Capitalism Project--Intentionally Proving the Point

Capitalism Project – People who believe in the power of capitalism coming together to make a difference.

There is a huge opportunity that Katrina has put before us. It’s one that always exists, but it is now in sharp relief. That opportunity is to see the difference capitalism makes versus the difference the welfare state makes.

My idea is to create a “Capitalism Project” where businesses (especially manufacturing businesses) are created, and their contribution is tracked. Their contribution consists of the presence of the business itself, the return to the investors, the number of jobs created, the amount of taxes paid both by the corporation and the individual, etc.

These businesses can be anywhere, but we will specifically target putting at least the manufacturing in the Gulf Coast region, not only to help rebuild it, but also because it would be foolish not to also take advantage of the government programs that will be established to aid this kind of activity. Proving that those types of programs are more effective than government handouts will be an additional win for the project.

There are different levels at which people can invest in businesses. To maximize return, and to create the largest impact possible, I recommend that the investment be made at the ground floor. I’m talking about literally supporting (partnering with) the entrepreneur/inventor at the very beginning. At this level the largest difference can be made for the smallest investment, and the return on investment is multiples of the investment as the company moves to a second round of funding.

My goal would be to find entrepreneur/inventors that hold Patents on their products. The Patent gives us confidence that the product is both unique and protected. Obviously, beyond that, someone, or a committee of people, would have to look at the product (and business plan) to decide if it has high potential. There are literally thousands of entrepreneurs in this position.

The biggest problem for these entrepreneur/inventors is getting their product from the original idea to a level where they can raise large amounts of capital, sell their company to a larger competitor, or can begin production and sales if the amount of capital needed to begin manufacturing isn’t terribly high. This amount (I’ll refer to it as the “bridge amount” because it is the bridge between the idea and the ultimate potential) is generally small. The bridge amount may be just enough to build a final prototype, do product testing, or perhaps do some test marketing.

Teaming with the entrepreneur at this level gives the provider of the capital (in this case, us) a high level of ownership for a relatively small investment. When the company is ready for the next level of financing, this small investment can be extracted at multiples of the original. This is a common practice, most often done by family members, individuals, or small groups of investors. It is at this level that investors make the most money from a successful company.

The idea of the Capitalism Project would be to collect funds (details on this to come, it’s been researched… suffice it to say that the world provides the opportunity needed) and invest at the “bridge” level in as many companies as possible. These companies would be shepherded to the next level of funding, at which point we would cash out, and turn the money to investment in more opportunities. Turning the money at the return rates that are common at this level of investment can create enormous wealth relatively quickly, particularly since the amount of time needed to bring the company through the period in it’s growth that we are talking about is relatively short. Most of the time lag for entrepreneurs/inventors at this level is trying to raise funds, usually from people who may be willing to invest, but only AFTER the entrepreneur has gone through this bridge period, which is when they really need the funding.

Example of potential return: $100,000 is invested at a dime per share. We’d get 1,000,000 shares. Say the IPO goes at $1. That’s a 10x return, resulting in $1,000,000. Say 5 more companies are then funded at $200,000 per company. Assume 2 out of 5 fail (to be conservative). We’re left with (assuming our ownership is purchased at a dime in every case, which is typical) 6 million shares. Say the IPOs or buyouts go at an average of $0.75 per share. That’s $4.5 million on an original investment of $100,000 after two turns. Now imagine that the original amount was $1,000,000 and we worked with 3 or 4 (or more) companies.

Remember: we’re working at the beginning, as partners because we’ll find these people early in their process, not as part of an IPO.

Obviously, those of us who put money into the project stand to make a very large return for ourselves, along with the good that will be done by creating successful businesses. And, we will make part of the program tracking the good that is done for the general economy as a result.

The money would be raised from ordinary people... people who believe in capitalism and the project... not requiring a large investment from any one individual (though people could do that if they wanted). Again, this has been researched and it's possible. Even small investments could result in very large returns after many turns. In the example above, an investment of $100 would be returning, after two turns, $4,500. $1,000 would return $45,000 after 2 turns.

More to come…

"They Hate Poor People"

I haven't posted in a while, because I've spent my blogging time commenting on other sites. However, I saw a comment on a blog post regarding the race baiting associated with hurricane Katrina that I thought required a post longer than a blog comment.

This person said, sarcastically, "Republicans don't hate blacks. They hate poor people."

