time and thus make continuous decisions and offerings that can scale to a global market. AI can be the game changer for what John Kelly calls smart machines. The game change lies “in assisting people to do what they are unable to do today, vastly expanding the problems we can solve and creating new spheres of innovation for every industry.”²

Future innovations will come from small groups focused on bringing big ideas to fruition. Matt Ridley suggests, “Free markets serving consumers—not crony capitalism or corporatism—are freeing and revolutionary.”³ This entrepreneurial approach to opportunity does not have to be a high-tech Silicon Valley style start-up. All commercial undertakings can be entrepreneurial and enabled by the applications of the new technologies.

The entrepreneur creates innovation: serving others by creating new experiences, new value, and new knowledge. Each transaction creates new knowledge because there is aggregate learning about consumer preferences, behaviors, and price–value relationships. Growing small businesses create new jobs for others in the marketplace by serving consumers.

Larger companies such as Apple and Amazon create opportunities for many suppliers, distributors, vendors, and third-party developers, who serve as components in the service system.

How the Entrepreneur Economy Works

Happily, the new technologies favor individual initiative, imagination, and creativity. Let’s walk together through the new model we call the entrepreneur economy.

It Starts with One Individual: You

The individual as èntrepreneur is the driver of the individual economy. Values + Action is the foundational formula for self-resourcing your entrepreneurial journey.

Your first set of resources is found in your own values. You ask yourself Dr. Saras D. Sarasvathy’s three questions:⁴ “Who am I?” “What do I know?” and “Who do I know?”

Figure 4.1 Values + Action

When you ask yourself “Who am I?”, dig deep to identify your own values and what it is that you truly want out of life. What is your purpose? What are your best traits? What are your preferences? What are your abilities?

The Knack app provides free self-assessment to get you started and provides insights into your attributes and potential as an entrepreneur. If you are interested in more in-depth self-knowledge about your character, leadership, and communications style, you can use VIA character strength assessment⁵ and IPEC energy leadership assessment.⁶

When you ask yourself “What Do I Know,” consider the T-shaped model⁷ as a way to track and prepare yourself in your breadth and depth of experience and expertise.

When you ask yourself “Who do I know?” think of a network rather than a list of names. LinkedIn (profiled in Chapter 7) is the largest networking platform. Learn to use their full services and presto! you are interconnected.

Reid Hoffman, cofounder of LinkedIn, provides great guidance for each of us to be both proactive in self-reflection and flexible in our entrepreneurial career paths and choices.

Career plans should leverage your assets, set you in the direction of your aspirations, and account for the market realities . . . But as much as you can, prioritize plans that offer the best chance at learning about yourself and the world . . . Its changing direction to changing your path to get somewhere based on what you’ve learned along the way.⁸

Augment Yourself

Great news! All the advantages we have as individual economic actors can now be newly augmented. We can connect to a global market through mobile devices, download scale from the Internet, access the right information instantly with cognitive assistants, and refine the quality of our knowledge with data and analytic insights. Using the service thinking framework,⁹ we can improve our capabilities in serving others, which is the ultimate key to economic success in the individual economy.

Figure 4.2 Augmentation

Scale: Available, from “one man band” to “globally networked, unlimited computing power, fully expandable storage capacity.”

Knowledge: Available via networks, queries, intelligent search, and cognitive assistance.

Skills: Acquire appropriate skills—the right skills at the right time. These can be acquired through online learning and on-the-job application. The online learning component is increasingly becoming tradable as a result of badging and certification with Open Standards.

Data and analytics: Assume that any insights you seek to derive will be available, given sufficient data and the appropriate analytics. There’s an algorithm for that.

Service thinking: Using empathy, as well as behavioral analysis and experience mapping and other service-design techniques, you can identify service-innovation opportunities that you can address with new solutions. You can do this as an individual, decide which service field you choose entrepreneurially to enter, and proceed to business planning and market entry.

