[I]n a market economy, entrepreneurs play a very specific and important role. In the pursuit of profits, they make guesses about the future and then direct scarce productive resources, either their own or someone else’s, into a particular line of production. If they guess correctly, they earn profits; if they guess incorrectly, they suffer losses.
The late economist Murray Rothbard described the role of the entrepreneur very well. He wrote that an entrepreneur “earns profits only if he has by superior foresight and judgment, uncovered a maladjustment — specifically an undervaluation of certain factors [of production] by the market. By stepping into this situation and gaining the profit, he calls everyone’s attention to that maladjustment and sets forces into motion that eventually eliminate [the profit].” Losses, on the other hand, Rothbard wrote, “are a sign that [the entrepreneur] has added further to a maladjustment.”
Entrepreneurship is a talent that combines creative thinking, foresight and a tolerance for risk. It probably cannot be taught in school; indeed, many very successful entrepreneurs never graduated from college or even — in decades not long past — high school.
The English author Somerset Maugham wrote a short story [originally titled The Man Who Made His Mark] that shows how education and successful entrepreneurship do not necessarily go hand-in-hand. The story, called “The Verger,” is about a man who for many years was the verger — a custodian or caretaker — of a fashionable London church, St. Peters, Neville Square...
