Over the last 250 years, the quality of life throughout the world has been transformed. Life expectancy has increased from nineteen years in 1750 to seventy years today, and practically everyone today lives better than a king in the 1700s. There has been more progress during this period than in the preceding 25,000 years.
What kind of environment has made this incredible progress possible? Dr. Edwin A. Locke’s answer is one based on reason, individual rights, and free markets. Who made this great leap in productivity possible? Dr. Locke is unequivocally clear that productive geniuses from Thomas Edison to Bill Gates are the Prime Movers of human progress. While these men amassed great fortunes, they raised the standard of living for all of us. Tragically, despite their enormous contributions to human well being, they have been unjustly branded as “robber barons” and “greedy capitalists.”
What characteristics enabled these men to make such a significant contribution? These great creators have the capacity to see the big picture trends others cannot foresee — vision. They have active and independent minds with an undying commitment to action, the capacity to make rational decisions based on the facts, the ability to judge ability in others, and the willingness to reward superior contributions by others. These attributes produce a level of confidence and competence that leads to success.
Dr. Locke’s view is radically different from the common belief that progress more or less happens automatically or is the result of some undefined collective effort. Dr. Locke sees a relatively small number of outstanding individuals who make a disproportionate contribution to human well-being.
My experience as a banker and CEO of a successful S&P 500 company supports this conclusion. Over the years, I have learned from making loans to many types of businesses that when a company fails, it is practically never true that the average employee of the failed company is intrinsically less competent than the average employee of a successful company. It is almost always true that the reason for failure is poor leadership at the top of the organization. Sometimes, unknowable and uncontrollable economic factors cause companies to fail, but 90 percent of the time, the failure is the result of irrational decisions made by the leaders. Success is the flip side of failure in this context. Occasionally people get lucky, but 90 percent of the time, successful companies are created by powerful leaders.
I have often seen mediocre-performing operations transformed into high-performing units by changing leadership. While it is true that to be successful in the long term, a business must have excellent performance from all its employees, exceptional leaders have the capacity to enable others to achieve more. Oftentimes, this change in performance is created simply (but profoundly) by being sure that everyone is headed in the right direction.
It is interesting to reflect on the implications of Dr. Locke’s thesis. If Dr. Locke is correct, we owe a huge debt to these Prime Movers, and we have a moral obligation to recognize that debt. The term “robber barons” should be driven from our vocabulary.
If the characteristics that Dr. Locke discusses have contributed to these individuals’ success, we should teach these attributes to our children. Clearly, the foundation attribute is an unwavering commitment to make independent, rational decisions based on the facts-which is the ultimate form of honesty. We must avoid the temptation to use government to put ’13,alls and chains” on great people. “Balls and chains” are created by excessive taxation and mind-numbing government rules and regulations.
Every person alive today has a far better quality of life thanks to Thomas Edison. Edison’s list of life-enhancing inventions is incredible, including the invention of the research laboratory itself. When we put “balls and chains” on great people like Thomas Edison (or Bill Gates), we reduce the quality of life for the rest of us.
The same concept can be applied to industries. There have been gigantic leaps in productivity in the financial services, telecommunications, and transportation industries as these businesses have been deregulated. What industry is making the greatest progress? Technology. What industry is the least regulated? Technology. Government interference in free markets inevitably reduces productivity.
It is interesting that (so-called) “intellectuals” on our college campuses still defend communism and socialism even after the unbelievable human misery created by communist governments has been exposed. They use the “robber barons” myth as an example of the evil of socialism’s alternative: capitalism. These “intellectuals” say that communism is good in principle, but difficult to practice because human nature is flawed. The “flaw” is that people tend to do what they are rewarded to do. They believe that people should be self-sacrificial. They must also believe that Mother Nature herself is flawed or they fail to recognize an immutable fact of nature, which is that everything that is alive must act in its self-interest or die. A lion must hunt or starve. A deer must run from the hunter or be eaten. Man must obtain food or perish. Our choice is to act in our self-interest or die (or barely survive in abject poverty, e.g., North Korea).
The underlining ethics of communism is: From each according to his ability, to each according to his need. In other words, the more incompetent and less productive you are (i.e., the more needy), the more you receive. The more competent and productive you are, the harder you get to work. No wonder there are many needy people in such a system, and not many producers.
The morality of capitalism is exactly the opposite: From each according to his ability; to each according to his productivity. The more you produce, the more you receive. This is justice. No wonder there are many productive people in a capitalist system, and a higher standard of living for everybody.
Capitalism is the system that allows Prime Movers to make their maximum contribution. It provides the innovators and creators the freedom they need to use their independent judgment, often to do things that the crowd cannot see or understand. Prime Movers are the driving force of human progress, making our lives longer and happier.
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