Capitalism 2.0 Save for later Reblogpost

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Communism is wonderful, except for one small detail: it doesn’t work.

What is the alternative, for people familiar with The Gulag Archipelago?

To find alternatives, we need to look at what works. What creates wealth? Maybe we can find clues in what actually works.

Here is my idea: Everyone should belong to a corporation. We need to invent new legal mechanisms, based on some of the ideas that make corporations work. Test them out, find what works, in a lot of social experiments. Collect the data. Analyze it. Find out what works, and what doesn’t.

What exactly IS a corporation? And why does it work? And why should everyone belong to one?

The corporation was invented by the Dutch a few hundred years ago, and it evolved into a social mechanism, that organizes business and money, among large groups of people. And this mechanism was so effective at creating wealth, for a variety of reasons, that most of the wealth in the world, is now contained in corporations….in the hands of a few people at the top of the most successful corporations.

So the first thing is, corporations work. It works very, very well. That’s a fact. They work so well, they pretty much are the organizing social and legal principle behind most wealth creation. No social form even remotely comes close to the corporation, as a method of creating wealth, by organizing humans.

It works so well that….damn!….everyone should belong to one, in my opinion.

In some respects, corporations are almost communistic: -a variety of people working together, with people working together in groups for common economic interests. In both corporations and communist systems, people can help each other, by bringing a variety of skills together, with each skill helping and complimenting the skills of other people in the corporation.

So then, if both communism and capitalism organize people in groups, for wealth creation, why did corporations wildly succeed, but communist societies failed? If you go looking for the answer, you may find some clues. There are subtle and not so subtle differences between the two systems by which people pursue wealth.

One of the big differences is is the profit motive. That’s a big thing. People like to win, and are competitive. Not including the profit motive into communist theory was enough of a fatal flaw, that communism failed, despite it’s similarities to corporations as a social and economic form, or way of organizing humans, to create wealth.

Let’s be creative, people….

Too much central planning and the government running all economic activity was another flaw in communism. Allowing business to set up, test ideas, succeed or fail, means you allow many many of what are, essentially experiments….to see see what works, in reality. That’s a good thing, because reality is so complex, we can’t really predict what will work. We can only try a bunch of things, see what works.

My view is there are potential new social and economic forms, waiting to be found, which incorporate some of the aims of communism, such as sharing much in common, together with some aspects of capitalism….such as competition and the profit motive. And these new social and economic forms could out-compete capitalist forms like corporations, if we find the right form. We need to find those new forms, think up new ideas, test them out, look at the data, find out what works, what does not.

My basic guess as to why corporations work: Humans vary in all kinds of knowledge, interests, skills and aptitude. No one is good at everything. Plus there is the huge fact that ability and IQ vary widely among people. A kid with an IQ of 80 is unlikely to manage and run the finances of a corporation. Humans are quite varied. The kid with an IQ of 80 may bring other skills needed. So…humans vary a lot. A kid with an IQ of 80 may be happy running a warehouse for a business that is started by a bunch of people, much brighter than him. This allows everyone to put their skills, where they would be best suited, so someone with an IQ of 140 doesn’t have to waste his talent, moving boxes around all day. Group cooperation and specialization of jobs, helps everyone. It gives the kid with an IQ of 80 something to do, while freeing up the time of people whose skills would be better employed, doing other things. And this arrangement benefits both the kid with an 80 IQ, and the people who founded the corporation: When people use legal means to organize the money, the leadership, the work of a group of people, then groups of people, properly organized, have a very large economic advantage, over people working as individuals in the free market…..because when working in groups, having a variety of people with different skills means that whatever one person is weak at, another person may be better at….so everyone benefits from having other people around, who are good at things, which you may not be good at. We bring our strengths and make up for each other’s weaknesses, when we cooperate in properly functioning, properly organized groups.  Working together in groups, based on rules, humans can create many, many times the amounts of wealth, that individuals working alone could ever hope to create….and this is not conjecture: the evidence is in: Properly designed, with the right rules, corporations are amazing organizing tools, for generating enormous amounts of wealth. But they run as a group of people, not as individual people.

So part of this is giving up the American myth of the “rugged individual”…that was fine for the 19th Century, but that social world, is long gone.

Ask yourself a question if you are an ardent capitalist, like me: Can I compete as a sole single human being, with Exxon Corporation? Not likely. Exxon has thousands of people working for them, many of them highly specialized. They have specialized internal knowledge, skills and machinery and capital….then ask: How did all this come about? Answer: By people organizing work in legal structures we call corporations.

