The Entrepreneurship Game How to Get Rich

The Entrepreneurship Game: How to Get Rich

Right, let's talk money. Not just any money - the kind of money that makes people quit their day jobs, drop out of uni, and risk everything because they have an idea. We're diving into entrepreneurship, but not all entrepreneurial ventures are created equal. Some build empires, others fleece people, and some just waste everyone's time and resources.

Think of it like this - if entrepreneurship were a video game, there'd be three different character types you could choose. Each has different strategies, different outcomes, and wildly different moral standings. But before we meet our players, let's give credit to the economists who first mapped out this game.

Jean-Baptiste Say (the OG entrepreneur economist) argued back in the early 1800s that entrepreneurs are the driving force of economic growth and progress - they're the ones who spot opportunities, coordinate resources, and bear the uncertainty of business ventures. Say's Law ("supply creates its own demand") basically suggests that production drives economic growth, and entrepreneurs are the ones making that production happen.

Joseph Schumpeter took this further in the 20th century with his concept of "creative destruction" - the idea that capitalism progresses through waves of innovation that destroy old industries whilst creating new ones. Schumpeter saw entrepreneurs as the heroes of economic development, constantly revolutionising the economy from within.

Both economists understood that entrepreneurship isn't just about making money - it's about driving economic progress. But here's what they didn't fully explore: not all entrepreneurship serves this noble purpose. Let's meet our players.

Player One: The Productive Entrepreneur (AKA The Main Character)

Meet James Dyson. Bloke spends 15 years perfecting a bagless vacuum cleaner, gets rejected by every major manufacturer, then builds a billion-pound empire from his garage. Classic main character energy.

Productive entrepreneurs are the heroes of our economic story. They're the ones Adam Smith was banging on about when he talked about the "invisible hand" - that magical force where people pursuing their own self-interest somehow make everyone better off. Sounds difficult to believe, but it actually works.

These entrepreneurs create value by:

• Innovating new products: Think iPhone, Netflix, or even that impossible burger that bleeds but isn't actually meat

• Developing better production processes: How Amazon gets your impulse purchases to your door in 24 hours (properly scary efficiency)

• Finding new markets: Steve Jobs didn't just make computers; he made computers cool enough that people would queue for hours to buy them

• Reorganising operations: Sam Walton turned Walmart into a retail monster by figuring out supply chains better than anyone else

But here's the thing - even productive entrepreneurship can be brutal. Recent UK data shows that whilst entrepreneurial activity remains high, with 30% of adults either running a business or planning to start one within three years, innovation often comes with casualties.

When Amazon revolutionised online shopping, thousands of independent bookshops closed. When digital photography exploded (hello, Instagram), Kodak - once worth billions - went bankrupt. Even the iPhone you're probably reading this on decimated entire industries. Remember when people had separate cameras, MP3 players, and sat navs? Yeah, exactly.

This is Schumpeter's "creative destruction" in action - innovation creates new value but destroys old industries. Bit like when Spotify made music streaming mainstream and killed off HMV. Schumpeter argued this process is essential for economic progress, even though it's brutal for those caught on the wrong side of innovation. Progress isn't always pretty, but society benefits overall - exactly what Say predicted when he argued that entrepreneurial production drives economic growth.

Player Two: The Unproductive Entrepreneur (The Time Waster)

Now meet our second character type - the rent-seeker. These are the entrepreneurs who've figured out how to game the system without actually creating anything useful. They're not necessarily evil, just... well, a bit pointless from society's perspective.

In 2024, UK entrepreneurs are increasingly focusing on AI and automation to reduce costs and increase efficiency, but some are using these same tools for unproductive ends.

Unproductive entrepreneurs specialise in:

• Creating legal monopolies: Like when pharmaceutical companies patent minor variations of existing drugs to extend their monopoly

• Rent-seeking: Basically finding ways to extract money without creating value (think patent trolls or excessive lobbying)

• Exploiting regulatory loopholes: The financial services industry lobbying to treat hedge fund earnings as capital gains rather than income (hello, lower tax rates!)

Medieval guilds were masters of this. They'd restrict membership to keep prices high - imagine if today's baristas formed a guild and you needed a licence to make coffee. But that's essentially what these entrepreneurs do - they manipulate rules to earn "rents" (economist-speak for above-average profits without creating extra value).

The bigger the government, the more opportunities for unproductive entrepreneurship. Why? More contracts to win, more regulations to influence, more preferential treatment to lobby for. With the UK government's increased focus on workers' rights in 2025, including elimination of zero-hour contracts and a 6.7% increase in National Living Wage to £12.21 per hour, we might see more unproductive entrepreneurs trying to exploit these new regulations.

Player Three: The Destructive Entrepreneur (The Villain)

Right, now we meet our proper villains. Destructive entrepreneurs don't just waste time - they actively make society worse off. They're the ones using their entrepreneurial skills for, well, developing properly "dodgy" stuff.

This category includes:

• Theft and extortion: The old-school approach

• Modern financial fraud: Like the massive NFT scams that cost investors over $22 million in "rug pull" schemes, where creators launch digital asset projects, collect funds, then vanish

• Cryptocurrency fraud: Traders lost $2 billion in 2023 to cryptocurrency scammers, with schemes ranging from romance scams to fake investment platforms

Historically, this was often the most respected form of entrepreneurship. Roman generals extracting tribute from conquered provinces? That was the career ladder. Spanish conquistadors turning entire civilisations into gold-mining operations? Perfectly acceptable entrepreneurship for the time.

