No Mr. President, Entrepreneurs Did Build That…
The war against freedom, free enterprise, and entrepreneurialism continues.
Last week US President, Barack Obama told a crowd of cheering Statists and Progressives exactly what he thinks about entrepreneurs.
He told the baying crowd:
‘If you’ve been successful, you didn’t get there on your own. You didn’t get there on your own…if you got a business, you didn’t build that, somebody else made that happen.’
That’s what every central planner thinks. That if it wasn’t for the government, nothing would get done. Of course, the reality is the complete opposite…
To prove his point, Obama reeled off examples of how businesses didn’t make things 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…that’s how we created the middle class, that’s how we built the Golden Gate Bridge, the Hoover Dam. That’s how we invented the internet, that’s how we sent a man to the moon.’
Obama and other Statists forget who paid for the big projects — the taxpayer. And that without the ingenuity of entrepreneurs and the hard work of individuals, the government wouldn’t be able to take the taxes that it needs to build its expensive follies.
The Golden Gate Bridge and Hoover Dam are impressive feats of engineering and construction. But would the world really be any worse off if either was never built?
Putting a man on the Moon? Great. What exactly did that achieve? The space race and arms race bankrupted the Soviet Union. And it would have bankrupted the US too if it wasn’t for the entrepreneurialism that kept the US economy going.
The Golden Gate Bridge, Hoover Dam and Neil Armstrong’s small step didn’t create prosperity. They were just the follies built by government from expropriated private wealth (taxes).
(And we won’t even mention the fallacy about the US government inventing the internet. But at least it’s an improvement on Al Gore’s claim to have invented it!)
No. Private enterprise creates the real wealth in an economy.
It’s the entrepreneurs and businesses who take a risk. Some get it right. Others get it wrong.
An example of firms getting it wrong is Nokia. We wrote about this toAustralian Small-Cap Investigator subscribers a few weeks back, and again in our Money Morning article on how a href=”http://www.moneymorning.com.au/20120704/why-government-intervention-hinders-progress-and-innovation.html” target=”_blank”>government intervention hinders progress and innovation on 4 July.
Here’s what we wrote:
‘First, it missed the trend towards ‘flip’ mobile phones. It stayed with the ‘brick’ style that had won it millions of customers over the years. But at the time consumers wanted compact and sleek phones. The kind you could neatly hide away in a pocket or handbag.
‘But as you know, technology changes quickly. The trend for compact and sleek phones didn’t last long. Perhaps if Nokia caught the next trend wave it would be fine.
‘But no, it missed that too. That was where consumers wanted the opposite of sleek and compact. Mobile phones (smart phones) became fashion accessories.
‘Consumers wanted big screens. The bigger the better. No longer were mobile phones stashed in pockets or handbags, now they were laid out on the table or desk where everyone could marvel at the size of your screen and the smallness of your pixels.
‘Nokia missed out. But Apple and Samsung didn’t.’
It turns out Nokia wasn’t as far away from getting it right as we thought. The Wall Street Journal reports:
‘More than seven years before Apple rolled out the iPhone, the Nokia [design] team showed a phone with a colour touch-screen set above a single button. The device was shown locating a restaurant, playing a racing game and ordering lipstick. In the late 1990s, Nokia secretly developed another alluring product: a tablet computer with a wireless connection and touch screen — all features today of the hot-selling Apple iPad.’
The entrepreneurs (the Nokia designers) had it right, but the pen pushing executives got it wrong, and Nokia has paid the price. Yesterday the firm announced a record loss. As the UK Daily Telegraph reports:
‘In the second quarter, Nokia posted a net loss of 1.41 billion euros, about four times their loss of 368 million euros during the same period a year earlier and more than double the loss anticipated by analysts.’
That’s the problem with big firms that are too slow to move. They’re more worried about protecting their existing market, rather than with trying out crazy new ideas.
Entrepreneurial small businesses are different. Most of the time they’ve got nothing…except for an idea. If they get it wrong and their idea doesn’t work out, they haven’t lost much.
Of course, the investors who punt on the idea may lose, but they know the risks to begin with…which is why they invest. Yes, they lose all they’ve invested, but if the idea works, well, they could make three, four, five, or even 100 times their money.
For punters, those are odds worth taking.
It’s that attitude which steers the managing director of the company we met with earlier this week. We recorded a half-hour Strategy Session for subscribers of Australian Small-Cap Investigator. Subscribers will get the link to the video later today.
The company sprung up from nowhere. This entrepreneurial MD recognised an opportunity that few others had explored — the east coast of Africa.
Today, East Africa is a hive of activity. A bidding war between oil major, Shell and a Thai exploration company has priced a UK explorer at more than one billion pounds.
But after missing out on the deal, Shell isn’t finished. It’s eyeing off other assets, including an $8 billion portfolio held by US firm, Anadarko.
This entrepreneur and the small Aussie firm took a risk. It punted on a frontier exploration opportunity.
It could have gone pear-shaped (and it still could; nothing is ever certain with oil exploration until the black gold flows), but it could also lead to big returns for those prepared to take the risk.
So when Statists and Progressives start telling entrepreneurs and individuals that ‘you didn’t build that’, it’s a slap in the face.
President Obama’s attitude to free enterprise is something we’ve always felt Statists and Progressives believed. That your wages are the gift of the government…it takes the taxes and leaves you with whatever is left over.
They may as well say about your wages, ‘you didn’t earn that’.
But if you work in the private sector we know you did earn that. And you earned it despite the government, not because of it.
This article is contributed by Money Morning. Click Here to Subscribe to their free newsletter.