How Business Executives and Investors Create Wealth and Earn Large Incomes

Posted on November 3, 2013 by Sword of Apollo

Imagine you could genetically engineer a creature, and you chose to omit a brain, opting instead for local controls that cause each part to do whatever it does, while generally ignoring the state of the other parts. Would this creature be an effective actor in the world, capable of sustaining itself by its own action? I think you would find that it would die pretty quickly, because each part is pulling in a different direction, without any coordination between the parts.

Such would tend to be the fate of a large business without the central control of a chief executive. He/she along with other executives, serves as the “brain” of the company. He provides the overall direction of the company and works to keep its parts coordinated to accomplish major goals. Without executive guidance, the decisions and goals of the various departments would often conflict. (1) The body manufacturing division of a car company, for example, may think that the company should be producing more sports cars, and start shifting its production to sport car bodies. But the engine manufacturing section may think that vans and SUVs are on the rise in the market, and so start shifting production to big-block engines for trucks. The mismatch between the vehicle bodies and engines will waste resources and stop the company from selling as many vehicles to dealers as they otherwise would.

What is needed to avoid such problems is a party to provide overall direction and coordination to the company. This role is filled by the executives, especially the CEO.

For a CEO to guide the company effectively in a free market, he needs to have a great deal of knowledge about his industry, past and present. This knowledge, along with an active, creative mind, is necessary so that he can have a viable vision for the future of his company. He also has to have a solid grasp of the organization, attributes and capabilities of his company. He has to keep all of his company’s moving parts in mind as he makes crucial, high-stakes decisions. One wrong decision can doom the company and cost him his job, potentially making him unemployable as a CEO in the future. A series of right decisions can make the company very successful and very profitable. Being a CEO is hard, stressful, mental work and involves very long hours.

Continue reading →

Why Healthcare in the US is So Expensive, and What Can Be Done About It

Posted on September 20, 2013 by Sword of Apollo

The passage of ObamaCare, and the ongoing debate over it, is the culmination of over 80 years of ever-increasing government involvement in the healthcare industry. It is also the culmination of about 50 years of obviously increasing healthcare costs.

The following is a copy of an email that I sent to talk-show host, Bill Handel, on KFI AM 640 radio in the Los Angeles area:

Dear Bill,

You have observed the indisputably bad state of American healthcare, with its poor performance and high, constantly rising costs, and concluded that the USA would be better off embracing a socialized healthcare system more like that of France. You have implied that these are our only two options. But I am sending you this email to let you know that there is a third alternative; one that is vastly superior to the two that you have considered.

The healthcare system in the US, today, is NOT anywhere near a free market. Over the past 80 years, the Federal and state governments have interfered/regulated, (used government compulsion) in the healthcare industry at an ever-increasing scale. In the 1930s and -40s, the Federal government decided to exempt group and employer-provided health care plans from taxation, thus creating a tax incentive for such plans. Over time, with the help of government acts, laws, and union collective bargaining, these plans developed into the type of plans we have today. What we have today, with the support of government, are healthcare plans that act somewhat like insurance, except that this “insurance” is used for just about every common illness, injury, or other health issue. This system of “everyday insurance” insulates the patient from the cost of the treatments he receives. The patient no longer has to make a cost/benefit analysis for treatments, nor be concerned with getting the most value for his money. He simply pays his premium, then gets the most out of the coverage he can. At best, the price/service competition among doctors that keeps their prices in check, is shifted from appealing to patients to appealing to health plan providers. The patient, instead of having hundreds of doctors competing for his continued business each visit, has a few health plan providers competing for his long-term allegiance. It is much more of a hassle to switch health plan providers than to switch doctors, so competition is limited. Continue reading →

Wealth is Created by Action Based on Rational Thought

Posted on August 31, 2013 by Sword of Apollo

One little bit of high-tech wealth brought to you by a lot of human thought.

Wealth consists of the life-promoting goods and services that people have access to. Wealth, (beyond fruit) does not grow on trees. Luxury homes do not spring up from the earth by themselves. Seasoned pork roasts do not fall from the sky. Wealth must be created by human activity.

But what kind of human activity generates wealth? Is it desiring? Does simply wanting a new car make it appear? Despite what most Keynesians will tell you, I’m afraid that it will not. (1) People have to act to create wealth. But what kind of action? If you flail your arms about mindlessly, will that create wealth? Obviously not. What is needed is action based on rational thought: That is, taking stock of one’s surroundings and the actual needs of oneself and/or others, then figuring out how to use one’s surroundings to create what is needed for the promotion of such human life, (i.e. wealth.)

To provide food, people need to think about how to plant and harvest, how to hunt, how to maintain livestock, how to store crop yields without spoilage, how to keep and prepare meat safely, etc. If no one thinks at all, everyone starves. But is all that’s required to reach today’s level of wealth, minimal, routine, low-level thought? Continue reading →

Wealth is Not Money — Monetary Wages vs. Real Wages

Posted on August 16, 2013 by Sword of Apollo

Not wealth.

There are many confusions that many people hold about economics today. One fairly common one that I’d like to address is the confusion of wealth with money.

Wealth consists of the actual goods and services that are available to a person. Food, medicine, clothing, houses, televisions, computers, jewelry, the services of a doctor–all of this is wealth.

Money, on the other hand, is the medium of exchange used to indirectly barter wealth. Unlike wealth, having money does you no good by yourself on an island. If the money supply in an economy is doubled, this does not increase the amount of wealth in that economy. What increases wealth in an economy is the production of material goods and the offering of valuable services.

The confusion between money and wealth tends to arise because, on an individual level with a given money supply, the way one gets access to more wealth is to get more money. But the way money translates into wealth is not a simple “more nominal money equals more wealth,” but “having a greater percentage of the money in the economy entitles one to a greater percentage of the wealth in that economy that one doesn’t already own.” Money is a claim to the wealth produced by others, (who are willing to sell) relative to the total money supply and the total wealth.

When people create wealth by producing valuable goods from raw materials or using skills to offer services, then trade these for money, they give value to the money in circulation. If they are able to produce wealth (of a type that’s needed/desired) faster than it’s consumed, they increase the value of the money in circulation. Since there are more goods and services chasing the same amount of money (assuming no more money is printed/created) the prices of the goods and services decrease. Continue reading →

Mainstream Radio Talks About Atlas MD

Posted on April 15, 2013 by Sword of Apollo

In this segment of his morning radio show, Bill Handel talks about the benefits of the concierge doctor service, Atlas MD. It’s a glimpse into the quality and efficiency of free-market healthcare. The only thing that’s missing is an unregulated, unsubsidized health insurance industry that mostly provides benefits for large/catastrophic medical expenses, rather than everyday expenses. This segment really is great to hear.

Bill Handel on Atlas MD

America Before The Entitlement State

Posted on March 16, 2013 by Sword of Apollo

This article by Yaron Brook and Don Watkins should be seen by all Americans, and indeed, everyone else. It describes how people dealt with sudden injuries, deaths and the various disasters that can befall people, before government welfare programs and Social Security:

America Before The Entitlement State

Here’s a video reading of a part of an essay from Capitalism: The Unknown Ideal by Ayn Rand:

—–

How to Show That Taxation is Robbery

QuickPoint 2: Altruism Supports Coercion…

The Nature of the Morality of Rational Egoism: Short Notes

19th-Century Capitalism Didn’t Create Poverty, But Reduced It

Posted on February 25, 2013 by Sword of Apollo

Here’s an article by Yaron Brook and Don Watkins on the near-laissez-faire capitalism of the 19th Century:

Capitalism In No Way Created Poverty, It Inherited It

—–

Related Posts:

How to Show That Taxation is Robbery

QuickPoint 2: Altruism Supports Coercion…

Why “Anarcho-Capitalism” is Wrongheaded

The Nature of the Morality of Rational Egoism: Short Notes

The False Freedom of “Equality of Opportunity”

Posted on February 17, 2013 by Sword of Apollo

In mainstream discourse in the US, “equality of opportunity” is taken as an uncontroversial rallying cry for both “conservatives” and “modern liberals.” It’s typically seen as a more reasonable alternative to the openly socialist “equality of results.”

Don Watkins, of the blog, LaissezFaire, has written two posts exposing the fact that “equality of opportunity,” taken literally, is just as irrational and unjust a notion as “equality of results.” (If it’s not taken literally, then it’s an extremely vague term and shouldn’t be used.)

What matters for the justice of a society is not “equality of opportunity” but the absence of initiated coercion.

Just Say “No” to Equality of Opportunity

Who Needs Opportunity?

—–

How to Show That Taxation is Robbery

QuickPoint 2: Altruism Supports Coercion…

The REAL Fiscal Cliff

Posted on December 27, 2012 by Sword of Apollo

While politicians and the mainstream media in the US have been busy talking about the tax laws that expire at the end of 2012, we are approaching the real “fiscal cliff” very rapidly. This cliff is further in the future and no one knows exactly when we will fall over it, but the US will fall over it if it doesn’t change direction immediately and drastically.

The US Federal debt currently stands at over $16.3 trillion and is rising by about $1 million every 40 seconds. The CBO projects massive annual deficits for the next 10 years.

The economist, Peter Schiff, spells out the harsh reality of the situation the US is getting itself into in the following set of videos:

QE stands for “Quantitative Easing,” where the the Federal Reserve creates new money and uses it to buy financial assets directly from banks. QE generates an increase in the money supply.

To paraphrase Ayn Rand: The majority of people in the US can ignore reality, but they can’t escape the consequences of ignoring reality.

The Federal Reserve is setting the US economy up for another huge crash and a round of hyperinflation. Yet, given our history, it is not hard to predict that when the big crash happens, “scheming businessmen” and/or “unscrupulous financial traders” will take the blame from the mainstream media and dominant public opinion.

This Objective Standard article describes the deeper philosophical problem: The Moral Cliff

—–

Posted on August 18, 2012 by Sword of Apollo

Below are links to Yaron Brook’s explanation of how the US housing bubble and financial crisis happened. Yaron Brook has an MBA, a Ph.D. in Finance, and was a professor of finance at a university.

Here is a short video on what caused the crisis: