 Okay, I think one of the obvious truths of the last 250 years, one of the most, you know, astounding developments in the last 250 years is the fact that capitalism is the, is the development of capitalism as a system that creates enormous amounts of wealth and it raises the standard of living of everybody who lives under it. And the evidence for this is just overwhelming. The evidence is historical, it's geographic, it's everywhere you look you see the evidence that capitalism has worked. I mean, you can think of the last 250 years as a big experiment, an experiment in social economic systems, you know, what works, what doesn't work, what creates wealth, what doesn't create wealth. And we've tried almost everything in the spectrum from, we've tried communism and fascism, so we know what 100% statism if you will is, 100% control of the state, at least the what? Death, destruction, and poverty. It just does, right? Tens of millions of people died out of communism and the people who were alive were good, so it's a complete net of death. We tried capitalism, we tried, you know, maybe not as pure capitalism as I would like, maybe we've never quite achieved that, but we got pretty close, 19th century America, but what happened? Well, we went from 1776, we were third-rate British colony, right? Not even worth putting the fourth force of the British army to fight us, because we weren't that important. And within 140 years, we were the, by far, the strongest economy in the world, the mightiest military economic power in the world, by the big, by the start of World War I, it was over, the United States was there. What happened in those 140 years? Well, we tried capitalism, we tried free markets, we let people alone for the most part. So, it's that you can argue about what the particulars happen and all the awful stuff that supposedly capitalism does, but the fact is that we went from nothing to being this incredible economy during a period where government was, what, 10%, 5% of the size of this today? You could cut 95% of all government spending today, and that's the size of government that we had during the 90s centuries. And it's no accident, in my view, that's also the period in which we became this incredible economic power. But you don't even have to look at history. We have tried, over the last 100 years, we've tried all sorts of mixtures of socialism and capitalism, all these mixed economies, some more socialist, some more capitalist. And you can plot these on a graph, right? And you can plot the relative standard of living, wealth creation, GDP, wealth per capita, all these things. And it's almost a perfect graph, where there are more capitalism, there are more freedom, high standard of living, more wealth creation, greater GDP per capita. More socialism, more poverty, less wealth creation, worse occupancy. Imperical evidence is right there. There's an economic freedom index, the two organizations, one created by the Frasier Institute of Canada, one created by Hewittage. And you can find these numbers and you can correlate. And there's almost no question that economic freedom leads to good stuff. And if you want another example, you go to Hong Kong, I don't know if anybody is, you mean a Hong Kong buck? Yeah, Hong Kong is this amazing place. 70 years ago, Hong Kong was a fishing village in the middle of nowhere on a walk that nobody really wanted, right? And all the British did was took over this walk and established the rule of law. They protected property rights, contracts. You couldn't vote, but your property was yours, right? And guess what happened? Within those 70 years, today, you go to Hong Kong, it makes, you know, it puts New York to shame because at least skyscrapers are all modern and beautiful. We haven't built a skyscraper in New York in years. 7.5 million people live on this walk, 7.5 million people from nothing. And they came from all over Asia, you know, they risked their lives, they risked their families' lives to get to this statewide. No safety net, no distribution of wealth, no massive regulations. All they have was protection of property rights and they were left alone. And they built something. Today, GDP per capita in Hong Kong, it's a standard of wealth is equal to that of the United States. They went from nothing to one of the wealthiest countries in the world in 70 years with capitalism. The closer capitalism we have in the world today, they rank one of two in economic freedom based on these indexes. They're in Singapore, rank one of two in economic freedom. United States, by the way, 12 years ago was number three. You know where they are, what we are today? 18. According to Economic Freedom Index, Denmark, Canada are freer than the United States. Socialist Canada is more economically free than we are today in the U.S. Now these indexes are imperfect, but that gives you a sense of a trend, right? And a trend is clearly towards stateism, bigger and bigger government, more and more regulations. So this is the puzzle that we try to, you know, untangle in the book that we just wrote. Here you've got the system that creates wealth, raises people out of poverty, the poor are better off than capitalism than any other system. I visited Cambodia a few years ago and you go to Cambodian villages and you see poor people. I mean, nobody in America is poor on that scale. They have no electricity, no running water. I mean, here 90 plus percent of poor people in the United States are televisions, automobiles, air conditioning. They're not saying they're not relatively poor, but in absolute terms. So capitalism raises the standard of living of pretty much everybody, creates huge amounts of economic wealth. And yet, and yet, for the last, I would argue, 100 years, we in the West have turned our back on it, have been drifting toward socialism. Even though we know socialism, and you should know, socialism can be failure when it comes to material wealth. The question is why? I mean, it's not that these economic political factors are so obscure, so difficult to figure out that it takes some PhD in economics in the country, I think. The more educated economics you become, the stupider you become. Just like a popcorn. It's like, the more, the more you just look out into the world, the more you just observe, the more straightforward it is. Freedom works. Statism doesn't. When it comes to economic attention. So why are we moving away from freedom towards, towards statism? And we are for 100 years. No matter who gets elected, Democrats or Republicans, it doesn't matter. Government only grows. Government spending, which is a proxy for the amount of government in our lives, only grows. It's, it's been nothing but growth since 1920s, right? That's 90 years. Consumers are like, oh, but Ronald Reagan was great. Ronald Reagan, government spending under Ronald Reagan, the 80 years of Ronald Reagan was president. Government spending doubled. Now that was good because the previous 80 years, it had tripled. But it's still doubled. Governments, boo. Coming intervention in our lives, boo, that money goes to somewhere. It either gets me distributed or it pays bureaucrats to supervise what we do with our lives. So all of the last 100 years, it's actually exactly 100 years because I think the real, real big push of statism came in 1913. We got two big things. Anybody know what happened in 1913? Federal Reserve. Federal Reserve is one. What's the second one? Income tax. Income tax was ruled unconstitutional by Supreme Court after Supreme Court after Supreme Court, you know what we did? We changed the Constitution. 16th Amendment allows for raising taxes on income. Of course today the Supreme Court would rule the Constitutionals. You wouldn't need that. But 16th Amendment makes it official, right? It's not part of the Constitution. So 1913 is a good date. You could argue it started early in 1890 with antitrust. We can talk about antitrust if you have any questions on that. But you could argue 1890. But certainly 1913 is the beginning of kind of this moving away. And you see it all over the world. You see it in Europe moving more and more and more toward stages. And even though they have firsthanded experience with communism and fascism and all these things, they're still moving in a direction. That was just in the Czech Republic this summer. And I was at a conference and one of the people at the conference was actually still is, until the end of March, he's still the president of the Czech Republic. And the president of the Czech Republic is a huge capitalist. He's a huge fan of free markets. And I thought, this'll be good. This'll give me some optimism, right? Because he lived under communism. How pessimistic could he be, right? He's seen what communism is. He was part of the Velvet Revolution that overthrew the communists. And now he's the president. So he must be optimistic. Well, it turns out this guy was unbelievably depressing. Because what he was saying was, we witnessed communism. We came out of communism energized and positive and thinking we could change the world. And now what we're seeing is we're slipping back down that road. And Europe is just moving in that increased government, more controls, more regulations, status, growth of the state. And he was unbelievably depressed. And this is a guy who should be incredibly optimistic because he knows he's been on the dark side and come out of it. So the whole West is moving in this direction. You know, maybe Asia is the one area of light in the world today where they seem to have some respect for capitalism. Some. Because in many respects, they look at us and they say, well, we want to mimic the welfare state that is Europe and is the United States. They're taking an example from us moving leftward, moving to what state. So the fundamental question is why? Why is it? And it's not that we don't understand the economics of capitalism. We've had great economists who explained it. They want to know about prices, who explained why capitalism works, right? Whether it's about the free men or if they hire or, you know, fund users. There'd be lots of really great economists to explain, not just the empirical fact that markets work, which I think is evident to anybody with eyes and somewhat of a brain. But the theory behind it, why it actually functions? We know that markets work better than governments in markets. Governments are a disaster with anti-markets. And there are lots of reasons for that. Again, we'll talk about that in the Q&A. But so it's not that there's something more fundamental. There's something more basic that causes our society to reject capitalism, to reject free markets. So what is it? What is it about capitalism that is so repugnant? Every time there's a crisis, every time something bad happens to the economy, who do we blame? Before the debt is even in, before we know anything about what's going on, who do we blame instinctually? Capitalism. We blame markets. We blame bankers. Bankers are our favorite, favorite, yeah. For 2,000 years I would argue bankers are being developed. We've always been bankers. I mean, who caused the Great Depression? Our speculation on Wall Street, of course. Now, if you know economics, no serious economist actually believes that anymore. Who caused the Great Depression based on serious economists as well? The Federal Reserve messed up, Hoover messed up, and FDR messed up. And they just dug us deeper and deeper into the Great Depression. It's a government messed up. That's not what they teach you in high school, I'm sure. You're taught that it was markets gone amok, right? It was speculation, but that's empirical. It's just not true. You have to ask yourself, why do markets go amok suddenly? Well, it turns out that if you flood markets with money, cheap money, people misbehave. But it's the cheap money that usually causes that. You know, the same deal with financial crisis right now. What caused the financial crisis right now? If you read the headlines, it was capitalism, greed. Suddenly Wall Street discovered greed, right? For 80 years, there was no greed on Wall Street. In the mid-2000s, somebody discovered greed and they became really greedy and they destroyed the financial market. I mean, that's ridiculous. Greed is always on Wall Street. Greed is part of business, right? We'll talk about that in a minute. Greed in the sense of wanting to make more. But what happened in the 2000s? Well, it has nothing to do with greed. It has everything to do with incentives created by regulations. Everything to do with the Federal Reserve keeping interest rates below the rate of inflation by two and a half years. We call that a finance, a negative real rate of return. Yes, what happens? If you keep the rate of interest below the rate of inflation, you're basically paying people to borrow money. Guess what people do if you incentivize them to borrow money? If you incentivize people to do pretty much anything, what do they do? What do you incentivize them to do? If you incentivize people to borrow money, what do they do? They borrow money. And we borrow money like crazy in the 2000s because interest rates were officially kept really low. Then why did it all go into