What Capitalism Means to Me

Originally, I was going to call this essay "I Am A Capitalist." Though I am a businessman and think commerce is a fundamental human activity, the more I thought about "capitalism" the less comfortable I became with that statement. Before I can decide whether I can endorse "capitalism", as opposed to business, I must define the term and determine if there is a distinction between the two concepts. In order to do that, I have to give a bit of autobiography, about my relationship to commerce.

In my family, business was an unknown and somewhat suspect activity. My parents were both doctors. My mother's parents had a store, and my father's father was a successful furniture wholesaler. Both had swung so far away from their parents' commercial lives that they had no predilection for business themselves and there was an unspoken idea that we were superior to it. The only respectable professions were medicine and law, though if I had become a professor of literature my parents would probably have easily reconciled to it.

The world view that I gained growing up in this environment was that history was the record of human aspirations, knowledge, politics and war, and that business was simply a recent and trivial historical development of no rooted sociological significance. My parents were somewhat apolitical, so I wasn't raised to see business as the enemy either; it just wasn't on the radar screen. Most of the people they associated with were also doctors and lawyers; anyone who sold something was considered a little bit beneath us, someone we could socialize with but likely feel some embarassment about at the same time. Of course, today this seems like the snobbishness of the recently middle class; my grandparents were all immigrants who made their start here, and my mother's parents had never done very well for themselves, so that my mother in particular must always have felt as if she were a step or two away from poverty.

I first became really aware of the world at age 15, in 1969; see my bio for more details. Suddenly awake to powerful injustices, irrationality and violence in the world, I spent more time worrying about government, as embodied by our gangster president, than I did about business. However, in the iconography of the time, business was the enemy; large corporations manufactured napalm and other weapons, sacked the environment, and were even involved in overthrowing governments and supporting regimes who murdered and tortured people, as in Chile.

After a very intense passage in my life, the war ended, Nixon resigned, and I made a decision to be as straight as possible. I went to law school because it was one of the few professions acceptable to my family, and because I wanted to make a good living; as impassioned as I felt about the causes in which I had been involved, I lacked the stones to be an activist, rewarded only by the work. Most lawyers serve business, but at one remove; like medicine, it is a highly structured profession, a sort of guild with its own rules, job security, and a substantial suppression of competition that would not be tolerated in the business world. In my first law job, I heard an M&A lawyer remark, "I know how to make the deal--I just don't know why or when to make the deal", and I dimly began to understand the distinction between advisers and actors. I soon learned I wanted to be the latter, not the former.

In fact, within a year or two of law school, I fell in love with business. After a year and a half of working in a horribly political and cruel law firm, I opened my own practice; this was an act of desperation and at the same time of foolish optimism, as I didn't have much experience either in practicing law or finding clients. My first year on my own, 1982, I made eight thousand dollars; the following year, I made sixteen thousand. In August of my first year, I billed and collected only $75 the entire month. Though I often didn't have the money to eat enough to quell my appetite, it was more like an exercise in poverty than the reality itself. I could have asked my parents for help at any time, and didn't want to. I would however go over to their house, sometimes, and raid the refrigerator.

My first clients were a young couple with inherited money who produced and distributed instructional videos on subjects such as dog-training, tennis, and job interviewing. After two or three years, they were selling a quarter million dollars worth of their product in a year; they got bored and wanted to go around the world. I suddenly realized that I wanted to run their business for them much more than I wanted to practice law; we negotiated for a few weeks but couldn't come to terms, and in the end, to my great sadness, they shut their business rather than let me continue it for them.

It took another seven years before I had another opportunity to persuade a client to put me in charge. That time, it was a $28 million contract programming company, and I succeeded in persuading the owners that I could supply a missing piece, make them more secure, and help them grow the business. In February 1990, I joined their company as Vice President of operations and will celebrate my seventh anniversary next week. The company did $80 million in revenue last year and now employs almost 900 people--three times as many as when I joined.

