What is an entrepreneur?

It can be somewhat difficult to define what an entrepreneur is in a comprehensive and exact way.  For example, the link below says, among other things, that an entrepreneur is someone who “runs a small business.”  However, this is in contrast with an economics book that I have used in the past (Hubbard and O’Brien, Microeconomics, 4th Edition) which discusses the ways in which Henry Ford and Steve Jobs (both of whom ran very large companies) were entrepreneurs.  Although I see holes in this definition, my favorite way to define an entrepreneur is to say that an entrepreneur is a person who takes all the risks and gains all the rewards of doing business in a way that is somehow new and innovative.

There are two parts to this definition.  First, an entrepreneur has to do business in some way that is new or innovative.  This can be true in at least two different ways.  One possibility is that the entrepreneur would create a new product and bring it to market.  This is typically something that consumers did not even know they needed.  The Hubbard and O’Brien book mentioned above quotes Henry Ford (on p. 56) as saying, “If I had asked my customers what they wanted, they would have said a faster horse.”  In this case, it is the product itself that is innovative.

Other entrepreneurs figure out how to create existing products in new and better ways.  For example, we can say that part of Ford’s entrepreneurial genius was the fact that he figured out how to use assembly line techniques to make his cars quickly and at low price.  These entrepreneurs do not necessarily create new products, but they innovate in ways that allow them to make those products better and/or more efficiently.

The second part of the definition says that the entrepreneur has to put their own money on the line when they innovate. In other words, an entrepreneur cannot simply be an employee of a company.  Entrepreneurs have to take personal risks, and they often fail when they do so.  Many entrepreneurs who eventually become very successful fail at first.  Of course, many would-be entrepreneurs fail at first and never do find a way to succeed.  In order to be an entrepreneur, a person has to bet their own resources on the new product or new process that they are introducing.  (I see holes in this part of the definition because, for example, I would say that a manager in a company who puts her job on the line to try to do things in a new way is an entrepreneur as well.)

One way to define an entrepreneur, then, is to say that he or she is a person who risks their own money to run their own business, which either creates a new product or uses new techniques to make an old product in a better way.