Today's destructive entrepreneurs are more sophisticated. Take the recent Brooklyn case where an 85-year-old artist lost over $135,000 to a fake NFT marketplace scam - the scammers created 40 fraudulent websites that looked legitimate. The US Treasury now considers NFTs "highly susceptible" to fraud and money laundering.

These aren't just individual bad actors - they're entrepreneurial in their approach to crime. They innovate new scam techniques, scale their operations globally, and often inspire legitimate innovations in cybersecurity as a side effect.

The Rules of the Game: Why Institutions Matter

Here's the crucial bit - and this is pure IB economics gold for your exams - the type of entrepreneurship people choose depends entirely on the "rules of the game" (institutions). This builds directly on both Say and Schumpeter's work, but adds a critical insight they missed.

Say focused on how entrepreneurs coordinate resources and drive supply, whilst Schumpeter celebrated their role as innovators and agents of creative destruction. But neither fully addressed this question: what determines whether entrepreneurial talent gets channeled into productive innovation (Schumpeter's creative destruction) or destructive rent-seeking?

If your society rewards innovation and protects property rights, you get more James Dysons. If it rewards corruption and rent-seeking, you get more unproductive activity. If it fails to enforce law and order, you get more destructive entrepreneurship.

Current UK data supports this - with 10% of women now engaged in early-stage entrepreneurial activity (triple the rate from 2002) and immigrant populations continuing to be the most entrepreneurial groups. This suggests UK institutions are generally supportive of productive entrepreneurship.

But there's a catch - 58% of UK adults say fear of failure would prevent them from starting a business. This institutional "fear factor" might be limiting productive entrepreneurship.

Path dependence matters too - economist jargon for "history matters." If a country builds institutions that reward destructive entrepreneurship (hello, corruption), those become self-reinforcing. The people getting rich from dodgy deals have every incentive to keep the system dodgy.

The One Percent

As students you need to be aware that the way rich people get rich has completely changed.

A century ago, the top 1% in America earnt their wealth mostly through inherited land and existing capital. Proper old-money stuff - think Downton Abbey. Today? Survey data shows current business owners are significantly more satisfied with their lives (70%) compared to non-business owners, and they're planning aggressive expansion with 54% planning to hire new employees within 12 months.

Most of today's wealthy earnt it through wages and business profits - they had to actually do something productive. Sure, you still get the odd inheritance millionaire, but increasingly, wealth comes from creating value, not just owning stuff.

This shift suggests that productive entrepreneurship has become the dominant path to prosperity in developed economies. The institutions have evolved to reward innovation over extraction.

The Modern Entrepreneur's Dilemma

Recent global data reveals a concerning trend - nearly half (49%) of potential entrepreneurs in 2024 won't start businesses due to fear of failure, up from 44% in 2019. Meanwhile, UK entrepreneurs are embracing AI and automation, with some companies reducing project timelines from two weeks to 48 hours using these technologies.

But here's the rub - not everyone using these new tools is playing fair. Some are using AI and automation for productive ends (creating better products faster), others for unproductive ends (gaming algorithms for profit), and some for destructive ends (sophisticated scam operations).

The challenge for policymakers? Creating institutions that encourage the good stuff whilst stamping out the dodgy bits. It's like trying to encourage innovation whilst preventing fraud - you need regulations that are smart enough to tell the difference.

Why This Matters for Your Exams (And Life)

Understanding entrepreneurship varieties isn't just academic - it's about recognising the difference between wealth creation and wealth extraction. When politicians promise to "support entrepreneurs," ask which type they mean. When you see a get-rich-quick scheme on social media, ask whether it's creating value or just redistributing it.

For your IB economics exams, remember:

• Say's contribution: Entrepreneurs coordinate resources and drive economic supply / production

• Schumpeter's insight: Entrepreneurship drives economic development through creative destruction

• Baumol's framework: The institutional environment determines whether entrepreneurial talent becomes productive, unproductive, or destructive

• Productive entrepreneurship drives economic growth through innovation and efficiency (Say + Schumpeter's vision)

• Unproductive entrepreneurship redistributes wealth without creating value (what Say and Schumpeter didn't account for)

• Destructive entrepreneurship actively reduces social welfare (the dark side they missed)

• Institutions matter - the rules of the game determine which type dominates

• Historical context shapes current entrepreneurial incentives

The invisible hand works brilliantly - but only when the rules are set up properly. Bad institutions can turn potential innovators into rent-seekers or even criminals. Good institutions channel entrepreneurial energy towards productive ends.

The Bottom Line

Entrepreneurship isn't inherently good or bad - it's a tool. Like any tool, its value depends entirely on how it's used. A hammer can build a house or commit a crime. Entrepreneurial talent can create the next Tesla or the next cryptocurrency scam.

Say understood that entrepreneurs drive production and economic coordination. Schumpeter celebrated their role as agents of creative destruction and economic development. But the reality is more complex - entrepreneurial talent can be channeled in multiple directions depending on institutional incentives.

The goal isn't to eliminate risk-taking or ambitious thinking - society needs entrepreneurs fulfilling Say's vision of resource coordination and Schumpeter's vision of creative destruction. The goal is to create institutions that make productive entrepreneurship the most attractive option. When innovation pays better than corruption, when creating value is easier than extracting it, that's when both Say's and Schumpeter's optimistic view of entrepreneurship becomes reality.

So next time someone tells you they're "disrupting" an industry, ask the right question: are they creating value, redistributing it, or destroying it? The answer matters more than you might think.

Stay well