housing? Because we were heavily subsidizing it. So not only were interest rates low, but then we subsidized everybody's mortgage too. Fenty and Fenty and the Federal Home Loan Bank and they're like multiple agencies responsible for making sure you guys all live at home and you buy, not for making rent and even worse if you pay off your mortgage. Always like the ice car audience, it's not fair with students. How many of you rent, I assume, in the living rooms where you rent, right? And then how many of you pay off your mortgage? Some people pay off their mortgage here. And I always thank the audience, thank you, because all of you are subsidizing my taxes. I've got issues mortgage. I get deducted from taxes. You don't get deducted your rent from taxes. You have nothing to do. You pay it off. So you get penalized. You get to pay more taxes for them. We have this crazy and sane housing policy that incentivizes us to take on debt and then subsidizes that debt so that we all get into homes because under the Carter administration, the Clinton administration, they set a goal to get 70% of all Americans into homes. That they own. I don't know what it means to own a home with 70% mortgage on it, but anyway, you know, you're going to own, you're going to have that deed to the home, right? 70%. It used to be historical trends somewhere between 63% to 65%. Canada that has no fate, no fanny, no housing policy, no incentive, no deduction of the mortgage interest, nothing, has 65% home ownership. It's kind of an equilibrium. It's kind of an equilibrium. So they pushed for 70%. During the peak of the bubble we reached something like 68.5%. Right now we're below 65% because of all the foreclosures, right? Yeah, so what caused this crisis? I would argue three basic things. There are lots of things. Federalism policy, housing policy, and the way in which we regulate financial institutions and provide an incentive to make the fail and incentive to take on excessive risk because the upside is all yours. The downside is, if I have an upside that's all mine and the downside is all yours, it's what I'm going to do. I'm going to take on lots of risk and take the upside. When I go crash, because when you take on a lot of risk, what does this mean? They're once in a while you crash. Otherwise, risk is meaningless. And when I'm going to crash, you guys pick up the bill. Because you have picked up the bill. All of you have picked up the bill for whatever risk-taking, wall-speed day. But then we incentivize to do it. Again, when you incentivize people in a particular way, most of the time, that's exactly how they behave. Because part of the problem is, that if you're on wall-speed and you don't play the game by taking on these risks that government has incentivized you to do, you are at a competitive disadvantage during the upside. Yeah, long-term, you'll benefit. But in the short-term, you'll be nice. So everybody drifts towards the short-term. And again, this is government-registered on how markets work. If governments don't create these weird asymmetries in markets, you get an upside, but what happens on the downside? You may. You suffer. Because markets are very good at penalizing failure. This is not a marketplace what we have on it. So this crisis was brought, in my view, government from beginning to end. Everywhere you pee all day on there, there's a government regulation, a government control, a government thing that's for the particular behavior that you're looking at. And yet, nobody spoke up in 2008, 2009 to blame government. Everybody blamed the market. So what is it about markets? Free markets? What is it about markets we don't like? That we resent? What are markets about? Your question. What are markets about? Profits on loss. Profits on loss. Does anybody go into business to make a loss? So what are people going to business for? To make money. To make a profit. Now, is it only money? I mean, Steve Jobs built this, right? And he wasn't in for the money. The thing is that profit margins are what? First iPhone said 60% profit margin. If he really cared about me, he would have sold it cheaper. But he didn't, right? What else? I mean, you can't say Steve Jobs would just about the money. What else? Why did Steve Jobs do it? He loved doing it. This was his passion. He loved beautiful things. He loved waking up in the morning thinking of cool stuff that he could build himself. But it was all about whom? Me? Who is this about? Steve Jobs. Steve Jobs. This is about that. And when I went and bought my first iPhone, my 2008 economy spider in the air of control, I did it because I wanted to stimulate the economy. Because that's why you guys go to the mall. You go to the mall, you go shopping, because you want to make sure everybody has a job. And you can... No, I mean, why do you go to the mall? Because you want something. Because you want... You want to be cool, you want something pretty, you want something that will make you more productive. But it's about whom? About you. So what is the market place? What's the market place about? It's about people doing what? Consuming. Well, consuming on the one side and producing on the other side. But why do we consume and why do we produce? Individual interest, another way of putting that. What are we going out there to pursue? Our own self-interest. The market place is about people pursuing their own self-interest. All markets place about that. You go to an agent, you go to a food market, right? And people are haggling over a pound of tomatoes. Well, the buyout wants to get the best deal he can. And the vendor wants to make as much of a profit as he can in there. But they're each about what? It's either one of them considering the whole being of society. Markets are not about that. Markets are about people, individuals, going out there to pursue their own self-interest. I mean, Anna Smith understood this. Now, Waltham Nations, famous book, the first real economics textbook, the book, right? And it written, anybody know when it was written? 