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The Philosophy of an Entrepreneur

An Excerpt from the book Zero to One Million: How to Build a Company to One Million Dollars in Sales by Ryan Allis

Values, philosophies, and ideas are immensely important. As John Stuart Mill said in Representative Government, “It is what men think, that determines how they act.” Ideologies can be the cause of wars, hatred, death, or prosperity. As such, it is very important for each human to analyze their own ideology, to not without question pick up the religious, economic, and political views of his or her parents, and to truly know why they do what they do and for what they would or would not sacrifice. As such, in this chapter I will explain the principles of my philosophy—the philosophy of an entrepreneur.

There are many questions to be answered in determining one’s economic philosophy. Personally, I am a believer in competitive market economies and the potential of the human spirit.

I surely do not use the ideal of liberalistic laissez faire—no regulation and no government interference, as a façade to pay less taxes and enrich myself while those without the same opportunity as I languish. On the other hand, I do believe that those who build the real economy, the entrepreneurs and business owners, should be given incentives to produce and that their incentive should not be taxed or regulated away. Without such incentives or with too much regulation, the wealth that is needed to have the ability to provide jobs or assistance to the impoverished would be non-existent.

The competitive market economy has been able to develop largely due to the development of the philosophy of liberalism over the past four hundred years. Without key persons such as Martin Luther, Adam Smith, Thomas Hobbes, John Locke, and John Stuart Mill, capitalism would be very different. To truly become a successful entrepreneur, it is important to understand the ideological basis of the competitive market economy. Let’s take a moment to see just how liberalism has shaped the markets and the world of an entrepreneur.

On Liberalism

Today, the main players on the ideological battleground are socialists, social liberals, neoclassical liberals, conservatives, and libertarians. As Francis Fukayama points out in The End of History and the Last Man liberalism, in its classical sense, has won the battle and been accepted by nearly everyone. Although dissent still exists, the ideas of Thomas Hobbes, John Locke, Voltaire and J.S. Mill have, for now, won the day.

To illustrate this point, I will point out that both of the major political parties in the United States are parties that have liberalism at their foundation. Republicans are generally neoclassical liberals while Democrats, often the ones referred to as liberals, are generally social liberals. Both forms of liberalism seek the same end, an increase in liberty, but simply go after this goal in different manners. The key difference being that neoclassical liberals believe that less government can lead to more liberty while social liberals believe that equality of opportunity does not exist and the government can take positive actions to rectify this liberty-reducing wrong. In the United States, the belief that Democrats are liberals and Republicans are not is a bit of an historical misnomer that does not speak to the true definition of liberalism.

Liberalism sprang up as a reaction to two of the characteristic features of medieval society in Europe—religious conformity and ascribed status. This reaction took place in different times in different places. By the early 19 th century however, ‘liberalism’ had entered the vocabulary of politics and a distinct ‘liberal’ viewpoint emerged. Liberals wanted freedom of religion and separation of church and state. These ideas were diametrically opposed to the thinking of the Middle Ages during which church and state were supposed to work together to defend and spread religion.

The other feature of medieval society which early liberals disagreed with was ascribed status. In medieval times, a person’s class standing was fixed (ascribed) at birth and one could not improve his or her lot or have any upward mobility. The liberals instead wanted to create a society based on achieved status in which everyone had an equal opportunity to work his or her way up in society. Liberalism demanded equality of opportunity and an end to aristocratic privilege. This surely was not possible under the system of feudalism that developed after the collapse of Charlemagne’s empire in the ninth century. Other characteristics of a liberal society include a competitive market economy, a rule of law, and a free exchange of ideas.

With the wealth controlled by those who had the most incentive to keep the system as it was, it would take a number of events and many centuries for liberalism to emerge. Adding to the chance liberalism would succeed was the Magna Carta, Renaissance, Black Death, expansion in trade and commerce, the discovery of the new world, the Protestant Reformation, the English Bill of Rights of 1688 and the American and French revolutions.

Thomas Hobbes (1588-1679) is recognized as one of the early founders of liberalism. In Leviathan (1651), he introduced the ideas of self-interest and that government should only be obeyed as long as the person or persons in power protected its people. Hobbes argued that government was formed by the consent of the people and that all individuals are equal.

John Locke continued on Hobbes’ path by stating in his Letter Concerning Toleration that it was wrong for governments to force their subjects to conform to a particular religion. He stated that governments should tolerate diverse religious beliefs as long as those beliefs did not directly jeopardize the order of the state. Locke set forth the natural rights of all humans as life, liberty, and property—rights that no one could take away without cause and explained that the populace had the right to overthrow any government that threatened these natural rights. These beliefs were committed to writing once again thirteen years on with the French Declaration of the Rights of Man.

