An entrepreneur is someone who takes risk to set up a business in the hope of making a profit. When we hear the word “profit” we sometimes put up our guard and hesitate due to the negative connotations that are sometimes associated with that word. In the media, films, and even in our discussions with each other, we sometimes characterise business people as “evil” and “greedy”.
How did businesses come to be? What are the economic systems that support them? What does the Bible say about entrepreneurs?
We previously talked about some very core economic foundations from the Bible and how the way society operates is built on Biblical principles. Expanding on these principles can help us see whether entrepreneurs are acceptable and whether profit is a good thing.
Profit
The Bible has plenty of verses that warn us about the love of money (1 Timothy chapter 6, verse 10), but not many that talk about making profit, except that it is a reward for work (Proverbs chapter 14, verse 23). Similarly, it says that chasing profit is meaningless (Ecclesiastes chapter 5, verses 8 to 20).
How does profit come about? It is gained through selling or providing goods and services for a price higher than it would cost you to provide it. In the Old Testament, King Solomon made a lot of profit and accumulated treasures through trading with nations both near and far from Israel (1 Kings chapter 10 verses 14-29).
When we strip everything down to basics, we can see that many of the economic systems in Israel are the same as they are today and that profit comes naturally through our free market economy.
Markets, supply and demand
Human action, private ownership of property and voluntary exchange are the three pre-requisites from which any economic system can function. It requires two, or more, willing parties to exchange goods or services in order to satisfy a discomfort or desire. This actually describes a “market”.
Multiple people can participate and there can be many buyers and sellers. The concepts of supply and demand arise to describe what might be happening in a market.
Demand can be simply described as how many parties want a particular good or service. Supply is how many parties can supply a particular good or service. When there is high demand and low supply, it will cause prices to rise. When there is low demand and high supply, it will cause prices to fall.
A food court market
An everyday example which describes this can be our local food court that we might visit for lunch. If we take each food shop as a seller and each hungry person visiting the food court as a buyer, it is a small localised market. Each party willingly participates in transactions that will exchange money for food.
Bargain hunters know that the best time to buy is after 3pm. By then food shops that have cooked excess food such as sushi, wraps or sandwiches drop their prices to clear their stock (high supply) to sell to the smaller number of buyers at the food court (low demand). You can find many great deals such as 3 x rice boxes for $10!
Market gaps, entrepreneurs and profit
A market gap explains a phenomenon when there is a high demand for a particular good or service but there are limited or no providers for it. An alternate definition is a group of “unmet consumer needs”. The easiest way to understand this is to think about the time before smartphones became essential for everyone - we did not know we all needed smartphones, and once we did, we were willing to pay for one.
Market gaps and unmet demands provide opportunities to people or parties who are willing to take personal risk in an attempt to meet these gaps. These people are otherwise known as entrepreneurs. Those who are successful are rewarded by the market, through a large amount of willing people paying a premium price in order to have their demands met and in turn, make profit.
These profits incentivise further expansion or research to reach and serve even more people than their initial market. Remember how the first 128MB USBs were around $50-$100 each? Today we can get 64GB or even 128GB USBs for less than $30 and it was driven through reinvestment of profit back into research and distribution.
These economic risk takers are the people or firms in our society who provide the goods and services we may or may not know we need and can potentially help advance our society. (I’m not quite sure yet of the value that fidget spinners have to society as a whole).
Besides the famous entrepreneurs such as Thomas Edison Ray Kroc, Bill Gates and Elon Musk, there are also many entrepreneurs amongst us! They are the people and families who take on a risk to start and run your local chicken shop, your dental practice, tradies, farmers buying land to expand their operations and more! These people fill everyday market gaps that we may or may not realise that we need.
The Bible does not necessarily frown on risk taking, entrepreneurship or profit. Instead it warns us against dishonest ways of conducting business with one another (Proverbs chapter 11, verse 1).
Whilst we are correct in guarding our hearts against the love of money and excessive chasing of profit, we also need to make sure that we do not restrict or reduce the ability of businesses to make profit (such as mandating businesses charge a certain amount), as doing so may stifle entrepreneurship and harm us in the long run.
As all economic transactions are voluntary, the best way to impact and signal to businesses what you like and do not like is to vote with your wallet.
Brandon Tsang is a Sydney-based writer currently working in IT. He studied Marketing and Economics at UNSW and loves to spend his spare time hiking, playing volleyball or watching Netflix.
Brandon Tsang’s previous articles may be viewed at
http://www.pressserviceinternational.org/brandon-tsang.html
Brandon Tsang is a Sydney-based writer currently working in IT. He studied Marketing and Economics at UNSW and loves to spend his spare time hiking, playing volleyball or watching Netflix.
Brandon Tsang’s previous articles may be viewed at http://www.pressserviceinternational.org/brandon-tsang.html