Towards an Untrepreneurial Economy? Rise of the Veblenian Entrepreneur (2019)
papers.ssrn.com
papers.ssrn.com
So if wantrepreneurism is a form of conspicuous consumption for the privileged - or those who desire to become so - what's the equivalent for the less privileged?
I think it has to be MLM and Instagram influencing. The wantrepreneur wants to be a mini-Jobs, but the MLM/Insta dreamer wants to be a mini-Kardashian, hawking products with a glamorous image. But their desire is exploited ruthlessly by a system that promises success but will mostly drain their wallet. Nevertheless a lot of them feel the need to keep going, largely because they've publicly bought into the image.
Maybe it's about what forms of success one is exposed to and what one sees is popular among one's peers?
Fashion is fashion. For some it's a rebellion, a coming of age story, for others it's a way to blend in with the peers, be one of the cool guys.
On a tangent: many (most?) investors are playing the same game, only by proxy. This is why the VC industry is losing money as a whole - they aren't there for the money.
Something closely related, but if you do understand a technology, and if/why it really is superior to existing solutions, you would almost certainly already be making money with that technology.
So you do need to question a lot of investments into technology firms that have no revenue? They have no enormously expensive hardware component. (Like there is with, say, concentrated solar thermal technology.) There is often no onerous federal regulatory framework they need to navigate. (As exists for FDA compliant health care tech for instance.) Why are people laying out these enormous investments if not something of a combination of vanity and entertainment?
The cargo cult thing makes a lot of sense to me, honestly. Venture funding is a field where the feedback loops are long and noisy. It takes literal years to see results, and a lot more years to see if somebody is truly good, instead of glib and lucky. By that point, the technologies and trends have changed so much that there's not a lot of reason to think they're still good.
And I think the way stakes have gotten larger since Bubble 1.0 makes it so much worse. The amount of money really increases the incentive to do, say, think absolutely anything that might get you a slice of the expected returns.
I wonder if this particular cancer is not more widespread than that?
What I mean is this - What if there is a very real perception among the populace, that insta-youtube-dreaming is, in actuality, a good way to make money? Maybe the problem is deeper than simple "peer pressure"? Maybe the issue is that at this point, having seen so many seemingly successful people doing this, the populace has come to believe this is how you can make a living? Just as previously the lower socioeconomic side of the populace believed the way to make a living was to go out and get a job at the town's factory. While working at a grocer was something you did only until you got that job down at the plant. Today, working at Starbucks may be getting viewed as something you do only until your Twitch-Youtube-InstaFaceChat channel gets enough followers.
It's a bit depressing when you think about it.
> I think it has to be MLM and Instagram influencing. The wantrepreneur wants to be a mini-Jobs, but the MLM/Insta dreamer wants to be a mini-Kardashian, hawking products with a glamorous image. But their desire is exploited ruthlessly by a system that promises success but will mostly drain their wallet. Nevertheless a lot of them feel the need to keep going, largely because they've publicly bought into the image.
Interesting idea, with the sad conclusion that whilst the average wantrapreneur suffers the opportunity cost of missing out on salary, they might well actually be able to pay themself from some sort of funding and come out with an enhanced CV and personal network, whereas the MLM dreamer who's less able to afford it probably spends more on inventory than they earn on sales and burns their personal network with irritating sales pitches.
I know founders who ruined their credit, destroyed their friendships, ended lifelong relationships, lost their sanity, and in one case, probably committed suicide. Some do move on to other things and have a lingering sense they are failures, because they knew one or two people who exited with millions who seemed no better than they were. And they don't think they can talk to anyone about any of this, because who would have sympathy?
I don't have data, but I think the negative or ambiguous outcomes hit the founders from middle-class or working class backgrounds way harder. This was their one shot. Someone who falls back to their parents' millions will get other chances.