When I quit the law, I had 300 clients, mostly software developers, consulting companies and software publishers. I was a successful computer law specialist, the author of three books and writing and lecturing regularly, but I wanted out. I believed that on the other side of the fence in the business world, I would have the opportunity to be more creative, to set up systems to avoid problems rather than being called in as the attorney to clean them up after they happen. I was interested in software development in particular, in setting up the infrastructure to permit a company to do a good job of developing applications and avoid angry confrontations with its clients.

Even before I was making a real living practicing law, I managed to bring people I liked into my enterprise. There was an absurd period of time when, although I had more work than I could personally handle, I couldn't charge enough yet to make ends meet. Nevertheless, I found two other young lawyers to whom I could give the spill-over work, and to whom I could act as mentor. I learned the most important lesson of business: what it means to me is associating myself with really good people and taking care of them. The commercial goal happens to be the project you work on together, and if you are careful about selecting good people, are honest with them, and give them the opportunity for self-realization and financial growth, you will make money.

I have practiced the same philosophy at the company where I work now, and it seems to be a successful one. Financial success follows at the end of a series of steps; it is almost incidental in the grand scheme of things to honesty and teamwork. I find the sense of teamwork, of joint problem-solving effort, viscerally rewarding. I call it the Mickey Rooney theory of company-making; in the Andy Hardy movies, he was always saying, "Lets put on a show! We can use the old barn for a theater!"--and then getting all his friends organized to participate. Creating and running a company involves forming bonds with some really great people to make an enterprise which will improve all of our lives--and bring opportunity and pleasure to some others as well; see my essay last month on teaching kids HTML for an example of a community activity a company can engage in to spread its good luck around and share it with other people.

I have been extraordinarily lucky, but I have managed to be in business all these years without ever having to make a really tough moral choice, and I do not think I have ever harmed anyone. Software development is a really clean business, because its a brain business; you don't manufacture any unwanted by-products, nothing leaches into the soil or gets released into the atmosphere. You get to create jobs and produce a product that facilitates other businesses and, if all goes well, helps them to grow as well.

Along the way, I came to understand that a really healthy business should be a partnership among four constituencies: the owners, the employees, the clients and the general public. Rather than the 1980's evil catchphrase, "maximizing shareholder value", which so often meant firing the employees and selling the assets off for scrap, business can be a means of striking the balance between the interests of all four groups. If we began the business day with a philosophy that we are all inextricably woven together, that all are ends and not means, and that nothing is essentially good for the shareholders unless it is good for all four groups, we can make money while creating value--financial and intangible--for other people. After all, it is not written anywhere that I must make twenty while you make nothing; I may be happier making ten while I see your life improve as well.

Here is where I see the essential difference between "capitalism" and "commerce". Commerce is an essentially friendly human activity, rooted in the earliest human prehistory, that advances human welfare by creating bonds among people, facilitates information flow, and allows the exchange of goods and services to improve everyone's lives. It must have sprung into being as soon as language did, maybe even a little before, as soon as humans could conceive of an abstract idea: I have something I don't need that you do; I will trade it to you for something you don't want, that I do. Commerce dampens aggression, makes us all feel kindly to one another, and helps to avoid war.

"Capitalism", on the other hand, strikes me as a strange phrase, as if I were to say "automobilism" instead of "transportation". "Transportation" implies that people are going somewhere, but "automobilism" is an autistic phrase which implies that there are no people, only cars. Similarly, "capitalism" suggests that by inventing such a phrase, we have forgotten that capital is only a tool of human beings. Like so many other tools, it can be used well or badly; it can make cities spring from the desert, or lay them waste again. "Capitalism" suggests that the money has a life of its own, superior to that of the people it serves. A 'capitalist" using his capital to create jobs and improve people's lives, is really more of a "people-ist", because (despite the fact that he makes a profit, and even a good one, as a reward for his labors) he has not forgotten that people are the ends, and capital only the means to serve them.

I have written at length about compassion and about a government's interest in the welfare of its citizens. In the last analysis, there is no government action which is so rewarding, or so fascinating, as the creation of good jobs by private enterprise. What my parents missed is that a businessman or woman who, at the end of a life, can say, "I created jobs, was honest to employees, helped create a community, served my clients fairly and never harmed the public interest"--deserves as much honor as the philanthropist, the activist or the teacher in the grand scheme of things.