1776. Easy day to remember, right? And in Waltham Nations, Anna Smith says, the baker makes the bread, not because he loves you, not because he cares about his customers in any deep sense. What's he trying to do about making the bread? Make a living for himself. Feed his family. He's being self-interested. And the guy who delivers the bread to the grocery store, he cares about you, he cares about the grocery store, he cares about the baker now. He only cares about them, because they are means to him making a living for himself. Markets are about self-interest. They're about people pursuing their own self-interest. And we do that by trading, right? So, when I buy the iPhone, who lost? Well, I'm better off. I paid 300 bucks for this. What's it worth to me? Now, it's not worth 300 bucks. I would have gone out of bed if it was just worth exactly 300 bucks, right? It's worth more than 300 bucks to me. That's why I'm willing to give up something to get something more valuable, right? So it's worth more to me than 300 bucks. Now, what's it worth to Apple? More or less than 300. Less. They make a profit. So who lost? Who won? Everybody. The beauty of trade is that it's win-win. So we all pursue our self-interest, but by doing that, we all win. And yet, what are we taught about self-interest? From when we're this big? What are we told? Yeah, and what do we mean by selfish? Do we mean taking care of self? No, what do we mean? Yeah, you have to share anything, but what kind of behavior do we associate with being selfish? Weave. Weave. That's just another word. What's a behavior? What attributes do people have? If you look at a kid, you say, he's over there, he's selfish. What do you mean? He's a bully. He's a cheater. He'll lie still and cheat. He'll do anything in his power to get what he wants. That's what we have as a mental image of self-interest. And what are we taught is good. Sharing. Sharing. How many of you in the sandbox were told by your parents to trade? You were a weird exception. No, that's great. To trade or to share? Oh, share, sorry. Yeah, share. I was wondering. I never get a hand when he raises a hand. My kids are probably the only admiration out there. Johnny, you know, Johnny wants your truck. You have to share it. Nobody tells you, well, trade. See what he has that he can offer you in return. And it's funny because, you know, Johnny in the sandbox knows that if a stranger comes up to mommy and asks for the car keys, she ain't sharing. Why is it? So why is it that we're not willing to share but we want our kids to share? It's because we project all ideals in our kids. We're cynics. We're not going to, you know, we share it. That's not realistic. That's not practical, right? But ideal, the ideal world, utopia out there, they're still communists. We're self-war communists. We're everything to share. You know, I mean, that's still, you know, imagine there's no property, right? That's what he says. I mean, that's still kind of in some deep sense. What we really believe is the ideal, even though it kills hundreds of millions of people. It doesn't matter. It's still kind of, oh, they, you know, communism's a noble idea. It just was practice bad. Deep down in our culture, we believe that. Because we've grown up sharing, but it's not just sharing. What else are we being taught? What is noble? What is moral? What is good? To me, what? If selfish is bad, what is the opposite of selfish? Selfless. I mean, I grew up in a good Jewish household, and I was taught when I was very young, think of yourself less. Think about this first. Sacrifice, that's nobility. That's goodness. Sacrifice, selflessness. Giving, right? That's, that's good. It's not my mother that didn't mean it. That's the thing about morality that we're taught. Nobody actually means it, right? Because you want to be successful, and you want to be self-interested. But you can't say that because that goes against everything we be taught that is morality. Morality is selflessness. That's what we be taught. And selflessness is not capitalism. We're not selfless and capitalism. We're self-interested in capitalism. And it's a conflict there. Think about Bill Gates. Somebody like Bill Gates. Bill Gates makes tens of millions or billions, sorry, tens of billions of dollars for himself. Now how does he do it? By doing what? By doing what? Yeah, in selling products and trading. So does anybody who was soft because of Bill Gates? I would argue that billions of people, everybody on the planet pretty much is better off because of Bill Gates. Everybody. Because he revolutionized computing. He revolutionized what it meant. He made tens of billions. But the world made trillions. I'm better off with Bill Gates even though I've been using Apple since 89. I'm still better off because of Bill Gates. I mean, using wood. Excel. There were more than 100 bucks I spent on. Otherwise, I wouldn't have done it. Every human being on the planet was touched by it. Yet, how much moral, ethical credit does Bill Gates get for creating Microsoft? None. He gets some negatives, right? Greedy, made too much money. How can any one individual have 16 billions of dollars? When does Bill Gates become a good guy? When he leaves Microsoft and he starts to give it away. So, giving, that's good. Making, and, not so much. Creating, building, not so much. Why is this not morally good? It's not morally good because he benefited from it. That's why it's not morally good. He's being selfish with it. But when he gives it away, we don't see the benefit. He might be having fun doing it. So they might still be a benefit, but we don't see it. So it's not in our face. It's also money. How could we make Bill Gates a saint? I haven't talked to the Pope, and the shifting Pope right now, so I'm not sure who to talk to. But how would you make Bill Gates a saint? You would have to give it all away, move into a tent, and if he gets just some blood, some sacrifice, some real pain, then he'd say, wow, I mean, nobody wants to be that way. Ridiculousity gave all his money away, but, wow, ethically, morally, they're going to be teaching him in case studies. After case study in ethics classes all over the world. He's going to be the model saint. So think about this. We have an economic system that works. It creates wealth. It creates a standard of living. But it is the exact opposite of our ethical code. Our ethical code is about giving. It's about sharing. It's about distributing. It's about sacrificing. It's about selflessness. That sounds like what? What economic system does that sound like? Socialism. Communist. That sounds like socialism. Give. We distribute. Where capitalism is about making, creating, building, benefiting, trading. But we don't value that. Not ethically. We all want to be that. And that creates an interesting conflict inside of us. We don't want to be Bill Gates. But we all think Mother Teresa is the real saint. Right? So we should be Mother Teresa. But we want to be an entrepreneur in Silicon Valley making millions and millions of dollars. What does that create inside of you? Not when you're young. You're too young for this, right? You're like, you know, later on in life, when