After announcements earlier this month that Elon Musk had become the world’s first trillionaire, there was an outpouring of attacks from people who thought that was horrible.
"there was an outpouring of attacks from [leftists] who thought that was horrible" - FTFY DH ;-)
Of course SpaceX is a wonderful company that has greatly reduced the price of launching satellites into space. This IPO represents 4% of the company and the extrapolated valuation of the shares based on the issuance of this 4% to the public means there are some in the market who believe the present value of the future expected cash flows exceeds $1tn. Given its current sales of $19bn, I personally think this valuation is rich, but that's beside the point.
What I personally find scary about leftist chagrin here is, firstly, the failure to recognize that the present value of the future expected cashflows hasn't even happened yet. There's no bank account with more a trillion dollars in it. But more importantly, what's more scary is that leftists are vilifying the golden goose whose eggs pay for the welfare state they support.
“We’re living in a time when more and more people are just hanging on by their fingernails to survive in this economy, and Elon Musk has more money and more wealth than anyone [else] in human history.” —Elizabeth Warren
Great piece.
And while you are of course right in eviscerating Warren on the second part of what she said re: billionaires and money, you neglected to point out that the first part of her claim isn’t true either.
By *any* reasonable definition, it is simply not the case that there are “more and more people” in worse shape than they used to be.
Despite (not because of) leftist anti-growth policies, almost all Americans - and most humans around the globe - are in fact better off than ever before.
As some of your own pieces, and the pieces of so many of those you’ve pointed to, make clear.
Whether or not she is willing to accept the (pretty clear) truth that entrepreneurs becoming billionaires is overall goodness as one of the main reasons.
This discussion reminds me of something I have thought about but never seen written about anywhere. The socialist criticism of capitalism dates from the early days of the Industrial Revolution, when technological change and business innovation was just beginning to raise living standards for the non-wealthy. Socialism was part of the Romantic response to the Industrial and Market revolutions, but its intellectual premise (that capitalist wealth came from exploitation of workers) was much truer of the pre-market agricultural society that preceded those revolutions. Much wealth in the pre-modern world was exploitative, arising from social arrangements under which the nobility used its monopoly on the effective use of force to extract a large percentage of the surplus production of the peasant class, whether free but dependent, semi-free or unfree. What was a legitimate critique of wealth in the “feudal” era became illegitimate once wealth was being created in ways that benefitted, rather than exploited, the working class (both as consumers and eventually as workers). John D. Rockefeller, for instance, became the richest man in history by ruthlessly driving down the price of lighting and then transportation fuel, with the result that twentieth century workers had inexpensive artificial light and means of mobility that were completely unavailable to 18th Century Kings. But the so-called “progressive” critics were so intellectually tied to an analysis based on the now superseded feudal economy that they totally missed the change.
I'm so glad you wrote this. What great insights! Especially the gains to consumers, compared to producers, which you mentioned get a lousy 2.2% of the haul. As you said: " The remaining 97.8 percent of the gains from innovation go to consumers. Thanks for sharing the German's exhuberance about America too. I belong to a Spanish Club at the University Club of Chicago. When some of the group started bad-mouthing America (in a slight way), a German lady, who has been incredibly innovative in nuclear power along with her husband, said: "You people have no idea. It's very difficult to innovate in Germany." And she went on further though I don't remember the details now. It was very emotional for her, but I think the lefty crowd may not have gotten the message.
Joy, nice stuff. The lousy 2.2% also comes at enormous odds AGAINST risk taking Entrepreneurs. It's estimated that 90% of startups fail in five years. I suspect even econ illiterates like AOC or Senator Warren would not go to Las Vegas or Atlantic City with those odds against.
Great point! I also like Ayn Rand's point that the janitor in a good company, as well as the other rank-and-file employees, owe much to the innovator who started it. Not only their livlihood, but their feeling of purpose. They wouldn't even have a job without the risktakers.
I have always taken the opinion that the founders of the companies I worked at, and the followers who "merely" took the reins of an existing company, are doing work that I have zero inclination in doing. It would be a sorry spectacle for me to demand they fork over their pay to me just because I don't want to do their job.
Chart, good point. Of course the moment you made that demand , you would be summarily "outplaced!" Years previous, a well paid,150k per annum, employee of my firm wanted a bigger piece of the pie. His words. He thought he was a partner because of his position as the firm's medical director. I informed him that being a partner required buying in and putting his name on loan documents. He refused, claiming he was a de facto partner because he was irreplaceable. News flash. he was replaced by another within days of his dismissal.
