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Concentrated Interest

I used to think that Barack Obama was one of the more intelligent Presidents of the United States, but I no longer do.  Consider his recent statements, which show his socialistic attitude:

     There are a lot of wealthy, successful Americans who agree with me — because they want to give something back.  They know they didn’t — look, if you’ve been successful, you didn’t get there on your own.  You didn’t get there on your own.  I’m always struck by people who think, well, it must be because I was just so smart.  There are a lot of smart people out there.  It must be because I worked harder than everybody else.  Let me tell you something — there are a whole bunch of hardworking people out there.  (Applause.)

     If you were successful, somebody along the line gave you some help.  There was a great teacher somewhere in your life.  Somebody helped to create this unbelievable American system that we have that allowed you to thrive.  Somebody invested in roads and bridges.  If you’ve got a business — you didn’t build that.  Somebody else made that happen.  The Internet didn’t get invented on its own.  Government research created the Internet so that all the companies could make money off the Internet.

No man is an island.  We know that.  But in any big enterprise, there is the difficulty of organizing the efforts of all to create something that will satisfy the needs/desires of many.  It is true in business; it is true in war; it is even true in politics, more’s the pity.

Those that structure and plan, who create work so that others can do relatively simple tasks and be paid are valuable people; they have unique skills, and deserve to earn a lot if their efforts result in a lot of satisfied customers.

Our public schools do not train people to be entrepreneurs; they train people to be clerks and technicians.  That said, one advantage the US has over other nations is that we are willing to be flexible, and let failures figure out how they will survive.  Not knowing how you will pay the bills is a great incentive toward initiative.

Back to the main topic.  If you have built a successful business, you have done an amazing thing that most people could not do.  You took the efforts of many men and concentrated them toward a specific task of satisfying the needs of customers.  That is tough stuff, and few can do that well.

Bureaucrats can’t create a business.  Okay, maybe they can create failures like Fannie and Freddie.  They might be able to create a technology by accident, but not know what it could be used for.  Though Arpanet was the precursor to the Internet, it could not create the wide diversity of services created in the private sphere.  It’s like talking about the things the Chinese invented ahead of the West, but they never exploited those inventions.  The private sector did far more to make the Internet useful than the US Government did.

Having a concentrated interest for profit is what sharpens businesses, and makes them more responsive to the needs of people.  This is preferable to having a big government dictate what businesses and individuals ought to do, because the government by its nature is either “one size fits all” (good, sort of) or cronyist, playing favorites (bad).

Everyone has people who helped them and trained them in this life.  That doesn’t mean the government can take credit and demand full allegiance and high taxes.  Most of the time, productive people had good parents, and as one of my mentors said to me, “Children who are not taught by their parents do not get taught.”  He put five children through the public schools, all of them bright.

It takes thought and effort to create a big organization and prosper.  Don’t let naysayers deceive you.  If you built a successful business, you did something significant.  You built it.  Yes, the common resources of society support many of us, but using the common resources and the efforts of those who are only capable of doing a job is significant, and worthy of praise, not condescension from a man who has never built anything significant in his life, and presently destroys opportunities through bad policy.






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21 Responses to Concentrated Interest

  1. [...] David Merkel: Obama, though intelligent, truly does not understand business or American capitalism.  (AlephBlog) [...]

  2. john says:

    It seems the word “that” in “you didn’t build that” refers to “roads and bridges” from the previous sentence.

    Honestly, would you really say that Barack Obama has governed with a “socialistic attitude”?

    • He could have added one or two words if he wanted to make that clear. The phrasing is deliberately vague, and combined with the stuff above in the two paragraphs, copied from the White House website, indicates a downplaying of individual initiative. It’s obvious that no one man doesn’t create infrastructure, that’s a point that is not worth making.

      Obamacare, socialistic. Dodd-Frank, ridiculous, not socialistic. The runaway deficit, ridiculous.

      I think the GOP is socialistic; the last President was a great example — adding $8-10T of unfunded liabilities via Medicare Part D. There are many things that we have federalized that should not be. There are wars that we have fought for no good reason. We engage the drones to kill others in other countries that we do mot like. We have created too powerful of a central government, and the checks and balances are not working as they should.

      It’s not Obama, it is us. We exchange our political freedoms for promises of prosperity and security. We need to change culturally, then maybe the politicians will change.

      • john says:

        I think it helps to hear it. When I read the comment, my first response was “He can’t really be that dumb, can he?” NPR had a story about it and Romney’s “I like to fire people” out of context gaff. Good of you to seek out a couple of paragraphs from the speech for context, but even then, it still is out of context.

        As to “Obamacare”, I just fail to see how forcing everyone into private insurance is socialistic. It is corporatist to the core. That the idea came out of the Heritage Foundation and is a cornerstone of the Republican nominee’s resume should tamp down any accusations otherwise.

        I do agree with you “it is us” — it is us for allowing ourselves to be manipulated and made to feel frightened at every shadow. “Uncertainty” being the big boogeyman of the day. (Hey, welcome to reality!)

      • Obama not only downplays individual initiative, he completely ignores that successful (i.e. profitable) buisness owners pay taxes, which pay for that infrastructure (though a large part of what they pay is medicare and social security).

        And our tax structure is already progressive, so your business pays more taxes the more successful it is… so his argument is not that you need to “give back”; it’s that you need to “give even more back” (i.e. federal income taxes should be even more progressive).

        To the wealthy, successful Americans who want to give something back, feel free to make a donation:
        http://www.treasurydirect.gov/govt/resources/faq/faq_publicdebt.htm#DebtFinance

        If your desire to “give back” is dependent on coercing your peers to do the same… I’m not sure what to call that, but it’s not generosity.

    • fallingman says:

      So, what you’re saying is that he’s not so much a socialist as he is simply illiterate.

      Roads and bridges…plural. Business…singular.

      Roads and bridges… you didn’t build that.

      Why not use the word “them?” Is the guy just stupid.

      Please, spare us the tortured apologia.

      Was he ad libbing again…god forbid…or was this a written speech he was delivering from a teleprompter? No written speech would have such poor phrasing in it, even if written by a publik skool graduate.

      • john says:

        No, I’m simply listened to the section of the speech and heard what I heard. No tortured apologia. I’m no fan of the guy.

  3. Conscience of a Conservative says:

    We’re hearing a lot of populist rhetoric from Obama. I was similarly struck by statements he made that the guy who built a business didn’t really deserve full credit since he’s benefited from the infrastructure built by the country(roads, subways,etc). He’s not speaking to the rich here but to his base, those not owning or starting businesses. The goal here is to convince them that they are responsible for the business owners success and by extension argue that tax rates should go up. It’s a weak argument.

  4. BostonDude says:

    It feels as if people are a bit sensitive on this topic. Obviously smart, hard working people deserve the success that comes their way. However, it is also important to realize how much of their success comes not from their hard work, but the environment that society creates for them and pure blind luck.

    I also think that a distinction needs to be made between entrepreneurs that risk bear their own risk versus senior executives, money managers and other often highly compensated people that do not bear their own risk. A good CEO should be compensated well. He has a difficult job, that if done well, provides significant benefit to the company’s stakeholders. However, he does not bear much in the way of individual risk, so why should he be compensated to the degree that so many of our current CEO’s are?

    How much should money managers including private equity partners be compensated? They are obviously very smart, hard working people and do provide a valuable service. The majority of them, however, make their living managing other people’s money. Yet they are compensated as if they are bearing great economic risk with commensurate rewards.

    At the end of the day, it feels like there is a class of people who have worked hard, are smart and have been successful. However, they also know that they have been very lucky to get where they are. Now they are fearful that the playing field will be tilted more towards level and they are unhappy about it.