you look back at your life and you say, you know, I should have been Mother Teresa. That's what I was taught by everybody, by my professors, by my preachers, by my mother that that is the real ideal. But I spent my life making money. What do you think that creates inside? It's an emotion. It starts with G. Guilt. Guilt. You live a life that was not the ideal. It was not. Right? You were selfish. And most philanthropy today in America is driven not by value, but driven by that guilt. Because what do people try to do? They make a lot of money and they try to buy themselves into heaven. Buy being. Buy portraying themselves at least. That doesn't mean selfishness. So I was at a luncheon award for business leaders, right? This was in, so nobody can accuse one of, this was an example of liberalism. This was in ultra conservative South Carolina, Charleston, South Carolina. It was at a luncheon where they were celebrating like an achievement of business leaders. And each, they would come up and they would have these long introductions with these guys. Ten minute introductions. And they would spend one minute on the incredible business success and nine minute on the charity and community service. Where do you think business leaders have more impact on the world than the charity or their business? Business. By far. There's no comparison. I'm not against charity. Charity's great. But is that what defines you? Is that where you really have an impact on the world? Bill Gates has, through his business, touched every human being on the planet. Yeah, I mean you'll say some kids who are malaria in his charity and that's a good thing. There's nothing wrong with that. But he's had by factors of thousands more impact through Microsoft on people's lives than he ever will in his charity. And yet in charity he gives them all credit. The business gets a zero mark. Even see this and you know the micro lending, you probably all heard of micro lending. They give you small loans. Well there are two business models for micro lending. One is a non-for-profit model and the other is a for-profit model. Not surprising the for-profit model tends to be more successful in terms of actual generating business activity among poor people. But what do you think gets them all credit? The non-for-profit look down on the profit model. They're greedy. They're users. They're trying to, they're leaching off of the poor. Even though the benefits are right there in their face. They're leaching off of the poor. And where does the normal price go? The normal price goes to the guy who wants a non-for-profit, not the guy who wants a for-profit. Even though the guy who wants a for-profit is probably a big success. So it's actually impacting the lives of people. We resent self-interest. We resent as a consequence profit. And therefore it doesn't matter to us whether something works or doesn't work. People don't vote their pocketbook. People don't vote their economic interest. They did. Obama would have never got elected. Certainly not in the second time. They don't vote what's good for their economic. People vote what they think is right, what they think is just, what they think is fair, what they think is good. Capitalism's not good, it's not just, it's not fair. That's what we've been taught. And therefore we have to vote against it. Think of it in the two aspects of kind of big government that this relates to. One is the entitlement state. You know, redistribution of wealth. And the second is the great illiterate state. So think in terms of the entitlement state. How does the entitlement state come about? Well, there's a coup over there, and they're really poor, and they don't have good healthcare. And you guys aren't helping them. It's not money, and you're not helping them. I mean, maybe you're giving a little bit of charity, but obviously these people still need better healthcare, and you guys haven't helped them. So I, as president, I'm just going to ask you to help them a little bit more. And since you won't do it voluntarily, I'm just going to force you to do it. I'm going to raise your taxes to help them. And what are you going to do? You're not going to object. You're going to say, yeah, are you ready? I'm not giving them enough. So if I need to be forced to be a good person, so be it. And you see this. And then, of course, there's one group of poor people, right? And so we subsidize their healthcare, whatever. But then there's other people over here who don't quite get as good of healthcare as everybody else in there. So we have to subsidize them, because we subsidize their first group. And they still need, and this morality of selflessness says, they need, there's a claim on you. Your job is to sacrifice for them. How can you say no? How can you vote against that? And then there's another group, and another group. It's soon enough, 50% of Americans are being subsidized. And nobody stands up and says no. Nobody says that up and says, enough, why? Because you'd be selfish if you did that. You'd be self-interested. Nats, emo. Morality drives all of this. How many of the wealthiest counties in the United States? How many of you think voted for Obama? The top 10. How many of you think voted for Obama? Now, understand what it meant to vote for Obama if you're very wealthy. It meant that for sure, your taxes were going up. If you won your personal taxes, not in a theoretical sense, not in some abstraction, you were going to pay more taxes. And yet how many of these people actually voted for Obama? Of the top 10 counties, richest counties in America. This is the mythology of the 47% of people who voted class. People don't vote their class. Of the top 10 counties, richest counties in America, eight voted for Obama. Eight. So rich people all over America voted to have their taxes raised. I mean, we live in a state where we just did that, right? And I bet you that most people earning more than $250,000, the people attracted by the tax increase voted for the tax increase, voted for Club 30. Why? Why would people vote and they income taxes increase? Because they feel more responsible for those people over there who are suffering. They need the money. Morally responsible. It's not economics. It's all about morality. If people voted they pocketbook, we'd be living capitalist heaven right now. Because that's what's good for your pocketbook. It's freedom. It's lower taxes, lower government spending, and economic freedom. So you tie them into completely driven by this morality. Now let's think about the regulatory state. How is it influenced by this? You go into one of the buildings on campus and you walk into an elevator and you see a little certificate on the wall of the elevator that says that a government bureaucrat inspected the elevator and assures you that it's safe. And I always go, oh good, no American dying this elevator. Because we know that in a pure free market what would happen to the elevators? They'd be falling all the time. Because the best way to make money in a free market is to kill your customers. We need government inspectors. The inspect elevators, otherwise, they'd kill us. But that's what we assume all regulations, all of them, again, what do we get? What do we get? You know, all these food inspectors. Because we know that if our food inspectors, McDonald's, would sell this thing to you. Because that's how they make money by making us sick. And you say that to somebody in business and they go, what? That's ridiculous. But that whole regulatory state is built in there. So what's the assumption behind it? The assumption is, businessmen left a new owner are self-interested. Self-interest equals line stealing, cheating. Therefore, if we leave them alone, what will they do? Lice steal and cheat. So what do we need to do? We need a supervisor. We need a regulator. We need to control them. We need to look over their shoulder all the time to make sure that they don't lice steal and cheat. And the best example of this was you guys probably don't remember. In 2000, there was a bunch of cases of fraud. Like Enron, WorldCom, it was like 12 or something. But all these cases, and they caught these guys and they were going to send them to jail. But that wasn't enough. It was an assumption in the culture that this was just a tip of the iceberg. That indeed every CEO in America was tainted. That there was a lot of fraud out there. That there were all crooks. I remember I was on Bill O'Reilly in Fox. I was on Bill O'Reilly in the spring of 2002. Bill O'Reilly, if you want to know what people are thinking, just watch Bill O'Reilly because he's a figure in the wind. He's very much a populist. Bill O'Reilly wanted to fire every CEO in America because they were all crooks. I went out to defend CEOs. I said, you know, in this country, you're innocent. It's a pool of guilty. And no, these guys are not crooks. Everything we have around us is a consequence of some company with some CEO building and producing and creating stuff. But he wanted them all fired. And it wasn't just Bill. This was a real sense in the culture. It's what a congress did. Congress passed something called Saul Manzox. One of the most disastrous regulatory bills in history. That basically, without getting technical, placed a little government bureaucrat on every businessman show they're looking at the books. Mountains of regulations on how to do accounting, how to do communications within a company. It just created this enormous burden in America. You could argue that IPOs after that, initial public offerings, it sort of meant crashed immediately after that because becoming public was such a huge burden. American companies were going public in London and in Singapore rather than doing it here because of this accounting disaster. By some estimates, it cost the US economy $1.5 trillion of GDP. Just huge enough. Why? Why do you do that? Because we know there are crooks. We just need the mechanisms to catch them. How many crooks does Saul Manzox get caught? Zero. Did it prevent the financial crisis? How many, how many conservatives, so-called conservatives, voted against it in the Senate? 98 to zero is Bill Castro. 98 to zero. Why? Because we don't trust CEOs. We don't trust businessmen. Because they're self-interested. And if you look at regulation, after regulation, after regulation, most of them are there in order to protect pro-consumers from really exploitative businessmen. In order to protect shareholders from really exploitative businessmen because bureaucrats know better than shareholders how to supervise managers. Regulation after regulation after regulation are there to control the self-interest of business. This is morality. This has nothing to do with economics. I mean, I would argue you cannot make a pro-economic argument before regulation. It's only a model. So the fundamental question here is is self-interest equivalent to lying, cheating, and stealing? Because notice that the people who control the dialogue about ethics in the world today offer us only two alternatives. You can be selfless, self-sacrificial, place the well-being of others first, Mother Teresa. Nobody lives this way, but we all made a film guilty as a consequence. Which is, by the way, and incredibly, I mean, it's important to note, I don't know how many of you grew up in the Jewish and Catholic households, but Jewish and Catholic mothers figured this out a long time ago, the guilt is an incredible powerful tool to control people. It is. And politicians know this. So you create an ethical system that nobody actually lives up to Mother Teresa. And now you've got everybody. You've got them because they're all feeling guilty and you get a control. So that's the ethical system. That's one alternative. And that's goodness. And that's virtue. And the alternative is lying, stealing, and cheating, which is what they define as self-interest. Those are the two alternatives. That's what they do. But that's how it's presented. There are only third alternatives who cares about ethics, which is what they teach in business ethics courses in business schools. I taught a class in ethics and financing. I mean, what you taught in ethics and finance in business ethics schools is this. It's exactly as they taught it. What you taught is this. Profit is self-interested. So that can't be good. What's really noble and good is to serve the community and stakeholders and be socially responsible. But to do that, you have to make a profit because otherwise you won't have money to serve there. So it's okay to make a profit, but only if you use that profit to serve the community and your stakeholders. And that's it. That's business ethics. You don't have to take the class anymore. You just have to. And don't, oh, this was the one principle I got out of business ethics. Don't do anything you wouldn't want to be on the front page of the New York Times about. That's the only ethical guide inside of you. Now, I argue, we argue in the book, I in fact argue that there is a third alternative. And that is a proper definition of selfishness. Because if you think about it, is lying, stealing, cheating in your selfishness? I mean, you've ever lied. It doesn't work. It usually gets you