Five Active Processes of Austrian Economics That Helped Bob Luddy Build One of America’s Most Successful Entrepreneurial Businesses
Key Takeaways and Indicated Actions
Bob Luddy is founder and CEO of CaptiveAire (CaptiveAire.com), the US market leader in commercial kitchen ventilation systems. It’s a $500MM business with 1,000 employees and a 40 -year success record. Bob explains to Economics tor Entrepreneurs how these principles of Austrian economics, applied as active processes, played a part.
Say’s Law is a fundamental proposition in support of a production-driven market system as opposed to a consumption-driven view. It’s quite difficult to interpret and pithy summaries like “production creates its own demand” and “production precedes demand” don’t help entrepreneurs very much.
Bob Luddy doesn’t interpret, he applies. His application formula is this: new supply that is brought to market can solve problems that have not so far been solved. In that case, demand will result.
He gave this example: in the 1980s, many of the harmful effluents from cooking in a restaurant were escaping into the kitchen and sometimes even into the dining room. Those effluents could contain carcinogens, and at the very least, they’re very unpleasant. That was a problem – but it was the status quo.
So Bob thought, in Say’s Law mode: if CaptiveAire could solve that problem, and bring the solution to market at an acceptable price, demand (i.e., lots of customers) would follow. That turned out to be exactly right.
Implied in this formula, of course, is attention to market signals regarding unsolved problems, a problem-solution design process, and a communications and customer interaction capability to inform the market of the new solution. Say’s Law applies, but not in isolation from other entrepreneurial actions. Those actions, Bob tells us, include accuracy and completeness in solving the problem, since many competitors may be trying to address it at the same time. Small details can make a big difference in applying Say’s Law.
Many podcast listeners have asked whether the concept of subjective value — which holds that it is the subjective and emotional evaluation by customers of an entrepreneurial offering that determines its market acceptance – applies equally in B2B markets as in B2C markets. Isn’t subjective value more releva
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