Perhaps the simple fact is that most people are motivated by the need for social validation, and only a tiny tiny fraction of the population is driven instead by things like intellectual curiosity, desire to help others / solve societal problems, etc. So any class of activity that becomes open to a sufficient number of entrants will eventually turn into a form of conspicuous consumption.
Now scientific research is conspicuous consumption (MIT Media Lab?), book authorship is conspicuous consumption, and political candidacy is conspicuous consumption. Are there any activities left that doesn’t function as a form of conspicuous consumption?
> scientific research is conspicuous consumption (MIT Media Lab?), book authorship is conspicuous consumption, and political candidacy is conspicuous consumption
Is the paper making all these claims? I don't see them.
Then I don't understand who this question is supposed to be directed at:
> Are there any activities left that doesn’t function as a form of conspicuous consumption?
My answer would be that none of the activities you list (with the possible exception of the kind of wannabe entrepreneurship the paper is talking about) are conspicuous consumption. But it seemed like you were directing the question at the authors of the paper, not me.
To the HN community of course.
> My answer would be that none of the activities you list (with the possible exception of the kind of wannabe entrepreneurship the paper is talking about) are conspicuous consumption.
That’s a valid response, although I don’t agree. Note that I’m not regarding these activities to be entirely about conspicuous consumption, just like the paper doesn’t claim all of entrepreneurship is veblenian. Fwiw the paper does cite another work that claims some internships can be viewed as a form of conspicuous consumption.
If your definition of an activity being conspicuous consumption is that somebody, somewhere, can use it for conspicuous consumption, I think you're right that it's going to be hard to find an activity that isn't "conspicuous consumption" by this definition. But I would say that's a problem with your definition.
I would guess anything that doesn't involve exchanging money for an object or experience, in which the quality and/or duration of the object/experience increases with increased cost.
Some ideas off the top of my head:
- Volunteering your time locally in your community (soup kitchen, tutoring underprivileged kids, coaching youth sports, etc.)
- Building interpersonal relationships with new people
- Putting work in to maintain existing interpersonal relationships
- Meditation, mindfulness
- Building a tangible skill that takes intense study/practice over a time scale of multiple years to be considered an expert (craftsmanship, visual arts, martial arts, athletics, etc.)
I believe this widely held view comes from people who have more money than time, so they value time more.
(That's a joke, but it also isn't - in a media panopticon society everything is conspicuous, and in an industrial/consumerist society everything is consumption .. that leaves only activities which are productive or collective but done privately. That leaves .. a few of the religions? Someone should break out the Baudrillard at this point, we are not the first to address this question)
Edit: I forgot the major media event of the time, duh; protesting, while very conspicuous, is intrinsically anticonsumerist, and getting injured and teargassed as part of it is sacrificial rather than consumerist.
"Everything you do is either because of X, or you believe it's for some other reason but your subconscious does it because of X anyway."
1- The rise of specialized services that lower the entrance bars for many industries.
2- The rise of the wantrepreneur.
3- "Inefficient market offerings" that reduce innovation.
The answer to these:
1- Yes by lowering the entrance bar with SAAS products, regular people can create companies more easily. This means many people that shouldn't be company owners are now. But this is hardly a bad thing. The converse to this is that many people who should be entrepreneurs that weren't are.
2- This is really complex. And yes, the ease of starting a business and businesses that service businesses will always play into this segment. But it's hard to blame mailchimp for the rise of the wantrepreneur, which seems to be a logical conclusion if we follow the premise of the study. Since that's not a logical conclusion, it follows the study's premise isn't very sound.
3- As I understand it, inefficiencies in the production of services means more people offering a service than can be sustained by the demand of such services. Such events are normal when industries are in flux. It's actually a good thing, as it fosters competition and the surviving brands are stronger, leaner and smarter than they would be if there wasn't such 'inefficiencies'.
I'm really not sure what people see in this study. Even the language used is... emotional? lacking? I mean, it's just not language that lends to nuance and understanding. It's almost marketing like. And I say this as someone who is a digital marketeer, so I'm not using it as an insult. It just feels out of place, I expect analytical language in a study.