The insanity of saying Republicans hate blacks, or that Pres. Bush hates blacks is absolutely too far gone even to comment about it. Racism is the result of a screwed up personal philosophy, usually held by people who are afraid that they are not good enough, so they want to feel superior to someone else... at least in this day and age, when anyone with half a brain and any heart at all knows that a human being is a human being. Frankly, the racists I see (those who spout racial epithets at minorities) seem pretty dense. Bush, on the other hand, seems to truly take Martin Luther King Jr.'s dream to heart, and looks at the content of people's character and not the color of their skin. (Something I can honestly say that I see from most Republicans). Who represents this country's foreign policy? Who did it before her? Who's the person I hear Republicans cheering because of the effectiveness he showed when he took over the effort in New Orleans and immediately started getting results? Moreover, Bush never made a big deal out of the racial makeup of his Cabinet. It didn't matter to him. He was picking people, not a rainbow.

Anyway... The accusation of racism is rediculous.

The accusation that Republicans hate poor people is equally rediculous. Here's why:

Republicans are supposed to be the party of business, right? Supposedly, Republicans are the rich--the capitalists. Here's the deal. Nobody wants people to be successful more than the capitalists. It's very simple. If you look at it from a strictly selfish point of view, ignoring the benefits that most people realize are obvious to society and the spirit, capitalists SELL goods and services. They sell more when more people can buy them. Every person that goes from poverty to affluence (or at least solvency) is a new prospective customer. They go from being a drain on income in terms of taxes paid to support welfare and other entitlements, to being a customer and fellow tax payer. Capitalists WANT people to succeed, because every new success can potentially contribute to their success.

OK... what about the people who make their money on Wall Street? Obviously, high unemployment drags markets down. Those capitalists want to see a fully employed work force. It raises confidence. Why? See above. They want a larger tax base, which can ease tax burdens, rather than more dependence on government which leads to higher tax burdens. Everybody wins that way. They want companies to do well so their stocks go up in price (again, see above). Also, more successful entrepreneurial efforts create not only more jobs, but more opportunities on Wall Street.

There is absolutely no reason why "rich" capitalists would want to see poverty. It benefits them not at all. And, it costs them money. It also costs them security.

Who DOES benefit from having an underclass? Who would WANT to hold people down, to convince them that they can't make it, and that someone else is keeping them down? Let's see...

--Entitlement bureaucrats who would have to stop sucking at the government teet and truly do a job in which they were accountable for performance if they didn't have their bureaucratic jobs.

--Various people who make a cushy living race baiting and producing no results that actually benefit people long term, except to roil anger short term (and line their pockets with donations from supporters).

--Politicians who get elected over and over making promises that they will help people achieve a better life, but who know no other way to do it than to give those people other people's money, or creating more bureaucracies that continue to keep people dependent on them. These politicians NEED people to stay poor, and they keep trying to sell them the same, tired mantra that the government (meaning THEY) will help them... so long as they keep getting re-elected. What they really mean is that they'll help them stay at a subsistance level and never achieve anything beyond that.

President Bush talked about the "soft prejudice of lowered expectations." THAT is field on which the three beneficiaries of poverty play. "You can't help yourself, so rely on us. We're what stands between you and 'the Man'." The problem is, this fictitious 'the Man' only benefits by having as many people as possible achieve their way out of poverty.

I say "achieve their way out of poverty" because the "soft prejudice of lowered expectations" that is peddled by the people who benefit from poverty tells people the lie that the government (meaning THEM) can lift them out of poverty. But the government can do no such thing. It certainly can't do it without creating socialism, where everyone gets just a small suck off the government teet (except the elite, who happen to be the same people who benefit from poverty now), at least eventually. In that scenario, the capitalists, entrepreneurs, and workers have no motivation to create and to work. Their efforts are pilfered to equalize everyone (except the elite, who create nothing but the scheme for pilfering the creativity and labors of others) and the entire economy will quickly swirl down the drain. Then everyone will be equal... equally miserable and impoverished. But, when capitalists and entrepreneurs (including people in poverty with good ideas) provide opportunities for people to achieve their way out of poverty, so they are climbing the ladder rather than having the ladder removed so everyone is on the same level, everybody wins.

It might truthfully be said that Republicans hate poverty. But it can't truthfully be said that Republicans hate the poor. We want the poor gainfully employed and climbing the ladder of success, because we know that benefits everyone. We also know that the long unfulfilled promise of the government taking care of those people has not only proved itself to be an untruth and an impossibility, but that it has proved to be an effective illusion used by Dems against Republicans at election time, despite the fact that it harms everyone involved.

Race baiting, and inciting class warfare works to the actual benefit of no one, except the people making their living by keeping other people down. And that's NOT the Republicans, capitalists, and entrepreneurs in this country.