Bill Gates, Microsoft, Dot-Com Companies, Dot-Com Bubble, Green Energy and Green Energy Companies

Posted by PITHOCRATES - December 18th, 2012

History 101

Investors poured Money into Dot-Com IPOs to get in on the Ground Floor of the next BIG Thing

Cash is king.  It is the lifeblood of a business.  The most serious business issues are discussed in blood metaphors.  When a company’s operations are losing money the company is ‘in the red’.  When the company’s losses are so great that there is a high probability of bankruptcy business analysts may say the company is ‘bleeding (or hemorrhaging) red ink all over their balance sheet’.  Indicating the death of the business is imminent.  For if the company is bleeding too much cash it simply won’t have the cash to pay its people, its vendors, its taxes, etc.  And it will cease to be.  Like any living organism that loses too much blood.

Healthy cash flows in a business are so important that analysts, investors, bankers, etc., will review one particular financial statement, the statement of cash flows, for an immediate assessment of a business’ health.  This statement shows the three sources of cash a business has.  Operating activities, investing activities and financing activities.  A successful business can generate all the cash they need from their operating activities.  To get there, though, they need startup capital.  Which comes from their financing activities.  The companies that are preparing for a surge in growth will look for venture capital.  And the inevitable initial public offering (i.e., going public).  For many companies the IPO is the measure of success.  Because going public is what makes these entrepreneurs millionaires.  And billionaires.

In the Eighties one such entrepreneur that became a billionaire is Bill Gates.  Mr. Microsoft himself.  Who made a fortune.  And is now working to give it away.  Just like Andrew Carnegie.  And John D. Rockefeller.  This geek made so much money with his software company that he made a lot of people wealthy who were smart enough to buy Microsoft stock early.  How these stockholders loved Bill Gates.  And every investor since has been waiting for the next Bill Gates to come along.  So they can get in on the ground floor of the next BIG thing.  And they thought they found him.  Rather, they thought they found a whole bunch of him.  Pouring their money into IPO after IPO.  Just waiting for the nascent dot-com companies to take off and soar into the stratosphere of profits.  For the Internet had arrived.  Few knew what it did.  But everyone knew it was the next BIG thing.

The Dot-Coms survived on Venture Capital and the Proceeds from their IPOs as they had no Sales Revenue

And these dot-coms took their money and spent it.  They hired programmers like there was no tomorrow.  They built office buildings.  Cities even offered lucrative incentives to attract these dot-coms to tech corridors they were building in their cities.  And splurged on infrastructure to support them.  The dot-coms bought advertising.  They spent a fortune to develop their brand identity.  Making them common place names in the new high-tech economy.  There was only one thing they didn’t do.  Develop something they could actually sell.

Those on the Left keep talking about how great the Clinton economy was in the Nineties.  Despite higher marginal tax rates than we have now.  These people who don’t even like Wall Street say the stock market did better under Clinton.  Apparently getting rich in the stock market was okay in the Nineties.  Today it only attracts occupy movements to protest the evil that stock profits now are.  But there was one subtle difference between the economy in the Nineties and the boom of the Eighties.  Most of the Nineties was a bubble.  A dot-com bubble.  It wasn’t real.  It was all paper profits that sent stock prices of companies that had nothing to sell soaring.  As all those stockholders sat and waited for these companies to sell the next BIG thing.  Taking them on a whirlwind ride to riches that never came.  Because once that startup capital petered out so did these dot-coms.  Leaving George W. Bush to deal with the resulting Clinton recession.

A review of their statement of cash flows for all of these failed dot-coms would show the same thing.  They would show tremendous flows of cash.  But it all flowed from their financing activities to their operating activities.  Which was nothing but a black hole for that startup capital.  All of these companies survived on venture capital and the proceeds from their IPOs.  They paid all their programmers, bought their buildings, paid for advertising and developed their brand with money from investors.  A healthy business eventually has to replace that startup capital with money from their operating activities.  Businesses that don’t fail.  Because even the most diehard of investors will stop investing in a company that can’t do anything but bleed red ink all over their balance sheet.