into more trouble than you were trying to avoid by doing it. It has, the more you do it, the more disastrous the consequences are. It's a stupid strategy for living. It doesn't work. You know, I asked Booty Madoff, and Booty Madoff, every scheme guy, he lied, and it was a disaster. And it wasn't like, for a while he enjoyed his money, he never enjoyed his money. Because he was always afraid of being caught. And he wasn't afraid of being caught by the police. That was the least of his worries. He was afraid of being caught by his best friends, by his family. You know who turned Booty Madoff in? His sons. I mean, can you imagine something more horrific in life than his sons having to call the police a you? He says that he's happier in jail now than he was before he was caught. And I believe it. Because human happiness and lying, cheating, and stealing are not compatible. They don't work. People tied. We've got plenty of empirical evidence. It doesn't. There's no connection between them. Indeed, I would argue that you cannot be happy if your life's feeling cheap and that happiness requires the exact opposite of it. What is that? What is the main thing that allows us to succeed and thrive in the world? The thing about the human being, human beings, what is the one tool that we have, the one capacity we have that makes it possible for us to succeed in life? What's that? I mean, cheetahs fulfill their desires. You know, yeah, but it's heavy. What do you need to ask? I mean, if you look at your neighbor. You can look. We're pretty pathetic. We're weak. We're slow. We have no claws. We have no fans. You go out there, try chasing down a bison and biting into it. You put you in a saber to tie you in a cave. Who do you think is going to win? And yet, in spite of the fact that as a biological entity, we are so weak, we thrive. Why? What is it that we have? Yeah, our minds. Our reason, our capacity, our reason. Everything, everything good in our world around us is a product of reason. And that includes their odds. The odds do not exist without human reason. Is that a capacity that you ask them? Understand the world around us. Observe. Integrate. Think about. Figure out. Solve problems. It's all about our minds. Now, what does lying do to your mind? This is why lying is so dessert. You know the term in computers? Garbage in, garbage out. Well, think of your mind as a computer. What's a lie? It's a lie. It's nonsense. It's not true. What does reason depend on? Fact. On what actually happened. When you put in non-fact, guess what the result is going to be? Bad. It doesn't look. So, it turns out that lying, cheating, and stealing are not self-interested. Boony made up was not a self-interested person. He wasn't selfish. He was stupid. He was self-destructive. Boony made up did not sit down one day and say, oh, I wonder how I can be the best human being I can be. A machine, incredible happiness and flourishing, fulfillment in life. Oh, I know. I'll cheat, lie, and steal from my best friends. That didn't happen. Boony made up didn't think. That's his problem. Boony made up, emoted. I have a desire for that pile of money. It happens to me, yours, who cares? I'm just going to take it. Emotions are not reason. Emotions are what gets you in trouble. Emotions are why you lie. You don't think and sit down and think, I think I should lie to my girlfriend today. That'll get you far in life. No, your fear, you know, some guilt, whatever it is about your emotions lead you to that. It's not about reason. Reason doesn't lead you on that path. So, if you're truly self-interested, we ain't argues. You don't lie to your cheat. You think. You reason. Self-interest. Even selfishness, she's got a famous essay called The Virtue of Selfishness. Because her selfishness means taking care of self in the deepest sense possible. Living your life to the fullest, making your life the best life that it can be. And she says the tool to do that is your mind, is your reason. And to be able to use your reason, you have to be honest. You have to have integrity. You have to be just. You have to be productive. That's what your mind requires. And not just your mind. You know, think about happiness. What would this happiness come from? What makes you happy? I mean real happiness, not the momentary heart, but a sustained happiness. It comes from, what? I can't do this. Don't let me know. What causes don't let me know. It's achieving stuff. It's setting goals and achieving them. It's the same place where self esteem comes from. What's self esteem? What do you get self esteem from? A ribbon that somebody gives you. Everybody in the class gets the same ribbon so you all get self esteem. That's modern self esteem theory. That's why nobody has self esteem in our culture. If we had self esteem in our culture, do you think we'd let the TSA do what they do to us? Can you imagine George Washington going through airport security? He'd slap him. He'd slap him. Those people like self esteem, we all do it like a culture of whips. Because self esteem comes from not who events, it comes from what? It comes from achievement. It comes from setting goals and it comes from self recognition of your achievement. I am worthy. That's where self esteem comes from. And you cannot be happy if you don't have self esteem. Happiness comes from that sense that I am good, I am worthy, I can live in this world, I can take care of myself. So for example, in my view, if you're a welfare recipient, you cannot have self esteem. You're not taking care of yourself. Somebody else is taking care of you. You're dependent on other people's work and set goals. Welfare is incredibly crippling to the recipient of welfare. They're the victims. Because they'll never have a job. They'll never have self esteem because where do we get most of our self esteem? Where do you sit? I mean, you guys are young. When you leave here, you'll discover very quickly that all the talk about family and all that stuff is nice talk. But where do we spend most of our time? I think of your dad's. Some of your mom's. Most of our time is in work. I mean, we love our family and we devote a lot of resources to our family. The fact is that we get that high, we get that excitement, we set goals, we gain our self esteem from work, from the work that we do. If you don't allow people to work, they will never be happy. That's why employment is such a tragedy that we have high employment rates because people are not working and they're not taking care of themselves. And they're never going to be happy. So being productive, that's a huge virtue. If you care