Rational Entrepreneurs and "Lucky Fools"
September 6, 2001
Some economists advance the theory that dynamic economies owe their vitality more to chances taken by "lucky fools" than to the rational calculations of cautious businessmen. Economic historian John V.C. Nye advanced just this theory in a 1991 article entitled "Lucky Fools and Cautious Businessmen."
In essence, Nye argued that:
- The big entrepreneurial winners are usually people who overestimate their chances of striking it rich -- people who, based on rational calculations, shouldn't have bet their time, money and ideas.
- Dynamic societies are those who create more people willing to take greater risks.
- Entrepreneurs in Victorian Britain were noted for taking rational risks -- and, while they invested wisely, Britain's economy eventually became stagnant and fell behind those of the U.S. and Germany.
- Lucky fools create huge spillover benefits for society -- new sources of wealth, new jobs, new industries offering less risky opportunities and new technologies that improve life.
Capitalism, in this view, works by exploiting the capitalists themselves.
Source: Virginia Postrel (Reason magazine), "Economic Scene: A Vital Economy Is One that Suffers Fools Gladly," New York Times, September 6, 2001.
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