If you’re like most, you probably think of an entrepreneur as someone who organizes and operates a business. Meanwhile, the rest of us think of ourselves as employees. And yet the world has changed in ways that now require everyone to think like an entrepreneur. As such, the distinction between employee and entrepreneur is rapidly becoming obsolete.
A brief history
It’s worth noting that the term “entrepreneur” emerged at the dawn of the industrial revolution as a way to distinguish those who organized and operated a business from those who provided labor to those businesses. The word “employee” emerged a century later, at the dawn of the second industrial revolution.
It’s also worth noting that, as the industrial revolution began to emerge, the barriers to becoming an entrepreneur were significant. Knowledge was scarce, the means of mass production required vast sums of money while transportation and communication were limited. For most, the only viable option was to become an employee.
We all live by exchanging
Let’s begin with the basic assumption that we all survive by making ourselves useful to others. As Adam Smith observed at the dawn of the industrial revolution, we all live by exchanging. That is, we all provide a product or a service for which someone is willing to pay.
This simple observation brings us to a set of interesting questions: What is the “useful thing” that we exchange, and with whom do we exchange? And who determines what is useful to others? How do we make ourselves useful? And what determines the amount of value we create?
First-principles of usefulness
The usefulness we provide can be measured in two dimensions: the value of the product or service we provide, and the volume of people we serve. To visualize this, think of an XY graph with usefulness (value) as the vertical axis and volume as the horizontal axis.
So, for example, a neurosurgeon might be high and to the left, as they provide a highly valuable service, yet they can only serve a relatively small number of people. Meanwhile, an author or an app developer might be low and to the right, creating less valuable products or services, yet they can serve a much larger audience, thereby creating equal or greater overall value.
How do we become useful?
From an early age, we are immersed in formal learning structures. These are led by professional teachers and guided by learning objectives and standardized curricula. Within these standardized systems, it is assumed that someone else has figured out what we need to learn in order to be successful in life and that we are expected to follow the rules.
Within these systems, it is also assumed that we will work within an established organization where someone else will determine what is useful. We choose academic majors and become immersed in career readiness programs that assume we will exchange our knowledge and skill with an employer who will tell us exactly what needs to be done.
As a result, we learn to assume that we will function within highly stable, other-directed organizations where the rules are clear and the path is well defined. We learn to assume that someone else will determine what is useful and that we will follow the rules. Without realizing it, an employee mindset begins to emerge.
While this industrial-era mindset once helped build a vibrant economy with a thriving middle class, the world has suddenly changed and the traditional “employee” mindset that once enabled us to thrive may now be holding us back.
Bounded rationality
From a traditional employee perspective, it rarely occurs to us that we can take it upon ourselves to figure out how to become useful to others. Instead, we assume that someone else will determine what is useful, that someone else will tell us what we need to learn, that someone else will determine the amount of value we create. And by doing so, we unwittingly fall prey to a bounded rationality that blinds us to opportunities that may be hiding in plain sight.
The distinction between entrepreneur and employee lies in the way we think.
By contrast, the entrepreneur assumes responsibility for figuring out how to make themselves useful to others. They intuitively understand that by creating value for others, they can empower themselves. They assume that the more useful they become, the better off they are likely to be—not only financially, but also in terms of a sense of meaning and purpose in their lives.
From this perspective, those with an entrepreneurial mindset are constantly looking for ways to increase their knowledge and improve their skills. They see problems as potential opportunities, and, as a result, they become action-oriented, self-directed life-long learners. Over time, they become agile, resilient, and resourceful. From this perspective, they are no longer bound by the limitations of a credential, a salary, or an hourly wage. They are constantly pushing themselves high and to the right, constantly striving to find new ways to not only increase the value they provide but also the number of people they serve. As a result, they develop the skills the world now demands.
Redefining entrepreneurship
Simply put, entrepreneurship is the self-directed pursuit of opportunities to create value for others. This new definition enables anyone to embrace an entrepreneurial mindset—whether they endeavor to work within an established organization—or start a business of their own.
We all live by exchanging, and the barriers to becoming an entrepreneur have been all but eliminated. The only barriers that remain are those that linger in our minds.
A useful way to distinguish the employee from the entrepreneur: Employees engage in other-directed value creation while entrepreneurs engage in self-directed value creation. That simple shift in perspective can make a life-changing impact.