Your friend has a business idea, and needs your help. He
needs $20,000 to start a part-time business, but only has $10,000. He knows you’ve
been saving for a new car, but if you’ll invest your $10,000 in his business
instead, he will sell you half the business. He will split the profits, after
his salary and all other expenses, evenly with you. Of course, if there are no
profits then you don’t get anything. And if the company fails, then you don’t
get anything and you lose your $10,000. If the business succeeds, he expects
that it’ll make about $1,000 profit per year. After reinvesting some for future
growth, about $750 will be available for the owners, so you’ll get $375 per
year. Also, if the business is successful and grows, you’ll own half of it.
First decision: What do you think? Would you give him the money? You get a
3.75% return, and maybe the company will grow, but it might fail and you lose
all your money. Second decision: if you give him the money, and take the $375
per year plus half the company, are you taking unfair advantage of him? Are you
evil? Is your share of the profits unfair to the rest of society? Should other
people be able to make similar deals, and start similar businesses?
Change the story a little: your friend is a bit more
ambitious. This business requires 500 times as much money to buy tools and
build buildings. He has to raise $10,000,000 instead of $20,000. The deal is
the same, though - for each $10,000 you invest, you expect $375 per year
return, plus a proportionate share of ownership (0.1% instead of 50%, since the
company is 500 times bigger). He has to get 1000 investors to cooperate now, so
there will be some kind of owner voting structure (instead of just meeting at
lunch) to make important decisions about the company. Does this larger
cooperation change your answers? Is it ok for 1000 people to each invest in the
company, and get ownership and 3.75% return? Would it be ok if you took two
pieces of the pie - invested $20,000, and got 0.2% ownership to go with your
$750 per year return?
Now let’s do this 20,000 times, or about once in every city
in the US. Your friend joins forces with these 20,000 other compatible
businesses. The owners each have a smaller piece of the much larger pie. They
still just invested $10,000, and still just get $375 per year, but when you add
them all together the totals are bigger. The owner voting is a bit more
complicated, since so many owners have to be involved, but basically we’re just
doing the same things we did in the first story, but cooperating with more
investors, more employees, more buildings and tools. Question: Is there
anything evil about our financial arrangements? Have we cheated anybody - the
customers who voluntarily buy our products, the staff who run the tools that
make the business go, the owners who put up the money and get their 3.75%
return?
This is all a little abstract, so let’s put add some color.
Let’s say our business is to make drugs that help treat and cure diseases. And
let’s name our big cooperative Pfizer. The numbers haven’t changed, but Bernie
Sanders now says we’re obscene. Maybe he doesn’t like people cooperating,
unless they do what he wants. Or unless they stay in small enough groups that
they don’t attract his attention. Or maybe he just doesn’t understand that it’s
not evil to add small numbers to get big numbers.
What do you think? Comment if you think I’ve missed
something. Share if you think this will help others to think and understand.
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