Wikipedia Deep Dive

Entrepreneurship

13 min read

The Beautiful Gamble

In 1908, a German craftsperson who wanted to start their own business faced a peculiar hurdle: they needed something called the "small proof of competence"—a certificate proving they were skilled enough to train apprentices. Without it, no entrepreneurship allowed. The state had decided that starting a business was too important to leave to amateurs.

This instinct—to regulate, credential, and gatekeep who gets to build something new—runs deep in human societies. And yet entrepreneurship keeps happening anyway, often in spite of the rules, driven by people who see an opportunity that others miss and feel compelled to chase it.

What exactly is entrepreneurship? At its core, it's deceptively simple: taking resources from where they're less productive and moving them to where they're more productive. The French economist Jean-Baptiste Say captured this elegantly in the early nineteenth century. An entrepreneur, he argued, shifts economic resources "out of an area of lower and into an area of higher productivity and greater yield."

But that clinical definition misses the texture of the thing. Entrepreneurship is also risk. It's uncertainty. It's the willingness to pay a known price today for something you'll sell tomorrow at an unknown price—and accepting that you might lose everything.

The Intellectual Lineage

The word "entrepreneur" comes from French—specifically from a 1723 dictionary called the Dictionnaire Universel de Commerce. Before the French term caught on, the English had their own word: "adventurer." That older term captured something essential that the modern word sometimes obscures. Starting a business is an adventure. It requires the same appetite for the unknown that sent explorers across oceans.

The intellectual study of entrepreneurship traces back to an Irish-French economist named Richard Cantillon, working in the late seventeenth and early eighteenth centuries. His Essai sur la Nature du Commerce en Général—Essay on the Nature of Trade in General—was so foundational that the economist William Stanley Jevons called it "the cradle of political economy."

Cantillon's insight was crucial: he separated the entrepreneur from the capitalist. The capitalist provides money. The entrepreneur takes the risk and makes decisions about how to use resources. These can be the same person, but they don't have to be. This distinction matters because it clarifies what makes entrepreneurs special. It's not having money. It's having the willingness to bet on uncertainty.

Creative Destruction

The most influential thinker on entrepreneurship in the twentieth century was the Austrian economist Joseph Schumpeter. Working in the 1930s, Schumpeter gave us a phrase that still echoes through business schools and venture capital pitch decks: "creative destruction."

The idea is both thrilling and terrifying. Entrepreneurs don't just create new things—they destroy old ones. The automobile didn't merely add to the transportation options available to humanity. It systematically dismantled the horse-drawn carriage industry, the blacksmiths who shod horses, the stable hands who cared for them, the harness makers, the feedlot operators.

Schumpeter saw this destruction as healthy—even necessary. "The changing environment continuously provides new information about the optimum allocation of resources," he wrote. Some people acquire this new information before others. They see what's coming. And they recombine existing resources in novel ways to capture the opportunity.

His favorite example was the automobile itself. The technology wasn't actually new—steam engines existed, wagon-making techniques existed. The innovation was combining them in a new way. The horseless carriage didn't require dramatic new inventions. It required someone to see that existing pieces could fit together differently.

The Incremental Alternative

Not everyone agrees with Schumpeter's dramatic vision. The economist Israel Kirzner, still active into the twenty-first century, offered a quieter alternative. Most innovation, Kirzner argued, isn't revolutionary. It's incremental. It's noticing that plastic straws work better than paper ones. It's seeing a small inefficiency and fixing it.

This debate—revolution versus evolution, big leaps versus small steps—continues in academic economics. The truth is probably that both happen. Some entrepreneurs are Schumpeterian destroyers, remaking entire industries. Others are Kirznerian improvers, making things a little bit better, a little bit cheaper, a little bit more convenient.

The economy needs both.

What Entrepreneurs Actually Do

Strip away the theory, and what does an entrepreneur actually spend their time on? The list is unglamorous but real:

Developing a business plan—mapping out how the venture will make money
Hiring people—finding humans with the right skills and convincing them to join
Acquiring resources—money, materials, equipment, office space
Providing leadership—making decisions when no one else can or will
Bearing responsibility—absorbing both success and failure

That last point deserves emphasis. Entrepreneurs are responsible for outcomes. When things go well, they receive rewards. When things go poorly—and things often go poorly—they absorb the loss. This asymmetry of responsibility is what justifies the potential asymmetry of reward.

The Ecosystem

No entrepreneur operates in isolation. They exist within ecosystems—networks of support, resources, and infrastructure that make entrepreneurship possible.

Consider what a modern entrepreneurship ecosystem includes: government programs that promote startups; non-governmental organizations that offer mentoring and advice; advocacy groups that lobby for small-business-friendly regulations; physical spaces like business incubators where young companies can get their footing; educational programs in schools and universities; and, crucially, financing—bank loans, venture capital, angel investors, foundation grants.

