Economics for Business: Austrian Principles Practically Applied

hi my name's hunter hastings austrian principles practically applied that's what we're going to talk about for the next 30 minutes we're going to introduce a new project of the mises institute i'm going to give a quick overview of it and our panelists here are going to talk about how they apply austrian principles practically we're trying to build a bridge from austrian theory to its application in business so peter klein you know very well he's he occupies the middle of the bridge between academia and business he consults with a lot of business companies he's an entrepreneur himself he advises entrepreneurs but greg moran who's a living breathing entrepreneur and bob luddy who's our uh our entrepreneur par excellence in the sense of he wrote the book the entrepreneurial life he's built a huge company over 42 years of applying austrian principles so they're going to talk about the real part of this economics for business is a project of the mises institute it's authorized by by lou and the board it's resourced by by jeff you'll see the project team there we've got a number of of uh excellent team members wesley downes is here today as is lena wong who's running our marketing along with uh ricky and and clay miller who are not here today but our tech technology geniuses we've got an academic advisory panel that peter sits on as well as those other great names you can see there and we've had a ton of help from uh from the mises institute from uh a group we rounded up from aerc presenters and attendees a lot of mises you alumni rbg alumni other members of the staff are working on this project and we've got a slack group of supporters some of some of you are in the audience today so this is quite a big team that we've got on this this new project why are we doing this the first goal is to expand the reach of the mises institute and to get a greater understanding of the merits of austrian economics i put 2x in there i'd be happy for that to be 10x so we'll take that by the the number of visitors the mizorg site has and we we need 2x of that new people who are they they're the business audience people in business could be anybody in business starting a business running a business owning a business working in a large corporation and trying to understand entrepreneurship uh a professional in law or marketing whatever it might be it's the business audience so it's it's very expensive and as we said it's about applied austrian theory uh anybody of any of you listen to the podcast might have heard us talk about the uh austrian school versus business school it's a theme we've been developing and it's the idea that business school is full of fallacies but there are more insights in the austrian school and we're determined users of the word austrian we're trying to popularize that and get people to understand what what austrian is which is a bit of an uphill climb because when you google it you get a lot of austrian airlines and holidays in the alps and things like that so we're building which i'm going to show you in just a second a uh a platform so amazon is a platform we're a platform that means you've got at least two sides on one side we've got entrepreneurs with a business audience looking for knowledge looking for tools and looking for a community that they can collaborate with on the other side we've got knowledge providers the people who are providing the content and the uh the output and the advice and so on like that will make it trustworthy through the right authorities and editors and and mentors including the gentleman here sometime in the future there might be a service exchange on this platform where members of the mises institute of practice law for example might offer their services to uh other members who who are marketers and vice versa and so on like that but that's in the future so at econ4business.com we'll establish that url if you find us on the web you will be able to we'll ask you for a quick registration which is just to start to build a profile because the artificial intelligence in our platform is trying to get the right content to you as the person who uses it so um i don't have to fill out the form today it'll take you to what we call the entrepreneurial gps so this is a metaphor the metaphor is that it's a journey it's a journey of a lifetime it's a journey to greater mastery it's a journey to greater success it's not a linear journey but you might stop at all of these places you might be recursive and come back from time to time but basically you start at imagination peter klein always tells us there are no objective opportunities out there it's just the imagination of the entrepreneur so we'll help with that you then go to design then you've got to assemble the resources you take it to market one of the big insights of austrian economics is that value is an experience we're stressing that very much an experience in the mind of the consumer the customer that's subjective value she'll be a customer experience development module and then your business is launched you're going to manage it you got to grow it and we may even have a what we call disposition if you want to sell it at the end then we'll help you with that as well so you can customize your own uh gps again we want to know how to help you best so if you customize it you'll get the content that you need you can select a template and then you'll find yourself at a dashboard so this particular dashboard just has a lot of of articles on the left i'll explain the right hand side in a second we might have some special groups like the free market medical association i want to help understand how to bring entrepreneurship we conceived something we call the austrian business model so you might want to learn about that we uh we think of business as an ecosystem so you