Cognitive assistance: At a rapidly accelerating rate, artificial intelligence and machine learning are being deployed in the form of cognitive assistance. A cognitive assistant is software that responds to your need for knowledge. Let’s imagine you are launching a legal research business. You can have the competitive advantage of a cognitive assistant specifically designed for paralegal work in your practice area. The cognitive assistant would parse your case description and present you with details of the most relevant legal precedents, in ranked order of relevance, with links to the underlying statutes. The assistant would stand by for your next request, which might be to compose a first draft of a defense document. This capability already exists: IBM’s Haifa research lab built IBM Argumentor as a form of deep learning for legal analysis.

However, cognitive assistance does not have to be so advanced. Your smartphone can perform as a cognitive assistant. Your GPS that routes and then reroutes you based on traffic conditions in real time is an everyday application of a cognitive assistant. That technology capability enabled the launching of Uber and Lyft, creating a whole new industry for contingent workers to fill a real consumer need.

We illustrate how these principles and practices are enacted by profiling two entrepreneurs who have taken different paths in their development and offerings, but who show how to make individual dreams, based on a value system of service to others, become realities.

Jeremiah Ruddell

CEO, Executive Home Services

Jeremiah Ruddell is a recently discharged Navy veteran. He has established a business to maintain homes for residential homeowners. He provides a comprehensive inspection, a complete, customized list of maintenance items, and monthly implementations of continued maintenance. This is a subscription service for homeowners, with additional revenues from special repairs and interventions.

Key Takeaways

• Jeremiah conducted an entrepreneurial self-assessment when he left the Navy.
• His gap analysis identified the areas where he needed augmentation.
• He found his augmentation online, via knowledge searching, and has built a continuous stream of knowledge for his business.
• He has mastered networking to connect to other knowledgeable actors.
• He is a lifelong learner.

Tom Woods

The Tom Woods Show, tomwoods.com

Tom Woods started as a university academic with multiple degrees: an AB from Harvard University, and an MPhil. and a PhD from Columbia University. He was a highly awarded history professor. As many in academia do, he decided to become an entrepreneur. He explored the entrepreneur’s questions: What do I know? Who do I know? What are my resources? What are my values? How can I contribute?

Understanding how to teach history, he began by creating online history courses. To date, he has created 400+ videos on history and government for the Ron Paul Curriculum, a K-12 homeschool curriculum, and an entire course on liberty and history for his Liberty Classroom. He became an author, with New York Times Best Sellers: Meltdown: A Free-Market Look at Why the Stock Market Collapsed, the Economy Tanked, and Government Bailouts Will Make Things Worse, and The Politically Incorrect Guide to American History. He created the Tom Woods Show, a 5-days-a-week podcast with free subscription, which he has built into a broadcasting phenomenon. He also operates The Happy Earner, a site dedicated to helping other aspiring entrepreneurs to achieve the same success and independence as he has done.

Tom speaks at many events, while he makes the time to be with his family, which includes five daughters. He is respected and loved by a wide community of entrepreneurs, historians, economists, libertarians, students, and anyone who simply wants to understand the world from an independent perspective.

Key Takeaways

• Tom Woods asked himself the entrepreneurial questions, “Who am I? What do I know? How can I contribute?”
• He leveraged online capacities to introduce products, services, and networked services such as affiliate marketing.
• He overcame his initial fears to transition from professor to being an Internet entrepreneur by looking for existing models and putting his own stamp on those models through hard work and continuous application.
• Online learning is a great field of opportunity for those who can adapt and leverage their insights, expertise, and practical advice to emergent audiences who seek to know and network with like-minded others.

In these two case studies, you can see how Jeremiah launched his business based on a service network and smarter way to augment his business, and Tom launched his business based on information, advice, and a point of view that attracts an audience eager to build a relationship with him through his books, podcasts, and products.

In the entrepreneur economy, you can augment your personal capability and resources to achieve your goals. Decide on what it is you want to do without first worrying about the scale of your resources. Then navigate these five elements.

Element 1: Step over the Threshold of Universal Access

You’ve completed your self-assessment and arranged your augmentation. You are now ready for the first action step: accessing the global economy.

Accessing the Global Economy

Using networks, search engines, platforms, and new digital institutions, your reach is unlimited. The cost of outreach is small, and so economic calculation reveals no barriers.