    • highskye says:

      BostonDude is the one who seems to be overly-sensitive. A quote from Thomas Jefferson is very appropriate: “I find the harder I work the luckier I get.” Being a serial entrepreneur myself, I can tell you for a fact that starting and successfully managing a business is not due to “pure blind luck.” I may have had help from employees, family members, and rule of law and a society that supports private property rights, but the financial risk has been all mine, the long hours are often a requirement of having your own business (and I don’t get overtime for those hours like the employees do), and if problems arise, guess where the buck stops. The employees get to go home at the end of the day or the week and don’t have to think twice about the business or any of the issues that might be going on, but the business owner does not have that luxury. Even though CEO’s of large companies do not have the same level of financial risk, they do have a much higher level of responsibility and their necks are on the line in the event of problems with the company. Added responsibility equals higher compensation.

  5. [...] David Merkel, “It takes thought and effort to create a big organization and prosper.”  (Aleph Blog) [...]

  6. amritsari says:

    I echo john – the “that” in the sentence refers to the infrastructure, not the business. Poor wording. I have seen this misinterpretation all over the place. The emphasis on infrastructure is needed since the right wing in this country has spread the meme (through repetition) that the government does nothing. No form of government spending is good. I find it moronic to try to put business or government on the pedestal at the expense of the other. They are symbiotic. Think internet, GPS etc. For every failure of government I can also point to colossal failures in business (enron, worldcom etc).
    Obamacare is socialistic ? Wow. Tell that to the insurance companies that are going to mint money from all the extra customers.

  7. Obama could have included one or two more words to make his intent crystal clear. As it is, the statement in its surrounding context is intentionally ambiguous. It can apply to both infrastructure and individual effort generally. The idea that individuals don’t create infrastructure is a trivial point that is not worth making. I stand by the idea that he was minimizing the efforts of those in the private sector, and what they create.

    Everyone has access to infrastructure; it’s what you do with it that counts. (And, as we my find out to our peril… it’s how you maintain it that counts.)

    • amritsari says:

      Me thinks people WANT to interpret the language the way they are predisposed to think of Obama. Bias is at work. This also reminds me of the (many) arguments with my spouse. She picks the one bad thing I did and ignores all the good. Obama also said – “Somebody helped to create this unbelievable American system that we have that allowed you to thrive”. So here he is praising the capitalistic american system that allows entrepreneurs to thrive. Yes ? Isn’t that good ? He seems to approve of the system.
      Its funny how people call Obama a socialist. To a lefty like me, he appears to be a moderate republican. Has he done anything to reign in the banks ? Nope. Did he institute a single payer health care system ? Nope. Calling him socialist is weak tea and belittles your arguments.
      Emphasizing infrastructure is trivial ? That depends on your point of view. To many rational people vaccination is a trivial no brainer. Yet there are a large number of people who think vaccinations are risky and are putting their children’s health in danger by not vaccinating them. Political discourse often times has to emphasize the trivial. Political speeches often (99% ??) emphasize the trivial. They aren’t aiming for well informed people (like you).

      • TPC says:

        I agree with you totally. I also think David and others are allowing their rational minds to be clouded by their Republican mantras.

        I believe 80-90% of 6th grade English teachers would agree based on the full reading of his comment that he is speaking not of building businesses, but of building our national infrastructure, including public education, which allow our nation to be the strongest in the history of mankind.

        Unfortunately, rational thought, objectivity, and honesty are the first casualties of our national elections (a la Rush, Bech, the “birthers”, new voter id laws for fraud that doesn’t exist, etc.).

    • john says:

      > Everyone has access to infrastructure

      I’ll basically agree, but point out that some infrastructures are more structural than others. Schools are hardly apples-to-apples. Sidewalks, roads, bridges, parks, police protection, a chance in hell in the court system (civil or criminal) — barely comparable within my city, let alone across the country. As money accumulates at the top, separate private worlds are fenced off to the detriment of society generally. This has been going on for my lifetime (40 years), but wow is it heating up now. I look off ten years from now and am afraid. I don’t think a vote or win for either major party candidate will change that feeling.

      That said, my wife and I will keep on our own path and do the best we can. Hopefully we’ll avoid the worst of whatever our system brings.