might want to understand ecosystem management and so on and so on and so on we might even have financing so one of our supporters dusty wunderlich has produced a a program about how to get financing from from entrepreneurs fintech as they call it these days so we've got a lot of content you can organize the content that you want the more that you select the more similar content will will come to you then in this right hand bar we've got a number of things one is a tool kit so we said part of application of austrian principles is tools so we'll give you tools to help you do that so fundamental to the austrian economics is the means end chain how the hell do you use that in business well here's how you do it here's a tool of five steps to take you through how to identify the highest values that your consumer is pursuing we talk about opportunity cost bob lighty talks about this a lot how it helps him in business what is opportunity cost well you can calculate it he's an opportunity cost calculator now most of these tools so far are uh a text you textual are visual but eventually you'll be able to digitize them you can put data in here and it will give you an output so this is another peter klein special you you uh austrians are always talking about empathy that uh entrepreneurs have empathy what is that well here's how to here's how to collect the information you need for your empathic diagnosis and here's what to do with it so we have a lot of tools that you can that you can use like that and then we have another element we call knowledge capsules so we've got this very dense and and tremendously continuous set of austrian knowledge but how do you make it consumable in today's day and age so we have this thing we call the knowledge capsule we kind of borrowed it from blinkist but it's a 10 bullet point summary so here we're talking about about value there's an introductory paragraph why should you know this what's in it for me and then we talk about subjective value we talk about only consumers create value here's what the entrepreneur does etc etc now this could just as well be an animated video it could be uh it could be a virtual presenter there are many ways to do this and then at the bottom there's all of these other links if you want to get more information about that particular topic so that's our that's our compressed module and then if you want to go deeper and get into a book you can go to the muses bookstore and get the relevant book we only seem to have books by peter j klein yeah peter jake find it or any other book yeah right now we are going to build some full-on courses and we have one in the in the the bag already which we call the value learning process is by dr packard from university of nevada reno it's absolutely original it's his own thesis about value as a process and again that's got 11 downloadable tools that you can take from the course and apply it in your own business we've got dr rapp who is going to give us a course on investment theory for entrepreneurs so again applying austrian principles in in very specific areas and then the third element that we want to talk about is the community element this is not very fully built yet but the idea is that if we get a few million entrepreneurs here that they can come into the site they can ask each other questions hey i've got this problem what's the answer to it you've got experience tell me tell me how you've done it or i need something i need a patent attorney has anyone had a good one you can recommend to each other and so on like that so we're we've got this idea of community right now it's it's q a um but eventually we want to see if we can build in a mentoring capability what if you could reserve half an hour of greg marin's or or bloody's time well you've got to ask them a good question you've got to put it on the calendar and they'll do some mentoring for you i'm not volunteering you guys i'm just talking about the principle here so the community is there and the uh the service exchange is in our future so we've got content we've got tools and we've got community and uh we're looking to build those as robustly as we can so i just want to talk about the greatest challenge which is content production it's uh mises.org is the greatest source of austrian and libertarian literature and content that you can find anywhere in the planet it's been built up over the years and years and years but now it's definitive we need to get there we need a lot of help with content production uh it's a different tone it's a different style maybe but we're looking to build up our production side of of content so with that introduction let me uh let me turn to the panel um i'd like to ask peter klein first from the middle of the bridge you talk to a lot of entrepreneurs you also teach the theory peter what do you see as the the practical challenges that we've got to get over here and what's what's the great victory from your perspective well thank you hunter for the question and thank you for leading this initiative i'm extremely excited about it not because it has a lot of peter klein books on the site that's a side side benefit but partly because as most of you know the austrian tradition the austrian school of economics which we believe offers the most complete accurate and useful uh way of thinking about the economy thinking about broader society is not the dominant viewpoint within the academy or within government uh in among the media and so forth and you know we've been sort of fighting a battle we austrian economists have been fighting for many many decades to uh to develop these theories to build out these theories to extend the great insights of mises and rothbard and others um but you know fighting sort of an uphill battle especially within the universities where other perspectives and economics are much more dominant well uh you know at