We live in the information age, where computers store, retrieve, transmit and manipulate data or information for us. Artificial intelligence promises to make the computers even better at this task, analyzing the information, finding patterns, learning and modeling and predicting. A.I. will make all computers more powerful and useful, including the miniaturized ones we carry around in our hands and call smartphones.
Historically, technological revolutions like this one free up human workers for higher level tasks. What is the higher-level task when computers are storing, retrieving and manipulating and analyzing data for us and providing it to us in the form of knowledge?
It is to generate new information. With the management of information taken care of by computers, humans can focus on the far more important task of generating new information. New information can lead to economic growth and improved quality of life. Entrepreneurs generate new information.
In The Theory Of Dynamic Efficiency, Spanish economist Jesus Huerta de Soto sets out the most important features of the economic system driven by entrepreneurship.
Entrepreneurship Always Generates New Information.
Entrepreneurs exercise a uniquely human form of imagination, based on unique knowledge that only they possess because it’s in their mind. They imagine a state of affairs that does not exist today, that they believe they can bring to fruition in the future as a result of their own actions. This is not the extrapolation of existing data. This is creativity – new subjective information. Once entrepreneurs act upon it, it becomes shared with others as a new proposition. The proposition either works or it doesn’t. Customers either buy or do not buy, creating further new information in both cases. Based on the market feedback, the entrepreneur re-imagines, acts again, constantly revising and adapting, and the cycle of new information generation continues.
Entrepreneurship Is Fundamentally Creative In Solving Social Dissatisfactions.
The environment in which entrepreneurial creativity operates is one of social dissatisfaction. People live in a permanent state of discontent: even though quality of life may be improving, things could always be better. (If that weren’t the attitude, then no-one would do anything – we’d live in a permanent state of happy inactivity.) They might not be able to articulate this dissatisfaction, but they feel it. Something’s wrong. The entrepreneur has an intuition for this feeling, and is able to imagine how to design improvements. He or she assembles resources to implement the design, creating something that did not exist before.
Entrepreneurship transmits new information that everyone can use in the innovation process.
Once the entrepreneur makes an exchange with a buyer of the innovation, there is new information in the marketplace. A new offering, a new price established, and news of the willingness of consumers to spend their money to improve their lives this way. A new development pathway is opened up. Market prices represent very dense information, conveyed very efficiently, and available to everyone.
Entrepreneurship co-ordinates economic activity.
Everyone has a personal hierarchy of needs that they are constantly attending to, buying more of this and less of that, substituting new goods and services they discover for those they now find inadequate, adjusting savings and investment. They’re always tinkering and doodling and imagining and thinking, “What if?” There is dynamic, continuous change. The entrepreneur’s role is to monitor this dynamic, and respond to meet consumers’ changing needs as fast and efficiently as possible. Other entrepreneurs observe this activity, and stay alert to jump on when there’s a gap to fill. In this way, resources are used to maximum efficiency, as defined by meeting consumer needs. It’s a complex, fast speed dynamic co-ordination.
Entrepreneurship is competitive.
Once an individual entrepreneur has created an opportunity for profit, the exact same opportunity – with the same offering to the same customer at the same price at the same time and place – can not be created by another entrepreneur. The chance is gone. The entrepreneurial process is one of rivalry, where entrepreneurs vie with each other to be the first to create opportunities for profit and, if they are late, to create the next one. Competition is not about the multiple suppliers performing exactly the same action to sell the same good at the same price to the same customer. It’s not dog eat dog. It’s about rivals seeking to improve the customer’s satisfaction by creating the next opportunity for an exchange.
The entrepreneurial process never stops or ends.
There is no state of equilibrium, that magic state that economists conceive of in order to make their spreadsheet models run smoothly. The entrepreneurial process of coordination is unbroken and never ending, always improving consumers’ lives, offering them new means to achieve their ends. It’s an ongoing process of creativity and ever-expanding knowledge and resources.
Individuals, companies, institutions and an entire economic system will all be more efficient the more they fuel entrepreneurial creativity and coordination.