Instead of Investors taking the Loss on Green Energy Investments it’s the American Taxpayer taking the Loss

Bill Clinton had his dot-coms.  While President Obama has his green energy companies.  Which are similar to the dot-coms but with one major difference.  Instead of investors pouring money into these companies for a whirlwind ride to riches they’re sitting out the green energy industry.  Because it is a bad investment.  There will be no Microsoft in green energy.  Because it is a horrible business model.  The cost to harness the free energy out of wind and solar is just prohibitive.  The amount of infrastructure required is so costly that there can never be a return on investment.  Like there can be for a coal-fired power plant.  Which is something investors will invest their money in.

Green energy cannot compete in the marketplace unless the government subsidizes it with tax dollars.  Green industries cannot even build a factory.  While they have some private investors it is never enough.  Most green investors typically support these companies with a token investment.  But the real investors who expect a return on investment look at a green energy prospectus and say, “Thank you but no.  It is a horrible investment.”  And the people who want to build these plants know they’re horrible investments as they want to risk other people’s money.  Not theirs.  Which leaves but one source for startup capital.  A source that is so inept about business that they will pour money into a horrible investment.  The government.

The Energy Department invested heavily into these bad investments.  And a lot of them ended the same.  Just like the dot-coms.  The cash on their statement of cash flows went from financing activity to operating activities.  Another black hole for investment capital.  They spent that startup capital on plants and buildings.  Hired people.  And paid themselves very well.  But eventually they ran through that startup capital.  And were unable to get any more.  And with their operating activities unable to generate cash like in a healthy business many of the green energy companies went the way of the dot-coms.  Only instead of investors taking the loss it’s the American taxpayer taking the loss.  As it is their money that is bleeding out in red ink all over these green energy balance sheets.

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LESSONS LEARNED #65: “The only thing the market is inefficient at is funneling money to anti-business politicians.” -Old Pithy

Posted by PITHOCRATES - May 12th, 2011

Microsoft Learns the hard way about the Costs of Lobbying

Once upon a time Microsoft had no lobbyists.  Microsoft grew to dominate the PC operating system with no help from the government.  Bill Gates became the richest man in the world with no help from the government.  And how did that go over with the government?  Not well.

Because of complaints by Microsoft’s competitors, the U.S. Justice Department began antitrust proceedings against Microsoft.  The complaint?  Microsoft was giving away something for free that others wanted to sell.  A web browser program.  Internet Explorer (IE), to be specific.  The competitors said that Microsoft had an unfair advantage when they bundled IE with their operating system.  Because why would people pay for something that they can get for free?  Consumers never complained about getting something free.  Just other corporations trying to make consumers pay for something that they could get free from Microsoft.  So the Justice Department went after Microsoft so consumers could no longer get something for free.  In other words, the antitrust case against Microsoft was to raise prices.  Which is kind of the opposite reason for an antitrust case.

Government may not know how to create or expand business activity.  But they sure know how to hurt a business.  Microsoft still bundles IE with their operating system.  But they learned a very important lesson.  And, today, Microsoft spends millions of dollars on lobbyists.  To lobby politicians for nothing in particular.  But to pay tribute.

There was no Health Care Cost Crisis before World War II

Once upon a time people paid their doctor’s bill.  Really.  They’d see their doctors.  The doctor would bill them.  And they would pay.  Of course, that was a long time ago in a mystical place.  The United States.  Before World War II.  Yeah, I know.  Crazy talk.  Paying your doctor’s bill.  But some crazy sons of bitches really did. 