"This rapidly growing industry has transformed the nature of entrepreneurship and encouraged a particular form of low-quality entrepreneurship. It has done so by leveraging the Ideology of Entrepreneurialism to mass-produce and mass-market products that make possible what we term Veblenian Entrepreneurship."
I'd agree with the first sentence, but not the second.
We really do have "entrepreneurship as a service" now. Or did, pre-epidemic. Wannabe writes a pitch deck or a white paper, and convinces VCs, Kickstarter users, or ICO investors to put in money. Get space from WeWork, technology infrastructure from AWS, and turn traffic into revenue with Google Ads. Show the traffic climbing and you're a success, even if not profitable. Some such businesses even succeed in the end.
The question is, is this diverting people from doing hard, useful things? Like refurbishing buildings in bad neighborhoods. Installing solar panels and inverters. Tree trimming near power lines as a service. Automating meat-cutting plants. Don't know. We don't have enough of the latter, though. Those things have no low-probability big upside, which is what VCs want.
Solar installations certainly seems that way - it probably runs by big companies/platforms, hiring freelance salesman and installers and offering better financing, web marketing, QA, brand, etc.
And of course this ties to "freelancers on demand" platforms, replacing many entrepreneurs.
Same could go for tree trimmings, maybe by using sat images to find opportunities, and automating the legal, marketing processes.
As for automating plants, there's robots-as-a-service, so this probably creates an opportunity for proven robotic service companies to grow and less for new entrepreneurs.
It may just be that the world just needs far fewer entrepreneurs.
It doesn't need to divert people from doing 'hard, useful' things to be a form of conspicuous consumption, it just needs people who are willing to accept less than they might otherwise earn in salary to have the social cachet of being a Founder CEO and investors [and sometimes even acquirers] willing to accept lower risk adjusted return to be associated with people and ideas they see as innovative or play golf with other investors in.
If Veblen was born a century he'd be dripping with snark - justified and otherwise - about everything to do with the Valley, probably including a lot of the successful exits.
Not mailchimp, because mailchimp, as a business, is not focused on providing services to entrepreneurs. It's much more general. The paper is talking about businesses that focus specifically on providing services to entrepreneurs, what it calls the "Entrepreneurial Industry".
I do think the paper suffers from a lack of specific examples; I would have liked to see some actual examples of companies that the paper considers to be in the Entrepreneurial Industry.
This is where the paper goes from research to opinion piece. It is easily argued that without the failures, there won't be successes. One can also see that while there are many many business failures, there are also unicorns the likes of which the world has not seen before. It is not obvious at all that not having more failed entrepreneurs is a bad thing. Lower life-time earnings is hardly a social cost. If these entrepreneurs ended up on welfare, then perhaps there is an argument. But if they find a fulfilling life doing what they do, and the consequence is they earn less... what problem is it of mine? Why do I need to derive a benefit from them? That seems to be putting my desire for 'stuff' (intangible or not) over their right to do whatever they want with their life.
More examples of editorializing:
> In contemporary society, the infatuation with entrepreneurs is such that they “are seen as almost having a magical effect on economies—alchemists, whose innovative capacity allows for water to be turned into wine, lead into gold.” (Greene et al, 2008; p. 3). -- citing a source does not make it true
It's all down to our increasing ability to satisfy human material needs. Instead of allocating stuff so people can survive, the economy allocates status so people can be popular. It's an economy of likes rather than an economy of needs.
Otherwise it feels like we are just twiddling our thumbs, redistributing wealth (upwards), and slowly dying.
The production is there. The money is there. If we simply won't do this, we aren't worth preserving as a society.
Guess what--It's hard to get a good job with a criminal record, and it's easy to have a criminal record when you are black/brown.
