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Putting the Capital Back in Capitalism: Jennifer Grossman's Prepared Remarks at Mercer University

Putting the Capital Back in Capitalism: Jennifer Grossman's Prepared Remarks at Mercer University

April 10, 2024

On April 4, 2024, Atlas Society CEO Jennifer Grossman (JAG) traveled to Mercer University in Macon, GA to talk about the pivotal (and neglected) role of investment capital in driving progress. Invited to engage with 100+ students assembled, the event was cut short when anti-Israel protestors proceeded to disrupt the event by shouting over JAG's remarks, with one going so far as to repeatedly shove her. You can watch the video by clicking HERE.

The media has characterized JAG's speech as relating to the Hamas-Israel conflict. We invite you to take a read and let us know if you agree with that assessment....


Let me begin by saying thank you to Turning Point at Mercer U for this opportunity and thanks to all of you for coming.

I first gave a version of this talk in Spanish last September at Guatemala’s Universidad Francisco Marroquín. Spanish is not my first language, but it’s o.k. because the concepts I’ll be covering are universal. I’ll begin with the caveat that while I’m talking to you about capitalism, I’m not a REAL economist. Then again, neither is Paul Krugman. I’m not even a professional philosopher. I’m speaking from my perspective as the CEO of The Atlas Society, and also as someone who’s spent a career writing speeches for presidents, working for visionary financiers like Ted Forstman and entrepreneurs like the owner of Dole Food Company, and above all marketing products, policy reforms, and ideas.

Let’s begin with a marketing question: which term do you prefer to describe the ideal social and economic systems for freedom and prosperity? Free Market, or Capitalism? By a show of hands, who prefers the term “free market”? And by a show of Platinum cards, who prefers “capitalism”? 

For those who prefer the term “free market,” I’m here today to try and change your mind. 

Yes, I know the arguments against my choice. It was coined by Marx. False. It was coined back in 1850 by the French socialist, Louis Blanc…and yes, I realize that the term “French socialist” is redundant. He coined it to describe “the appropriation of capital by some to the exclusion of others.” He and other socialists used the term capitalism to demonize the modern world in the midst of the industrial revolution. 

Now, while Blanc and Marx and especially modern day socialists are wrong to equate private ownership with theft—and actual theft, by the state, with justice—they were on to something in their focus on capital, as I’ll argue today.

Others say, “Don’t say ‘capitalism,’ it’s got a bad connotation.” People think it’s something it’s not. So call it something else.” But that’s the rebranding game played by the leftists. They’re socialists, then they’re progressives, then they’re liberals, then they’re progressives again. But branding isn’t the issue.

When someone slanders you, or misrepresents you, or even misunderstands you…do you just change your name, or get a makeover, or assume a new identity? No, you don’t give your adversaries that power. And that should also be our policy with the enemies of capitalism. We explain what capitalism is, what it isn’t, and make the case, perhaps most importantly, that it doesn’t just produce better results than the alternatives, but that it’s objectively more fair, more just, and more moral than the alternatives.

Here’s the case for capitalism vs. free markets in just three simple arguments:

1. Production before transactions.

2. Profits before production (don’t worry, I’ll explain that formulation).

3. Virtue before profits.

Production before transactions.

The first reason that capitalism, as a concept, is more comprehensive and fundamental than the idea of free markets, is because free markets concentrate on transactions. We’re trading goods and services in a market. What are some of your recent purchases? Happy purchases. A phone? An app? A plane trip? A hotel room? You paid $100 to take your girlfriend out for an anniversary dinner to a really fancy restaurant.   

You’re happy, the restaurant is happy, no one forced that transaction. But where did the $100 come from? Where did the restaurant come from?

What I’m getting at is that the term “free market” begs the question, what is being transacted? Where did it come from? The term “free market” focuses on the buyers and the sellers, but less on the producers, and the requirements of production.

Ayn Rand had a similar observation when it comes to charity: “One cannot give that which has not been created. Creation comes before distribution—or there will be nothing to distribute. The need of the creator comes before the need of any possible beneficiary. Yet we are taught to admire the second-hander who dispenses gifts he has not produced above the man who made the gifts possible. We praise an act of charity. We shrug at an act of achievement.”

One might say the same of free markets: One cannot buy or sell that which has not been produced. Production comes before transaction—or there will be nothing to transact. The need of the producer comes before the need of the customer or the retailer. 

So, what are the needs of the producer?  I think capitalism answers that better; capitalism rests on private ownership and control of the means of production. And the most fundamental means of production is one’s mind. And private ownership at the most fundamental level means you own yourself, you own your mind, you own your body, and no one has the right to tell you how to dispose of them. 

And that’s another reason why I prefer “capitalism,” because the mind is reflected in the origin of the word. The word “capital” comes from the latin word “caput” for “head.” And we see it reflected in other words that share the same etymological root—CAP-tain of a ship or team, CAP-stone of a building—perhaps of a CAP-itol building, mountain-CAPs. All the words imply hierarchy, and as such, CAP-italism, puts the mind, the head, at the apogee of its system.

So producers need to own the means of production, that starts with the mind, but extends to mines, like the famed Francisco d’Anconia’s San Sebastian mines, or Ellis Wyatt’s oil fields, or Hank Rearden’s metal refinery in Atlas Shrugged. And when central governments decide to seize upon these means of production, in one manner or another, the producers deploy various dramatic means to teach the bureaucrats and the world, there is no redistribution before production, and there is no production without protection of private property rights.

In the words of Ayn Rand: “Without property rights, no other rights are possible.”

So in Atlas Shrugged, Ayn Rand gives us an epic warning of what happens when property rights are undermined, when producers are vilified and the needs of production are not only ignored, but actively mocked. But let’s use our imagination to roll back to a time before the story’s famous railroads and refineries and oil fields and mines were built. Imagine a prequel to Atlas Shrugged if you will. On a practical level, what did the great visionaries need to make their visions a reality? After they did the initial surveys, maybe created a prototype and drew up the business plans…who did they call? What other character from Atlas Shrugged might they go to visit next?

Midas Mulligan. Right. Which brings me to my second reason for preferring the term “capitalism” to “free markets,” not only does the term provide deference to the “cap,” the head, the fountainhead of production, but capitalism enshrines the centrality of capital, specifically the capital investment required for production.

Profits Before Production

Now I know some of you are probably scratching your heads, thinking, “I know she said she was no economist, but did she even take economics 101?” Because we all know that profits come after production, after transaction (sales) and after deduction of costs. What’s left are your profits. So how can you say, “profits before production”? It makes no sense.

Well sure, profits come after production, but they also come before it. Just take the example of Elon Musk, who came from a relatively middle class family in South Africa, emigrated with his mom to Canada. Back in 1995 when Elon was 23—probably the age of some of you in this room—he and his brother Kimbal (21 at the time) had an idea for a startup, a kind of online business directory, kind of a web-enabled yellow pages with maps.

So they had a nifty idea—at least for the mid-1990s—they had some skills, they had a lot of ambition. What didn’t they have? Capital. Who had it? Investors. Where’d they get it? From profits they made in their own businesses and from their own investments. And these investors wanted to make more profits, those dirty capitalists, by taking a risk on these two kids with a crazy idea—an enormous risk, in fact, once you consider that 70% of startups fail within the first five years. So, you can bet that they drove a hard bargain—one which the Musk brothers were no doubt thrilled to jump at—to invest in their idea in exchange for significant equity in the company. How significant? Well, the company was sold to Compaq, in 1999, for $305 million, Elon and Kimbal, the original founders netted $22 million and $15 million respectively.

And what did Elon do with his profits? Well one thing he immediately regretted: spending nearly a million on a McLaren F1 sports car, then crashing it while driving around Peter Thiel, who he was hoping to lure as an investor in his next startup. Though the crash could have cost him, and Thiel, their lives, Musk learned a valuable lesson. So, he took the rest of those profits, plowed them into his next venture, which became PayPal. When that sold, he took the $180 million in profits and plowed them into his next venture, and the next.

So that is why I say, profits before production. Which any budding entrepreneur knows, whether they’ve got a tech startup, or they want to open a restaurant, or a hair salon, or a trucking company, they need the capital, whether that comes from profits they themselves have previously earned, or from the profits their investors made by risking previous capital, and are willing to risk plowing into someone’s new venture.

And what did he learn along the way? He recently observed: “It does not make sense to take the job of capital allocation away from people who have demonstrated great skill in capital allocation and give it to an entity that has demonstrated very poor skill in capital allocation, which is the government."

The term “free market” fails to capture the pivotal role of capital accumulation and capital allocation. And, of course, that role is completely ignored by those who want to “soak the rich” and redistribute income.

It’s a point reinforced by Ayn Rand when she observed: “Most people seem to believe that...the rich spend all or most of their money on personal luxury...but it does not happen to be true...The money of the rich is invested in production; it is...the stock seed that makes production possible.”

That’s why her character, Midas Mulligan described his job as feeding “life-fuel into the plants that are still capable of growing.” He’s the one who invested in a young Hank Rearden, “when he had just beaten his way out of Minnesota to buy steel mills in Pennsylvania.”  The strikers in Atlas Shrugged, who left their businesses behind, and came to that secret refuge in Colorado, they called it “Galt’s Gulch.” But what did John Galt call it? His answer? “I call it Mulligan’s Valley.” 

So if Production comes before Transaction, and Profits come before Production what comes before Profits?

Virtue Before Profits

Now, to consumers of popular culture and mainstream news, the idea that virtue comes before profits might seem surreal, as we are fed a steady diet of supposed business scandals, or even TV characters like Mr. Burns in The Simpsons or Gordon Gekko on the silver screen in Wall Street.

That’s among the reasons why, in terms of the arts, Atlas Shrugged was so revolutionary, in that it provided examples of heroic entrepreneurs. But, the most explicit and impassioned defense of capitalism in its pages is, of course, Francisco's Money Speech. And I ask you to think of “money” here, not simply as a currency, but more specifically as profits. The making of money.

He asks: “Did you say it’s the love of money that’s the root of all evil? To love a thing is to know and love its nature. To love money is to know and love the fact that money is the creation of the best power within you…Money demands of you the highest virtues, if you wish to make it or to keep it.”

“If you ask me to name the proudest distinction of Americans, I would choose…the fact that they were the people who created the phrase ‘to make money.’ No other language or nation had ever used these words before; men had always thought of wealth as a static quantity–to be seized, begged, inherited, shared, looted or obtained as a favor. Americans were the first to understand that wealth has to be created. The words ‘to make money’ hold the essence of human morality.”

The socialists see this making of money as exploitation. The religionists see this making of money as materialistic, and—heaven forbid—egoistic, self-interested. And many on the left, many non-ideological people see the “making of money” as a matter of luck. And certainly, luck plays a role in business startups—and when you consider that 70% failure rate, you’d have to agree that most of the luck is bad.

I remember when I worked at Dole Food company, reporting to its owner, David Murdock. And some guy in the packaged foods division said, “so what’s the big deal?,” the owner essentially won the lottery, he doesn’t deserve his riches. So, let’s take a look at that lottery. Murdock’s father, a traveling salesman, abandoned him and his two sisters. He was dyslexic, so he left home at 13 years of age to work a variety of odd jobs. After being drafted, and later discharged from the army, he ended up destitute in Detroit. He convinced somebody not to give him charity, but to give him a $1,000 loan to buy a run-down diner. And he sold it a year later for a small profit.

Over the course of the next several decades, through two bankruptcies, through the death of his young wife, and the tragic accidental deaths of two sons, he persevered, made more good investments than bad ones, made and lost fortune, and eventually became a billionaire. So, if you’re a mid-level, business-sale guy, like my colleague at Dole, you might feel better about calling that a lottery, than either accepting your own limitations—and, if anything, be grateful to have a job created by someone with greater ambition, greater acumen, and willingness to work 24-7 while you’re enjoying your weekends and vacations, or, even harder, you might decide to reorganize your priorities, be willing to risk your security, and develop yourself into an entrepreneur yourself.

While there will always be scammers who find a way to lie and cheat their way to short-term profits, the vast majority of successful entrepreneurs make their profits by practicing virtue—being honest, benevolent, industrious, creative. Above all, being rational in pursuing their self-interest by serving the self-interest of their customers, investors, and employers.

We’ve all heard the slogan, “Don’t hurt people, and don’t take their stuff.”  And that’s a principle that’s perfectly suited to the transactional nature of a free market. But I think it fails to capture the wider possibilities, indeed the deeper question asked by capitalism: What are you going to do with your freedom? You’re not going to hurt people, good. Are you going to find a way to help them by coming up with a new service or product? You’re not going to take stuff, good. Are you going to make stuff? Refraining from harming others is a good start on pursuing happiness, but ultimately the path to happiness lies in living a life of productive achievement, in choosing your values and living by them, and in practicing virtue as men and women of character.

Thank you.

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