Of course, back then, medicine wasn’t socialized yet.  Market forces controlled medical costs.  How, you may ask?  Simple.  The people ‘buying’ the medical services paid the bill.  Medical services were just another service provided by licensed professionals.  Like a plumber.   And though plumbers are expensive, they are affordable.  Because if they weren’t affordable, there wouldn’t be a market for their plumbing services.  As it was for doctors.  Before World War II.  Doctor services were affordable.  Because if they weren’t, there wouldn’t be a market for their medical services.  And it worked like this until World War II.  When health care became a benefit.  And benefit administrators came between buyers and sellers of medical services.

Let’s do a little experiment.  Let’s say you work for a company that is putting together a company picnic.  The company is paying the tab for all 20 employees attending.  And you get a company credit card to buy the food with no restrictions given.  What are you going to buy?  Hotdogs and hamburgers?  Or filet mignon?  Now, later in the summer, you’re having a family BBQ.  There’ll be 20 people in all.  But this time you’re paying the entire bill.  What are you going to buy?  Hotdogs and hamburgers?  Or filet mignon?  Chances are that you’ll be eating different food at these events.

The Price Mechanism doesn’t work if someone else Pays our Bills

Do you see how having someone else pay for your benefits affects your purchasing decisions?  You’ll be enjoying filet mignon on the company’s dime.  But you’ll be satisfied with hotdogs and hamburgers on your dime.  This is the problem in post World War II health care.  There are no market forces anymore in health care.  Someone else is paying for your benefits.  So you don’t care what the costs are.  So you’ll never object to getting the filet mignon of health care benefits.  Even if you’re a single guy.  And your employer is paying for insurance that includes breast and cervix exams.  If you were paying the full cost of your health insurance bill, though, you probably would not pay for breast and cervix exams.  Sure, they’re nice.  But as a guy you would probably never use these benefits.  So you probably wouldn’t pay for them.

This is a big reason why health care costs are so out of control today.  There are no market forces in play to control costs.  Other people pay for our benefits.  So we never ask, “Can I afford this?”  Which everyone does before hiring a plumber.  Dr. Gratzer, a physician and senior fellow at the Manhattan Institute, wrote that Americans pay only twelve cents for every dollar of health care services they receive.  Which means 88% of the American health care is already socialized medicine.  In other words, other people pay for 88% of an American’s health care.  And when other people are paying, how often do you ask, “How much does this cost?”

This is why health care costs are out of control.  Elsewhere in the economy prices serve as a mechanism to adjust supply and demand.  Not in health care.  No one knows the prices in health care.  Because no one asks.  And the further we go in this direction the worse it’s going to get.  Yet that is exactly the direction some in government want to take health care.  Why?

Politicians Matter more than the Cost of Health Care

Because the market is efficient.  It works very well when left alone.  Just ask Bill Gates.  Or anyone who saw a doctor before World War II.  The market works.  But it has one drawback.  It doesn’t need government.  And for those who are looking for a career in politics, that’s a problem.

Microsoft wasn’t harming any consumers.  They were hurting other businesses that couldn’t make consumers spend more money.  So the politicians stepped in.  To show they mattered.  And cared.  Also, Microsoft was obscenely wealthy.  A little lobbying on their part could fill a few campaign war chests.  And provide a nice vacation or two.  They just needed to see the light.  How things worked in Washington.

But becoming a senator or a representative needs more than a fat war chest.  You need people to vote for you.  And a good way to do that is to get as many people dependent on government as possible.  Either as patients in a new national health care system.  Or as employees in a vast new bureaucracy for the new national health care system.  Which is why they’re not turning to the free market to fix the cost problems in their health care system.  Like they are in the UK and Canada.  They don’t want to fix the cost problems.  They want the dependency created by a new national health care system.  They can worry about costs later.  After they’ve taken over one-sixth of the U.S. economy.

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LESSONS LEARNED #20: “It is never a consumer that complains about ‘predatory’ pricing.” -Old Pithy

Posted by PITHOCRATES - July 1st, 2010

ECONOMIES OF SCALE and vertical integration can do two things very well.  Make industrialists rich.  And make the things they sell cheap. 

