The Veblenian Entrepreneur

For quite a long time I’ve been thinking that people tend to focus their time on easy things instead of focusing on the complicated ones in an attempt to avoid pain. People, in general, try to avoid harmful situations which leads them to take the path with the least pain possible (at least at the start) i.e. the easy path. In some cases, the easy and straightforward choice may become the worse long-term solution. But this scientific publication made me rethink the problem. In a way it is related to conspicuous consumption where people choose to buy items by the status they give rather than the value and utility they provide.

In the article, Rasmus et. al. state that we are heading towards an untrepeneural economy. As defined in the paper, an untrepeneural economy is a seemingly dynamic society full of inefficiencies and a substantial lack of innovation. This is achieved through the promotion of entrepreneurship irrespective of their likelihood of success. Leading people to desire the “entrepreneur lifestyle” as an identity. But this lifestyle is flawed for the simple reason that many endeavors fail and the ones that make it big are extremely rare and not the norm. Even though startups and innovation are needed in a society, the distribution success vs failure of startups is heavily skewed towards failure. Individuals who start a company have many odds of failure which incurs personal risks. Starting a company is something that people should carefully consider.

The entrepreneurship industry benefits from promoting entrepreneurial endeavors in a catch 22. This industry motivates individuals to build startups to get rich but the industry itself needs only aspiring people. So the more people start startups the better, but also if they fail and keep trying that’s recurrent revenue! If an individual has a failed startup it may be due to a lack of skills so they will consider buying more info-products to get better and have more chances the next time. So in a way, the best possible course for the entrepreneurship industry is about selling dreams and expecting people to keep showing up every time their dreams get crushed.

Currently, there is a cultural celebration of entrepreneurship founded by many parties. Universities are promoting innovation through many programs, VCs, hubs, clusters, governments, etc. These ventures create a vibrant startup environment that may be more likely to attract trend-following individuals. These vibrant environments created people with the desire to present themselves as entrepreneurs. Sometimes they are people in search of jobs or have wealthy families to support them. The Veblenian entrepreneur is the one who desires to build his or her identity on being an entrepreneur and being apprised for it.

Veblenian entrepreneurs “work” on early-stage startups. They are highly engaged with the ecosystem to signal that they are active entrepreneurs thus obtaining the recognition of their counterparts. They approach work in an enjoyable and leisure-like approach. They love pitching, networking, and attend idea-competitions as an opportunity to have fun and socialize rather than creating tangible value. In a way, they see pitching as a ritual to be part of the community. But they lack deep technical knowledge. They are good enough to engage in tech talks and impress non-technical audiences. They only need to look competent and have a plan.

“Real entrepreneurs” have industry experience which Veblenian entrepreneurs see as an asset whereas Veblenian entrepreneurs see their knowledge gap as an asset to reinvent the industry and build grand alternatives irrespective of their viability.

Veblenian entrepreneurs see acquiring venture capital as an end itself irrespective of their source (family, friends, and fools vs experienced VCs). Capital and the most fashionable technology give them legitimacy to be in business. Technology for them is a fashion statement showing that the entrepreneur is working on something visionary and cutting-edge.

Innovation-driven entrepreneurs design their physical and work environments to attract and motivate talented workers whereas Veblenian entrepreneurs design it mostly for their own enjoyment and as a statement of coolness and anti-corporate sentiment. Like most of the things they do it lacks substance. It represents an unproductive form of entrepreneurship with the principal purpose of emulating successful entrepreneurs. This creates an entrepreneurial process based mostly on consumption rather than production. They mostly validate their identity through the consumption of entrepreneurial goods instead of materialized achievements (product development, sales, profitability, etc.).

The rise of entrepreneurship is based on several factors. The feeling of self-realization and making a difference is inspiring to many, especially when a young employee has a mundane and unfulfilling job. This creates an identity tension that can be resolved using the counter-narrative of being an entrepreneur. It also helps to escape the job market realities where maybe not everyone is easily employable. So, entrepreneurship creates an extended period of unemployment financed primarily by parents or spouses whose demands are insulated from real market forces. The Veblenian Entrepreneur is not bound anymore to the corporate constraints nor the socio-economic realities of the market while at the same time they are being praised by other fellow entrepreneurs.

Veblenian Entrepreneurs are not only a risk to themselves, but they are also a risk to the whole ecosystem. Upon failure, the aspiring entrepreneur may choose to rebrand themselves and become a mentor, coach in incubators, or work on other parts of the industry playing up their experience. Inspiring others to take the leap leading some to believe that this world is full of charlatans and dreamers. Veblenian entrepreneurs incur other costs to the community like increase the risk of seed-stage investments. Leading to an actuarial increase in the price of equity, reducing the available funding for other kinds of entrepreneurs. Leading to an overall slower technological progress and economic growth.

The solutions proposed in the paper are that institutions encourage more experienced individuals and discourage the young and inexperienced. The young are less likely to succeed leading them to take unsustained risks. Whereas the old face higher opportunity costs thus preventing unfounded pursuits. The policies should be growth-oriented and prevent the romanticized idea of entrepreneurship. Entrepreneurship has substantial costs that should be explicitly stated.

Here you can find the table in the manuscript where they compare the innovation driven entrepreneur vs the veblenian entrepreneur on several axis.

Exemplary differences between innovation-driven and Veblenian entrepreneurship
Exemplary differences between innovation-driven and Veblenian entrepreneurship

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