So you take a bad job. And with that job, you remain so poor that you cannot handle the slightest emergency. A huge bill or disaster in your life (medical; car; legal) can pretty much end you. If you don't have a strong network to support you, you become homeless.
How do you reconcile the fact that most homeless people have some sort of family structure that is not homeless? I've never seen any evidence that homelessness is an inherited condition.
You blame both will power and genetics. Why are you so anxious to believe that society has no role in creating or solving this problem? If you make access to education equitable; if you don't ruin people's ability to engage with the economy with drug offenses that statistically appear quite racist in their skew; if you treat mental problems with medical assistance rather than criminal justice systems; if you regulate housing markets to prioritize making housing affordable rather than prioritize generating passive income for upper classes-- you can have a meaningful reduction of homelessness.
The increasing number of innovation hubs, incubators, development grants, boot camps, etc. are taken together, what the article terms the "Entrepreneurial Industrial Complex". An entire industry now exists around making money off people that want to be entrepreneurs, or posturing so that they can profit from the potential success of unicorns (e.g. Incubators that take a cut). SaaS that let's you make a SaaS to provide people with tools for SaaS creation anybody?
As others have said here before, in a gold rush, it is the tool makers that make the money. And I think in this current "unicorn rush" that's exactly what we're seeing.
> It's simple, demand "pulls" the economy far better than supply pushes it, and we are a rotten insecure society with no demand.
I'm not sure it's so simple. In certain industries, we have a ton of demand that isn't really met: housing, education, healthcare, to name three.
But the reason we don't meet the demand for these (now highly-inflationary) goods and services is political, not economic.
1. We know how to build lots of really nice housing for not that much, but the most in-demand regions prevent that construction through the political process. Any innovation in construction tech has to contend with not just limits on construction in in-demand areas, but also requirements ("all new construction needs rooftop solar!" -- I love solar, but the costs are way, way lower at utility-scale) that increase costs.
2. High-quality, public education used to be ~free, a reality that applied significant downward pressure on private college tuition as well, but state funding has entirely dried up as costs (often non-teaching-related) have soared, in part thanks to (1)!
3. Due to somewhat well-meaning regulation, healthcare has become a disaster of hidden price signals, requiring a team of bureaucrats weeks to months to decide how much money to exchange for a service already provided. Powerful political organizations limit the number of new practitioners trained in the US,
There are good and totally justifiable path-dependent reasons why we are where we are in the three industries above. But they are now the largest category of consumer cash outflows, pushing innovation to the margins (cell phones! computers! ads!). The reason housing, education, and healthcare are so expensive is because demand vastly exceeds supply, and supply is limited by politics.
The most egregious example I'd seen was a clearly smart and talented guy ready to torch his budding medical career in order to launch a tourism related startup. Deeply ironic considering subsequent events.
Reading it I just think why does it matter either way? You're either looking for profit, looking for scale, or looking for someone to bankroll you to do those things. The rest is all noise, so much noise.
For academics working on understanding things like societal/economic dynamics, perhaps take a moment to consider that for the work to have any real impact, it needs to be understood by laypeople? Biologists can get away with naming things all sort of nonsense because the everyday person doesnt interact with it, but if you're trying to highlight destructive dynamics in the entrepreneurial sector, saying "this is an example of Veblenian Entrepreneurship!" doesn't communicate anything. Most of the writing that actually influenced the field use terms that are understandable and communicable build on terms already understood by practitioners, like minimum viable product or strategic inflection point. Making an argument with a whole bunch of jargon like "Ideology of Entepreneurialsm" or "Veblenian" just means anyone that wants to engage with the text has to go look up a bunch of random terms to figure out that you're referencing some 1800s era economist that coined the term "conspicuous consumption." It also makes you wonder if this level of being divorced from the actual practice impacts the analysis and if the findings are based on an actual understanding of the field or just an academic bubble. If, as they say at the end of the paper, this should be used as a catalyst to change entrepreneurship education- I wonder if they understand first how many people start companies because they majored in entrepreneurship, and second if they understand just how accessible this terminology and jargon is and if it would be getting in the way of making actual impact on curriculums
Also in this case it looks like the authors are from business schools. Business buzzwords are a well known and common absurdity. On the other hand, I might be freaked out if random names for stuff started coming out of logic or maths circles.
