The entrepreneur and the gambler

10 10 2011

The passing of Steve Jobs was a sad moment for genuine ingenuity in the world. He was a billionaire that made his money from being a bog standard capitalist, in the sense that he created goods which huge swathes of people wanted to buy. So successful did he become, he even inadvertently gave rise to another breed of customer who became hysterically loyal to his company’s brand. You can easily make cigarettes addictive but a true genius makes a computer brand addictive.

Steve Jobs really began to see his own personal success at a time when the tax burden he and other mega rich individuals faced was being forced lower and lower. So much so that the third richest man in the world, Warren Buffet, recently pointed out the insanity of taxing his secretary more than him. This was because politicians became convinced that it was not just bad to tax rich people, it was even immoral.

There is reasoning behind this and for a politician Steve Jobs is the ideal example to provide. The theory goes like this, if Steve’s taxes had been double what he paid, he may never have brought us the something like the iPod. The fact that he did, meant that he was a wealth creator, Apple products multiplied and boomed around that time creating thousands of jobs.

So to take more tax from Steve Jobs, Lloyd Blankfein (CEO of Goldman Sachs) or the derivatives trader at JP Morgan is a like tying a weight around their brilliant minds. This is how the Occupy Wall Street movement is being dismissed by the big media and what
Paul Krugman calls the Very Serious People.

This simplistic idea says that Steve Jobs and the whizz kids on Wall Street have something in common beyond wealth. What is the difference between Steve Jobs and Lloyd Blankfein? Well one creates and one bets.

In real economic terms, Steve Jobs created things. They weren’t even unique products he could slap a patent on and sit back and watch the monopoly money roll in. There were plenty of MP3 players on the market but the iPod was the sleekest, best designed and most easy to use by a couple of light years. (I single out the iPod merely because it represents the advantage all Apple products have over most of their rivals)

Lloyd Blankfein bet money that a certain price of a good, stock or mathematical equation would rise (or fall). He and the rest of his species on Wall Street genuinely see themselves as being akin to the Steve Jobs of the world, but they don’t actually make anything that you can touch.

For an industry that doesn’t make anything the financial sector talks about ‘innovation’ an awful lot. When they talk about innovation, to them this means coming up with a piece of abstract maths. This allows you to bet money on another bet which relates to another bet, also based itself on a bet, none of which have to exist in the real world, except the original bet.

Spot the difference?

Your not supposed to understand how this works, the maths geniuses who come up with this stuff used to build supersonic jets or sent rockets into space. There is just far too much money to be made betting on a bet these days.

Yet if the giant betting shops in Wall Street and the City of London had to pay a little more tax and be properly regulated, the world would end up like East Berlin we are told. People with business ideas would simply give up and sit at home in their pants eating pizza all day, rather than become millionaires.

Steve Jobs said it better than I ever could:

“Being the richest man in the cemetery doesn’t matter to me …. Going to bed at night saying we’ve done something wonderful… that’s what matters to me.”