about your own happiness, if you care about your own happiness, if you care about your own life, if you're selfish, self-interested, then you have to work. You have to make a living from yourself and you can do all kinds of work. You can be a professor and make nothing. Whatever you're making, you're making a friend of mine who became a CEO of the 10th largest financial institution in the U.S. still has his grandfather. His grandfather was Brickley. Brickley, you know, a long time. But his grandfather worked every day. Lane Reds got paid for it. Made enough money to feed himself, feed his family, send his kids to school. He had self esteem. He was happy. He had crying because he knew he was making care of his family, of the people he loved. And yeah, his grand kid became the CEO of one of the largest banks in the U.S., right? But that's not the point. The point is that he was making it. So don't dedicate any kind of job, any job, to a good job because it's you supporting yourself. It's a self-interested brand's vision. It's a self-interested about pursuing your goals. It's about pursuing your interests from doing it rationally and doing it long-term. So it's a rational long-term self-interest. And there's a consequence there. It's about rationality. It's about productiveness. It's about honesty and integrity and pride. And you have to patch yourself on the back when you've achieved something. And be ambitious. Wanting to be good. But know what it means to be good. Where does Bill Gates fall on that? Bill Gates, when he was at Microsoft, that's when he was good. That's when he was virtuous. That's when he's a moral person. And I'm giving him money anyway, that's fine. But here we know he was good because we can see him creating stuff. We can see him building stuff. Was he taking care of himself and his family? Yes. Better than any human being on the planet ever, right? And he was benefiting everybody else at the same time. Wow. That's virtue. That's goodness. That's morality. We don't have to wait for him to retire and give it away to make him a saint. He's already a saint. He's a saint for making the money. Now, I don't know what he was like in his personal life. Who knows? But you can say, poor business life, this guy's a giant, a moral, ethical journey. Not engage in self-destruction. He's not engaged in living for other people. He's not engaged in self-destruction in the fullest sense of that word. At least in business. That's what I ran is advocating for. That each of us think our lives suit, that each of us pursue our interests in wrestling over the long term and with passion. And then that is what is required. That kind of moral code, that kind of morality, that holds the individual's whiteness of life. that upholds, you know, human happiness, individual human happiness. That is the morality, that's the moral foundation of we need to defend capitalism and to defend the standard of living and to defend freedom. We have to reject the notion that your life belongs to other people because that's what selflessness means. It means that it's on the moment you're born you are an obligation to others. Now how did that happen? Where did that come from? Where did that obligation come from? Where did it come from? How did that become my brother's keeper? I don't remember signing that. No, reject unchosen obligations. Pursue what is truly in your rational self-interest. And the argument is if we can convince the world to be rational self-interested and capitalism just falls into place because if you have self-esteem, if you want to be productive, if you want to be successful, if you want to pursue your own self-interest, what kind of political system do you want? A political system that leaves you alone. A political system that extracts the one thing. What is the one thing that can get in your way from being successful? You have restriction, coercion. People are forcing themselves on you. People are restricting your ability to pursue. Somebody sticks a gun. So my view is that force and reason are opposites. Force and reason are opposites. In the face of a gun, there's no thought. If I put a gun to your back and say two plus two from now on equals five. And if you don't agree, I'm going to shoot you. And you have to live your life based on the idea that two plus two equals five. You can't build a bridge. You can't build a computer. You can't do anything. Your life's over with. There's an undercut reality fund. That's what force does to the human mind. So the one thing a self-interested person wants is to live in a society where he is not caused. He is not forced. And that's the job of government. The job of government is to extract force from society. The founders of this country understood that. That's the whole concept of individual rights. Individual rights are the concept of freedom. You are free to live when they say you have a right to life. What do they mean? You have a right to pursue the values necessary for your life. As long as you don't hurt other people, nobody has a right to hurt you. We the government will protect you. We the government will shield you from other people trying to cause you. Whether it's through physical force, whether it's far, whether it's other countries trying to invade us or trying to terrorize us. That's it. So if you believe in self-interests, then you want to be left alone. You want the government to do only one thing and that's hope you'll be left alone. Protect you from, not always going to be crooks, always going to be bad guys in society. Protect you from the bad guys. And that's it. And that's really the vision, you know, it's, I'm simplifying it a little bit because the founders were more complex than this, but that's basically what they meant by this. What they meant when they founded the country. What the Declaration of Independence, which is by far the most important political document, I think in human history. And each one of us has an inalienable right. Inalienable means what? Nobody can take it away from it. Not even a majority. Not even 99% of the people voting against you. Nobody can take it away from it. You have a right to live your life as you see fit. And in the most selfish political statement in human history, you have a right to pursue your hand. So if we want capitalism, if we want the standard of living capitalism involves, if we want the freedom capitalism involves, that to me is what we need to fight for. We need to fight for the right to pursue all the happiness. And with all the implications that has to some morality and in terms of being honest. Thank you guys.