Economics is the measuring stick of entrepreneurial decisions.  The educated entrepreneur looks at economics as an indicator and guide to efficient and effective progress and innovation.  Stated in an over-simplified manner, economic success indicates a move in the right direction while failure indicates an invalid idea, an unnecessary product or service, or poor management and development capabilities.  This being the case, progress is only hindered by the continued operation of such an enterprise.  Thus enters the natural beauty of competition.  Those creating the best products and services at the best prices with the most effective management will ultimately survive and “beat” the less-capable competition.  Should we feel bad for the defeated entrepreneur? NO!  They are now free to look at areas of progression where they can excel, creating a more powerful societal expansion.

Weakness enters when we arrogantly think there are no more industries, we have developed everything, there will be no more human progress. Sadly, this thought process is all-to-common (although subconscious in many cases).  The desire to sustain a failing enterprise is to admittedly mis-allocate and ultimately waste resources, human capital, intellectual capital, and financial capital. Regulation, bail-outs, subsidies and similar government action only perpetuate this circumstance.

As Ayn Rand states (referring to the businessman): “His success depends on the objective value of his work and on the rationality of those who recognize that value.” (from For the New Intellectual).   This alludes to another economic principle, that of Marginal Utility, which basically refers to the value of something being set by the consumer willing to purchase it.  What price will the market bare? Do people actually want your product or service?  Maybe it is not the time for your product.  This is another issue, products that come before their “time.”  This is another important point in economics and entrepreneurship.  3oo years ago, there was no need for an automatic transmission for cars.  You probably would not be selling many of them.  Much of this can be summed up, again, by Ayn Rand:

Capitalism demands the best of every man–his rationality–and rewards him accordingly…

…When men are free to trade, with reason and reality as their only arbiter, when no man may use physical force to extort the consent of another, it is the best product and the best judgment that win in every field of human endeavor, and raise the standard of living–and of thought–ever higher for all those who take part in mankind’s productive activity.

So don’t look at business failure as a personal failure, only an opportunity to create in another arena, a learned lesson, simply a response to the result of the economic indicator test.  As a powerful entrepreneur that is now free, We expect you to create a new product or service that we currently want but don’t have, or simply an improvement over a currently poor performing product or service; either way, we look forward to further expansion in human progress.

Tags: Ayn Rand, entrepreneurship, free markets