Corporate Greed Isn't Greed, It's Power

Democrats and Republicans Get It Wrong

The head of the Teamsters spoke at the Republican Convention. Amazing. It doesn’t surprise me that Trump gets along with unions. He’s a commercial real estate developer from NYC. Of course he has to understand and get along with unions.

At the convention, the WSJ columnist Peggy Noonan wrote, “And of course Sean O’Brien, head of the Teamsters, railing against corporate greed to a Republican convention whose delegates warmly applauded.”

Democrats rail against corporate greed and profits all the time. Corporations don’t pay enough in taxes and without government regulation, we’d all be working as slaves for corporations and our entire world would be screwed up.

Both parties are wrong-headed about corporations. Corporations aren’t evil by themselves. A corporation is just a way to structure a business organization to execute the mission to serve customers better. If there was a better way to serve customers, someone would have thought of it.

It goes without saying that tax takes for the government would be higher using the Fair Tax scheme rather than the gerrymandered minefield of a tax code that we use today. The Fair Tax encourages risk-taking, innovation, and profits. The current tax code penalizes all of that.

Why does a corporation even exist?

Corporations aggregate resources. They work to produce goods and services by eliminating marginal costs. They aren’t “greedy”. Corporate greed is a misnomer.

What corporations are after is market power.

I suggest you watch the recent podcast with a16z venture capitalists Marc Andreessen and Ben Horowitz. They talk about corporate tech vs little tech. They also talk about why they are supporting Trump.

If you are employed you should be supporting Trump too. Their podcast shows you why.

In the podcast, Andreessen talks about his philosophical disagreement with Peter Thiel about “Zero to One” and corporations. I see both of their points. However, one of the things that dawned on me when I earned my MBA from Chicago Booth was this, corporations always try to become monopolies. It’s not because they are greedy, it’s because they want market power and the ability to fend off competition.

Life is a lot easier as a monopoly or in Theil’s terms, “One” than it is to compete.

Democrats have been against corporations for years but for the wrong reasons. They curried favor with the unions and saw the unions as competitive with corporations. They created a false fixed-pie mentality that had to be divided between corporate management and its stakeholders versus the workers. Truth is, the better the corporation does the better it is for the worker and if it can be monopolistic, labor can do better!

The Dems couch it in terms of corporate greed because it sounds good. Nothing could be further from the truth. Corporations want power. This line of thinking leads to the idea that somehow running a company as a non-profit or cooperative is better than being a for-profit LLC or for-profit corporation. This line of thinking led to the “B Corporation” fad which flamed out as I predicted.

Just stupid logic.

Populist Republicans have fallen into similar traps when thinking about corporations. GOPe has tried to harness corporate power for its own GOPe power. It worked, but now it doesn’t since many corporates have gone woke. They aren’t in the Republican camp anymore. Wall Street isn’t Republican either despite Republicans’ claims that it’s a “free market capitalistic party”. It isn’t in reality and Wall Street is not exactly free market capitalism in the way it is structured either.

Both parties have listened to lobbyists from each side and helped gerrymander government regulations to help their cause. George Stigler was dead on correct.

This is what tech moguls Thiel, Andreessen, and Horowitz see. Corporations won’t innovate unless pushed. Who pushes them? Other corporates can but in many cases, it is entrepreneurs innovating and pushing the envelope because corporations are too risk-averse to do it.

Entrepreneurs face very high hurdles to achieve success and threaten corporations. But, the highest hurdle these days is often the government regulation register and the tax system.

I have thrown in the towel trying to persuade Democrats about capitalistic competition. Their vision for the world is Big and Bigger Government combined with the New Socialism. That doesn’t work, has never worked in the past, and won’t work in the future. They can’t get out of the box they made for themselves. They have too much internal fear and mistrust of capitalism. For them, it has to be “managed”. They don’t understand that managing it means you never stop managing it and there are always problems that need fixing. The fixes create more issues and problems and then we have a gigantic regulatory book and economic stasis.

My hope is that Trump populism decimates the federal regulatory register and unleashes competition. Tariffs aren’t a part of that equation. Tariffs are anti-competitive, entrenching big corporations disincentivizing them from innovating, and insulating them from competition.

Andreessen is correct. It is time to build. We have the most amazing tools at our disposal today which have never been more accessible to more humans at a cheaper cost. The potential for economic dynamism is there.

Instead of greed and who pays what in taxes, we ought to be focused on competition. The more competitive we make our economy, the more we will have innovation. Big Labor does better with competition because if Big Corporate don’t want or need the labor, the innovative startups do. It’s not just about “learning to code”. There are plenty of non-tech jobs that get created when you have rampant innovation.

Creative destruction is a feature and benefit, not a bug.

We don’t care about who wins, or who loses, and we have no way of even predicting what those jobs might look like or how much they will pay. We just know in a free market highly competitive capitalistic society, it will happen.