I think you raise a valid point about the impact of overly academic work, but I also think it's not unreasonable for academics to expect that their primary audience will have a passing familiarity with the major figures in the field.
Perhaps that could be because Veblenian entrepreneurship, like most entrepreneurship, is made possible through higher margins. I always parade out this 2S Ventures post about the importance of margins [1] because it really drives the point home. On the contrary, "innovation" based businesses require a large variety of environmental factors to succeed, ranging from cultural ones to regulatory and logistic ones. And there is indeed no guarantee that an innovative business is necessarily one with higher gross margins than an incumbent whose products/services it would seek to unseat even if there is societal benefit, so the business may not intrinsically be attractive to investors.
So it is with this piece here. Its explanations of new business formation targeted at conspicuous consumption are targeted towards academics concerned with earlier explorations of these areas, rather than practitioners. I think the possibility of it being thought provoking for the first group while common sense for the second group is where the irony comes in -- presumably, it was intended to be the other way around!
[1] https://twosigmaventures.com/blog/article/why-gross-margins-...
(if only in a 'copycat' fashion, lest I insult anyone here)
that someone from outside the field of economics would complain about the lack of accessability of a formal paper in the field of economics to the 'average', 'casual' entrepreneur?
fairly certain this is kind of what they are getting at..
also:
'Ideology of Entepreneurialsm' is about as plain-english as you can get
'Veblenian' / the concept of 'conspicuous consumption' is fairly well known in pop culture, at least among the bourgeois/intellegensia/dropping-the latest-malcom-gladwell-or-thinker-du-jour-theory-over-cocktails set; i personally have encountered it many times in casual reading (e.g. time, economist, new yorker sorts of publications) and it was presented 2-3 times to me in various 101-level academic courses
Someone writing Medium blogs about startups probably expects the target audience to have at least a passing familiarity with what comparing an approach to Steve Blank might imply, and academic business schools referencing Veblen aren't very different.
I know a little bit about economics and social science, and for me the phrase "Veblenian Entrepreneur" was immediately meaningful and helpful. It gives me a theoretical frame for understanding a whole constellation of behaviors I've personally observed, and the incentives that drive them.
What I think this paper contributes is the idea of the entrepreneurial industry itself; that the low quality of ventures isn't a bug, but a feature. It's an integrated system to provide necessarily expensive social and signalling needs.
Some famous investors have questioned universities for the same reasons. The irony is that it might also be happening to technology ventures too.
This is in the site guidelines: https://news.ycombinator.com/newsguidelines.html. Plenty of past explanation here:
https://hn.algolia.com/?dateRange=all&page=0&prefix=true&que...
As a more direct example staying with the theme of computer science but using English communication, in the context of programming I can can use the term isomorphism and the subset of people I'm communicating to (or expecting to) will know what it means, or after looking it up likely quickly understand what I'm communicating. For a novice or non-programmer, that may be significantly less likely. Am I better off replacing the term isomorphism with "running the same code on the client and server" all over the place? It depends on my audience and goals.
So, what's the purpose of this paper? To be widely distributed to the general public, or to be spread between business and economics academics for further research and discussion? I suspect writing your academic papers to the lowest common denominator is a good way to get your ideas dismissed by peers, as it both takes them longer to wade through the extra (unnecessary, for them) words which are also less clear, as an oft-used community term will carry more meaning than is easily expressed by the words you can replace it with in usage in a sentence.
It's not like Veblen is an obscure figure nobody has heard of in the field of economics.