This ecosystem didn't emerge naturally. Governments in the twenty-first century have actively tried to cultivate it, hoping that more entrepreneurship will stimulate economic growth. After supply-side economics fell out of fashion, entrepreneurship became the new hope for boosting economies. The theory was simple: if you make it easier to start businesses, more people will start them, and economic dynamism will follow.

Whether this works remains debated. But the effort is real and ongoing.

The Four Requirements

What does it take to become an entrepreneur? Scholars have identified four essential criteria.

First, there must be an opportunity. Someone, somewhere, needs to be willing to pay for something that doesn't yet exist, or to pay more for something that could be done better. Without opportunity, there's nothing to exploit.

Second, entrepreneurs need an edge. This might be preferential access to certain information, or to certain people, or simply the ability to recognize opportunities that others overlook. If everyone saw the same opportunities equally, there would be no advantage to moving first.

Third, risk tolerance is essential. The outcome is uncertain. The entrepreneur might succeed brilliantly or fail completely. Anyone who can't stomach this uncertainty will never make the leap.

Fourth, entrepreneurship requires organization. An idea alone accomplishes nothing. People must be assembled, resources coordinated, systems created. This organizational work—the boring, operational side of building a business—is where many entrepreneurial dreams go to die.

The Psychology of Entrepreneurs

Research from the Global Entrepreneurship Monitor has tried to identify what makes entrepreneurs tick. Among entrepreneurs in the Association of Southeast Asian Nations (known as ASEAN), several traits stand out: experience managing or owning a business; the tendency to pursue opportunities even while still employed elsewhere; and comfort with self-employment.

These entrepreneurs typically carry a long-term mental model of their enterprise—a vision of where they're going—while simultaneously scanning for short-term opportunities. This dual awareness, looking far ahead while staying alert to immediate chances, characterizes what researchers call serial entrepreneurship: the tendency for successful entrepreneurs to start multiple ventures over their careers.

Entrepreneurs also exhibit characteristic biases. They're unusually optimistic about finding new possibilities. They see unmet market needs that others miss. And they have a higher tolerance for risk that makes them willing to act on opportunities that more cautious people would let pass.

Whether these traits are innate or learned remains unclear. Probably both. Some people seem born with entrepreneurial temperaments. Others develop them through experience and education. The entrepreneurship ecosystem includes training programs precisely because these skills can, to some degree, be taught.

Beyond Profit

The definition of entrepreneurship has expanded over time. Originally, it focused narrowly on profit-seeking businesses. But entrepreneurial behavior appears in places far removed from commercial enterprise.

Consider nonprofit organizations working to solve social problems. They identify opportunities—unmet needs in communities. They assemble resources—donations, grants, volunteers. They take risks—trying new approaches that might not work. They create value—improving lives, even if not through market transactions.

Or consider government agencies that innovate in how they deliver services. When a public health department finds a new way to reach underserved populations, when a transportation authority reimagines how buses should run, when a school system develops better methods for teaching reading—these are entrepreneurial acts, even though no one is seeking profit.

This broadened definition recognizes that entrepreneurship is fundamentally about seeing opportunities and having the initiative to pursue them. The specific domain—for-profit, nonprofit, government—matters less than the underlying dynamic of creation and risk-taking.

The Ashanti Precedent

Entrepreneurship isn't a Western invention. In the Ashanti Empire, located in what is now Ghana, successful entrepreneurs who accumulated wealth and followers and distinguished themselves through achievement received a special title: Abirempon, meaning "big men."

By the eighteenth and nineteenth centuries, this title had become formalized and political. It was awarded to those whose trade benefited the whole state, not just themselves. The most successful entrepreneurs received the Mena, an elephant tail that served as a "heraldic badge"—a visible symbol of their status and accomplishment.

This recognition reflects something important: societies across cultures have always needed people willing to take risks, organize resources, and create new value. The specific institutions vary. The underlying human need does not.

The Process View

Academic study of entrepreneurship has evolved. Early researchers focused on the entrepreneur as an individual—what traits they have, what they do, what makes them special. This "functionalist approach" treated entrepreneurship as something that belongs to certain people.

More recent scholarship takes what's called a "processual" or "contextual" approach. Instead of asking what makes an entrepreneur, these researchers ask how entrepreneurship happens. They examine the interplay between individual agency and surrounding context. A person might have all the traits of an entrepreneur, but without the right environment—the right ecosystem—nothing happens.

