Freedom & Fortune... The Spoiled American Voters of 2016 Squander Their Inheritance

In the segment of the financial planning industry that caters to the uber wealthy, the rule of thumb is that by the 2nd generation 70% of family fortunes are lost and by the 3rd 90% is gone. Why? “Most of them have no clue as to the value of money or how to handle it.” Financial wealth is not so different than freedom and Thomas Jefferson knew it: Eternal vigilance is the price of liberty.

The United States has thankfully lasted much longer than 3 generations, but the writing is on the wall and the election of 2016 is proof.

On one side of the debate we have Bernie Sanders and Hillary Clinton. We have two people who have zero experience in doing anything even remotely productive in the private sector in their lives. Bernie Sanders has virtually zero experience in the private sector as most of his many short lived jobs being for public or government institutions of one sort or another. His first steady paycheck not coming until he was 39 when he was elected Mayor of Burlington, VT. He’s never started a for profit company, he’s never ran a business that had to actually make a profit and meet a payroll… He’s never had to compete to attract consumers who are willing to freely exchange their hard earned money for a free market good or service he is providing. And, if it’s possible, Hillary Clinton has even less private sector experience.

Both of the people running for the presidency on the Democrat side have spent essentially their entire lives working in the public sector. As mayor. As congressional aide. As Congressman. As First Lady. As Senator. As Secretary of State. All of these jobs are funded by the taxpayers and in both cases their passions have been fueled by the desire to use the police power of government to bend the public to their will… in the service of good of course.

Donald Trump on the other hand has never had a job in the public sector. He’s been a builder and developer his whole life. He’s also been an operator of casinos, a reality TV show star, the leader of an eponymous university and he’s lent his name and likeness to countless products. While he parlayed his father’s $1 million loan and influence with bureaucrats into becoming a very successful real estate developer and reality TV star, the rest of his repertoire has been… shall we say, less than successful. But at the end of the day he’s a billionaire and that’s largely due to his real estate success. Not surprisingly, in that – real estate – Donald Trump has been in bed with government just as much as Bernie Sanders and Hillary Clinton. From using government tax handouts to finance buildings to using government sanctioned bankruptcy laws to threaten and blackmail erstwhile partners, Trump’s real estate success has been built on a foundation of government intervention… and everything else is built off of that. But at least he knows about meeting payroll and attracting customers who have a choice as to where to spend their money.

The fact that America has selected these three big government candidates as the only viable options for the White House tells you everything you need to know about America in 2016. Like the 2nd and 3rd generations of wealthy families, an overwhelming majority of Americans are more interested in what someone else – the government in this case – can do for them than what they can do for themselves. An overwhelming majority of Americans have no idea of what made America great in the first place. An overwhelming majority of Americans don’t understand exactly how close the nation is to killing the goose that laid our golden egg.

Half the population is prepared to vote for a socialist wannabe Hillary Clinton or the actual socialist Bernie Sanders. Their basic premise for governing is simply more regulation on businesses and individuals, more illegal immigration, higher taxes on the rich and more redistribution programs for the poor. Absolutely nothing in their positions suggests anything about helping businesses be successful. Nothing suggests freeing up capital or entrepreneurs to start the next big revolution. Nothing suggests driving down the cost of business so that companies can innovate, hire more employees and offer yet to be invented goods or services to the public. No, for Hillary Clinton and Bernie Sanders everything is about what the government can do for you or will do to someone else.

A significant portion of the remainder of the population are prepared to vote for Donald Trump, a crony capitalist of the highest order. The problem with crony capitalism is that it’s not really capitalism at all… it’s coercion of others by the state for the benefit of friends of bureaucrats and politicians. Whether it’s Vegas’s tax breaks for the billion dollar NFL or Georgia’s tax incentives for Hollywood movie production or the Agriculture Department’s subsidies of corn or sugar or peanuts, it’s all crony capitalism. So too is it when banking or broadcasting or healthcare regulation becomes so onerous that they stifle competition and innovation because only the ultra rich friends of government can afford to pay the compliance costs.

One way or another it’s always taxpayers, small businesses and average citizens who are left holding the bag for government decisions where bureaucrats and politicians put their personal or political agendas ahead of individual freedom and free markets. Fundamentally this is because so many Americans simply don’t understand that a government can’t produce prosperity, it can only stand in its way. That a government that can take something from someone else to give to you today can just as easily take from you to give to someone else tomorrow. That a government that can write rules that favor you today can turn around and write rules that handicap you tomorrow. One need look no farther than Cuba, Venezuela, Spain, France or Greece to see what such government strangulation of free markets and free citizens does. Economies that stagger from one crisis to the next. Widespread unemployment. Flatline economic growth or outright decline. Unrest in the streets. Such things are the hallmarks of big government.

And the truth is, supporters of the three contenders for the presidential crown have no clue how prosperity ever came to the United States in the first place. American prosperity dominated the world in the 20th century like perhaps no other nation has in all of human history. While China and India may have had a larger share of world GDP two millennia before, the 20th century saw world GDP grow more, and more broadly ever before, and growth was driven by the United States. More than anything else, that American Century was characterized by freedom where government – mostly – left free markets to solve problems and innovate a wider array of new products and services than the world had had ever seen.

Those times and that leadership are long gone and they may never return. Beginning with the trickle of the New Deal and picking up steam with the Great Society programs, government regulation and redistribution policies began to strangle the American economy by the end of the 1970s. It was on life support when Ronald Reagan was able to revive it with spectacular success. Since then however it’s largely been downhill. From George H.W. Bush to George Bush government regulation continued to grow year after year. Bill Clinton took advantage of the “Peace Dividend” to grow it more in between. Under Barack Obama government regulation and strangulation of the economy has advanced at an unprecedented rate. And the economy has shown it. During Ronald Reagan’s first 7 years the GDP grew at an average of 3.4%, during Clinton’s it was 3.84%, Bush’s 2.46% and under seven years of Barack Obama the American GDP has grown at a stultifying 1.4% a year… and this is during a period when $10 trillion was added to the National Debt and the Fed pumped in an additional $2 trillion! (BEA data in Excel)

And so it goes… like the wastrel children and grandchildren who blossom under fortunes built by someone else and proceed to lose those very fortunes, Americans have lost their way with prosperity and may not find it back. National prosperity demands freedom. Prosperity for the many demands free markets. Widespread prosperity demands limited governments. But rather than look for a president who will roll back the suffocating leviathan of government and unleash free markets and entrepreneurship, Americans are instead choosing to support candidates who offer to use the power of government to tilt the scales towards them and their friends at the expense of everyone else.

The sad thing is, it’s not like that choice doesn’t have a clear outcome. It’s been tried over and over again around the world and it always fails, every time. And it will fail here too. The question is, is a fiery collapse that resembles the likes of Venezuela in our future or is it the slow calcification of France or Greece where the government slowly strangles the citizenry to the point where practically nothing works and eventually the nation begins to simply implode? In either case as the consequences of the disastrous 2016 election begin to play themselves out over the next couple of years Americans should be prepared to find themselves involved in more wars, experiencing more economic failure, buckling under more government regulation and enjoying less freedom of all types, particularly speech. Add to that more racial division, riots, crime and ultimately, much more despair and distrust of the system. Such are the conditions of revolutions, the hot ones, not the ballot box types…

Legacy: Was Steve Jobs a selfish son of a bitch?

Steve Jobs passed away earlier this month with an estimated fortune of $8 billion. I have yet to see a single report about one single dollar that he gave away to charity. How is it possible that a person who was lucky enough to be born and grow up in the United States and take advantage of our laws, schools, infrastructure and patent protections could be so selfish? Compare his lack of philanthropic giving with that of other similarly rich types, past and present. Andrew Carnegie gave away virtually his entire fortune, over $350 million dollars during his lifetime – $5 billion in today’s dollars. John D. Rockefeller gave away over half a billion dollars over his lifetime – $8 billion in today’s dollars. Bill Gates has given away over $30 billion dollars and promised to give away most of the rest of his fortune while his friend Warren Buffett has promised to donate 99% of his wealth. The pair has created The Giving Pledge where billionaires pledge to donate a significant amount of their fortunes to charity. If all of these people can give this amount away, what was wrong with Jobs?

Charity and private giving has been a great force in America since its founding. Through churches and local organizations for those of modest means to building libraries, museums, or foundations for the wealthy, America has been a country where the successful and struggling alike look to support their communities as well as support the less fortunate around the world.

Apparently not so for Steve Jobs however… and charity’s not the only place he was tight. When he was alive he did everything he could to reduce his taxes. He used tax shelters to lower his tax rate from 35% to around 15% on millions. He put his real estate and other assets in trusts so they would escape the death tax.

Everywhere you look Steve Jobs was doing what he could to keep his own money. Not giving it away. Avoiding paying taxes. All while he’s taking advantage of everything America has to offer.

What’s wrong with a person who sees the misery going on around the world, from hunger in Africa to millions of poor here and does nothing to lend a hand? What kind of legacy is that?

When the robber baron Andrew Carnegie died his legacy was obvious. He had built thousands of libraries around the world, founded a university and built Carnegie Hall. By the time he died, JD Rockefeller had remade the face of modern medicine and created what was for years the largest charitable foundation in the world. Bill Gates is still very much alive, and he is remaking the face of charity. What kind of legacy is Steve Jobs leaving?

In 1977 he and Steve Wozniak introduced the Apple II, the first fully assembled personal computer. At the time the notion of a personal computer was an utterly foreign concept to 99.9% of the people on the planet. Term papers were still being written on typewriters. Math was still being done on calculators. Research was still done at the library.

In 1984 Apple introduced the Mac, the first personal computer to feature a mouse and graphic user interface. At the time most others still used the C: prompt.

In 1986 when he purchased Pixar, it was primarily a high-end computer hardware company with graphics as a side note.

In 2001 when Apple introduced the iPod, digital music was just becoming popular but most digital players were “big and clunky or small and useless”.

In 2003 when Apple introduced the iTunes Store the music industry was imploding and college students were being sued in their dorms.

In 2007 when Apple introduced the iPhone few people were able to surf the Internet on their phone and most competitors’ products were poorly designed and performed similarly.

In 2010 when Apple introduced the iPad, it essentially created the market, selling 5 times more than the rest of the devices combined.

Looking at all of this, the question to ask is, is Steve Job’s legacy going to be that he didn’t care about other people because he didn’t give his money away or let the government take it? Or is it going to be the fact that he changed the world and gave people something that is far more precious than money… more of their own time.

If you didn’t have a computer, how many hours a day would you have to spend (or would you have spent) in front of a typewriter typing, retyping or whiting out errors as you wrote a paper for class? Or doing computations with paper, pencil and a TI calculator? How much less efficient would your job be? Steve Jobs began and led the march that made the personal computer such an integral part of our lives, both personally and professionally. The value of that contribution to the improvement in the human condition is measured in the tens of trillions of hours and dollars rather than millions or billions. Add to that the value of the entertainment provided by iTunes & Pixar and the efficiency provided by the combination of mobility & functionality embodied in the iPhone and iPad and there are hundreds of billions more hours and dollars.

I never met Steve Jobs and from what I read he could be both generous and an SOB to those who knew or worked for him. Regardless of his personality or lack of a philanthropic gene, the fact of the matter is that he did far more for the world by running his business – and keeping the money generated from doing so – than he ever could have if he had “given back” every penny he ever earned or let the government tax him at the highest possible rate.

What might have become of Steve Jobs if today’s kleptocracy and regulatory straitjacket had kept him from starting his business in his parent’s garage with $1,200? Given that his return to Apple was driven by stock options and performance incentives, would he have returned if the “Occupy Wall Street” types had been setting tax policy? Or would he have decided to retire and travel the world?

We can’t know the answer, but we do know is that Steve Jobs created far more value for the world than he received in return. If he wanted to keep every single penny of it the world was still far better off. That’s how private enterprise works. It’s an exchange of ideas or products or services that others are willing to pay money for. In the end, although successful entrepreneurs and businessmen may indeed earn millions or billions, in almost all cases they do so by having provided customers or clients many times that in value. If you think Jobs was the only one, think about how much YouTube and Facebook have changed your life over the last five years. The founders of both are billionaires but the value of the benefits to the millions of ordinary citizens is many times that.

If the people at OWS or in the kleptomaniac ridden Democratic Party really wanted to jumpstart the economy and drive prosperity all they need to do is look at Steve Job’s life and give as many people as possible the opportunity to follow his path. Reduce taxes and regulations and just watch and see how many would-be Steve Jobs types come out of the woodwork.

Selfish son of a bitch? Don't know. Doesn't matter. A model for prosperity and improving the human condition… now that’s a legacy worth leaving.