Monday, November 17, 2008

Entrepreneurs, Love, and Signals

Intelligences gets things done by planning, acting, and then making continual adjustments. In order to be successful they must be able to evaluate their current course against where they were planning on going. If things are off, they adjust, change directions, speed, etc. to get back on the right path. As the old tired quote goes, “How do you get to the top of a mountain? Just make sure each step leads you higher”.

Now we get signals along the way that indicate how we are doing. A simple signal would be a measurement. Are we higher or lower than last step? This can then be compared with the desired goal if it is itself measurable (I want to make it to 5000 ft). In this way we can make adjustments with each step. We can even make sophisticated decisions like should I go down 10 steps to the bridge to cross so I do not have to go down 1000 steps to get across a gorge.

Not all signals are equal. Some goals have very good signals (like in our example of height). Others have much more complex signals. A good example of a goal with complex signals is love. Love is many things to many people, but usually has something to do with prioritization of another over ones self, or at least over others compared to the one loved. But this notion of prioritization is very complex and has to do with hundreds of social conventions and traditions. Even amongst personality types we see differences in what is perceived as meeting this goal.

In fact almost all intra-personal relations are subject to these same complex signals. From friendship, to family, to gift giving, politics, and leadership. All enormously complex with a multitude of signals that very in their significance from person to person and even from time to time for the same individual.

Now a given intelligence is only capable of so much planning and signal processing. Like any other resource, planning, adjusting, and signal processing are subject to the limits of time, processing power, and material resources that can be used in goal attainment. This is a two way street. Interpersonal relations are most commonly a very intimate one-on-one type of goal. Even the best individuals a re by themselves capable of attaining goals with only a very few set of relations (relative to the total number of people in existence).

Now in any society of individuals inevitably a system of trade (market) comes into play . People produce and consume goods and services and through specialization come to use a common medium of exchange called a currency or more commonly money (This is obviously a very specious treatment of the subject. For those so inclined I highly recommend the books Human Action and Theory of Money and Credit by Von Mises, and Man, Economy, & State by Rothbard). Prices (the costs in money of specific goods) becomes a universal signal for making decisions relating to the market. Prices adjust relative to supply and demand for any specific good, which reflect the aggregate desires of individuals across a huge section of every day life (remember labor is just as much of a good as any other).

Entrepreneurs use these market signals (prices) to attain their goal (profit). In so doing they fulfill the desires of a great number of individuals in addition to their own. By creating a giving good and with an advanced distribution network as we have developed today, can impact the lives of millions. A humble farmer can now, with current technology, produce enough food for hundreds of individuals. A clothing designer can create fashion to be enjoyed by millions.

Markets effectively offer a very simple signal which masks the complexity of the underlying system of interpersonal signals. By using the simplified market signal, we are able to achieve a scale far greater than that which is available to us on a direct interpersonal level.

For the few interpersonal relations you have resources for, by all means work towards your goals. They are greatly rewarding. But if you want to maximize your goal obtainment, then use the market's signals and produce!