Entrepreneurs have beliefs about the world in its current state, a vision of how the world could be, and a plan to get from the former to the latter. They do great work when they have incentives to produce goods and services that people like. But when those incentive aren’t there, they become unproductive entrepreneurs—using their creativity to make life worse for others
One of the great things about a commercial society is that it can channel our most vicious impulses of greed into the service to others.
What Markets Do to People
You have probably heard some people criticize high-level executives for anti-social, if not outright sociopathic tendencies.
It might very well be true executives have these characteristics, but we would far rather they channel them into finding new ways to bring us soap and oven mitts and potato chips at ever-lower prices. All else equal, I would rather Alexander the Great and Genghis Khan have been CEOs of corporations rather than warlords.
The great social experiment of humanity is not about changing humans, but about establishing the right institutions in which self-interested and often greedy people have financial motives to find ways to serve their fellow human beings—even those they will never meet.
Not all entrepreneurs are productive, though. We can have incentives that encourage unproductive entrepreneurship—innovation that is destructive rather than productive to society.
Enter Gru, the Unproductive Entrepreneur
Gru, the Steve Carell-voiced villain-turned-hero of the Despicable Me movies provides a great example of unproductive entrepreneurship.
Gru, his research director Doctor Nefario, and his minions are constantly looking for new ways to go about their evil schemes. Gru, for example, has a big plan to steal the moon. He believes that if he is successful in this venture, he will outdo all other villains.
Gru’s ventures are financed by the Bank of Evil, and it’s clear he is operating in a competitive market for evil deeds and evil financing. The original Despicable Me movie focuses on Gru’s struggles with Vector, the upstart, new entrant into the market for villainy—who has made a splash in the villain world by stealing the pyramids in Egypt.
Gru is an unproductive entrepreneur because he directs so much time, energy, and attention to crime, theft, exploitation, and extortion—things that hurt rather than help others. He sees Vector in the perfection of these vices and is constantly engaging in negative-sum gains. When he wins, everyone else loses.
He isn’t producing new goods and services or expanding consumers’ choices. He is fighting with other villains. He’s soaking up loanable funds that could go to support productive ventures. He’s using them to finance destructive lasers and bombs. He’s hiring an army of minions to help him carry out his plots.
His nemesis Vector is also an unproductive entrepreneur: he has stolen the pyramids of Giza, and he is investing a lot of time and energy in making new gizmos and devices aimed at making his evil schemes more effective, like the piranha gun.
Gru, the Reformed Entrepreneur
Of course, Gru turns from his wicked ways at the end of the first movie and becomes a loving adoptive father. In the sequel, he has gotten out of the villain game and has become a legitimate businessman who is working with Dr. Nefario and his minions to develop a “delicious line of jams and jellies.” It’s an endeavor that isn’t quite as successful as some of his villainous schemes—but it ultimately helps him defeat a new unproductive entrepreneur by the end of the sequel.
In the real world, we can’t just hope for a movie-like happy ending where the evil people voluntarily turn from their negative-sum ways. We must advance institutions and the ideas on which they rest which foster productive entrepreneurship.
This behavior means that even the greediest of businessman, to make money, has to identify with the needs and wants of others and help solve their problems.
Winning only occurs when you solve problems, on the margin, over the long term. Productive entrepreneurship means that we must fight for the virtues and ideas of a free and flourishing society.
When we do, even the “Grus” of the world will want to serve strangers.