Liberalism is the core of what I believe. I firmly and wholeheartedly believe in freedom of religion, separation of church and state, and equality of opportunity for all humans. I believe government is created with the consent of the governed and that its main roles are to provide security, protect and promote liberty, and make laws. Finally, I believe that a democratic republic, even with the flaws it has, is the best form of government man has created to date.

Let’s now take a look at the competitive market economy that has developed within this philosophical framework.

The Case for the Competitive Market Economy

A child born to a wealthy family in Bethesda, Maryland will have a very different life and set of opportunities than a child born to a peasant family in Zimbabwe. Looking at the equality of opportunity between these two persons would be difficult, as the economic and political situations in the United States and Zimbabwe are vastly different. But what about a child born to a wealthy U.S. family versus a child born to an impoverished U.S. family? And what about a white child versus a black or Hispanic child? Are the opportunities the same? Is there truly equality of opportunity?

In many cases, surely there is not. The white child born to the wealthy family is likely to grow up in a good neighborhood, go to good primary and secondary schools, likely private ones, be cared for by both parents, be encouraged to go to college, have his college paid for, be provided with a car, house, and a good job upon graduation, and receive a large sum bequeathed to him upon his parents passing. The poor minority child is much more likely to have only one parent, to not have that parent around too often, be living in poor conditions, be exposed to drugs and violence at an early age, and have an increased risk of getting in trouble. He may attend poor schools and rarely have the encouragement or additional assistance needed to do well. He may never reach college or finish high school and end up uneducated, an early parent, and with a low-wage job. The cycle of poverty will continue to the next generation.

So how, if I believe that there truly is not equality of opportunity in the United States, can I strongly support its economic system? I hope the following anecdote will help illustrate the answer.

Standing Up for the Free Enterprise System

The day after the start of the 2003 war in Iraq, my psychology professor decided to postpone the class on developmental psychology in favor of having a ‘discussion’ on why he was against the war and why it was an immoral and illegal war. While I had no problem with him expressing these feelings, I did have a problem when he turned the anti-war speech into a tirade on the American competitive market economy.

Thankfully, Dr. Lawson opened the floor for comments after his twenty minute speech. With three hundred students in the lecture hall looking on, no one raised their hand to speak. I raised my hand, and taking my notes with me, proceeded to the front of the room as the professor handed me the microphone. I began with a comment that in Iraq Professor Lawson would have been stoned, hung, shot, or otherwise killed and one of the things I liked about this country was that one could speak their mind without fear. I continued by saying that personally, I had come that day to learn psychology. This caused the students to cheer. I think they were quite surprised by this point. Who was this kid taking on his professor in front of hundreds of people?

Fortunately, we all knew Dr. Lawson well, or at least knew he was a very easy-going guy. We discerned this through stories of his twelve years living in developing countries and going to the beach and doing yoga every day. I was sure that he would welcome differing opinions, so I continued. I mentioned that I was not going to talk about the war, as we had all heard the pros and cons ad nauseum, but rather, wanted to give a rebuttal to some of his comments about the free enterprise system. I felt that someone had to fight for the competitive market economy. Being an economics major, entrepreneur, and Vice-President of the Carolina Entrepreneurship Club I thought I was a good person to do it.

Comments like, “Money is the root of all evil” and “the rich are battling the poor in America” made me want to respond. So I stood up and told Dr. Lawson that in my opinion money is the root of much of the prosperity we have and that without money societies would have to resort to barter, greatly reducing the amount of trade and welfare in the world. Further I argued that the only reason that we had the high level of quality facilities we had in that room was because of free enterprise and that without a competitive market for desks, lights, seats, microphones, projectors, carpet, wood, paint, and construction labor the room we were in could never exist, that the high standards of living we have are directly due to the competitive market economy, and that without a competitive market economy we would have no incentive to produce and to make high quality goods at low costs.

In response to his comment that there was ‘the biggest disparity between rich and poor since slavery’ I replied that anyone in the United States that was motivated enough could, through entrepreneurship, support themselves and break out of poverty. I added that while important it was not the disparity that mattered most, but rather the ability of anyone to become anything they dream. Mobility was what truly mattered. A large pie unevenly distributed is much better than a small pie divvied up in equal proportion. As former Chinese ruler Deng Xiaoping once noted, “I can distribute poverty or I can distribute wealth.” It is, in my opinion, better for there to be inequality and the worst-off person have two goats than there to be equality and everyone have just one goat.