The more you make, the less each thing you make costs.  Businesses have fixed costs.  Big one time investments in plant and equipment.  Businesses have to recover these costs.  Each thing they sell has a portion of these fixed costs added to its price.  The more they sell, the less they need to add to each unit sold.  This is economies of scale.  Think of bulk goods.  Warehouse clubs.  Places where you can buy large quantities of things at lower unit prices.  You may buy an ‘economy pack’ of 3 bottles of shampoo shrink-wrapped together.  The purchase price of a 3-pack will be greater than the price of a single bottle of shampoo at your convenient corner drug store.  But the unit cost of each of the bottles in the 3-pack will be less.  You save more over time by buying 3 bottles at a time.  Spending more, then, means spending less.  In time.

Few of us buy raw materials.  Few have a need for crude oil.  Iron ore.  Coal.  Limestone.  Manganese.  But they make the stuff we buy.  A lot of things have to happen before those raw materials make it to us in those things we buy.  It has to be mined or drilled/pumped.  Transported.  Processed.  Stored.  Transported again.  Processed again.  Stored again.  Transported again.  There are many different stages between extracting raw materials from the earth and incorporating them into a final product we consumers buy.  At every stage there are costs.  And inefficiencies.  Which add to costs.  By reducing these costs along the way, the component materials used at the final manufacturing stage cost less.  This reduces the selling price of the final product.  This is what vertical integration does.  It puts everything from the extraction of raw materials to the incorporation of those processed materials into the final product for sale under control of the final user.  It brings in a high level of quality, cost containment and reduction of inefficiencies into the entire process resulting in a high quality, mass produced, inexpensive product.

Not everyone can do these things.  You have to live and breathe the industry you’re in.  You have to understand it intimately.  An industrialist at the top of his game can do this.  A politician can’t.  States trying to take control of their economy have failed.  Every time they’ve tried.  Why?  Politicians are ‘intellectuals’.  They’ve never run a business.  They only thought about it.  And, somehow, that gives them the moral authority to tamper in something they are simply unqualified to do.  And when they meddle, they destroy.  Purposely.  Or through unintended consequences.  In the process, though, they enrich themselves.  And their cronies.

ANDREW CARNEGIE WAS a brilliant entrepreneur.  After working for a railroad, he saw the future.  Railroads.  And he would build its rails.  And its bridges.  With his Keystone Bridge Company.  Which used steel and iron.  So he built his Union Mills.  Which needed pig iron.  So he built his Lucy blast furnace.  Which consumed raw material (iron, coke, limestone).  So he secured his own sources of raw materials. 

His Lucy blast furnace set world records, nearly doubling the weekly output of his steel competitors.  No one made more steel than Carnegie.  For less.  In about 20 years, he brought the price down for steel rails from $160/ton to $17/ton.  And got rich in the process.

Economies of scale.  Vertical integration.  And innovation.  Carnegie hired the best people he could find and used the latest technology.  Always improving.  Always cutting costs.  Always making steel more plentiful.  And cheaper.  His steel built a nation.  Dominated the industry.  And destroyed the competition.  Of course, that drew the attention of the government.  And they tried to break up the steel giant because it was unfair to the competition.  Who couldn’t sell steel as cheap as he could.

JOHN D. ROCKEFELLER was a brilliant entrepreneur.  After trying the oil drilling business, he saw the future.  The refining business.  For America lit the night with kerosene.  And he would provide that kerosene.  At prices that a poor man could afford.  And he did.  And he saved the whales in the process (his cheap kerosene put the whale oil business out of business).

Like Carnegie, cutting costs and production efficiencies consumed him.  He built his own kilns and used his own timber for fuel.  He made his own barrels from his own timber.  He used his own horse-drawn carts, boats, rail cars and pipelines.  He bought up competitors.  He grew to dominate the industry.  By far the biggest shipper, he got better shipping rates than his competitors.  And he constantly innovated.  When others were dumping the gasoline byproduct from refining kerosene into the river (no internal combustion engine yet), he was using it for fuel.  He hired the best talent available to find a use for every byproduct from the refining process, giving us everything from industrial lubricants to petroleum jelly (i.e., Vaseline).