It’s a myth that all humans can compete in a capitalist society,as solitary individuals, competing against corporations, on an even playing field. We all compete, organized in groups. Maybe you are part of a church. Or you have a group of friends you grew up with. All those things give you an economic advantage, because social isolation means poverty. You definitely came from a family, which is in itself an economic cooperation agreement among humans, that facilitates human survival and economic prosperity, by sharing resources and labor, much like a corporation does.

With the new social invention of various forms of corporations, everyone who joins one should get a large tax break. This would encourage all people in a capitalist economy, to compete better….by being part of a larger group of economic cooperation.

Bowling Alone was an interesting book that showed the social isolation which has engulfed America. Much of the population is alone.

https://www.amazon.com/Bowling-Alone-Collapse-American-Community/dp/0743203046/ref=sr_1_1?ie=UTF8&qid=1538200964&sr=8-1&keywords=bowling+alone

Too many Americans are alone and isolated today. That’s very frightening and leaves a large chunk of the population economically and socially vulnerable. No wonder “socialism” is on the rise….even if pure socialism isn’t the answer. Socialism is all about re-distributing already existing wealth, from people who already know how to cooperate with others, to create wealth. We don’t need more of that. We need less of people stealing other people’s wealth, and we need more of more groups forming, to create even more wealth. Make America Great Again…but this time, for EVERYBODY…..We need more of humans working together in groups, to create even more wealth, so everyone is looked after, by local groups, by people who know you, know your problems, your strengths and weaknesses. We need more capitalism, with a socialism face, embedded in that most capitalist of social forms: the Corporation.

However, to be clear, at the universities the left wingers have to admit a basic truth: their side lost. Communism, the evil form of socialism, was a complete and utter disaster. Let’s not mince words. Jordan Peterson is exactly right on that.

Generally speaking, communism has been tested many times, and sounds good on paper, but when the data comes in, it turns out, it does not work, and only leads to mass murder. Jordan Peterson studied it for decades, looked at all the data, and came to that conclusion.

Question: why is that? It’s easy to pull blue fairies out of your ass and say communism will work. If you are one of those Bernie Bros who think communism will work, write a paper, make a video, outline your ideas, then let people comment on it….why it might work, or why it might not work.

Capitalist ideas evolved over a very long period of hundreds of years, various components of it, came into being. Many ideas were discarded, I’m sure. It’s the same with any new idea, new system. Build it, test it, and if it works, people will adopt it….but:

If we just continue to speculate, with no proof of what works, and then we are just farting rainbows and pussycats, out our backsides.

Here is one interesting idea: https://en.wikipedia.org/wiki/Mondragon_Corporation

Other ideas:

-Israeli kibbutz

-Amish communities….

Both have experimented with alternative business models, based on a combination of socialism, capitalism, and corporations. I have also observed that some ethnic groups and some families cooperate a lot more than other families. I have known a lot of families of immigrants from India who work together as economic units. Coming here with little money, within a short time they are out-competing Americans who are born here. We should learn from them. They essentially are working in a corporation, even if they don’t think about it, that way. It’s a family and extended family based corporation. No doubt within Indian-American families, some people are extremely smart, others not so much. But by cooperating, everyone helps everyone else to economically prosper….just like in a well-functioning corporation.

Think of it this way: Think of it this way: humans evolved in small tribes. Humans survived by cooperation. With various unique skills in each human being, the combined skills of people working in groups, it created whatever wealth our ancestors had, even if it was just a caribou they got to eat communally, after they hunted it, and killed it.

And a group of hunters, that is basically what a corporation is: a group of people working together, cooperating, to create goods and services. There is a reason why people who look for talented people to head up major corporations are called “head hunters”…Corporations, they work because they mimics human evolution. We evolved to cooperate, in small tribes, to be led, to work together, and to attain a goal. Sports are based on the same principle, and they appeal to a lot of people because cooperative team behavior, towards a goal, is innate in humans: we evolved for it. We may as well take advantage of what worked in evolution, when designing our economic life….because that is what is most likely to succeed.

The plan of socialists is  basically to find useful people, who already know how to cooperate with other human beings, these people are our most useful people, they work in corporations, and they create useful goods and services for other human beings, and then once socialists like Bernie Sanders find these people, they want to take their money from them?…..leaving them with less money, and worse, leaving most of the population, still useless…..the 49% as Mitt Romney called them.