I'm not an economist or social scientist but I understood what Veblenian means from Veblen goods and conspicuous consumption seemed familiar so I looked it up.
https://news.ycombinator.com/newsguidelines.html
Reflexive, generic comments are much more boring to read than they are to write, and they take threads in uninteresting directions. With a submission like this, if you don't find something to engage with in the article, there are lots of other things to read on HN's front page.
I'm not really seeing other examples in the comment. In any case, the main problem is that its core point is a misunderstanding. As other users have pointed out, the term "Veblenian entrepreneurship" means a lot: it instantly communicates the idea of entrepreneurship as a status signal, rather than for an economically productive purpose. In fact, if there's a problem with the term, it might be exactly the opposite: it already communicates so much that the mind could start to assume that it's a thing, and then find rationalizations for believing it.
That's the reason I called the comment a shallow dismissal: it dismissed an entire field based on a misreading. Also, there was snark at the beginning.
By the way, the problem with such comments is not that they're so bad in themselves—it's that threads are sensitive to initial conditions and they tend to choke out better, more specific discussion. This has something to do with the reflexive/reflective distinction: https://hn.algolia.com/?dateRange=all&page=0&prefix=true&que...
This is not how science works. Never has, never will. Like any specialty, it will - inevitably - develop its own jargon. Not as gatekeeping, but because shorthand matters for efficient communication.
If you'd like to understand topics at a more layperson level, science papers are not what you want to read. You want to look to science communicators, who do the work of breaking it down, dejargonizing, and making it understandable for a wider audience.
Demanding science is conducted at the lowest common denominator level makes science impossible.
The difference between an academic paper and a blog post is that an academic paper needs to fit into the context of the academic literature through its format (particularly through citation of prior work), and it needs to undergo some form of peer review. None of that is any guarantee of quality, of course. There are lots of terrible academic papers and lots of excellent blog posts. But you don't need to be a scientist to write an academic paper.
> Rather, we seek to provide a description of a subset of the population of ventures which appear to be growth-oriented entrepreneurship but on closer inspection are not. The exact size of this sub-set is a matter for further empirical study.
So, I'm looking forward to the follow up I guess :)
https://news.ycombinator.com/newsguidelines.html
Reflexive, generic comments are much more boring to read than they are to write, and they take threads in uninteresting directions. With a submission like this, if you don't find something to engage with in the article, there are lots of other things to read on HN's front page.
What separates a good paper from a blog post is the attention it devotes to second and third order consequences, its discussion and dismissal of likely counter-arguments, and the author's framing of the new idea in the context of existing literature. This is true for social science papers and law-review articles as much as it is true for machine learning and engineering papers.
These are the hallmarks of careful analysis that are generally lacking in hot-take blog posts.
As for research as a whole it would require a metanalysis of a lot of papers over the year. It is possible it was always distributed about the same, or there were other filtering effects like stinkers didn't propagate as far in the past with higher publishing costs so we can't tell for sure.
Snark aside it is more like a clickbait article in making assertions and failing to either provide qualatative justifications or properly constrain them to the subset actually examined. Most businesses fail and dissolve in their first year period. A qualatative study that looked at numbers of "great outliers" may be more permissible but one which tries to make broad claims.
It isn't even consistent with the definitions, and axiomatically assumes low quality and waste for veblen goods. There have long been whole markets out there for high status "green" or "socially conscious" goods that cost more than the commodity as effective status signaling as an effect (whether it is primary or secondary depends on the individuals involved and their sincerity and consistency of action).
Low quality is also poorly defined. They imply cheap goods upsold but that doesn't make it poor enterpenuariship - going bankrupt in an easily preventable way and failing would be though.
It appears to be yet another tedious academic political axe grinder.
https://news.ycombinator.com/newsguidelines.html
Reflexive, generic comments are much more boring to read than they are to write, and they take threads in uninteresting directions. With a submission like this, if you don't find something to engage with in the article, please find something else to read that you do find interesting.