His company, Standard Oil, was close to being a monopoly.  When they controlled 90% of the market kerosene was never cheaper.  He brought the price down from $0.26/gallon to $0.08/gallon.  And that was an outrage.  We can’t allow any one company to control 90% of the market.  Sure, consumers were doing well, but the higher-cost competitors could not stay in business selling at those low prices.  So the government broke up Standard Oil via antitrust legislation (the Sherman Act).  To protect the country from monopolistic practices.  And cheap kerosene, apparently.

BILL GATES WAS a brilliant entrepreneur in building Microsoft.  The personal computer (PC) was new.  You couldn’t do much with it in the early days unless you were pretty computer savvy.  But programs were available that made them great business tools (word processing and spreadsheet programs). 

IBM created the PC.  And they licensed it so others could make IBM-like machines.  IBM clones.  The PC industry chewed each other up.  But Gates did well.  Because all of these machines used his operating system (Microsoft’s Disk Operating System – DOS).  Apple developed the Macintosh (with a mouse and Graphical User Interface – GUI) but it was expensive.  Anyone who used one in college wanted to buy one.  Until they saw the price.  So they bought an IBM clone instead.  And when Gates came out with Windows, they were just as easy to use as the Macs.

Because of the higher volume of the IBM platform sold, Microsoft flourished.  Software was bundled.  New machines came preloaded with Windows.  And Internet Explorer.  And Windows Media Player.  You got a lot of bang for the buck going with a Windows-based PC.  And Windows dominated the market.  Consumers weren’t complaining.  Much.  Sure, there were things they did bitch about (glitches, drivers, viruses, etc.), but it sure wasn’t price.

Of course, Microsoft’s competitors were hurting.  They couldn’t sell their products if Microsoft was giving away a similar product free.  Because they were hurting their competitors, the government tried to break up the company with the Sherman Act. 

THE NORTHERN SECURITIES SUIT of 1902 found a holding company guilty of not yet committing a crime.  Teddy Roosevelt’s administration filed a Sherman antitrust suit against Northern Securities.  This was a holding company for Northern Pacific, Great Northern, and Chicago, Burlington, and Quincy Railroads.  What’s a holding company?  It replaced a trust.   Which large corporations created in response to government’s attacks on large corporations.

Small competitors feared large corporations.  They could not compete against their economies of scale and vertical integration.  The little guys couldn’t sell things as cheap as the big corporations could.  So the government intervened to protect the little guy.  So they could sell at higher prices.

But businesses grow.  All big corporations started out as little guys.  And the growing process doesn’t stop.  So the big corporations had to find other ways to grow.  They formed trusts.  Then the trust-busters busted up the trusts.  The next form was the holding company. 

The trust-busters said that the big corporations, trusts and holding companies were all trying to become monopolies.  And once they eliminated all competitors, they would raise their prices and gouge the consumers.  Northern Securities never did.  But they could.  So they were guilty.  Because they might commit a crime.  One day.

ALL BUSINESS OWNERS aren’t morally ethical and honest.  But the market is, albeit cruel.  Economies of scales will always put the little guy out of business.  Sad, yes, for the little guy.  But for every little guy put out of business, millions of consumers save money.  They can buy things for less.  Which means they have more money to buy more things.  New things.  Different things.  From new little guys who now have a chance with this new surplus of purchasing power.

But when politicians get involved, consumers lose.  When they help a competitor, they help them by keeping prices high.  To keep competition ‘fair’.  For the politically connected.

Consumers never complain about low prices.  Only competitors do.  Or their employees.  Those working on whaling ships didn’t like to see the low price of Rockefeller’s kerosene.  But the new refining industry (and its auxiliaries) created far more jobs than were lost on the whaling ships.  We call it progress.  And with it comes a better life for the many.  Even if it is at the expense of the few.

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FUNDAMENTAL TRUTH #11: “Before you condemn capitalism, imagine a world without professional sports, movies, cell phones and tampons.” -Old Pithy

Posted by PITHOCRATES - April 27th, 2010

PEOPLE HAVE SOME strong opinions about capitalism.  Both good and bad.  So what is it?  What is capitalism?

Merriman Webster OnLine defines it as:

An economic system characterized by private or corporate ownership of capital goods, by investments that are determined by private decision, and by prices, production, and the distribution of goods that are determined mainly by competition in a free market.

To explain this let’s start by explaining what it replaced.  In fact, let’s go further back.  A few hundred years when life truly sucked by our standards.  During the Middle Ages, people barely lived.  People worked very hard and had little time off.  When they did they usually spent it sleeping, being sick, dying or being dead.  You grew or killed what you ate.  You built your own house.  You made your own clothes.  You died probably no further than a short walk from where you were born.  And you worked your whole life somewhere in between.

Think of peasant or serf.  That’s what most were.  Tied to the land.  You had no choices.  If you were born on the land you worked the land.  Until you died.  The land owned you and someone owned the land.  You worked the land at the grace of the owner.  You helped produce his food and, in return, he let you have a small parcel of land to grow your food.  There was a bond of loyalty between landlord and tenant.  Land and protection in exchange for backbreaking, never-ending labor.  Doesn’t sound good until you consider the alternative.  Death by famine.  Or death by murder at the hands of roving bands of outlaws.

Improvements in farming led to more food production.  Eventually, there were food surpluses.  This meant not everyone had to farm.  Some could do other things.  And did.  They became specialists.  Artisans.  Craftsmen.  Cities grew in response to commerce.  People went to market to trade for things they wanted.  Then they started using money, which made getting the things they wanted easier (it’s easier to go to the market with a coin purse than with a sack of grain or a side of beef).  Life got better.  People enjoyed some of it.

THUS BEGAN THE rise of a middle class.  Those city folk making things or doing something.  They were good at what they did and people gladly paid for what they did.  These specialists then improved what they did and thought of new things to do.  They created things to make their work easier.  These individual specialists grew into manufacturing shops.  The cost of production only limited their output.  And banking solved that problem.

Alexander Hamilton, one of America’s Founding Fathers, was a capitalist.  And he thought big.  Money is nice but what can it get you?  A few things for the home?  Something for the wife?  Maybe some new farm tools.  Good stuff, yes, but nothing big.  Lots of little sums of money all over the place can buy lots of little things.  But when you pool lots of little sums of money you get one big-ass pile of it.  That money is now capital.  And you can do big things with it.

And that’s what banking has given us.  People with ideas, entrepreneurs, could now borrow money to bring their ideas to market.  And this is, in a nutshell, capitalism.  The free flow of ideas and capital to make life better.  Making life better wasn’t necessarily the objective; it’s just the natural consequence of people mutually partaking in a free market.

BUT WHAT ABOUT the Soviet Union?  Didn’t they do big things, too?  They built jetliners.  They had a space program.  They had factories.  They did these and other things without capitalism.  They did these things for the good of the people, not for profits.  Isn’t that better?

Talk to someone who wiped their ass with Soviet-era toilet paper.  Let me save you the trouble.  It didn’t feel good.  Unless you enjoy the feel of sandpaper back there.  And to add insult to injury, you had to wait in line to get that toilet paper.  If it was available.

When you think of the Soviet economy you have to think of stores with empty shelves and warehouses full of stuff no one wants.  This is what a command economy does for you.  Some bureaucrat, not the consumer, determines what to sell.  And one person simply cannot figure out what a hundred million plus want.  To get an idea of how difficult this is, pick a movie that 4 of your friends would love to see.  Pick a couple of guys and a couple of girls.  For diversity.  And remove the possibility of sex completely from the equation.  Now pick.  Not so easy, is it?  Now try to pick a movie a hundred million people would love to see.  Can’t do it, can you?  No one can.  Because people are diverse.  One size doesn’t fit all.

Soviet president Mikhail Gorbachev asked Margaret Thatcher how she made sure her people had enough food to eat.  The Soviets were having difficulty feeding theirs.  In fact, they were importing grain from their archenemy.  The United States.  The answer to Gorbachev’s answer was that Thatcher did nothing to feed her people.  The free market fed her people.  Capitalism.

As far as those other big things the Soviets did, they acquired a lot of the knowledge to do those things through an elaborate network of espionage.  They stole technology and copied it.  And they were the first into space because their captured Nazi rocket scientists did it before our captured Nazi rocket scientists did.  (The seed of the space industry was the Nazi V-2 rocket that reigned terror on London and other cities during World War II).

(Lest you think that I’m ripping on the Soviet/Russian people, I’m not.  Just their economic system during the Soviet era.  Their people have suffered.  And persevered.  It was them after all who first threw back Napoleon in Europe.  And it was them who first threw back the Nazis in Europe.  They gave us Pyotr Ilyich Tchaikovsky, Sergei Rachmaninoff, Leo Tolstoy, Fyodor Dostoyevsky, Mikhail Dolivo-Dobrovolsky and, of course, Maria Sharapova to name just a few of the greats.  Good people.  Just sometimes bad government.  As in most nations.  Even in the U.S.)

SO WHAT IS the basic difference between capitalism and a command economy like that of the former Soviet Union?  Probably the freedom to take and accept risk.  Bankers take a risk in loaning money.  They analyze the risk.  If the return on the loan is greater than the risk, they’ll make the loan.  It’s their call.  And they’re pretty good.  Their successes are far greater than their failures.

Some loans are riskier than others.  There’s a greater chance of failure.  But it could also be the next, say, Microsoft.  Or Apple.  If so, even though there’s great risk, the potential of reward is so great that people will want to loan money.  They’ll buy junk bonds (high risk/high yield) or an initial public offering of stock.  They’ll risk their money for a greater return on their investment.  If it pays off.  And they don’t always do.  But good ideas with potential typically find financing.  And investors typically make more money than they lose.  It’s a pretty good system.  Capitalism.

WHEN YOU HAVE risk takers who choose to participate in the free flow of ideas and capital, great things happen.  Modern AC electrical power that we take for granted is invented (thank you Nikola Tesla for the genius and George Westinghouse for taking the risk).  You develop modern commercial jet aviation (thank you Boeing for the 707, 727, 737, 747, well, you get the picture).  You transform the world when you add impurities to semiconducting material and sandwich them together (thank you John Bardeen, Walter H. Brattain and William B. Shockley for the transistor).

These great things, along with others, give us professional sports (stadiums, transportation to and from the stadium, jetliners to take teams to other stadiums, oil exploration and refining for jet and car fuel, etc.).  They give us movies (financing, cameras and production equipment, special effects, theaters, popcorn, DVDs for home viewing, etc.).  They give us cell phones (cellular towers, switching networks, compact and long lasting batteries, interactive handheld devices, voicemail, email, texting, etc.).  And they liberated women to do whatever they want wherever they want by making feminine hygiene protection portable and plentiful (mass production, rail and truck transport, retail and vending outlets, etc.) and by providing convenient privacy (public toilet facilities with vending machines and disposal bins). 

Imagine any of these things provided by the same people who renew our driver’s license.  Do you think any of it would be as good?  Or do you think it would be more like Soviet-era life?  There’s so much we take for granted in capitalism because we can.  It’s a system that works on basic human nature.  It doesn’t require sacrifice.  It doesn’t depend on consensus.  It just needs the free flow of ideas and capital.  And great things follow.

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