In the newly interconnected world, your smart profile can do the work for you. Pedro Domingos, Professor of computer science at the University of Washington, describes the process in this way:

Everyone will have a detailed model of him- or herself, and these models will talk to each other all the time. If you’re looking for a job and company X is looking to hire, its model will interview your model. It will be a lot like a real, flesh-and-blood interview—your model will still be well advised to not volunteer negative information about you, and so on—but it will take only a fraction of a second. You’ll click on “Find Job” in your future LinkedIn account, and you’ll immediately interview for every job in the universe that remotely fits your parameters (profession, location, pay, etc.). LinkedIn will respond on the spot with a ranked list of the best prospects, and out of those, you’ll pick the first company that you want to have a chat with.¹⁰

This form of interconnectedness requires effort on the individual’s part: Make sure your smart profile represents you faithfully and well; and, equally important, make sure it’s programmed with the right parameters to find the best prospects to which to connect.

Figure 4.3 Universal Access

As an entrepreneur who is seeking to build a team, smart profiles can enable access to talent and expertise that can be plugged in at each stage of the business development.

Computing power is the second form of access. This is a fundamental resource in the interconnected digital universe. In many cases, we access computing power at no or little cost—if you’ve purchased a smartphone and connected it to the Internet, then Google gives you free access to computing power every time you type characters into their search bar. You are actually bargaining for computing power in a “data deal”: you reveal an atom of data about yourself by typing in the characters, and that’s a good trade for both you and Google. But it feels free, and the reality of the computing power in the palm of your hand is undiminished.

At the level of a more structured commercial relationship, you can buy cloud computing power from AWS (Amazon), Azure (Microsoft), Google, or IBM. Here is how AWS describes their pricing on their own website:

With AWS you no longer need to dedicate valuable resources to building costly infrastructure, including purchasing servers, software licenses or leasing facilities. With AWS you can replace large upfront expenses with lower variable costs and pay only for what you use and for as long as you need it. All AWS services are available on demand, and require no long term contracts and have no complex licensing dependencies.

By paying for services on an as needed basis, you can redirect your focus to innovation and invention, reducing procurement complexity and enabling your business to be fully elastic.¹¹

“Fully elastic” embraces any business size from an enterprise of one to enormous global scale.

Element 2: Social Networking

Social networks are technological mechanisms for interconnecting people, content, and ideas. Corporations from IBM to GE to Google to start-ups with engineers in India or Latvia and managers and marketers in Silicon Valley and salespeople in New York have discovered that social networking is a way to efficiently get work done and advance projects and further innovation as a networking function rather than a process.

Figure 4.4 Social Networking

When you are operating in a social network, you are advancing along a new path of human collaboration: networking as communal and collaborative action.

Proactively build the best, strongest, and most useful network to advance your business. You both give and receive to build these relationships.

You can think about your collaborative network at two levels.

For Collaborative Work and Knowledge Sharing

Whether you are a start-up entrepreneur, small business, social entrepreneur, educator or enterprise executive, you can design a social network for the specific purpose of collaborative work.

Identify the individuals or organizations that can be most helpful to you. Make a list of desired resources, and then of the individuals or institutions or websites that can provide those resources. Think of the knowledge you have and the knowledge you need. Where is it sourced? Who can provide you with knowledge directly and who can link you to the next node to acquire or access the knowledge?

What will you contribute to the network? Are you offering a win–win proposition for all your connections?

If you are designing a network for a specific work area or knowledge area, think of it as a “cluster” of closely related, mutual service entities. Once you get to this point, remember that the cluster does not have to be all virtual, all the time. You may identify some geographically local resources for physical contact and meetings, so that you strengthen the relationship, making it physical–virtual. Human plus nonhuman interaction is a great recipe for innovation, mutual advancement, and shared purpose.

For Gap-Filling Expertise

As you design your network, you will identify highly specific types of expertise that you are currently missing and might want to add. You may need a video producer, a marketing tactician, a writer, and someone with expertise in a type of code engineering.