Bad idea, is what that concept is, of just taking from the successful. My concept is to encourage more and more human beings, to organize and cooperate together in groups, so they can create even more wealth and services, at a local level, and take care of each other. Socialists promote robbery, I promote cooperation.

And then of course, there is the Pareto Principle. Half the economic value of any group of people, turns out to be created by a square root of the number of people involved in any group. So if you have 100 people working together, then 10 people create half the value, or money.

The Pareto Principle is a natural law. It predicts the cluster of stars in the galaxy, where populations of people tend to cluster, which rock and roll albums sell the most, book sales…..and it predicts that a few people in any group, will produce most of it’s wealth. We must understand this Principle….and work with it, for the benefit of everyone.

It works in economics: If you have 10,000 people, then only 100 of them create half the money…..a hundred being the square root of ten thousand.

This is just an iron law of economics. Can you see how 1 isolated individual might not survive, when he is not a member of an economic group….with the Pareto Principle functioning in the background?

But: If you are embedded within a larger group, you at least have a chance, to gain some of the spoils of the most successful people, who drive the success of the group. Out of the group, you have less chance. And if you are lucky and the successful ones actually give a rats ass about you, once they know you, maybe they will help you out.  Humans were not meant to survive alone. Our survival depends on the group.

And this means that people working alone, have a very low chance of getting part of that wealth…..and all the value that is created, by the small minority of people, who are more talented than others, and who create a large portion of all money or value.

Back in the Pleistocene era, most tribes had one premier hunter, who was sharper and smarter than the other hunters. It’s a good thing he was around, because he would often find the game, and everyone working with him, got to eat.

Economics works by the same principle today. It’s a natural law. It’s the Pareto Principle and it means if you are part of a group, you have a chance to share in the rewards. This means the top hunters get a bit more status, because they contribute more. That’s fair. Communism rewards everyone in theory, just the same, no matter how small or great, their contribution is. That’s unfair. That’s stupid. No wonder communism failed. I say: Reward the productive, but have everyone share. That’s the natural way to sort things out. And this works better for everyone, if you are part of a group. But, if you are not part of a group, you don’t get to eat, a whole lot….you don’t get to share in the spoils. Maybe we need to get back to nature, join a hunting party….

Later edit, after initial publication: Let’s talk about Richard Wolff:

Richard Wolff says we should take away property rights. That’s what Marxists believe. When you do that, you take away all human incentive. “From each according to his abilities, to each according to his needs” assumes that all humans will continue to do what they do, whether they have incentive to do so or not. Obviously that is nonsense. The people I know, that have a lot, tend to be quite driven and materially focused and driven by status seeking. To be honest, I don’t even like the people I am thinking about, in my life that are like that, but it’s obvious that some people are very status and wealth driven. They like to win, more than others like to win, and they have the sorts of human qualities which allow them to flourish in a capitalist system of rewards.

So Richard Wolff is full of b.s. Communism will not work, as it is out of alignment with human nature. And taking away property rights is crazy. Under “property rights” I would put in, the right to earn good money, make a profit, own a business, own a house, own all kinds of things, as individuals.

But then again, who says that ownership has to be individual? When I bought shares in a Chinese battery manufacturer, I did not own the whole thing. I own a tiny piece of it, and I own a piece of paper proving it. And as I said previously, group cooperation is spectacularly successful, in creating everything, in a capitalist society.

So then I’d say Richard Wolff is mostly wrong, but he has a point: No, he’s wrong on his quest to take away property rights and he is wrong on human nature. But his impulse for group efforts is correct: humans organize in groups, to create wealth. What he is wrong on, is in his structure of what that group should look like. Communism wants to take away all private property….and takes away financial incentive, for people to get rich. That is insanely foolish, as it sucks the economic vitality, right out of an economy.

A better plan is to financially incentivize the whole population, for each individual to become some sort of economically cooperating unit….like a kibbutz is. If everyone is part of a group, then we take care somewhat, of the Pareto Distribution problem in capitalism. The Pareto Distribution is both bad, and good. It’s bad in that it pushes us towards inequality, naturally. It’s good in that it rewards competence, which massively pushes up innovation and economic output. So how to have the best of the Pareto Distribution, while avoiding the negative aspects of that Pareto reality? That’s simple: Have everyone be part of some sort of economic cooperative…..that way they benefit from the Pareto Distribution, while economic output continues to rise, as everyone is incentivized to produce more. If everyone belonged to a group, whose interest was economic, and  people were all incentivized to set up business forms, to help each other, everyone would belong to a “corporation” of one kind or another….which would allow everyone to benefit from the Pareto Distribution’s tendency to push productivity gains into a few hands, while avoiding the economic devastation that often accompanies the person who competes alone and is subject to the brutal aspect of the Pareto Distribution, which disproportionately punishes losers in that distribution. If we do this, then capitalism would be improved over time.