I submit the fact that in the United States there is not equality of opportunity in many cases. However, I still believe the opportunity is there for anyone with enough desire and perseverance to reach the same heights as anyone born into money and a supportive family. While it is by no means perfect, there are great opportunities in the economic system we have, and without the incentives provided within it, we would all be worse off and there would be a lot more of us in poverty. There is room for improvement and certainly some corruption and malfeasance within the economic system we have, but surely it is much less that that in most other countries and in other systems.

Adding Compassion

I was completely sure of this view talking that day in psychology. I stood up there and vigorously and eloquently defended what I held to be dear.

A girl came up to me after class that day, however; a girl named Allison. Allison just asked me to consider that perhaps many poor persons did not have the opportunity I had had. It was true. I had two loving parents, a mom who always encouraged me to follow my dreams and be independent, and a supportive childhood during which I received a good education. I also had the luck to become good at web site development and web marketing and help build a company to a million dollars in sales my senior year of high school, providing at least some financial comfort for me.

I had never considered how difficult it would have been for me to start a business without loving parents supporting me. I had never considered how hard it would have been to start a business if my parents had not told me what I needed to know about sex and I had impregnated a girl at sixteen. I had never considered how difficult it would have been to obtain a good education without the encouragement to go to school and do well. And I had never considered how hard it would have been to succeed in business if I would have grown up with murder and drugs outside my door.

So did these considerations change my views on the competitive market economy and entrepreneurship? Not entirely, but they did add a bit of compassion to them. While we may not be able to start people out on the same footing, we can, through competitive market economies, entrepreneurship, education, philanthropy, and a little bit of compassion, provide any person who wants to take hold of it the opportunity to break the cycle of poverty and make something of themselves. It is up to that person to take the initiative. It is up to us to spread the word that this possibility is there. For me, this book is a start toward spreading that message.

On the topic of the role of government, there are cases that the justification of laissez faire simply should not be used. One such example is in early Industrial England when children were being shackled to machines in order to get them to work harder. The British parliament attempted to pass a law against this practice but many early capitalists lobbied the lawmakers to vote against the law, quoting Smith’s work in saying that any attempt to interfere with the workings of the marketplace would be for the worse. While I am a strong proponent of the marketplace and of the competitive market economy, there are times when a government has to have a role.

There are other times, of course, when the government should have less of a role. Looking at the system setup during the communist era in the USSR provides a classic example. Communism failed because no human, or computer system for that matter, could properly plan and account for the dynamic nature of the marketplace. The market and resource directing information that prices provide simply could not be replicated by a team of a thousand researchers and planners at Gosplan with the best supercomputers.

While there are times when the government should be involved in the marketplace, there are many instances in which planners and bureaucrats would only harm us. In the end, it comes down to efficient and intelligent regulation, the ability we have as a society to root out corruption and promote ethics in business, our ability to strike a balance between protecting the consumer and worker while protecting commerce, and the ability we have as a society to instill ethical, non-corrupt leaders.

There are types of capitalists that I like and hold as heroes, and there are types of capitalists I consider criminals. The type of capitalists I don’t like are those that exploited children in the mines and factories in the Industrial revolution, created monopolistic cartels in the 1880s, dumped toxic waste in rivers in the 1950s, and cooked their books in the 1990s. Those capitalists are the ones that give the market system a bad name and reduce, instead of increase, the standards of living in our world.

The real capitalists, the real entrepreneurs, promote innovation, bring efficiency into their industries, take on risk, drive competition, and build wealth for themselves as well as society. Let’s all commit now to bringing ethics, responsibility, and the ideals of the true entrepreneur into what we do. Let us succeed in building our million dollar companies because we find new efficiencies, build good teams, and take an innovative product or business model to market, not because we get in good with key government leaders, have the heads of our competing companies killed, report revenue on our books that doesn’t exist, and save on disposal costs by dumping our waste in the ocean or in the river. While these are extreme steps that would be unthinkable for many, they happen more often than you may think and nearly every day in developing countries.

Without a competitive market economy, an incentive system, and a price system our lives would be terrible. There would be no incentives for teachers to teach, doctors to heal, bakers to bake, or workers to produce. There would be no chance for us to help the billions of humans in our world that presently are not able to enjoy our level of prosperity or improve their standard of living.

As my dad, a retired Episcopal priest once said, “Money is not the root of all evil. The Bible says it is the love of money that is the root of all evil, not money itself. Used and invested properly, money can create an increasing degree of comfort in the lives of all members of society. It’s the excessive lust for and hoarding of money that is evil, not the building of wealth and reinvesting wealth to increase prosperity for all.”