Imagine no possessions.”
— John Lennon, 1971
Five years after those words were sung, a couple of college dropouts named Steve hooked up and started making computers. They called their little company Apple Computer.
Computers don’t build themselves. Steve Wozniak and Steve Jobs had to buy the parts and pay designers and manufacturers. After exhausting their paltry money, they persuaded an investor to kick in a few hundred thousand dollars for part of their new company.
The company grew and they needed more money. Several other individuals and then venture capital firms invested millions in return for sizable chunks of the company.
The company continued to grow. In 1980, the Steves raised more money for further expansion by selling much of the company to the public for about $100 million in a Wall Street offering. State regulators banned the stock offering in Massachusetts as too risky for its residents.
In the first day of trading, the stock rose 32%. Despite ups and few downs along the way, the stock now is up. Up big. The company is worth $1 trillion dollars. The early investors did well.
But they had no way of knowing that at the time they made their investments. Sure, seasoned venture capital investors with Harvard MBA’s or Cal Tech Ph.D.’s do their homework on the technology, the market and the founders. But even so, many of their investments fail. They make investments anyway, because the successes can more than offset the failures.
In the case of Apple, they invested in a couple of college dropouts who wanted to build and sell home computers. That sounds like a no-brainer today, but this was well before the internet. In the late ’70s, why would anyone want a big and ugly computer in the house?
Now let’s review some economics, especially for the benefit of younger readers who don’t get taught such things in school anymore.
“Capitalism” in simple terms is an economic system where capital — money — is not only spent or loaned but also invested. A capital investor in a company gets no right to be repaid, but does get a share of the company.
If the company fails, the investor loses his money. If the company succeeds, the investor makes his money back and maybe more.
Capitalism necessitates risk and reward. If there were no risk, then everyone would want in on the investments. If there were no reward, then nobody would.
Bernie Sanders thinks this system is bad. He thinks the people who invest money are bad and the people who receive those investments to build their companies are bad. Because profits.
In fact, Bernie just name-called a competing candidate (isn’t it hurtful that we demand people compete with one another?) for the Democrat nomination for president the worst name he can think of. He called Elizabeth Warren a “capitalist.”
Warren is trying to disprove this slander. It’s bad enough for a Democrat to be name-called by the president just because she falsely claimed to be a Native American for much of her career, but being name-called a “capitalist” by a self-described socialist, well, that hurts.
I’ll let the two of them sort out which is the least capitalistic and most Native American.
Meanwhile, I have a question for them, and perhaps for the rest of the Democrat candidates: If not for capitalism, who would have funded Apple Computer?
The government, you say? But what bureaucrat is qualified to make that investment decision? Who would have the business acumen, technological savvy, personality insights, cultural foresight and appetite for risk to give money to two grungy college dropouts named Steve to start a company to make machines that nobody wanted?
Recall that these government types are the people who couldn’t design a simple website for Obamacare, and banned the initial offering of Apple stock in Massachusetts.
And how would the government know how much of the company to take in return for the money? Oops, that one’s easy. The government takes it all. Because we’re banning private property, right?
Well then, why would the Steves bother with years of 80-hour weeks building their new company if they didn’t get to own any of it?
Apple is unique in its success, but is typical in its method. Capitalism funds companies with money from investors who hope to realize a profit on their investments. If the company succeeds, the investors succeed.
Along the way, the company creates jobs (over 130,000 in the case of Apple, plus a multiple of that in suppliers and distribution chains) and new products ranging from pharmaceuticals to cure disease to electric cars to reduce pollution to smart phones to put the world in your hand even if you’re in West Africa.
Without capitalism — without possessions — imagine nothing. Tell me, Bernie, what company was the Apple Computer of the Soviet Union when you took your honeymoon there?
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