Walking the Three Circles: PFR’s Framework for Entrepreneurial Success

Entrepreneurship today is often celebrated as a path to freedom, creativity, and wealth. But if we look closer, most of what passes for entrepreneurship is really just activity inside a marketplace—not full-fledged capitalism. The confusion is understandable. Without a clear framework, many assume that selling a product or starting an LLC makes them capitalists.

To clarify this confusion, Duke economist Mike Munger offers a powerful lens: capitalism exists in three nested levels—voluntary exchange, markets, and true capitalism. This article builds on Munger’s framework, integrating it with Personal Finance Reimagined’s (PFR) mission to equip creators, students, and founders with the tools to build sustainable value. We show how each level builds, where the prior level is a necessary but insufficient enabler of the subsequent level. We pair economic clarity with behavioral insight to help people move beyond side hustles and into scalable ventures.

About the author: Jeff Hulett leads Personal Finance Reimagined, a financial strategy and decision-making platform supporting high-potential entrepreneurs and content creators. Through PFR’s fractional CFO services, Jeff helps clients build scalable business models, raise capital, and make smart investment decisions.

Jeff is a career banker, data scientist, behavioral economist, and choice architect. Jeff teaches Personal Finance at James Madison University. He has held executive and advisory roles at Wells Fargo, Citibank, KPMG, and IBM, and is the author of Making Choices, Making Money: Your Guide to Making Confident Financial Decisions.

Level 1: Voluntary Exchange – The Moral Core of Commerce

The foundation of all economic life is voluntary exchange—when two people willingly trade because each expects to be better off. This concept, grounded in moral philosophy, forms the widest and most inclusive circle in the capitalist system. It is where commerce begins and where trust, value, and entrepreneurial spirit take root.

At Personal Finance Reimagined (PFR), we teach this not only as an economic principle but as a deeply personal one. Voluntary exchange reflects mutual respect, the beginnings of trust, and what Adam Smith described as the human desire to be both “loved and lovely.” This moral dimension is often overlooked in modern economic discourse, but it is essential. Voluntary exchange is not simply a transaction—it is a signal of alignment, where both parties find meaning in the trade.

But clarity matters. For an exchange to be truly voluntary, both parties must understand what they are giving up and what they are getting in return. That means:

For the consumer, utility is not just about price—it is about the perceived value they gain from the product or service: convenience, status, joy, time saved, or meaning created.

But this utility is not always clear—even to the consumer. Preferences are weighted, often unconsciously, and can shift over time. What feels valuable in one moment may feel excessive or irrelevant in another. Consumers often discover their preferences only through experience, which makes understanding utility an evolving challenge.

For the entrepreneur, the key is understanding what they are offering—not just the product, but the total value proposition—and what it costs them to produce it: time, capital, attention, and opportunity cost. This requires anticipating diverse and dynamic consumer preferences—an inherently complex task. What resonates with one audience may fall flat with another, and value signals can be subtle, delayed, or easily misinterpreted.

When both sides are clear about their utility—what they are giving and receiving—voluntary exchange moves beyond a simple trade. It becomes a mutually reinforcing feedback loop, laying the groundwork for sustainable business relationships and long-term wealth creation.This is especially critical for early-stage creators and entrepreneurs. In the beginning, the exchanges are often unstructured—bartering exposure for services, offering discounts to build a portfolio, or trading time for learning. These trades may not show immediate profit, but they build relational capital, credibility, and feedback channels that help sharpen one’s offering.

That is why at PFR, we emphasize building these early exchanges with intention. Tools like Definitive Choice help creators clarify their own tradeoffs and better understand what their customers value. This structured clarity:

• Reduces regret and decision fatigue,

• Builds confidence in early negotiations,

• And reinforces the habit of creating value before extracting it.

But while voluntary exchange is the moral foundation, it is only the beginning. It teaches the fundamentals of trust and value, but it operates primarily in the realm of personal, one-to-one relationships—neighbors, clients, early adopters.

Yet economies do not flourish on one decision at a time. Nor can an entrepreneur serve a community, let alone a nation, by trading only with people they know.

To grow beyond the intimacy of direct exchange, we need something more: a system that allows strangers to cooperate—to trust each other not because they know one another, but because the structure of the market enables them to.

This is where Level 2: Markets as scale engines begins. Markets allow us to move from handcrafted trust to scalable coordination. They transform the deeply personal into the broadly impersonal—without losing the value. They enable us to build systems where incentives align even when relationships do not exist.

Voluntary exchange may be the spark, but markets are the combustion engine. They allow that spark to power entire industries, cities, and civilizations.

Level 2: Markets – Platforms That Enable Scale and Pseudo-Personal Exchange

The second level is markets—systems that institutionalize voluntary exchange and allow it to scale. In traditional economics, markets are places—physical or digital—where impersonal transactions occur under shared rules: prices, contracts, payment systems, and property rights. Today, however, many markets take the form of social and content platforms such as TikTok, YouTube, Instagram, and Amazon.

For many of PFR’s clients—especially Content Entrepreneurs (those who monetize their personality, storytelling, or niche expertise) and Offering Entrepreneurs (those who sell physical or digital goods or services using content for advertising)—these platforms are the market.

What makes these modern platforms unique is the psychological experience of the transaction. While exchanges are technically impersonal—creators with 10 million followers cannot know their audience individually—each follower feels a sense of connection, known as parasocial interaction. This pseudo-personal bond is essential to driving trust,

engagement, and ultimately conversion.

This is how innovation works: it is not just invention. It is invention plus consumer or client acceptance. That acceptance must be earned—through persistence, testing, and iteration. And when it is, liquidity becomes available as a tool to accelerate and scale what is already working, not to fund what is merely imagined. The market may be thought of as voters and lovers:

• The social platforms are like a market of voters. Curated and tested content drives followers and engagement once it is proven. They are voting with their scarce attention.

• The market is also a fickle and difficult-to-please lover. They will make you work for your relationship, their reasons for acceptance are not always clear, and those reasons for acceptance will change over time. The market reflects the people it aggregates, diverse across individuals and over time.

At PFR, we help entrepreneurs succeed in Level 2 by navigating platform ecosystems with strategy—aligning content with algorithm incentives, pricing for value, and building sustainable models off-platform. Markets enable reach and revenue—but scale alone is not success.

To grow further, entrepreneurs must solve a deeper challenge: how to fund today what will only pay off tomorrow. That is where capitalism begins. It introduces time travel through liquidity—the ability to secure resources now based on the promise of future value. Whether through credit, investment, or reinvested earnings, this shift transforms scale into sustainability.

But the costs are real, and the profits uncertain. Moving forward requires structure, foresight, and disciplined decision-making. Level 3 is not just about reaching more people. It is about making the future fundable.

Level 3: Capitalism – The Liquidity to Time Travel

True capitalism begins when businesses raise capital not just for today, but to fund future profits. This is not merely selling goods. It is building equity. Capitalism, in its fullest form, is a system of institutions that make time travel possible.

How? Through liquidity.

Capitalism allows investors to fund a startup’s factory or platform today, in return for a share of profits tomorrow. That leap—risking resources today based on expectations about the future—requires trust in contracts, legal structures, and market signals. More importantly, it requires proof.

And this is where many founders go astray. Because investor capital feels like a reward, they seek it too early—chasing validation instead of building value. But in reality, investor capital is not a reward for a good idea. It is a response to a demonstrated business. Investors fund time travel only after the founder proves mastery of the first two levels: voluntary exchange (value creation) and market participation (value delivery at scale).

At PFR, we help entrepreneurs succeed in Level 2 by aligning with platform incentives, managing risk, pricing for value, and building sustainable models off-platform. This is where early-stage scale is proven—where real traction with customers signals a viable business.

But markets do not fund the next leap. They help validate potential, not finance it. Level 3: Capitalism begins when demonstrated scale attracts liquidity across time—raising capital today based on future earnings. The platform markets reveal the outcome of the creator’s persistence, resilience, and creativity.

PFR guides founders through this next phase by helping them secure the right type of capital—whether through traditional bank loans, equity partners, or strategic reinvestment. In some cases, PFR may provide funding directly. In others, we connect entrepreneurs to aligned capital partners. Matching the funding source to the business model—and aligning expectations around return timing—is critical. The wrong partner can derail momentum. The right one can amplify it.

We emphasize that equity is not just ownership—it is shared belief in the future. Founders who understand this raise capital not from desperation, but from a position of strength. They convert a proven business into a scalable enterprise, turning customers into stakeholders and investors into long-term partners.

From Side Hustles to Capital Formation

This layered view of capitalism explains why so few side hustles become companies. Most never move past Level 1 or 2. They exchange time for money or operate within a market, but lack the tools, language, and confidence to build something investable.

PFR exists to change that. We help bridge the gap between passion and platform, between personal ambition and institutional design. For example:

• Content creators move from ad revenue to structured licensing models.

• Founders shift from bootstrapping to investor readiness.

• Solo consultants evolve into scalable firms with equity-based partnerships.

What unites these transformations is the shift from short-term exchange to long-term value creation, from marketplace activity to capitalism.

Why Capitalism Is Hard—and Worth It

True capitalism is not plug-and-play. It assumes—and requires—the foundation of functioning markets and norms of fair exchange. As Nobel laureate Douglass North argued, the institutions of capitalism—contracts, legal systems, and cultural norms—must already exist before equity finance and scale become viable.

In the U.S., that foundation is in place. What many aspiring entrepreneurs lack is not access to capitalism, but fluency in how to operate within it. PFR helps close that gap through education, decision tools, and behavioral scaffolding. We help people not just start businesses—but build them the right way.

Capitalism is not a vending machine for wealth. It is a trust-based architecture that allows strangers to build together under uncertainty. It democratizes opportunity but demands responsibility. It rewards innovation—but only if paired with execution, integrity, and adaptability.

Capitalism as Human Expression

Finally, capitalism is not just an economic structure. It is a means of self-expression. When founders create a business, they are doing more than solving a problem—they are embedding their values into the world. This is why the best ventures do more than grow—they inspire.

As Adam Smith understood, prosperity is not the end. It is the means to live with dignity, purpose, and contribution. In our work with entrepreneurs, students, and community-based creators, we emphasize this dual pursuit: build wealth, yes—but build meaning, too.

Capitalism, rightly understood, allows us to do both.

Resources for the Curious

• Munger, Michael. “What Is Capitalism?.” EconTalk, July 7, 2025.

• Hulett, Jeff. Making Choices, Making Money. Personal Finance Reimagined, 2024.

• North, Douglass C. Institutions, Institutional Change and Economic Performance. Cambridge University Press, 1990.

• Hulett, Jeff. “Adam Smith and How Choice Architecture Makes the Invisible Hand More Visible.” The Curiosity Vine, July 9, 2023.

• Smith, Adam. The Theory of Moral Sentiments. 1759.

• Smith, Adam. The Wealth of Nations. 1776.

• Horton, Donald, and R. Richard Wohl. “Mass Communication and Para-Social Interaction: Observations on Intimacy at a Distance.” Psychiatry, vol. 19, no. 3, 1956, pp. 215–229.