  8. Greg says:

    While the media has quoted both candidates out of context, Obama’s insult against entrepreneurs seems crystal clear to all but the most partisan readers / listeners.

    Even if we were to stipulate that he was referring only to infrastructure, it was still an insulting and ignorant comment from a man who never built any thing in his life.

    “Government” does not build bridges and roads. At best, government pays the cost of building the bridges and roads — albeit with money collected from taxpayers.

    Socialists in academia like to babble about “public goods” that only government can provide — the textbook example being lighthouses. This sort of revisionist thinking is nonsense.

    The vast majority of lighthouses were built by ship owners / local merchants that frequented each harbor. This is why few if any lighthouses look the same — they were designed and built locally, not in Washington.

    About 100 years ago, Washington DC “invented” anti-trust laws — which made it more and more difficult for merchants to work together on anything, whether good or bad for the public. Price fixing (real or imagined) was prohibited, and so was holding a meeting to build / improve a lighthouse. Lighthouses fell into disrepair because US federal law prohibited local merchants from working together.

    Then, in World War II, the federal government nationalized many lighthouses — banana republic style — and turned them over to the Coast Guard for national defense purposes.

    All the self serving academic bull about “public goods” ignores written history. Roads, bridges and lighthouses all existed before the Dept of Transportation.

    Healthcare is another case of revisionist stupidity. Doctors used to make house calls, because most people paid a doctor directly and they didn’t call a doctor for every tiny sniffle.

    The socialist Franklin D Roosevelt decided to limit wages during the great depression, and fix them by decree once the US entered WW2. To attract the best workers, some companies started paying for benefits (healthcare especially) as a way to work around wage controls.

    The US healthcare mess was started 100% by FDR, and made worse over the years by other socialists including LBJ and “W” Bush (who was also a socialist). The fact that Obama claims to style himself off FDR is just further proof that Obama is a socialist.

    US economic growth was much higher when the government was smaller. There was no income tax or Federal Reserve before 1914 — both were created to fund Teddy Roosevelt’s “need” for adventure / warmongering (WW 1 in his case).

    Thomas Jefferson said “That government which governs least, governs best” and he was absolutely correct. Big government has always produced corruption and economic suffering ever since humans started recording history… and this time is no different.

    There are always arrogant know-it-alls who think they can run things better … very very few can deliver. Whomever makes the claim must prove their ability — a la Rockefeller or Steve Jobs or Andrew Sloan.

    Getting that kind of power by birth (monarchy) or by lottery (“winning” elections) is a recipee for disaster.

    George Washington earned the presidency by leading troops in the Revolutionary War — fought against the previous group of arrogant government officials. Importantly, Washington did not want to be president — he tried to get out of it several times (academics should read about the confederation of states before making further fools of themselves).

    There are a few exceptions that prove the rule, but the most telling sign that a leader is an idiot is that he/she wants to run for office. Almost all the smart guys decline.

    Obama’s speech proves he is clueless how to get the economy re-started. His stupid and insulting comments betray a level of ignorance even for non-profit organizations like hospitals, never mind the imaginary “public goods” of academia.

    I have serious doubts about Romney as well, but at least the guy has held a job in the real world. Heck, even “W” had several cushy real world jobs bestowed on him by daddy — Obama lacks even that. Obama’s daddy was too busy writing anti-US propaganda.

    George W Bush made a mess of the USA, then Barack Obama made things 1000 times worse.

  9. Timoth3y says:

    To quote Daffy Duck – “Ah ha! Pronoun trouble!”

    And people wonder why Obama always uses a teleprompter. He gives a speech without one, stumbles over a phrase, and it’s held up as proof of hidden agendas and secret opinions.

    What I find interesting is that we reserve this juvenile analytical approach to politics. We don’t use it in the real world.

    Imagine, for example, a shareholder’s meeting where a CEO says “You hear a lot of concern over FX fluctuations and changes to the tax code. But the way we run our business and serve our customers day to day, that — that doesn’t concern us much”

    In response to this remark would we:
    a) Assume he meant what he obviously meant.
    b) Ask him what he meant.
    c) Breathlessly declare that his statement is proof of his hidden contempt for his company and its customers, short the stock, and demand that the CEO be fired.

