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Traynor gives the classic example of a team of men digging a trench with shovels. An
entrepreneur can invest in a bulldozer to speed production, but if he doesn't teach the men
how to use it, all he has is "men with shovels and a costly lawn ornament."
Thanks to inventions like bulldozers, labor has been disadvantaged by increasing
productivity, as fewer workers are required to create the same amount of output. Similarly,
globalization has placed increasing pressure on domestic labor forces to compete with
outsourcing opportunities.
Labor is also a key consideration for many businesses as they need to operate sizable, and
often educated or experienced, workforces, Castaneda says.
Capital
Capital as a factor of production refers to capital goods, or man-made resources, such as
tools and infrastructure, used in the production of a good or service. Petersmarck gives
examples such as a craftsman's hammer or a doctor's MRI machine. It is not to be
confused with money, which he says "can buy capital but is not used to produce capital."
Capital goods can also be distinguished from consumer goods in that capital goods are
used for production, while consumer goods are used for consumption. For example, a
business complex is a capital good, while an apartment complex is a consumer good.
Capital naturally varies based on the industry and workforce. Capital for the construction
industry may include a jackhammer and bulldozer, for instance.
Entrepreneurship
Entrepreneurs are the people who combine the other factors of production – land, labor
and capital – to generate profit. You can think back to McDonald's franchiser Ray Kroc as
an example of the entrepreneurial factor of production.
"Entrepreneurial activity is the engine of innovation that brings new ways of organizing
land, capital and labor to produce new goods and services," says Luis Portes, professor of
economics at Montclair State University.
Global events can also impact entrepreneurial success. For example, "post-9/11 there was a
spike in companies focused on security," McIntyre says. "Now, with the pandemic, there's
an uptick in medical-focused companies."
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