I would break this down even further, to basic human needs. One of the very basic, simple human needs, is for housing. Individual property ownership, is often a fool’s game. I have seen ethnic groups where group cooperation is more common. Often immigrants will come to America and be quickly out-competing white Americans that have been here, all their lives. Why is that? Being new immigrants, they realize they are economically vulnerable if they are alone, so they stick together, economically cooperate, especially in buying housing together.

I suggest we take up their good example, and set up in the legal system regarding property rights, and we set up in the tax system at all levels of government, a series of incentives to help people to buy property jointly. Already this happens at the level of a marriage, where a man and woman will jointly buy property together. A man and his wife is, after all, an economic cooperative unit. My suggestion is that multiple person economic units buying property together, that they be financially rewarded in the tax system, so as to encourage humans to avoid the single family plan we are currently on. Humans did not evolve as single isolated families, in suburbs. It’s unnatural to us. We evolved as extended kinship groupings, sharing economic resources.

So legally and economically encouraging people to form larger kinship bodies, seems to me evolutionarily natural and likely to lead to better economic outcomes, if properly implemented. Again, I’m short on specifics, a lot of trial and error is required for this to take root.

As to Richard Wolff’s suggestion in this video, that we do away with the board of directors and have the ordinary workers make the decisions, what a stupid idea. The best people available, should be running any business. Competence for business varies widely with people. Most people are quite incompetent, or may be competent for other things, but not running a business. I know a few people who are near genius level IQ in one area or another, such as mechanical aptitude or art….but lack the ordinary common sense required for business. Putting incompetent people in charge of businesses, is Mr. Wolff’s plan. What an idiot. That won’t work. Mr. Wolff is a fool.

13:10 Mr. Wolff……shows his cards, on how to organize the economy. He presents his alternative to capitalism. Quote:  “What’s the alternative? I already told you, at the beginning of this little monologue.  That’s when the people who produce the surplus, the workers, are themselves the people, who get the surplus. How would that work? Take any factory. Take any office. Take any store. In America, here in New York. Change it as follows: No more board of directors. Most things are done by corporations, run by a board of directors. No more board of directors. Don’t need it. Here’s how we’re gonna do it: Monday through Thursday, where all the workers, come to work, do what they were always doing. You cook bread, you clear the table, you set the table, you do the dishes, whatever. If it’s a restaurant, say. Friday, we have a different arrangement. You come to work, half of you, and do your regular job, and the other half of you, sit around, making the decisions….the menu, the investment.”

My comment on Mr. Wolff’s ideas: What a fool he is. The least competent person, the dishwasher, gets to run the restaurant? How does that even make sense? And the dishwasher likely didn’t invest a dime in the business. The people who are incompetent likely have no financial stake to lose, if things go bad….whereas the people putting up their life saving, to start the restaurant, have a lot to lose, and will work harder, and likely know far more about the running of the business, because their future depends on it, and they have been putting in an effort, likely for years, to understand how to run the restaurant properly.

There is nothing in Mr. Wolf’s idea of letting the workers run the business, by which to weed out the incompetent…or reward the competent who make good choices….whereas capitalism definitely has a plan to weed out the incompetent, while rewarding the competent. Mr. Wolff’s plan is to incentivize the likelihood that the business will fail, because incompetent people will run it. Believe me, business is hard enough, the challenges are big enough, that there will be plenty of naturally occurring failure in any business venture.

How do I know that? Who am I to talk about this, you might ask? What do I know? ….I ran a small business successfully for 20 years. I was not a huge, huge success, but enough of a success to have a very comfortable middle class life. One thing I remember from that time: You get up every day, you do the right series of things, or you may very well go bankrupt. My accountant once told me something very useful: “Tim Bucks, 80% of all businesses fail within 5 years. Another 5% fail within 10 years”. I lasted 20 years, then sold out, so I’m quite proud of that.

Richard Wolff is a fool.