I have repeatedly argued that entrepreneurs are merely those who help to improve the efficiency of the resource allocation in the market as well as the economy. Excellent entrepreneurs are those who are the best at reallocating resources. Today I would like to further discuss how entrepreneurs help to improve the efficiency of resource distribution in many different situations.
The most obvious situation is when the owners of a company is seeking new managers to manage their companies. Good managers are believed to be more able to generate higher returns and greater profits. The ability to achieve such goal is to redistribute the company’s resources more efficiently, better efficiency means resources are able to have greater marginal returns.
There is a less obvious way to see entrepreneurship’s function in helping to improve the efficiency of resource allocation, which is when entrepreneurs also play the role of innovators and start businesses in a whole new sector. For example, the case of Elon Musk and his SpaceX is such situation. However, under such circumstance, we can see entrepreneurs reallocate resources from our entire economy in a completely new sector where resources are able to generate surprisingly high returns. Entrepreneurs here can be seen as the entrepreneurs who have less traditional ideas about allocating resources but innovative ideas about where to put resources.
However, some people may feel confused that they may think bankers are bankers or investment managers who are also helping to allocate capitals. However, allocating capitals and allocating resources are not entirely the same, as capitals are only part of resources.
Overall, anyone with abilities to allocate resources efficiently can be a good entrepreneur.
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