Thread by @PerBylund

If we realize the value problem, we also realize the real problem that #entrepreneurs face and must find a solution to. It's not to come up with The Idea, as is often assumed, nor the invention or the technology, but how to make something valuable to other people.

Value is the experience of satisfying a want, which means to find oneself in a better situation than before and compared to what one otherwise expected. This does not need specific inputs, but if it doesn't then there is nothing stopping us from simply satisfying it at whim.

The world's limited resources means we must try to get as valuable experiences as possible, to be as well off as we can, from what means are available to us. There is no end to how content we can imagine becoming, but the means are not enough to get us there. So we must choose.

This is why the economic problem is one of production: how to create the means for consumption, i.e. how to get better, more appropriate and effective means to satisfy our wants. Much like a PC is a better tool than a typewriter, or a car or plane better than horse-and-carriage.

The problem would be easy to solve if we could know beforehand what would satisfy the wants we have. But we don't. most of us have experience of entering a store looking for something specific, but finding something we expect will bring us much greater satisfaction--a find.

That's still only you choosing between already existing goods in a store. You did not yourself know what you wanted to buy until you laid your eyes on this new thing. If you yourself cannot predict your value assessments, how can anybody else? The simple answer is, they cannot.

Then imagine undertaking producing the goods that are in that store. Entrepreneurs started planning and investing to produce them long, perhaps years, ago. They were betting that you (and others) would find those goods sufficiently valuable to pay a price that exceeds the cost.

This takes a lot of guts. It also takes good judgment. But also, probably, luck. Past trends can be indicative of how people might act, but as in the store example entrepreneurs cannot rely on data (the past) to produce new goods. The world is not repeating but renewing itself.

Another problem that the entrepreneur must deal with, or suffer the consequences: the purchasing behavior of potential customers is relative what they are offered. High value of one good is not enough if another available good is, by the customer, expected to be more valuable.

This is why the secret sauce for entrepreneurs is not "the idea," which means little in the real world. It is the implementation of it, the actual offering to the customer, that determines whether the undertaking has actual value. It is not the thought that counts, but the sale.

Actually, it is more than the sale: the customer buys something with expectations of the good's value. The sale is based on this expectation. But if this value is not realized, there will be disappointed. This is a problem for any entrepreneur seeking to scale up or resell.

It is the entrepreneur's job to not only come up with the idea or produce the good, but to facilitate actual value: to first entice the customer, make them expect value from and so buy the product and then find satisfaction in it. Satisfaction is relative the value expectation.

Fraud, from a value perspective, means a seller of something knowingly communicates value to the intended customer that is in direct conflict with facts. It is the creation of value *expectations* in the customer's mind that the goods offering cannot meet; it creates no value.

Misleading advertising gets close to fraud for this reason: it intentionally presents a distorted view of the good in order to create an exaggerated value expectation. Since it rarely will be met, the customer will be disappointed and feel cheated.

Contrary to common perception, entrepreneurship is not about cheating, cutting corners, or making a quick buck. If the customer is not satisfied, the business will not last. This is the reason for "satisfaction guarantees" offered by many stores. They want to continue selling.

Unfortunately, many have rather severe misconceptions about entrepreneurship and markets, which all emanate from not recognizing what value is: that it is the personal experience of using a good for the purpose of satisfying a want, to become better off on one's own terms.

If we but recognize that value is in fact subjective and that it is experiential, it becomes clear what entrepreneurs do, the problem they must solve, the power of consumers, and why fraud is not a strategy for lasting business.

Check out my discussion on this topic with @hhhastings and @mdpackard on the @econ4business podcast mises.org/library/bylund…