Hardly anyone understands the importance of entrepreneurs, who are like creative artists and need freedom. This is countered by politicians with planned economic thinking – today it is called “industrial policy”. But they know no better than millions of entrepreneurs and consumers what the most promising innovations of the future are.

Entrepreneurs are misunderstood and envied. Even most economists don’t understand what their actual function is, says Chinese economist Weiying Zhang in a just-published book.

Zhang reports on one of his students who found a well-paid job with an international company after completing his studies. Now he was thinking about starting his own company and asked Zhang for his opinion. The economist asked him what his parents thought of the idea. They were totally against it, the student replied. Zhang then recommended that the student give it a try. “In my opinion, decisions that parents agree with are probably not business decisions.” The student follows the advice and is now a successful entrepreneur.

I have read many books about entrepreneurship, but the book just published by Cambridge University, “ Re-Understanding Entrepreneurship. What It Is and Why It Matters” is the best. The author, Weiying Zhang, teaches at Peking University and is the most prominent advocate of the market economy in China. He has been working on the topic of entrepreneurship for 40 years. He rightly says that the entrepreneur should be at the center of economics – but he doesn’t even appear in many textbooks. Anyone who does not understand entrepreneurship cannot understand the market economy.

Many economists see the entrepreneur as something like a calculating machine. Someone who rationally considers how best to use scarce resources. However, this is far from reality and rather describes the manager at a middle level in the hierarchy. Entrepreneurs, on the other hand, are more like creative artists. They usually decide with their gut, i.e. based on their intuition. But gut feeling is nothing irrational or even mystical. It is called “tacit knowledge” in learning theory, which is the result of “implicit” learning. What this means is that they acquire their knowledge in practical life through “learning by doing”.

Chinese entrepreneur Jack Ma, founder of Alibaba, said: “You don’t need a business degree. Most business graduates are not useful… Unless you forget what you learned in school after studying business. Then you can use them. Because schools impart knowledge, while you need wisdom to start a business. Wisdom is gained through experience. Knowledge can be acquired through hard work.”

Erich Sixt, one of the most successful entrepreneurs in Germany, believes that business administration is a pointless course of study: “That’s why I wasn’t interested in business administration at university, a pointless course of study. The only thing that can be used is a semester of accounting. The rest was unrealistic and still is today.” After two semesters, he realized that the knowledge taught there was completely irrelevant for the rest of his life and dropped out.

Intellectuals absolutize academic knowledge, i.e. what you learn at university or book knowledge. If that’s what business is all about, then business professors would have to be the richest people and successful entrepreneurs because they have all the academic knowledge on the subject of business.

I myself have met hundreds of entrepreneurs in my life, including some who have built gigantic companies and made billions, but have never studied in their life. They all told me that they make the actual important decisions with their gut. This was also the result of my doctoral thesis on the psychology of the super-rich, to which Zhang also refers frequently.

Entrepreneurs are, above all, opportunity seekers and opportunity finders. You discover opportunities where others don’t see them. And entrepreneurs are often people who swim against the tide, non-conformists. Entrepreneurs are misunderstood by everyone. According to Zhang, the average citizen does not understand what an entrepreneur actually does and how he makes money.

It is even worse for intellectuals who consider themselves intellectually superior to entrepreneurs because they have read more books. Many people thought intellectuals were particularly smart people, but Zhang doubts this. He quotes George Orwell as saying, “Some ideas are so foolish that only an intellectual can believe them, for no normal person can be that foolish.”

The greatest catastrophes of the 20th century were triggered by ideas supported by many intellectuals. Many of them admired dictators like Mao and Stalin.

And so it is no coincidence that the most radical socialist experiment that has occurred in history, the rule of the Khmer Rouge in Cambodia, had its origins in Paris universities, where their leaders earned doctorates on Marxist topics. They believed that a perfect economic and social order could be designed on the drawing board. The experiment killed between a quarter and a fifth of Cambodia’s population between mid-1975 and early 1979 – estimates range from 1.6 to 2.2 million people.

However, according to Zhang’s observations, anti-capitalism is not as widespread among Chinese intellectuals as it is in the West. “Perhaps it is because Chinese intellectuals have lived under the planned economy for more than two decades. Their memories of hunger and hardship under the planned economy are still fresh, while Western intellectuals have never experienced life under the socialist planned economy.”

In Germany today there are again authors who advocate a planned economy, such as Ulrike Hermann in her book “The End of Capitalism”. But even politicians who do not openly support a planned economy often adhere to planned economy thinking – today it is called “industrial policy”. Economics Minister Robert Habeck is their most decisive advocate.

The reason why industrial policy regularly fails, says Zhang in his book, is the same reason why planned economies have failed again and again: The assumption that politicians and officials know better than millions of entrepreneurs and consumers what the most promising innovations of the future are is not true justified. Just as socialists are wrong when they repeatedly declare that the planned economy is superior in principle, but that it has not yet been implemented, so are representatives of industrial policy who, despite all the failures, claim that all that is needed is a “better” industrial policy.

According to Zhang, the idea that governments can correctly predict the future is a big mistake. In 1992, an entrepreneur in China applied for a license to produce cars, which was refused. The State Planning Commission declared at the time that “China has enough car manufacturers.” The entrepreneur, now extremely successful, started his automobile business about 10 years after his first application.

The failure of industrial policy often only becomes apparent in retrospect, as can be seen in the example of Japan. At the time, this was considered extremely successful and was admired in China and the USA. However, studies show that the 20 most successful Japanese industries received little funding, while the seven least successful industries received the most government funding.

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