I like what Bhu Srinivasan has to say in the first video I’ve attached to this class. He points out that capitalism is just an operating system, not an ideology. Fundamentally it is a series of market places. You can have a market place that sells lemonade, a market place that transports lemons, or a market place that provides fuel for the trucks used to transport those lemons.
What capitalism/the operating system does depends on the is apps you put into it. How it behaves depends on how you use it. More importantly it depends on who uses it and for what purpose.
Either way, capitalism has proven itself to be the most powerful creator of wealth among all the operating systems of the world. Not to use it would be foolhardy.
Social and political issues arise because people disagree over the outcomes . . . inequality, income distribution, unfair trade practices, harm to the environment, impact on democracy and so on.
That’s the political front of capitalism and it has a never-ending ebb and flow between opposite sides. As power shifts from one election to another, the game changes for good or bad depending on how you see it.
The most troubling issue is that the capitalist operating system in America has been used for the hostile and complete takeover of our democracy and our way of life. One political party admits it. One party doesn’t. Depending on which one has the wheel.
- Some fear that democracy has forever ebbed.
- Those who believe capitalism is an ideology are ready to kill it.
Still others fear capitalism is killing itself.
Until now there has been a fragile balance between the sides because American-style capitalism has been held in check. Controlled by the government. America is one of several countries with a mixed, not a pure capitalist economy. It can be said with some validity that the mix is between capitalism and socialism.
Other countries with a mixed economy include – in order of significance – Sweden, France, Japan, Russia and China. I suppose you notice these have decidedly different forms of government.
As you know, NME wasn’t design to create more unrestrained users of the capitalist operating system. The key to making capitalism work for the people is . . . you guessed it . . . the people.
And the people are on the economic front.
What we need to do is cut the users of the capitalist operating system down to size. We need to get the system into the hands of more people who are socially responsible entrepreneurs. And we need a new business model that will distribute the wealth fairly, based on their people’s value added through the investment of their human capital.
When we have done all that, we will have shifted the control over economics from the political front to the economic front. From others to ourselves.
The Future of Entrepreneurship
The time is right for the entrepreneurial spirit to rise again.
Small business development was on the rise before the Great Depression hit in 2007. While the monsters that caused the crash were bailed out, small businesses did not get the same assistance and many failed. What followed was a reluctance on the part of individual innovators and risk takers to deviate from the status quo to create their own paths.
Now, with estimates that predict 65 percent of today’s grade school children will end up in jobs that don’t yet exist, entrepreneurship is being redefined and the future for professionals of all backgrounds depends more and more on the entrepreneurial mindset.
It will be today’s entrepreneur who creates the jobs for the future tomorrow.
I refer to “the future of professionals” because labor will soon take a back seat to brainwork. Automation will replace low-skilled jobs with high-skilled positions. Technology will replace the repetitive, routine work of the past and humans will be freed up to engage in jobs that call for creativity and entrepreneurship.
The Bureau of Labor Statistics reports that workers already conduct nearly 25 percent of their work from home. Many large companies employ workers who do all or most of their work at home and this trend is increasing rapidly. The time is coming when working remotely is a routine decision.
What remains to be determined is who will be the paymaster, who will reap the profit, who will be in charge and who will receive the most benefit.
Capitalists succeed because they seize the opportunities. I want you to be a successful small capitalist, an indie entrepreneur, a company of one. I want you to seize this moment!
Forces are all ready in motion which favor your future as a small capitalist. As Yogi Berra once said, “When you come to a fork in the road, take it!”
Socially Responsible Capitalism
The term “social capitalism” has been around for a long time. There are many meanings given to social capitalism and it makes the term confusing, especially since it involves two popularly contradictory words. But generally it can be defined as a socially minded form of capitalism where the goal is making social improvements not just accumulating capital wealth.
I don’t want to get buried in that confusion. Instead, I call myself a capitalist and communitarian (See My Point of View).
In the public sector, a non-profit organization with the mission of helping the poor could be an excellent example of social capitalism except that most are non-profit.
The benefit of being non-profit is tax exemption.
To earn that privilege a non-profit takes a vow of virtual poverty rather than enjoying the benefits of a capitalist operating system. It labors under government restrictions that prevent the organization from earning profits.
In every other way, non-profits operate like any other business with overhead and payroll. Sometimes they are even in competition with for-profit organizations. If the non-profit were a capitalist enterprise, it would be able to compete more effectively and efficiently.
Having been an administrator in two 501-C3 organizations, there is no doubt in my mind that every charitable organization operating as a non-profit would do better as a socially responsible capitalist organization, able to use the capitalist operating system for the common good.
The only “loser” would be the financial contributor who uses non-profits as a way of avoiding personal income taxes. And, by the way, I take this opportunity to add that avoiding taxes is a regressive way of accumulating wealth. Personally, the more taxes I pay the more wealth I’ve created. Whoopee! But I’m not greedy.
In the public sector, the words “social” and “capitalism” come together with two different meanings. I find it less confusing if I name them differently.
“Social capitalism” in the private sector is a socially minded form of capitalism with the goal of making social improvements rather than accumulating capital.
“Socially responsible capitalism” produces profit for personal gain while either serving the public good or at least doing no harm.
Both forms are worthy, but for the purposes of NME, the second form – socially responsible capitalism – fits best because our primary goal is to give workers the opportunity to accumulate a fair share of the wealth created . . . as well as serving the public good.
The Ted Talk by Wendy Woods I’ve attached to this essay (second in the column to the left) provides an excellent argument in favor of socially responsible capitalism. In the clip, Wendy appreciates the philanthropic efforts provided by many corporations but points out that it’s not enough. They could do so much more by tying social purpose directly to their business strategies.
This is what I want you to consider as you develop your own personal strategic plan.
Historic Failure of Small Startups
If there is any bad news about entrepreneurialism, it is in the history. And by now you know that history is a great teacher.
I don’t want this segment to discourage you and so I will begin with at least one upbeat factoid:
- 99.7% of all businesses in the U.S. are small businesses.
That’s not a typographical error. That’s 28.8 million businesses compared to a few hundred unrestrained corporations.
The bad news is that 20 percent of startups fail in the first year, 34 percent by the second year and 70 percent by the tenth year!
And here’s why they fail:
- 19 percent lose out to the competition
- 23 percent don’t have the right team
- 49 percent have no market need
- 82 percent because of cash flow problems
These facts come from an infographic I’ve included in resources (second from the bottom of this essay) which includes suggestions on how to avoid these problems. But I venture to say it’s all about going into business without strategic thinking and planning.
These are the hard facts for all business, large or small, new or existing. And they are especially important for workers who are chasing their dream of being their own boss.
Large corporations are well aware of these truths and they gain advantage over the smalls by investing large sums of time and money on strategic thinking and planning. Small to mid-size companies fail to do it.
The four reasons for failure above are due to poor planning.
The absence of strategic planning among small enterprise is often explained away by the absence of time and understanding in the face of the daily operations of the company. Owners may recognize the need for strategic planning but a lack of understanding of the process.
But really, it doesn’t have to be all that complicated. Time consuming, yes. But time well spent.
Your most critical decision point is now. Facing the challenges before startup is critical. Making decisions now is easier and correctable. Making them later is probably too late.
So don’t worry about those troubling statics. Don’t look at them as “why nots.” Look at them as “how tos.”
Please move on to the next essay
Personal Strategic Thinking