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Why Are We Letting Marx Define Business?

 

Karl Marx coined the phrase, "creative destruction." That the founder of Marxism defined a way in which we see business today deserves rejection. It was coined by Marx to be insulting, and frankly, it is. Marx made the assumption, wrongly so, that I have to destroy what exists to rebuild, thereby ruining the value of what was what was in order to create something new. That narrow view misunderstands what really happens because it relies on the notion of there only being so much value - the pie analogy.

Business enterprise is not an exercise in destruction. It is an exercise of risk and creation.

What really happens in business is very similar to what happened this weekend with my daughter's car, which was broken after a year of driving it around. We tried to fix it, but determined that it would cost too much to keep it going. So we opted to sell it for salvage ($225) and she used that money to buy something that had more more sustainable value.

There are three parties at play here:

1) The owner (my daughter)
2) The buyer of the property owned (the salvage yard)
3) The seller of the new property

Now, if I am Marx, Bari took her broken car and destroyed its value so that she could get something new.

That's ridiculously simplistic and dumb.

What actually happened: Bari maximized the value of her car until she could get no more value from it. She found someone who still saw value in it and sold it to that person voluntarily so that both of them felt good about the transaction. She then used the value of the transaction to assist her purchase of a car from someone else, again voluntarily.

The value of her previous car will go for parts, far beyond the $225 that the salvage yard paid for it, which is good for them. She has a new car, which is good for the previous owner of her new car - he is richer for it. And she has the vehicle she needs, which is great for her.

In other words, value accumulates. There is no pie, where value is fixed and everybody only gets so much of what's available. Bari originally bought the car for $800, drove it for a year, then sold it for $225 to someone who can repurpose it for a different form of value. That's accumulative, not destructive.

All of us work to get the most value we can from what we own and what we do. If my TV is on the fritz, after getting a lot of use out of it, I put it on Craigslist and sell it to someone who finds value in it. They’re better off, I’m better off, and the retailer from which I buy my new TV is better off.

Everyone knows that nothing is permanent, and that jobs are not permanent. But instead we get idiots like Marx who see employers not as good in the temporary employment they create, but rather as evil for the inevitable job loss that happens. That would be like getting mad at Sony because my TV doesn't last forever.

What really happens: the job wouldn't exist at all if someone hadn't gambled to create or purchase a company. That person becomes the owner and the company becomes their property.

Does the business owner not have the right to do with their property as they choose? Or would we let idiots like Marx remove that right from them? And if we do, how many people would then create or purchase companies in that environment? Now that would actually be destructive, and in fact, part of the reason that the economy struggles today is because Obama and crew think like this and provide less and less incentive to business owners to take the risk in creating companies and hiring people.

Instead of celebrating the business owner, boneheads like Marx wrongfully attack them. Marx pisses and moans about the temporary nature of jobs, when he should be delighted that the job exists in the first place.

Business ownership is not "creative destruction," and to allow it to be described in that way only discourages business ownership and misinforms everyone who discusses it in those terms.

How would I phrase it? Perhaps "value opportunity." It depends on whether you perceive value in it, and if so, how much you make of the opportunity to wring value from it. There is value opportunity for the employer, the employee, the customers, the vendor chain, etc, for as long as the business can create the perception of value. When the business owner no longer finds value in the property owned, they can choose to sell it to someone who finds value in it, and then use the proceeds to find something of value to create more opportunity for everyone who can take advantage of the opportunity.

Marx, and those who think like him, can't understand that at all - so why let him define the discussion?

 


by Brett Rogers, 1/16/2012 7:03:49 AM
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