ACTIONABLE INSIGHTS FROM AUSTRIAN ECONOMICS

Business success is a function of knowledge — the right knowledge at the right time applied in the right way. But knowledge is always scarce and incomplete and sometimes wrong. It is best to regard knowledge as a process: continually gathering changing knowledge from a wide range of sources to integrate into decision-making and action. Austrian economics can provide that integration, helping businesspeople with sense-making in a complex, ever-changing world of knowledge.

We gather business knowledge from multiple sources and multiple disciplines. Gathering knowledge that’s relevant for business success is a process, a journey, and an exploration. We do not limit it to business subjects. A rounded businessperson studies economics, of course, but also history, psychology, languages, culture, computer science, political science. Why are these all relevant? Because business is a social science, concerned with how people think and perceive and interact, and how they adapt to new knowledge and changes in context and changes in choices. All the knowledge disciplines impact business.

There is an exploratory phase in every knowledge journey, where we cast our knowledge net wide. I gathered comparative knowledge of different countries and cultures. I continued the process by traveling to and studying in the Netherlands. I developed an elevated capacity for the critical business skill of empathy: seeing things as others see them, through others’ eyes, or rather, through others’ mental models. People who grow up with a different cultural, philosophical, religious,  linguistic and institutional background develop different mental models. The facility to discern, analyze and understand those mental models helps businesspeople in their interactions with customers, competitors, employees, partners, and suppliers. The exploratory phase of knowledge gathering does not require us to think about applying that knowledge in business at the time of gathering. It is building up a knowledge inventory.

I felt that, even with my wide range of multidisciplinary knowledge and multicultural experiences, I still did not understand people and their decision making sufficiently for business. I discovered Austrian economics by reading its definitive treatise, Human Action by Ludwig von Mises. I found the insights in Human Action, derived from theory, were highly confirmable in the real world through observation. Anyone can make the same discovery. Over time, for example, a person will build more and more confidence in his (her) understanding of how people make their decisions, as well as in their own decision-making about the future. By understanding how individuals’ value systems drive economic decision making, one will interpret and expect their economic choices. You will deduce the theories or mental models through which people see the world and analyze their actions that way. Value systems are at work in firms, as well. When a firm has a value system of trust and collaboration, there will be an alignment of interests among everyone who works there, and with suppliers and partners. If you take such a firm as a customer, you can apply the same values-based approach to building a strong business relationship.