the same time i think there are opportunities for austrian economics to grow and flourish and attract more adherence and have more influence in other parts of society beyond the economics department at the university right so i have spent most of my career teaching in business schools and so i teach undergraduate business students and mba students and teaching a number of executive education programs where the participants are looking for obviously a theoretical understanding of how the world works but they're looking for practical insight they're looking for knowledge that they can apply and use to make a difference in their businesses and their lives and so forth these audiences are very receptive to austrian economics they're very interested in uh the austrian approach and they find austrian economics much more practical and useful on average than what they get from mathematical neoclassical economics or keynesian macroeconomics or what have you and moreover unlike unlike economics departments which are very um you know sort of territorial and keynesian economists are very worried about losing their status and in the hierarchy and they feel threatened by austrians and so forth many academics professors and and practitioners who teach in business and management and even in public policy they're less concerned about those territorial disputes they're not threatened by austrians or by austrian economists so uh earlier hunter had a list of some of the advisors uh some of the the the professors who are advising this platform and most of them are teaching in business schools they're teaching uh courses in entrepreneurship or strategic management or human resources or finance and they're using austrian insights without getting pushback right so i think there's an opportunity for us to market our ideas and develop our ideas within the context of business and its applications as many of you know carl menger the great founder of the austrian school of economics before he became a professor before he wrote his great treatise on the principles of economics in 1871 was a journalist his profession was financial market journalism right he was reporting on industrial trends and price movements in different sectors of the economy within the austro-hungarian empire and he developed his pioneering theories of marginal utility and pricing to understand what was going on in the world around him it wasn't just an intellectual puzzle for carl menger it was an attempt to make sense of the world ludwig von mises i'm sure you know uh was only a part-time theoretician throughout almost his entire career it wasn't until mises was at a very mature age that he had a full-time professorial position he spent most of his career uh as a a bureaucrat uh within the uh government of the city of vienna as a sort of the chief economic advisor in vienna and so his day job was doing practical analysis of what was going on in industry in vienna and elsewhere what was the impact of government policy on the economy and then you know nights and weekends he was writing socialism and liberalism and human action you know would that we could all have those kind of mental powers right so the point is austrian economics was sort of birthed in practical considerations in the milieu of practical analysis of business trends and entrepreneurship and public policy austrian economics is also the only kind of school of thought and economics that still places the entrepreneur at the at the very heart and center of its analysis of markets and and the economy which other approaches in economics don't do so when you talk to real entrepreneurs like these guys you know when they hear uh the austrian understanding of how a market works and how industries are created and so forth their eyes light up now these two are also great scholars who have read most of the you know that they they know mises and rothbard's works and so forth but even people who haven't thought about it at that level when you articulate the austrian understanding of the entrepreneurial market system of course it makes complete sense unlike what they heard in their econ classes back when they were in school which which didn't make sense i've sort of lost the threat of your question on turrets i'm sort of rambling here but but what i'm what excites me about this platform is you know it's multi-dimensional it it provides outputs that are very useful to business practitioners it helps to advertise and publicize the mises institute and attract more people into our orbit but it also uh you know provides chances for us to develop the austrian tradition and and develop austrian doctrine better within the context of practical business problems good so the other end of the bridge is the actual application i'm going to jump to bob at the end greg if you don't mind and bob tells me he's been applying these principles and he's grown a fabulous business he's a leader in his in his market he's uh he's got incredible strategic uh capabilities that he's expressed in innovation and so on uh so bob just tell us a little bit about how you've applied austrian economics and how you teach it to your your managers and your workforce yeah i do teach it to every new engineer every new person coming to the company we do teach them austrian economics and they need to embrace it to survive at captive era i'm going to in the short story wrap in says law opportunity cost consumer choice comparative advantage and price now some of you know dr william peterson student and colleague of mises was my mentor teacher professor and one of the things he said was that if he had to get economics down to one word it would be price so the story if you look at any industry today whether it's education government manufacturing they tend to get more become more alike over time and if you violate any of the principles within an industry you are among other things a rogue stupid failure to understand the industry ditto ditto you're a complete outcast uh within society within the industry even within our own company i've had people come to me and said bob you don't understand this industry and we have to bring you along we have to help you to understand it better i said well i think i understand it but i'm creating a new industry so this is directly from peterson you can go out and compete in the market for a period of time but there's other competitors in the market what the real entrepreneur does is they anticipate the future market so a brief story on that circa 1988 the price of stainless steel which was our prime component that we use raw material was beginning to rise and it was it was up about 10 percent i thought it might go up another 10 turned out it actually went up about 40 at least for a period of time that's a big increase in your raw material so what manufacturers do they raise the price so i said well number one i'm not going to raise the price because we serve the user that's our theme so i began to think about light weight and at that time they use 16 and 18 gauge primarily 16 gauge metal weighs two and a half pounds a square foot it's very heavy so we switched the standard from 1618 to 1820 and translating that that means we save 20 percent of the tonnage or 20 of the cost overnight uh and we actually made a better product because it's not that easy to to use 16 gauge metal and we got this project done in two months we didn't tell anybody because we knew if you told anybody in the company they would be so freaked out they might just walk out the door and those those things have occurred over the years so i got to thinking we just pulled that off so beautifully there's got to be something else we could do so i began to question the type of metal so within the food service industry there's only one type of metal used primarily 304 stainless steel and it's been used for since the beginning of time so to show you how simple things can be because entrepreneurs don't have to be brilliant i called up the steel company and i said if i was going to start the kitchen ventilation industry today i want to know the cheapest metal i can use that's most of cost-effective most cost effective that'll be suitable over a long period of time they said we'll call you in a week so they went to their chemist and they said well there's a metal called 430 it's primarily used heavily used in europe almost not made in the u.s but it's made by a german company methanoxin down in mexico so we immediately ordered samples it's complex to switch a metal type because it bends different everything's different about it and it's not accepted in the marketplace so we began our test and after about two months i said we're moving on this thing we're going to switch now we're going to experience a 40 drop in material costs and you have to put on top of that we didn't actually achieve 40 because price went up so maybe net net we achieved a 10 or 15 price reduction so we could maintain the same price and we can make higher profit um within the industry this was so radical that the entire industry moved against captive air we were an eight million dollar nothing company everybody thought we were going to go bankrupt regardless of these changes we made and so they decide it's an industry we'll just freeze out captive air we'll convince the engineers these guys are rogue and then they'll go away and we'll go back to what we're doing well fast forward to 2003 so approximately 15 years later captive air went from eight million dollars to a hundred million dollars and we basically dominated the industry pushing toward fifty percent of u.s market share i'll give you a second version of that so we continued to gain market share we continued to integrate in 2015 our chief engineer who came with me out of college park maryland in 99 now 44 years old i said that's just that's just kick everybody out of the building so if there's a commercial restaurant there's nobody left but captive air and he says we're going to do that so if you if i went to our sales people and said we're kicking train out we're kicking our carrier kicking out all these famous names they would say that's impossible uh we're in phase one of doing that right now so the message is think to the future be bold and don't be afraid to exist within the industry and if you're if you're wrong you could be a major loser that's acknowledged but if you're right you're a major winner and that's what entrepreneurs do thank you thanks bob [Applause] so as bob said if we can um teach people properly on the economics for business platform we can teach them says law that what he did in production created its demand we can we can teach uh the value network which is the opposite of competition that's serving customers and bringing them value we can talk about the opportunity cost of doing x and not y but lots of ways we can put a foundation under that under that action um greg you and i were talking about the way the market is moving based on changing consumer behaviors yesterday maybe that's a place to start but give us your perception as a as a as a entrepreneur about how some of the austrian principles have helped you thank you hunter uh yeah we've seen what we were talking about yesterday was with the pandemic the way uh some of the trends have changed uh in my own industry and my company's seeking laboratories and we manufacture chemical products for aquariums and traditionally basically well kind of let's get back to the beginning we've been in business for 40 years and it was a family business my father started and we continued to grow over the years but over that whole time span we've always seen this trend where in the summer months the our sales would dip down and in the winter they would rise up and it always seemed a bit inexplicable but after many many years of that we finally figured out you know people are going out to the beach they're going to vacation this summer and that's why we see that dip and then in the winter they're at home they're you know nothing else to do so they start focusing on their aquarium so during this pandemic for us oddly enough it's been that a very positive trend because everyone's been locked up in their homes and so they're very interested in starting a new aquarium we're focusing on that so that really kind of demonstrates that you know consumer consumer there is consumer demand that's driven by their desires for filling up their specific needs in this case maintaining aquarium but there are exogenous factors as well that kind of influence that so something as simple as you know their choices of whether they're going to go on vacation or they're going to stay at home and have an impact so that kind of shows you how consumer preference can really drive a market and it's the the role of the the entrepreneur to identify um where that trend might be and sometimes you guess right sometimes it gets wrong and i kind of see the role of the entrepreneur is twofold one is as a it's mainly a service to mankind you're serving your fellow man so we all know that freddie thank you for your service but that's something that everyone should say to every business they encounter we've really felt that during these lockdowns we've we've tried to support a lot of more businesses restaurants that we don't usually go to because we really value it and it's when you realize that that's going to be taken away you kind of it brings in the stark contrast what people are providing as entrepreneurs so the other side to that is not only service but solving problems and that's probably one of the biggest drivers for entrepreneurship that i've seen seen it was the impetus for the start of our company my father basically was looking for a way to solve a specific problem if he was a hobbyist he'd buy these expensive fish and then they would die so after you start spending 100 on a fish every other month and they're dying it you realize this is a problem and the existing products that were out there did not solve the problem they were basically kind of me too products well this this will do this but it really doesn't work and so he used his knowledge so you you have to have that that capital structure and that could be a human capital structure so you have your own knowledge of whatever area you're interested in and you can apply that to solving problems that you're seeing and then when you solve that problem you realize well other people are going to be interested in this i think you know this is going to resonate with them and this is something tom woods touches on quite a bit trying to monetize something anything and the biggest challenge that has always been what is it what is your niche well you to figure out what that niche is look inside towards yourself look at what is your experience and what problems do you see that you encounter like thinking i wish somebody would figure this out well you could be that somebody you can figure that out and i think that this this program to the extent that we can kind of provide those tools to uh inform people on that insight that you have the capacity to solve these problems you just have to realize that that that's the most efficacious way to serve your fellow man is to draw on your own experience and to move forward in an entrepreneurial world and then once you've gotten over that hurdle there are many other steps in that process as well it's a very long chain of sequence defense from figuring out what you're going to sell how you're going to do it and then just the mechanics of putting it together making people aware of it that's the other huge challenge marketing that's an enormous challenge because we've we've been in the market ourselves for 40 years but we've tried to break into other similar markets pond market small animal bird so it seemed like a natural sort of extension but it's a completely different market you can't just walk in there overnight and suddenly you're you know you're at the top so it is a long steady process but i think that making these tools and these insights available to people will help help people to avoid a lot of the pitfalls that that entrepreneur run into thanks greg [Applause] just 1201 i'm going to ask you for one more minute we can build a whole new business paradigm around austrian economics so libertarianism is a new paradigm for how you live in this world the austrian paradigm for business can be entirely different built on subjectivism which if people understand that both the subjectivism of the customer and the subjectivism of the entrepreneur based on what we call the value network how you create value and and customers experience it based on the clarity of austrian thinking which is much more analytical what uh balan calls getting down to the nitty-gritty of how markets really work so you can run a better business as an entrepreneur so we've got quite an ambition uh to create a new business paradigm based on austrianism we have a long way to go but but we're getting started we're going to uh invite some people to be beta users on our site which just means bang around on it and tell us what doesn't work or what you might add or what you what might be better so you'll be getting details about that and uh as we build up the content we'll look to a a major launch maybe sometime in the in the first quarter of next year where we start to try and get those those millions of users so thank you very much

Channel: misesmedia

Views: 1,887

Keywords: Business, Austrian School, economics, E4B, E4E, application, entrepreneur, entrepreneurship, success

Id: 9rv69jFsGTA

Length: 32min 0sec (1920 seconds)

Published: Tue Oct 20 2020