Posts Tagged Capitalism

Who is John Galt?  He’s a fictional character in an ideological bludgeon of a novel, meant to represent the “producers” of the world.  The head mover and shaker who calls for a strike of the world’s brain trust in Ayn Rand’s novel, Atlas Shrugged.  Sales of the book have been going through the roof lately, fueled in part by the notion that the global economic downturn is in effect, that story come to life.  I find that point of view insulting, ignorant, and inaccurate.

It’s not that I dislike the book, quite the opposite.  Both Atlas Shrugged and The Fountainheadare among my favorite books.  The protagonists in those novels especially inspire me because I am one of those mystical creatures that the talking heads on television and politicians continually speak for but are seldom heard from: a small business owner. 

Politicians and pundits continually evoke “small businesses” and “small business owners” in their arguments and I am tired of letting them speak on my behalf, which is my motivation for starting this blog.  I don’t want a politician to speak for me, I can speak for myself.  Adding my own voice to the informational cacophony makes me feel a bit better.  Even if nobody is listening, at least I’ve spoken up.

I’m not sure what blogging etiquette is, but I feel that I should introduce myself briefly since this is my first post.  Hi I’m Rob.  About 2 years ago I started a software and web design and development company called Planet Telex.  At the time of this writing,we have 2 full time salaried employees (including myself) and a pool of around 5 contractors that we work with on a per-project basis.  My background is in computers and mathematics so learning the ins and outs of operating a business is still an ongoing process,but I have managed so far even though I’ve had to learn a few lessons the proverbial hard way. 

I am proud to consider myself an entrepreneur and a capitalist, but I do not share the fear and loathing of government that others of my ilk have expressed.  A fair-market capitalist or post-industrialist capitalist if you will.  As such, I like to think that I am in fact an innovator, which is why I take offence to the notion that the innovators are disappearing.  And yeah, I’m small time, but the suggestion of an Atlas Shrugpocolypse should be even more offensive to the likes of a Mark Zuckerberg, Jeff Bezos, Sergey Brin, or Larry Page.

Lots of things are offensive though, why bother address this notion in the first place?  Two reasons actually:  One is that such a claim takes the novel a bit too seriously, which I think is a problem.  The other is that this claim imparts a fundamental misunderstanding as to what motivates entrepreneurs.  Before elaborating upon this, I’ll quickly address the issue of taking Atlas Shrugged too literally.

Ayn Rand’s novels are caricatures; exaggerations to make a point.  I don’t fundamentally disagree with Ms. Rand’s ideology of individualism.  We are after all, individuals within a society.  The scales that balance the good of the individual against those of society are tenuous and extremely sensitive.  Nevertheless it is a fundamental question human societies will have to keep addressing as long as there is human society.  One fact is clear: there are just too many people in the world for pure individualism to be feasible.  We can only support our enormous global population with modern technology, specialization of skills and jobs, and the complex laws and rules that make up what we like to call society.  If you broadly consider socialism as a philosophy that values society over the individual, we must all favor socialism to the extent that we don’t favor massive death tolls or roving hordes of homeless people.  Authors like Ayn Rand or George Orwell write novels warning us not to tip the scales too far over to the “good of society” by revealing how socialism taken to an extreme infringes extremely upon the liberties of the individual.  As individuals in a society we try to balance out individualism and socialism.  Rand’s work is a heavy weight (pun) on the individualism side of that scale, but not the whole picture.  Not by a long shot.

People using a biased book to make a biased argument is nothing new though, and not the reason that has motivated me to write this blog entry.  What I really wanted to address is that anyone who takes the notion of an intellectual strike seriously seems to misunderstand what motivates innovation. 

Most people consider the accumulation of wealth as the primary goal of a capitalist.  Not true.  Myself, and most successful entrepreneurs I’ve met consider the creation of value our primary goal.  Because we trust in capitalism, we believe that if we succeed in creating something of value, we will be rewarded with some degree of wealth.  In a perfect world, the resulting wealth would be in direct proportion to the value generated.  If you create, distribute, and market something like the iPhone, you have added a product of substantial value to the market and should reap substantial rewards.

I’ll concede the point that the real world isn’t a perfect meritocracy, but to a large extent this is indeed what happens in capitalist societies dispite the flaws.  Flaws like Bernie Madoff.  He accumulated great wealth, but created no value.  This was his fundamental sin and it is akin to theft.  Not everybody steals big like Bernie, most steal small.  Anyone who takes more wealth than they generate in value is a drain on the entire system.  I call this “capitalism profiteering” and there is a good debate to be had as to how much should be allowed before stifling the creation of real value.  In other words, moochers will always exist, but what is the mooching threshold of our society?

This is starting to sound far too academic,  I want to get back to the issue of motivation because earlier I used the phrase “adding value,” which is business jargon. That’s great for pitching the board of directors, but not for describing motivation.  What dweeb sits around thinking thoughts like:  “How can I add value to the pizza service industry?”  Most people think thoughts more like: “It would be totally delicious if we injected cheese into the crust of this pizza.” And thus an innovation was born.

If that example seems trite, consider instead young Mark Zuckerberg circa 2003, staying up late, shooting the shit with his college roommates and ruminating upon “Wouldn’t it be cool if…?”  And thus one of the most important companies on the internet today was born.  Of course Mr. Zuckerberg and his buddies deserve big kudos for putting down the bong and getting to it.  Bringing an idea to reality and then to market, is in fact, an extremely difficult feat.  Most people have some idea for a product, service, web site, or what-have-you, but how many of them actually make it happen?  Very few- because it is a shit ton of work, and there is no guarantee of any reward.  In fact quite the opposite, most ventures fail.

Actually realizing an idea means that you have an exceptionally high opinion of that idea.  You want that idea to exist.  If it existed already you would be an enthusiastic consumer and would so love it.  It is this desire to bring to reality something that is in your mind that drives innovators and entrepreneurs.  Not that we don’t have materialistic desires too, but if we solely wanted to make money, there are a whole lot of better ways to do it than by starting a business.  When businesses fail they have still sucked a whole lot of time, effort, and often money from their founders.  Consider the risk versus the reward:  Would you risk a year of your life or more on an investment with a 10% chance you will get out more than what you put in?  It isn’t the most appealing proposition.  You have to really believe in your idea or innovation to undertake such risk.  What’s more, you have to really want that idea to manifest itself if for no other reason that you want to see that thing exist.

Not to mention it’s fun to create stuff. It’s fun to build and design and engineer and architect and solve problems and overcome challenges.  All too often the stresses of daily working life overshadow this fun factor, but anyone who has ever done any job or project well knows the satisfaction it can bring.  For me, achieving this satisfaction is a large contributing factor to my overall happiness, and I suspect this is true for most people who undertake projects.  I use the word “project” very loosely here:  It could mean creating a search algorithm, or landscaping a yard.  In either case, that project usually has value.  A great search engine transforms the way we store and access data on this planet, a great front yard is pleasing to the eye and place for respite and relaxation.  Both have value.  Real estate and stock markets help put a dollar amount on the value of each of these, but they both provide satisfaction to the individuals who conceived the project and undertook the effort.  Creating value is personally satisfying.  It is a win-win for both the individual and society.  While aware that some would consider this idealistic naiveté, I honestly believe this is what capitalism strives to achieve. 

As I write this I am attending The Next Web 2009 conference in Amsterdam.   I was amazed to hear the last keynote speaker of the first day, Chris Sacca, echoing this exact same sentiment.  Furthermore, he revealed that both Sergy and Larry feel “a strong social responsibility.”  The notion that you have to be a hippy or a communist to care about society is completely wrong.  Of course capitalists care about society.  First of all, society is where we sell products, services, and make money.  More importantly, we are people too.  We also live in this society.  Most commercial endeavors are born from a desire to improve daily life in some way, no matter how small.  This is just another way of saying that they have a desire to improve society.

At The Next Web I’ve seen a dozen or so start-ups present their companies and can report firsthand that innovation is indeed live and well, even if the monetization of some of these innovations is questionable. “What’s the buisness model?” is the first question asked to a presenter if they omitted that from their spiel.  This proves my point:  Businesses are being built around the idea of adding value to society, monetization is the secondary concern.  Twitter is all you hear about these days (especially on Twitter itself, which I find a tad self-indulgent) but it is still not making money.  Despite this, Chris Sacca (who is also an early Twitter investor and advisor) told the audience, “Anyone who can’t see how Twitter will make a whole lot of money shouldn’t be an entrepreneur.”  He says this because he is a true capitalist and believes that something of great value to society can be monetized largely to that extent.

It is also worth noting that Chris came to this conference from Ethiopia, where he has been working with a non-profit to dig wells for rural villages.  He is a capitalist and a socialist.  I think all good capitalists are socialists.  This is because every societal problem is a commercial opportunity. This reveals the paradox of Ayn Rand’s book:  If her innovators were as great and brilliant as she makes them out to be, they would be constructively addressing the challenges of society instead of running from them.  They would do this because every challenge can be a profit opportunity, but even more so because it is in their nature.

As The Next Web 2009 comes to a close, I feel overwhelmed by all the cool new stuff coming down the pipe- and this is just a small sample of what is going on in the world of technology.  I can’t help but to be optimistic in the presence of so many smart and driven individuals.  In a way I think that the global economic crisis has brought out the true capitalists.  The moochers aren’t in the startup game anymore, because the economy is not overvalued as it was.  There is no longer any room for capitalism profiteers that don’t create value.  These days they are all hanging out with John Galt.