The Nature of Opportunity

Randy asks a question that indirectly strikes at the core of what is the nature of opportunities. Much of the literature assumes, in a common interpretation (application?) of Kirzner’s (1973) “pure entrepreneur,” that opportunities are objective and that they are there for the grasping for the alert entrepreneur. But as the previous two posts (1, 2) suggest, what is important in the market is the action rather than the discovery of an opportunity. After all, most entrepreneurial ventures do fail.In the changing market place we can only identify what is an opportunity ex post, i.e. after the action has taken place and we can observe the effects of it as [historical] fact. If this were not the case, we would see no failures – which seems to corroborate Kirzner’s entrepreneur’s inability to make losses.

In other words, whether that which the entrepreneur initially “sees” is truly an opportunity depends not only on the entrepreneur’s ability to distinguish successful projects from those that turn out to be not so successful ones. It also depends on the entrepreneur’s recognition of what is an effective means (technology) to achieve that end, and ability to act properly on his or her technological estimation. What therefore “is” an opportunity is not when the decision to act on it is made; profitable ideas are only those that still hold as the future unfolds – and thus have been properly implemented.

The successful entrepreneur cannot discover opportunity, but must rely on and trust his or her judgment before the real opportunity “materializes,” at which time all proper measures must already have been taken to appropriate its value. To properly study entrepreneurship, therefore, we need to include the temporal lag between the decision to act (“discovery” of opportunity), and the realization of the chosen implementation. And in order to study opportunity, we need to get into the minds of entrepreneurs to “see what they see” and thereby form an understanding for the appropriateness of the implementation to the imagined future opportunity.

There is an obvious entrepreneurial opportunity here for scholars: to find a way to properly measure these subjective aspects of entrepreneurial success. All we need is an appropriate implementation.