Murry Rothbard said: “Before embarking on any investment or line of production, the entrepreneur, or “enterpriser,” must estimate present and future costs and future revenues and therefore estimate whether and how much profits he will earn from the investment. If he forecasts well and significantly better than his business competitors, he will reap profits from his investment. The better his forecasting, the higher the profits he will earn. If, on the other hand, he is a poor forecaster and overestimates the demand for his product, he will suffer losses and pretty soon be forced out of the business.”
What tools does the Entrepreneur use to make his/her forecasts? Supply and Demand Curves from Neoclassical Econ? Intution?
ROFL. Of course prices. But what other tools does an Entrepreneur use besides prices? Surely Bill Gates or Steve Jobs just didn’t use prices when creating the Windows or the Mac?
The very moment you try to start a business you see how destructive central planning is. When the government is stepping in and distorting prices how the hell is the entrepreneur supposed to make forecasts of how profitable a line of business might be? What if the government changes policy? I’ve had personal experience of this. With central planning you aren’t rewarding those who best serve the customer. You reward those who best guess where the government will jump next.
A proffesional sports bettor tries to determine wether there is a discrepancy (overlay or value) between a chance of one outcome occuring and a chance of that outcome occuring as percieved by the masses and reflected in the odds (price).
Ways to determine that are many and every bettor has a little different approach. The mathematicaly inclined use complex calculations and statistical models (ELO ratings would be one very primitive way) to determine what is the actual statistic chance of the outcome occuring which they then compare with the price.
Of course none will share their method lest it gets well known and “stops working” as the market takes it into account, but it is always a complex process to “price up a match”.
The more pyschologicaly inclined bettors however place bets without knowing to a great detail what is the real chance of the outcome occuring providing they come to belive the public perception as reflected in the price has been sufficiently skewed. For that they must feel the pulse of the public and that means following the media.
Ie, if the press has been bigging up an upcoming event as a “grudge match” between bitter rivals then it can not fail to pay, but to bet against a high number of fouls in the match, because the general public will have with its giant financial sway and under the influence of the hype made the price for low number of fouls unrealisticaly low.
Of course sport bettors have it easy because they bet against casual bettors betting for fun and who do not give their bets much thought. It is way harder for enterpreneurs which must bet against other enterpreneurs.
While the exactness of the tools I am looking for is not answered, your answer does provide insight as to the various methods that entreprenuers may use.
But what other tools does an Entrepreneur use besides prices? Surely Bill Gates or Steve Jobs just didn’t use prices when creating the Windows or the Mac?