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February 15, 2011

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I read the column from Inc. magazine. This idea of going the trial and error route first is nothing new. It's exactly how things should be done at first. As the story goes, was it not Thomas Edison who attempted to make the lightbulb work, yet failed 999 times before he got it right?

Another way to think about this is "hypothesis testing."

In his book, Individual, Institutions and Markets, C. Mantzavinos argues "every time a product is offered in the market, an entrepreneur is trying to solve what appears to him to be a new problem. Therefore, the supply of a certain product is at the same time equivalent to the trial of a new hypothesis on the part of the entrepreneur…Every time the entrepreneur offers a product in the market, therefore, he tests a hypothesis about the effectiveness of the sum of the action parameters in satisfying consumers’ wants and, consequently, in assuring profits."

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