All of these experts and fields of expertise are accessible to you and will join your social network. Your responsibility is to carefully identify the best match for your needs, initiate the contact, and make the economic and social calculation of the benefit you aim to receive and the benefit you aim to give. Is it a simple commercial relationship—fee for service? Is it a service exchange? Is it a knowledge exchange? Is it a current connection for potential activation in the future? Is there a specific project involved? Be clear in your ask, in your offering, and in the value of your network to yourself and others.

Element 3: Global Exchange

The entrepreneur economy is enabled by global exchange platforms. An exchange platform is a two-sided or multisided marketplace in digital space (often connected to a physical delivery service to complete the exchange when physical goods are involved).

Amazon, EBay, Jet.com, and many more platforms connect sellers to buyers. Kaggle assembles data scientists on one side of the platform and people with problems for data scientists to solve on the other. Lending Club connects investors with money to lend on one side of the platform and borrowers on the other. Medium connects people with informed opinions with people seeking content. HARO connects journalists on deadline with area experts, who can provide quotes and citations on an hourly demand. OpenTable connects restaurants with tables to fill with diners. PWC Talent Exchange (https://talentexchange.pwc.com) matches independent contractors with job postings. Exchange platforms match sellers and buyers, supply and demand.

Figure 4.5 Global Exchange

The platform is not merely neutral. Often, it provides added value such as payment services, data collection and analytics, reputational services (such as seller ratings), search capability, and marketing services.

The platform provides the entrepreneur with a free or a pay-as-you-need infrastructure. The entrepreneur can concentrate on fashioning an offering that reflects his or her unique values, knowledge, and services. The platforms extend to potential customers, test pricing and value bundles and messaging, and fine-tune to the point of economic success. If the offering scales up, the platform can handle the volume. If the appeal is global, many platforms can offer matching reach.

Element 4: Disintermediation

New technologies are opening up pathways to disintermediation—bypassing the institutional mediator to facilitate direct, often called peer-to-peer, exchanges of goods, services, and knowledge between primary economic actors.

One of the most important and fast-developing pathways is distributed ledger technology (DLT), represented by its most prominent form: blockchain. A traditional bank, in its depository and lending functions, is running a private ledger behind its firewall. Deposits are recorded on one side of the ledger and loans on the other side. The reason for customers to use the bank for this service is to take advantage of the bank’s ledger, which has all the trust that the bank has earned over many years.

Figure 4.6 Disintermediation

The DLT provides the same set of functions and the same, if not greater, levels of trust for similar transactions, at lower cost, faster speed, and greater reliability.

The DLT is banking without a bank, or asset management without a broker. It represents the disintermediation of financial services. An individual transactor can consummate a bid–ask relationship with another individual transactor without a middleman. This increases speed and efficiency for transactions and investment capital. Fees and commissions are friction in the productive, innovative economy. That’s what the Bank for International Settlements (BIS), the central bankers’ central bank, concludes:

First, the growth of a country’s financial system is a drag on productivity growth . . . because the financial sector competes with the rest of the economy for resources. Second, using sectoral data, we . . . find that credit booms harm what we normally think of as the engines for growth—those that are more R&D-intensive.¹²

Because of DLT and other disintermediation technologies, the individual economy can thrive and the individual entrepreneur will enjoy more direct access to more capital and resources at lower cost, faster speed, and low transactional friction. Legal software on the blockchain (known as smart contracts) will do most of our legal work for us.

The economic actor in the individual economy will experience open access to a wide array of resources previously ring-fenced by intermediaries. The efficiency of the economic coordination function between savers and investors, capital and entrepreneurs, and buyers and sellers will be radically increased. Economic growth will accelerate. Opportunities will emerge from behind the barriers that were in entrepreneurs’ path.

Element 5: New Organizational Forms

Traditional work is organized in a hierarchy, with C-Suite strategists at the top, managers in the middle, and workers at the bottom. Even if you think of the organization as a network, there are strategists, managers, and doers. The work takes place within the walls of a legal framework—a corporation or similar legal entity.

We expect that the evolution of work in the future will lead to an entirely different set of activities and a different form of organization, closely aligned with the principles of spontaneous order.

Imagine that a future enterprise—any sized enterprise, permanent or temporary, or even an enterprise of one—is simply a cluster of projects, of different timelines, levels of complexity, levels of resource requirements, and different required skills and knowledge.

Think of this project cluster embedded in a networked cloud of labor and available capital goods and resources, to which each project can interconnect, perhaps via smart contracts and smart profile matching, so that the parameters and tasks of the project can be matched to the capabilities of individuals and vendor firms as well as corporate departments.

Figure 4.7 New Organizational Forms

This world of work is all served by cloud computing technology and assets and networked together via communications.

An easy way to think about your opportunities in the new world is to imagine that the walls of the framework are now permeable, for both entry and exit.

You ENTER with your skills and knowledge—the division of labor for the new world of work. If you are able to identify your skills and knowledge great precision and specificity and announce them to the right target audience of customers, you will if you are able to identify your skills and knowledge with great precision and specificity, you will differentiate your skills and experience from those of everyone else. In this way, you will establish entry privileges to projects, project teams and project infrastructure where your differentiated skills and knowledge are the unique best fit to complement others that have been assembled or are in the process of assembling.

In the future, AI-assisted profile matching will do the job of matching your skills and knowledge to the right project. Your responsibility will be to fine-tune your smart profile so that it advertises the precise attributes of the skills and knowledge and experience and project successes a project’s smart profile might be seeking. In the meantime, use LinkedIn and other platforms, and your own carefully curated network, to get the word out about your availability and contributory value.

Summary

• Consumers decide, through their attention and behavior, what producers make and what has value.
• The entrepreneur is the driver, resolving uncertainty to provide future goods, services, and experiences that the consumer will prefer.
• The entrepreneur assesses and then augments his or her unique resources.
• Then, the entrepreneur navigates the five elements of the individual economy:
  • Universal access to individuals, groups, and new resources worldwide, including cloud computing power.
  • Carefully designed, constructed, curated, and maintained social networks for collaboration, knowledge sharing, and gap-filling expertise.
  • Global exchange platforms for e-commerce, talent trading, and project completion.
  • Disintermediation to eliminate middlemen and drive speed, low cost, and profitability.
  • New organizational forms to enable choice-based contribution and merit-based compensation in economic projects.

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¹Y.N. Harari. 2017. Home Deus: A Brief History of Tomorrow (New York City, NY: Harper Collins), p. 56.

²J. Kelly, III, and S. Hamm. 2013. Smart Machines. IBM’s Watson and the Era of Cognitive Computing (New York, NY: Columbia Business School), p. 10.

³M. Ridley. July, 2017. “The Case for Free Market Anticapitalism.” CAPX. https://capx.co/the-case-for-free-market-anticapitalism

⁴S.D. Sarasvathy. 2009. Effectuation: Elements of Entrepreneurial Expertise (Northampton, MA: Edward Elgar Publishing).

⁵“The VIA Survey.” VIA Institute on Character. http://www.viacharacter.org/www/Character-Strengths-Survey

⁶“The Energy Leadership Index Assessment.” Energy Leadership. http://energyleadership.com/the-assessment

⁷“What Is The T?” T-Academy 2017. http://tsummit.org/t

⁸R. Hoffman, and B. Casnocha. 2012. The Start-up of You: Adapt to the Future, Invest in Yourself, and Transform your Career (New York, NY: Crown Business).

⁹H. Hastings, and J. Saperstein. 2014. Service Thinking: The Seven Principles to Discover Innovative Opportunities (Singapore: Business Expert Press), pp. 65–67.

¹⁰P. Domingos. 2015. The Master Algorithm: How the Quest for the Ultimate Learning Machine will Remake our World (New York City, NY: Basic Books), p. 269.

¹¹“AWS Pricing,” AWS. https://aws.amazon.com/pricing/?nc2=h_ql_ny_livestream_blu_t1

¹²S.G. Cecchetti, and E. Kharroubi. February 2015. “Why Does Financial Sector Growth Crowd Out Real Economic Growth?” (Working Paper, BIS Working Papers No 490, Basel, Switzerland).