This shift matters because it suggests that entrepreneurship isn't just about finding or creating special individuals. It's also about building contexts in which entrepreneurial activity can flourish. The policy implications are significant: instead of trying to identify and support potential entrepreneurs, perhaps we should focus on creating environments where anyone with an idea can try to make it real.

The Uncertainty Problem

One insight from the academic literature deserves special attention: opportunities can only be identified after they have been exploited.

This sounds paradoxical, but think about it. Before an entrepreneur builds a successful business, we can't know for certain that the opportunity was real. Maybe the market need was genuine. Maybe customers were ready to buy. Maybe the timing was right. Or maybe not. We only find out after the fact.

This fundamental uncertainty distinguishes entrepreneurship from other economic activities. A worker takes a job and knows roughly what they'll earn. An investor buys a stock and can calculate expected returns based on historical data. But an entrepreneur launches a venture into the unknown. The opportunity might exist. Or it might be a mirage.

This is why risk tolerance is so essential. Entrepreneurs must act on incomplete information, make decisions without certainty, and accept that they might be wrong. The psychological demands are considerable.

Size Doesn't Matter

A common misconception equates entrepreneurship with small startups. But entrepreneurial behavior occurs across organizations of all sizes.

Large established firms engage in entrepreneurship when they develop new products, enter new markets, or transform their business models. Small businesses engage in it when they identify local opportunities and move to capture them. New ventures engage in it by definition. Even nonprofit organizations and government agencies can be entrepreneurial, as we've seen.

The relevant question isn't how big the organization is. It's whether the organization is identifying opportunities, taking risks, and creating new value. A giant corporation that does this is being entrepreneurial. A small business that doesn't isn't.

The Economic Debate

Does entrepreneurship actually drive economic growth? This question, surprisingly, remains contested among economists.

The intuitive case seems strong. Entrepreneurs create new products and services. They employ people. They generate wealth that flows through the economy. Surely this adds up to growth?

The academic case is murkier. In endogenous growth theory—the branch of economics that tries to explain where growth comes from—entrepreneurship represents what's called the "residual." It's the growth that can't be explained by other factors like capital accumulation or labor force expansion. But identifying the residual is easier than proving what causes it.

Some economists argue that entrepreneurship is indeed the driver—that Schumpeter's creative destruction is what pushes economies forward over the long run. Others suggest the relationship is more complicated, that entrepreneurship might follow growth rather than cause it, or that the apparent connection reflects other underlying factors.

The debate continues. But governments aren't waiting for resolution. They're betting on entrepreneurship anyway, building ecosystems and crafting policies on the assumption that more startups mean more prosperity.

Bootstrapping: Building Without Permission

Within the broader world of entrepreneurship, there's a particular path that deserves attention: bootstrapping. This is the art of building a business without external funding—no venture capital, no angel investors, no rich uncle writing checks.

The bootstrapped entrepreneur starts with what they have. Maybe it's savings. Maybe it's revenue from early customers. Maybe it's a credit card and a prayer. The constraint is brutal but clarifying: you can only spend money you actually have or can earn.

This constraint forces discipline. Every dollar matters. Every hire is scrutinized. Every expense must justify itself. There's no cushion of investor money to absorb mistakes. The feedback loop between action and consequence is immediate and unforgiving.

But bootstrapping also offers freedom. When you haven't taken outside money, you don't answer to outside investors. You can build the business you want to build, at the pace you want to build it, serving the customers you want to serve. There's no board meeting where you explain why growth wasn't fast enough. There's no pressure to pursue an exit that makes investors rich but might not be right for the business.

The Substack article that prompted this exploration mentions "a well-respected bootstrapped multimillion-dollar revenue Silicon Valley-oriented media and events business." That phrase—bootstrapped multimillion-dollar revenue—represents a particular achievement. It means building something substantial through patience and profit rather than through the accelerated timeline that venture capital demands.

The Meaning of It All

Beyond economics, entrepreneurship carries meaning. The entrepreneur uses their time, energy, and resources to create value for others. They see a problem that needs solving, a need that isn't being met, a better way of doing something—and they act on it.

When entrepreneurship works, both sides benefit. The entrepreneur receives monetary rewards. The customer receives value. The exchange is mutually beneficial, even beautiful in its symmetry.

This is perhaps why entrepreneurship holds such cultural resonance, particularly in societies that value initiative and self-reliance. The entrepreneur embodies a kind of hope: that individuals can make a difference, that problems can be solved, that tomorrow can be better than today.

Whether that hope is justified—whether entrepreneurship delivers on its promise—depends on many factors: the ecosystem, the timing, the execution, and a fair amount of luck. But the hope persists. And people keep trying.

Because at its heart, entrepreneurship is simply this: seeing something that could exist and deciding to make it real. That impulse—to create, to build, to risk—seems to be part of what makes us human.