    Any reporter or analyst reacting as c) would be laughed out of the business, However, when discussing politics, our discourse drops to the level of six-year-olds and such a reaction becomes the norm.

    Tim

  10. RichL says:

    This is election time. The Republican Party led the way in obfuscation, by painting the legitimate war hero John Kerry as a fraud with the Swift Boat campaign. They then got the US into a war in Iraq by misrepresenting the Weapons of Mass Destruction issue with Saddam.

    The Democrats are as dumb as posts, but if you have been beaten consistently by misrepresentation of the truth for a decade, you sometimes get wiser. My belief is that the Dems strategy is to denigrate the business accomplishments of Romney,which are his good attributes. In other words, the Swift Boat strategy redux.

    They only have to influence 5% of the voters, as the rest have opinions that are as fixed as cement. In politics, negative works.

    I’d suggest that the best use of time for the period up to the election is to not listen to any of the crap coming from either party or candidate. Obama is smart, and so is Romney. We could do worse.

    Absent a debacle (like Romney being shown to have been granted tax amnesty in 2009 for foreign tax non-reporting in prior tax years), this is just a silly season.

  11. The_Dumb_Money says:

    Hi David, big fan of your work especially re: insurance and valuation and your honesty re: your track record.

    I have to take issue with you here though. I think, too, that it’s pretty clear from the context that the “that” was a reference to infrastructure. I think your response that it’s “intentionally vague” is rather insufficient. What do you or I know what his intent is? Maybe the statement is like a Rorschach test and I see it my way and you see it your way. That’s certainly possible. But there’s no “intent” to be vague, except for what you ascribe. It’s a vague statement, yes, and many, many miles of political hay have been and will be made out of it in the coming weeks. It’s politics. The man doesn’t think an individual doesn’t build his business, he just thinks a man doesn’t build it in a vacuum, and doesn’t build it without some element, however small, of pure luck, even if it’s nothing more than the luck of being born with a super high IQ and EQ, or to parents who are as loving and involved as you and your wife are with your adopted and biological children.

  12. whartman says:

    Look, it doesn’t matter what the word “that” referred to. In the following section of his speech he made himself abundantly clear:

    “There are a lot of wealthy, successful Americans who agree with me — because they want to give something back. They know they didn’t — look, if you’ve been successful, you didn’t get there on your own. You didn’t get there on your own. I’m always struck by people who think, well, it must be because I was just so smart. There are a lot of smart people out there. It must be because I worked harder than everybody else. Let me tell you something — there are a whole bunch of hardworking people out there.”

    He said that you should not be proud of your success, being smart, or being hardworking.

    Listen to his speech on youtube. It is even worse when heard aloud. He was sneering at those who have been successful who dare to believe that they had some hand in their own success.

    This is precisely the Socialist and Communist mantra — success belongs to the society, not the individual. Yes, it is explicitly Socialist.

    And, in reality, it *is* the successful businessmen who, to a very large degree, supply the roads and other infrastructure. When a building is built, the builder typically pays up front for the local roads, water and sewer lines and capacity, and running cables for power, phone, internet, and cable. The major roads are paid for with gas taxes, which fall most heavily on businesses with trucks; businesses and the wealthy are not subsidized by the rest of us.

Disclaimer


David Merkel is an investment professional, and like every investment professional, he makes mistakes. David encourages you to do your own independent "due diligence" on any idea that he talks about, because he could be wrong. Nothing written here, at RealMoney, Wall Street All-Stars, or anywhere else David may write is an invitation to buy or sell any particular security; at most, David is handing out educated guesses as to what the markets may do. David is fond of saying, "The markets always find a new way to make a fool out of you," and so he encourages caution in investing. Risk control wins the game in the long run, not bold moves. Even the best strategies of the past fail, sometimes spectacularly, when you least expect it. David is not immune to that, so please understand that any past success of his will be probably be followed by failures.


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