I hold Warren’s socialism against her way more than I hold it against AOC.
At the end of the day, AOC and Bernie Sanders and their like are midwits who don’t seem to fully understand that what they seek would kill the goose that lays the golden eggs.
But Warren is clearly more intelligent than either of them, and at some level knows this, but just doesn’t care.
Whether for purely selfish reasons, or out of envy, or merely Machiavellian “end justifies the means” reasons (my personal suspicion), some combination of these, or something else.
"At the end of the day, AOC and Bernie Sanders and their like are midwits who don’t seem to fully understand that what they seek would kill the goose that lays the golden eggs."
I assure you my golden goose reference above was written before reading this, no plagiarism intended!
Good point. It's amazing that she was one of the law professors who attended the training in economics for law professors that Henry Manne started and I taught in.
As an aside Warren taught the kindergarten class in Riverdale, NJ of the current kindergarten teacher (Yes, she was an alum of the very kindergarten she taught) who had my kids. Let's hope leftism is not a communicable disease.
AI telling me that isn't true by the way: "Elizabeth Warren was never a kindergarten teacher in Riverdale, NJ. She worked as a speech pathologist (sometimes referred to as a speech correctionist or special education teacher) for the Riverdale School District during the 1970–1971 school year." -- I DID believe it. My kids' kindergarten teacher also would not have been old enough to have been there that year!
It reminds me of one of my early stories about the United States. After graduating from the University of Winnipeg in 1970, I hitchhiked across Canada and down the U.S. west coast in what a friend referred to as a libertarian pilgrimage. At one point, I ended up at a science fiction conference in Santa Barbara on the July 4 weekend. Growing up in Canada, I had always thought of July 4 with reverence. I wanted to share that with some of the libertarians I met there. One was a prominent libertarian whom I instantly liked. He called himself Skye D'Aureous. His real name, I later learned, was Durk Pearson.
I don't remember exactly what I said, but it was something very positive about the United States. Skye gave a world-weary response whose essential content was that this is not a great country. He certainly had his reasons. The Vietnam War was raging and the draft was still on, to name two reasons. He was pretty clearly comparing the United States with an ideal and finding it lacking. I was comparing the United States with Canada and, although, to its credit, Canada had (and has) an even more impressive history of a volunteer military than the United States had, I saw the possibilities for the United States in ways that even some sophisticated libertarians seemed to have trouble seeing.
That's a great story too! I went to only one Libertarian Party convention, in the late 80s, and met a couple of people like that too. They seemed to think that the US was worse than others, or just as bad.
Don’t tell me the problem is that “foreign” sweatshops have cheaper labor costs than American manufacturers; Or that big companies are greedy and don’t care about American workers!
The Problem
In the mid-1980s, Sam Walton grew increasingly troubled by the decline of American manufacturing and the loss of local textile jobs due to cheaper overseas imports. At the time, Walmart was buying huge quantities of flannel shirts from overseas vendors because domestic suppliers couldn’t match the price.
The Large Order Strategy
Walton approached Farris Burroughs, the head of Farris Fashions, with a challenge. Walton wanted to know if Farris Fashions could produce a massive run of flannel shirts at a price competitive with imports.
To make it happen, Walton leveraged Walmart’s immense scale:
• Guaranteed Volume: Walmart placed an extraordinarily large, guaranteed order months ahead of time.
• Upfront Commitment: By providing a non-cancelable commitment so far in advance, Walmart allowed the shirt company to buy their raw materials (like fabric and thread) in massive bulk at deeply discounted prices.
• Operational Efficiency: The guaranteed volume allowed the factory to plan its labor and production schedules perfectly, cutting out the typical waste, downtime, and inventory overhead that usually drives up the cost of American manufacturing.
The Result
Thanks to the sheer scale of the order, Farris Fashions was able to produce high-quality, American-made flannel shirts at a cost that allowed Walmart to sell them at their famous low prices while still turning a profit. The deal saved and created numerous manufacturing jobs in a small Arkansas town.
PS—Walton used this exact story in Made in America to prove his thesis: if a retailer and a domestic manufacturer partner together transparently and utilize high-volume forecasting, American factories can out-compete foreign imports.
PS—This was actually Sam Walton’s “Buy American" campaign in 1985.
Thanks; this is a subject that needs lots of emphasis. Public misconceptions (encouraged by hideous people like Elizabeth Warren) can lead a healthy nation into poverty. It's right up there in importance with understanding the terrible destructiveness of minimum wage laws and prohibitions on "price-gouging" after a natural disaster.
“What will the innovator do during that year? Cut price? Maybe a little but not much. For one year, all his competitors are using a method that costs $1.80 per unit and are charging $2.00. What the innovator could do is cut the price to, say, $1.90 per unit and take a large share of the market. Let’s say he takes half the market. Then 67 million households will buy 3.484 billion of his units and will spend $6.62 billion on his product.”
This is brilliant! You have captured Sam Walton’s secret to Walmart’s success—tiny margins and a huge market share.
In his 1992 autobiography, Sam Walton: Made in America, Sam Walton wrote about how Walmart's low prices do more good for working-class people than the government's welfare system.
“See, here’s the thing: by saving these people all this money on things they have to buy anyway—things like groceries and socks and underwear and television sets—we are giving them a raise. We’re giving them a better life. We’re doing more good for them than any welfare system the government could ever devise, and we’re doing it through the free market."
You know, Dan, when I lived in NJ I honestly didn't think much about that, but where I live in TN, Pickett County, the three closest Walmarts are Monticello, KY, Jamestown, TN and Cookeville, TN, three locations I am familiar with because if I am passing by any of the three I will almost invariably stop by or text my wife to ask if we need something from Walmart since I'm close by. That's because all we have locally is an IGA and a dollar holler. So all of a sudden you don't take Walmart for granted any longer.
Yes! It reminds me of this quote from George Stigler that was so good that I put it in the bio I wrote of him for The Concise Encyclopedia of Economics:
Sears, Roebuck and Company and Montgomery Ward made a good deal of money in the process of improving our rural marketing structure, but I am convinced that they did more for the poor farmers of America than the sum total of the federal agricultural support programs of the last five decades.
"there was an outpouring of attacks from [leftists] who thought that was horrible" - FTFY DH ;-)
Of course SpaceX is a wonderful company that has greatly reduced the price of launching satellites into space. This IPO represents 4% of the company and the extrapolated valuation of the shares based on the issuance of this 4% to the public means there are some in the market who believe the present value of the future expected cash flows exceeds $1tn. Given its current sales of $19bn, I personally think this valuation is rich, but that's beside the point.
What I personally find scary about leftist chagrin here is, firstly, the failure to recognize that the present value of the future expected cashflows hasn't even happened yet. There's no bank account with more a trillion dollars in it. But more importantly, what's more scary is that leftists are vilifying the golden goose whose eggs pay for the welfare state they support.
“We’re living in a time when more and more people are just hanging on by their fingernails to survive in this economy, and Elon Musk has more money and more wealth than anyone [else] in human history.” —Elizabeth Warren
Great piece.
And while you are of course right in eviscerating Warren on the second part of what she said re: billionaires and money, you neglected to point out that the first part of her claim isn’t true either.
By *any* reasonable definition, it is simply not the case that there are “more and more people” in worse shape than they used to be.
Despite (not because of) leftist anti-growth policies, almost all Americans - and most humans around the globe - are in fact better off than ever before.
As some of your own pieces, and the pieces of so many of those you’ve pointed to, make clear.
Whether or not she is willing to accept the (pretty clear) truth that entrepreneurs becoming billionaires is overall goodness as one of the main reasons.
True.
This discussion reminds me of something I have thought about but never seen written about anywhere. The socialist criticism of capitalism dates from the early days of the Industrial Revolution, when technological change and business innovation was just beginning to raise living standards for the non-wealthy. Socialism was part of the Romantic response to the Industrial and Market revolutions, but its intellectual premise (that capitalist wealth came from exploitation of workers) was much truer of the pre-market agricultural society that preceded those revolutions. Much wealth in the pre-modern world was exploitative, arising from social arrangements under which the nobility used its monopoly on the effective use of force to extract a large percentage of the surplus production of the peasant class, whether free but dependent, semi-free or unfree. What was a legitimate critique of wealth in the “feudal” era became illegitimate once wealth was being created in ways that benefitted, rather than exploited, the working class (both as consumers and eventually as workers). John D. Rockefeller, for instance, became the richest man in history by ruthlessly driving down the price of lighting and then transportation fuel, with the result that twentieth century workers had inexpensive artificial light and means of mobility that were completely unavailable to 18th Century Kings. But the so-called “progressive” critics were so intellectually tied to an analysis based on the now superseded feudal economy that they totally missed the change.
I'm so glad you wrote this. What great insights! Especially the gains to consumers, compared to producers, which you mentioned get a lousy 2.2% of the haul. As you said: " The remaining 97.8 percent of the gains from innovation go to consumers. Thanks for sharing the German's exhuberance about America too. I belong to a Spanish Club at the University Club of Chicago. When some of the group started bad-mouthing America (in a slight way), a German lady, who has been incredibly innovative in nuclear power along with her husband, said: "You people have no idea. It's very difficult to innovate in Germany." And she went on further though I don't remember the details now. It was very emotional for her, but I think the lefty crowd may not have gotten the message.
Joy, nice stuff. The lousy 2.2% also comes at enormous odds AGAINST risk taking Entrepreneurs. It's estimated that 90% of startups fail in five years. I suspect even econ illiterates like AOC or Senator Warren would not go to Las Vegas or Atlantic City with those odds against.
Great point! I also like Ayn Rand's point that the janitor in a good company, as well as the other rank-and-file employees, owe much to the innovator who started it. Not only their livlihood, but their feeling of purpose. They wouldn't even have a job without the risktakers.
I have always taken the opinion that the founders of the companies I worked at, and the followers who "merely" took the reins of an existing company, are doing work that I have zero inclination in doing. It would be a sorry spectacle for me to demand they fork over their pay to me just because I don't want to do their job.
Chart, good point. Of course the moment you made that demand , you would be summarily "outplaced!" Years previous, a well paid,150k per annum, employee of my firm wanted a bigger piece of the pie. His words. He thought he was a partner because of his position as the firm's medical director. I informed him that being a partner required buying in and putting his name on loan documents. He refused, claiming he was a de facto partner because he was irreplaceable. News flash. he was replaced by another within days of his dismissal.
Or maybe even can't do their job.
Yes! Even if I'd had the inclination, I didn't have their experience, their contacts.
And maybe even their ability.
What a great point of view!
I hold Warren’s socialism against her way more than I hold it against AOC.
At the end of the day, AOC and Bernie Sanders and their like are midwits who don’t seem to fully understand that what they seek would kill the goose that lays the golden eggs.
But Warren is clearly more intelligent than either of them, and at some level knows this, but just doesn’t care.
Whether for purely selfish reasons, or out of envy, or merely Machiavellian “end justifies the means” reasons (my personal suspicion), some combination of these, or something else.
"At the end of the day, AOC and Bernie Sanders and their like are midwits who don’t seem to fully understand that what they seek would kill the goose that lays the golden eggs."
I assure you my golden goose reference above was written before reading this, no plagiarism intended!
Good point. It's amazing that she was one of the law professors who attended the training in economics for law professors that Henry Manne started and I taught in.
As an aside Warren taught the kindergarten class in Riverdale, NJ of the current kindergarten teacher (Yes, she was an alum of the very kindergarten she taught) who had my kids. Let's hope leftism is not a communicable disease.
AI telling me that isn't true by the way: "Elizabeth Warren was never a kindergarten teacher in Riverdale, NJ. She worked as a speech pathologist (sometimes referred to as a speech correctionist or special education teacher) for the Riverdale School District during the 1970–1971 school year." -- I DID believe it. My kids' kindergarten teacher also would not have been old enough to have been there that year!
Thanks, Joy.
Great story.
It reminds me of one of my early stories about the United States. After graduating from the University of Winnipeg in 1970, I hitchhiked across Canada and down the U.S. west coast in what a friend referred to as a libertarian pilgrimage. At one point, I ended up at a science fiction conference in Santa Barbara on the July 4 weekend. Growing up in Canada, I had always thought of July 4 with reverence. I wanted to share that with some of the libertarians I met there. One was a prominent libertarian whom I instantly liked. He called himself Skye D'Aureous. His real name, I later learned, was Durk Pearson.
