“The major problem entrepreneurs face is that the value of production effort is not known until it is completed. It is only when the finished good is sold that the entrepreneur learns if the investment was worth-while—if consumers want the good. In contrast, costs are known and incurred long before the good is completed and offered for sale. Note that these costs are not merely the inputs that make the output, such as the flour, yeast, and water that are turned into bread, but also the capital needed: the oven, the bakery, etc. Even in those cases when an entrepreneur takes orders and is paid before producing the actual good, some costs are incurred as part of the not-yet-produced good. Those costs include such things as setting up the business, experimenting with capital, figuring out how to make an oven, developing a recipe or blueprint for production. Investments must be made to produce the good, which can then be sold.”