This post is by Jeff Carter from Points and Figures
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There has been a lot of talk about inequality. There is a lot of anger bubbling up about it. This anger has roiled our discourse and allowed pure out of the closet socialists to get elected to office.
That’s dangerous to a capitalistic society.
If you want to see how a socialist society winds up, take a peek at what is happening in Venezuela today. I don’t want to hear the “They did it wrong” excuse. China, Russia and everyone else that has tried it did it wrong too. Socialism only works when enforced by the tip of a spear.
In the US, we have abandoned competition. In sports, everyone got a trophy. In dating, rejection was considered untoward so parents and schools would micromanage big events like proms. But, competition brings out the best in people. It brings out the best in outcomes as well.
I think that best to revisit why America is what it is. Here is a good piece to ponder. I’ll pull a quote so you get the gist:
“Everywhere in the world there are gross inequities of income and wealth. They offend most of us. Few can fail to be moved by the contrast between the luxury enjoyed by some and the grinding poverty suffered by others.
In the past century a myth has grown up that free market capitalism—equality of opportunity as we have interpreted that term—increases such inequalities, that it is a system under which the rich exploit the poor.
Nothing could be further from the truth. . . . A society that puts equality—in the sense of equality of outcome—ahead of freedom will end up with neither equality nor freedom. The use of force to achieve equality will destroy freedom, and the force, introduced for good purposes, will end up in the hands of people who use it to promote their own interests.”
Here is a stated goal of a lot of people in America. We’d like for everyone to have access to good quality health care.
It’s a worthy and noble goal for our society. The devil is in the details on how you achieve that goal.
My friends on the left want socialism. Nationalize medical care. Medicare for all. What’s the outcome for that?
Well, if you look at Venezuela not so good. What will happen for sure is that if you are wealthy enough, you will buy supplemental insurance and have all the access to all the great doctors you want. If you are upper middle class or lower, you will be forced to deal with a bureaucratic government health care system. When you have a cold it will be great. A physical, great. When you really need health care you will be forced to get in line. You might not live long enough to get the care you need.
Economist Gary Becker said that people looked at medicine wrong. What they need to look at is outcomes. Who has the best cancer survival rates in the world? The US. Who has the best orthopedic surgeons and outcomes in the world? The US.
Again, how do we get there? How do we get people the care that they need?
It’s an iron law in economics that the more perfectly competitive you can make a market, two things will happen. First, you will decrease the price of the good or service being provided. Second, the quantity that is consumed will go up. This is Microeconomics 101.
Instead, focus on solving the problem via intense competition. Try to create a perfectly competitive market. The solution you come up with will not provide for equal outcomes, but it will provide for access to care. It will mean revamping and looking at things very differently. For example, you will have to let insurance companies compete across state borders and eliminate state’s individual mandates. That’s ceding government control to the free market. Scary for a lot of people.
I read Fred Wilson’s piece yesterday and have been thinking about it. I don’t agree with Fred on the means to get to the end at all. But, I can find some common ground on the end game.
I know some billionaires. They didn’t get there by inheriting wealth. They got there because they created a product or service that provided a lot of value for people. Bill Gates and his posse created a lot more value for the world than they received by building Microsoft. Nothing was given to them. They earned it. Entrepreneurship is a brutal affair. It wasn’t any easier in 1900 than it is in 2019.
Billionaire entrepreneurs are very special people. They have an engine inside them that is just different. They look at the world differently. Once I was chatting with one and I asked how things were going. He said, “Well, my wife and I wanted to go out and get a burger and a see a movie. We could always get the burger, but never saw a movie playing we wanted to see. So, now I am making movies.”
Another billionaire friend of mine said it best. I asked them to compare Southern California and Northern California. They said, “Those people down there just talk. They lob ideas and chat. They go have coffee and brunch. Up here, we are doers.” Another pal said a similar thing when comparing the cities of Houston and Dallas to Austin. “Austin is a government town. They aren’t doers. They work their 9 to 5 and go home.”
Doers are very different. They execute. They get stuff done and they create value for all kinds of people without regard to anything else.
Competition creates doers because it creates opportunity. Doers embrace opportunity.
The startup world is competitive. It’s not the most competitive world I have ever seen. The trading floor was the most competitive place I have ever seen. It was win or die. However, I saw some pretty compassionate things happen on trading floors. I saw people pick other people up when the failed. I saw people do noble things that you would never imagine someone doing. I know a lot of people from the trading floor that would eat a lot of the entrepreneur world for breakfast and digest them by lunch.
Competitive capitalism isn’t about greed, more for me, and to exploit the downtrodden.
We hear a lot about “impact investing” today. Anytime an entrepreneur builds a company that builds a solution to a problem someone is willing to spend their hard earned dollars to receive, there is impact and value created. It raises society up and has impact.
A large percentage of the entrepreneurial world has forgotten that. They think they are smarter than the rest of us. They have the credentials. They are fat. Fat cows get gored.
We need to embrace competition in the US, not toss it aside.