I don't remember exactly what I said, but it was something very positive about the United States. Skye gave a world-weary response whose essential content was that this is not a great country. He certainly had his reasons. The Vietnam War was raging and the draft was still on, to name two reasons. He was pretty clearly comparing the United States with an ideal and finding it lacking. I was comparing the United States with Canada and, although, to its credit, Canada had (and has) an even more impressive history of a volunteer military than the United States had, I saw the possibilities for the United States in ways that even some sophisticated libertarians seemed to have trouble seeing.
That's a great story too! I went to only one Libertarian Party convention, in the late 80s, and met a couple of people like that too. They seemed to think that the US was worse than others, or just as bad.
“Buy American”
By Melgar du Poseidon
Don’t tell me the problem is that “foreign” sweatshops have cheaper labor costs than American manufacturers; Or that big companies are greedy and don’t care about American workers!
The Problem
In the mid-1980s, Sam Walton grew increasingly troubled by the decline of American manufacturing and the loss of local textile jobs due to cheaper overseas imports. At the time, Walmart was buying huge quantities of flannel shirts from overseas vendors because domestic suppliers couldn’t match the price.
The Large Order Strategy
Walton approached Farris Burroughs, the head of Farris Fashions, with a challenge. Walton wanted to know if Farris Fashions could produce a massive run of flannel shirts at a price competitive with imports.
To make it happen, Walton leveraged Walmart’s immense scale:
• Guaranteed Volume: Walmart placed an extraordinarily large, guaranteed order months ahead of time.
• Upfront Commitment: By providing a non-cancelable commitment so far in advance, Walmart allowed the shirt company to buy their raw materials (like fabric and thread) in massive bulk at deeply discounted prices.
• Operational Efficiency: The guaranteed volume allowed the factory to plan its labor and production schedules perfectly, cutting out the typical waste, downtime, and inventory overhead that usually drives up the cost of American manufacturing.
The Result
Thanks to the sheer scale of the order, Farris Fashions was able to produce high-quality, American-made flannel shirts at a cost that allowed Walmart to sell them at their famous low prices while still turning a profit. The deal saved and created numerous manufacturing jobs in a small Arkansas town.
PS—Walton used this exact story in Made in America to prove his thesis: if a retailer and a domestic manufacturer partner together transparently and utilize high-volume forecasting, American factories can out-compete foreign imports.
PS—This was actually Sam Walton’s “Buy American" campaign in 1985.
Thanks; this is a subject that needs lots of emphasis. Public misconceptions (encouraged by hideous people like Elizabeth Warren) can lead a healthy nation into poverty. It's right up there in importance with understanding the terrible destructiveness of minimum wage laws and prohibitions on "price-gouging" after a natural disaster.
You're welcome and yes.
I think her views, if implemented, would cause much more destruction than the minimum and than laws against price-gouging after a natural disaster.
“What will the innovator do during that year? Cut price? Maybe a little but not much. For one year, all his competitors are using a method that costs $1.80 per unit and are charging $2.00. What the innovator could do is cut the price to, say, $1.90 per unit and take a large share of the market. Let’s say he takes half the market. Then 67 million households will buy 3.484 billion of his units and will spend $6.62 billion on his product.”
This is brilliant! You have captured Sam Walton’s secret to Walmart’s success—tiny margins and a huge market share.
Thanks.
In his 1992 autobiography, Sam Walton: Made in America, Sam Walton wrote about how Walmart's low prices do more good for working-class people than the government's welfare system.
“See, here’s the thing: by saving these people all this money on things they have to buy anyway—things like groceries and socks and underwear and television sets—we are giving them a raise. We’re giving them a better life. We’re doing more good for them than any welfare system the government could ever devise, and we’re doing it through the free market."
You know, Dan, when I lived in NJ I honestly didn't think much about that, but where I live in TN, Pickett County, the three closest Walmarts are Monticello, KY, Jamestown, TN and Cookeville, TN, three locations I am familiar with because if I am passing by any of the three I will almost invariably stop by or text my wife to ask if we need something from Walmart since I'm close by. That's because all we have locally is an IGA and a dollar holler. So all of a sudden you don't take Walmart for granted any longer.
Yes! It reminds me of this quote from George Stigler that was so good that I put it in the bio I wrote of him for The Concise Encyclopedia of Economics:
Sears, Roebuck and Company and Montgomery Ward made a good deal of money in the process of improving our rural marketing structure, but I am convinced that they did more for the poor farmers of America than the sum total of the federal agricultural support programs of the last five decades.
Here's the bio: https://www.econlib.org/library/Enc/bios/Stigler.html