Thursday, May 10, 2007

Guan Xi 关系- Kirzner and the Chinese

Kirzner's writes in Uncertainty, Discovery, and Human Action, "it appears equally plausible to associate entrepreneurship with that aspect of human action in which the alert individual realizes the existence of opportunities that he has up until now somehow failed to notice".

GuanXi (关系, pronounced goo wan shee) is a word in Chinese literally translated as "relationship". What it really means is your social network. Hayek teaches us in Use of Knowledge that the totality of information in a market is limited. No one individual, according to Hayek, can attain comprehensive knowledge about a market condition. Chinese have known this principle for ages. That is why GuanXi is vital. You know in your limited frame, inputs of production that are vital for someone else's pure profit potential. Your neighbor likewise has knowledge that may benefit you. It is through the network or GuanXi, that the awareness of entrepreneurial opportunities of pure profit arise.

So, if you want to do business in China, make sure you bring a strong stomach to eat strange things, and a patience to sit for long hours doing business in a restaurant or tea house.

No comments: