What I told the Pope about how to shape the new capitalism The Guardian Decent wages, dignity at work, no profit without morals - when it comes to reforming the unstable market economy, the Catholic church is leading where New Labour fears to tread
Digital Crossroads: Melinda and Bill's challenging mission San Jose MercuryNews The foundation's basic premise, according to Melinda Gates, is that "all lives have equal value."
Gates to spend 20 percent of his time on Microsoft projects in retirement CNET Gates said he will spend two to three days at Microsoft, where he will have an office, and two to three times that amount of time writing, thinking and working on a variety of pet projects.
Bill Gates Gives Last Big Speech Before Leaving Full-Time Microsoft Role InformationWeek Gates talks about how modeling will transform software development for Microsoft customers.
July 01, 2008
We figure Bill Gates has learned a thing or two about business over the course of his storied career, which ends (or at least finishes a chapter) today with his transition to full-time philanthropist and part-time Microsoft eminence grise.
And that's part of the reason it was such a surprise a few months ago to hear him display such a flawed understanding of the basic nature of capitalism. Addressing the World Economic Forum in Davos, Switz., Gates decried the inability of capitalism to improve the lot of the poor and powerless:
In a system of pure capitalism, as people's wealth rises, the financial incentive to serve them rises. As their wealth falls, the financial incentive to serve them falls-until it becomes zero. We have to find a way to make the aspects of capitalism that serve wealthier people serve poorer people as well.
The genius of capitalism lies in its ability to make self-interest serve the wider interest... But to harness this power so it benefits everyone-we need to refine the system.
Gates went on to prescribe what he calls "creative capitalism" -- "an approach where governments, businesses, and nonprofits work together to stretch the reach of market forces so that more people can make a profit, or gain recognition, doing work that eases the world's inequities."
Sounds interesting, but it doesn't sound like capitalism. A brief refresher with The Wealth of Nations confirms that under capitalism, the role of businesses is to make money for the people who own them. Those who pursue that goal with diluted attention are likely to be punished by competitors who pursue profit with better focus.
Improving the lot of the less fortunate is the role of government, individuals and organizations, guided by basic morals and fueled by the profits made through successful business pursuits.
If anyone should understand this, it should be Mr. Gates, whose company has pursued profits as doggedly as any of the last century. Yes, Microsoft can point to feel-good programs such as providing low-cost or free software in developing nations, but even those measures are more smart business moves than charity, aimed at slowing the spread of open-source software in regions that haven't already become enslaved to Windows.
Nope, Bill Gates' charitable impulses have been thoroughly and rightly pursued as an individual, not the leader of Microsoft. The Bill and Melinda Gates Foundation has amassed an endowment of $29 billion to pursue worthy humanitarian goals ranging from eliminating polio to improving rice harvests. And nothing the organization has done has had the slightest bit to do with Microsoft's business, as it should be.
Yes, it's an imperfect system. Not every plutocrat can be counted on to be as mindful of the public welfare as Gates apparently has been. Consider his chief rival in the software tycoon derby, Oracle's Larry Ellison, whose charitable impulses must compete with his interest in yachting.
But mixing humanitarian with business goals is typically a prescription for failing at both, as Bill Gates should surely know. It makes perfect sense in capitalistic terms that he should go down in the annals of American business as both one of the most ruthless competitors ever and one of the most generous individuals. Instead of reforming free enterprise, we can't help but think his time would be better spent inspiring other tycoons to share their good fortune with capitalism's inevitable left-behinds.
A Response on Improving Capitalism movement, movement Lets not start a discussion based on the premise that there is a perfect economic system out there.
Bill and Melinda (Gates that is) ask for your ideas The Tree of Life $100 million awaits those with compelling ideas.
How Bill Gates Prepared For His New Role USC Gould School of Law Messrs. Ballmer and Gates are attempting a tricky feat by navigating an "ambassadorial succession."
The Infographic that Saved a Million Lives Cool Infographics A very simple infographic motivated Bill and Melinda Gates to change the focus of their charity spending.
Who should take the lead in helping the world's poor?
8% 42% 25% 25%
Mr Gates' biggest mistake is in assuming that capitalism "improve the lot of the poor and powerless". Ideally, capitalism improves the lot of EVERYONE.
"The Wealth of Nations" is quite correct that capitalism is the dogged pursuit of profit by a business' owner. But, regardless of motive, that pursuit is far more likely to be beneficial to that business owner's clients and employees than any charity ever could be. If you are smart, your personal greed is far more beneficial to me than your sympathy.
A greedy merchant is not likely to cheat me because he knows that, if he does, I'll never come back to him and I'll tell all my friends to do likewise. His greed compels him to act honestly and he has a customer for life. The fact that his motives do not involve any particularly charitable inclinations toward me is entirely beside the point. I still benefit, regardless of his motive.
Mr. Gates -- like Henry Ford and Andrew Carnegie before him -- has benefitted far more poor people and shone a far brighter light in the darkness through his smart business tactics (such as the aptly mentioned low-cost software in developing nations) than the Bill and Melinda Gates Foundation could ever hope to accomplish.
Every day, I hope more greedy, exploitive capitalists will come along and do something to make themselves filthy rich. The chances are enormous that, in the process, they will make the world a better place for the rest of us regardless of whether that was what they intended to do.
This is what happens when you type comments at midnight. My first sentence was meant to read:
Mr. Gates' biggest mistake is in assuming that capitalism fails to "improve the lot of the poor and powerless".
Here's an idea for everyone to think about.
When I close a deal in real estate, many people benefit. There are many people directly or indirectly involved in real estate transaction: lenders, mortgage brokers, banks, real estate brokers, advertisers, appraisers, inspectors, repairman, notaries, and all their support staff. After the sale is complete, there is work for architects, contractors, home decorating and supply stores, interior designers, swimming pool maintenance people (if a swimming pool exists), landscapers, and gardeners. These people all shop at a supermarket, buy coffee at Starbuck's, buy a pastry somewhere, buy gasoline, buy clothes, go to the movies, go to Disneyland, by a DVD, take a vacation, use a cell phone, etc etc. all the people and businesses that supply those clothes, DVD's and make those movies all share in the money from those deals.
Investors and their staffs, vendors and the people they buy goods and services from all benefit from the profit derived from the lending of the money to buy that house or building.
Taxes are paid, utilities paid.
None of the above would be possible without the exchange of money in a free enterprise system.
Some of these people (like those at the local Carl's Jr) don't have a clue where the money came from to pay by that cheeseburger that helps pay their salary.
Adam Smith had it right; self-interest (not selfishness), and the "invisible hand" that works for the public interest or welfare through that self-interest.
Does gates really think it's not capitalism that has brought India into the realm of emerging natins, or turned China into a wealth creating nation?
I'll take my chances in a free-enterprise system, with all it's risks of failure, then spend one day in a "workers paradise".
Bill Gates should shut up, retire, and enjoy his money.
ExPat,
I agree with everything there except the notion that Bill Gates should retire. I hope he continues with new innovations until he breathes his last.
Your point about the "workers paradise" is especially good. History has proven that we cannot trust governments to help us by "rescuing us from exploitation". Such attitudes invariably result in actions that remove both the advantages and the freedoms from the working class people the claim to be helping. You might say the government has a habit of helping us to death.
For those who seek government imposed fairness over the freedom of the market, I have two words... HARRISON BERGERON. With today's topic in mind, let's all go and re-read it.
Dutchman said...
I'd put my money on Mr. Gates and not clinging to some tired definition of capitalism. It takes a bit of cheek, J.P, telling Bill how to spend his time. Does he tell you?
amoslanka said...
The thought that Capitalism "improves the lot of the poor and powerless" is actually true, though likely not in the manner in which Mr. Gates mentions it. I'm under the impression he speaks of it more from a standpoint of the erasing of class lines -- removing the gap between the rich and poor. In reality what Capitalism does is raises the standard for all, and according to the numbers presented by America's experiment in Capitalism, causes the rich to get richer faster than the poor are getting richer. Unfair? Perhaps, but compare the poor of this country to the poor in the majority of the rest of the world.
amoslanka,
First of all, hello. Welcome to the forum.
Your point is very good. I have always considered class distinctions to be one of the great evils of mankind. Not remotely unique to industrialized or even western societies, the notion that one person is inherently superior to another -- either through money or birth -- is truly grotesque.
The only thing that makes a person better or worse than another is their behavior. This is where the term, "class act" comes from. Where I come from, "class" is determined by your conduct.
The dminishing of class distinctions is a good idea but it is neither capitalism's place nor its function to accomplish this. That, like all social and philosophical concepts, begins at home.
To: amoslanka,
Welcome to our group.
While we do have poverty, hunger, and homelessness in U.S., I would not compare it to the poverty, hunger, and homelessness I see in Bombay (Mumbai) or Darfur.
I suspect that many Third World poor would gladly become the "poor" people of the U.S.
Spinner said...
Here, here, DPR. Just because one has somehow acquired a large portfolio does not mean they are of a "class " above us peons. In fact, I definitely have a problem with those CEO's that are only interested with making themselves money and to H#$% with the rest of the company and the stockholders. It seems to me that in this era, capitalism has run amok. Case in point, (and I will name names here), the CEO of National City Bank had a place in Florida and he wanted to be able to take his trips there off his taxes so persuaded his board to purchase a couple of lending companies near by. These were a couple of the ones that were very much into sub-prime mortgages. So with the collapse of the lending industry, Nat. City stock tanked. But he got his travel deduction! Now that is class... and he got canned but with a very nice parachute to send him off. And what about us that are retired and trying to live on a fixed income supplemented by investment income? Ahh, yes. Reagan's trickle-down effect. Not much has trickled down to us from that little maneuver.
By the way, I have just come from Mr. P's order site where I did my part in making him one of those scions of industry (his sale catalog is great!). Just trying to do my part in keeping the wheels turning.
ExPat: Indeed the poverty in Mumbai is so extreme it's almost grotesque: 60% of people live in 'slums' - that is, houses of tin, no running water, unemployment, well below the poverty line, even in India. The worst part is that in term of area, these slums occupy only 6% of Mumbai.
Oh, and for reference: that 60% in the slums equals out to just a little more than 8 million people.
The discussion of the comparative poverty between us and Mumbai reminds me of the old phrase, "We are the land of the fat unemployed."
Spinner,
We don't agree as much as you initially imply. Class and wealth have no inherent connection but that works in both directions. The holder of a large portfolio is no more likely to be of low class than he is to be of high class.
You are right in your objections to "those CEO's that are only interested with making themselves money and to H#$% with the rest of the company and the stockholders" but that is NOT an example of capitalism run amok. Quite the opposite; it is the defeat of capitalism. The CEO who wants to make himself a lot of money is most likely to serve the interests of his company and stockholders. The fact that his motives are selfish doesn't change the fact that benefitting the stockholders is the most efficient way of lining his own pockets. The bank head you referenced was a terrible capitalist. He could have made himself much heftier profits over a much longer period of time than a one-time parachute could have provided if he had simply looked out for the bank's interests.
What's good for my employer is good for me, whether I'm a CEO or a receptionist.