 a pleasure this afternoon to introduce you to our guest speaker Dr. Yaron Brooke. Dr. Brooke is the author of two books. You can see both of those pre-market revolution and equals and unfair. And after you hear him speak, if you want to follow up on his work, you can catch him every Saturday afternoon and blog talk radio on the Yaron Brooke show. And then shortly thereafter broadcast, you can pick this up on I Heart Radio, actually, AEM 560 out of Chicago as well. We're very fortunate to have Yaron here. Yaron and I have been counting years, and I think we've known each other about 10 years now. This is his third time on campus. And he's just outstanding, very sought after international speakers. So we're very fortunate, as I said, to have him. He is an immigrant to this country. He was born and raised in Israel. And as I understand the story, he and his wife decided what country do we go to where we have the most opportunity. And he chose the United States. So he ended up getting his MBA and PhD from the University of Texas in Austin. And so we're just very pleased that he's able to join us. He'll be speaking today on the morality of capitalism and the derivatives thereof, I guess is one way to look at that, Yaron. So please help give a good Arkansas to me. Oh, the book. The book. Oh, I'm sorry. Thank you, Yaron. Afterwards, we'll have a book signing session out in the atrium. We have a few books to give away. So I guess the first ones that line up will get books. And the rest, after that, we'll get a handshake, I suppose. Something along those lines. But it didn't write. If you all would, I'll just give Yaron a warm Arkansas. Welcome. Thank you all. Thank you all for coming in on the first day of school and on a kind of a cold, cold day. So I appreciate you coming out here. And thank you, Wes, for the kind introduction. And it's good to be back at the University of Arkansas. You know, one of the great mysteries for me in life is that there is a political system, an economic system called a capitalism, that works wonders. It has brought civilization out of poverty, raised the standard of living for anybody who practices it, has increased life expectancy. You know how long people used to live about 200 years ago? Anybody want to know? 45 was really old. Life expectancy was not 25, it was 39, somewhere in between, 39. Start of the 19th century, life expectancy was 39. You guys are already middle-aged. I'm long dead. That's reality. What was life like 200 and something years ago? What did most people do? You know, you probably all learned in school that during the 19th century, in the Industrial Revolution, we got child labor. Oh my God. What did children do before the Industrial Revolution, before capitalism? What did they do? Where'd we live? Where'd we all live? We lived on farms. We grew the stuff that we ate. There was nothing left over. There was no surplus. You worked every day, 365 days a year. Maybe you took off the Sabbath, but other than that, you worked every day and everybody worked. Everybody worked. All children worked. There was no such thing as a child now working because otherwise there wasn't enough food to feed them. The fact is that 250 years ago, we were all dirt poor, barely surviving, living on average to age 39. Children, only 50% of children made it to age 10. That was life. And this amazing thing happened that created incredible amounts of wealth. Now, I don't have a whiteboard, so I'm going to draw in the air. You're just going to have to follow me. This is a graph. This is a graph of wealth per capita or income per capita. It doesn't really matter from basically the beginning of time until today. This is the graph. It's a very simple graph. Flat, flat, flat, flat. And then it goes like that. I mean, literally flat for 10,000 years from the invention of agriculture until when? When does it go like that? Does it revolution? Give me a date. Anybody have a date for when it goes like that? 1870 is really late. But 100 years earlier, give me a date. A nice date. A nice one that's easy to remember. Yeah, 1776. That's a beautiful date, right? Two amazing things happen in 1776 that are not uniquely responsible for this, but have something to do with a sudden increase. One is the founding of the United States of America, obviously. And it's not so much the founding of America that causes this increase, but the kind of country America was when it was founded. But anybody know what the second thing that happened in 1776? Come on, economists, economic students. Famous book. Very good. Anna Smith, The Wealth of Nations, was published in 1776. It's the first real, I mean there were previous books, but the first real book defending markets in economics. 1776. So what happens somewhere around there? Put aside the exact date. What happens around there is we, people in certain parts of the world, primarily the United States and Western Europe, are set free. Free of what? We talk about freedom a lot. What do we free of when we talk about freedom? Free of? Free of government? Well what aspect of government? What is it that we're free of? What is freedom? When we say freedom, what do we mean? We're free from? Pressure? I don't know. The professors don't put pressure on you. You guys are not doing a good job. What do? Up pressure. Yeah, free of coercion, free of force. Suddenly we're allowed basically to do what we want. To build, to investigate, to speak, to write what we want. That's not human history. It's never been human history. And what happens? Well, it takes off. You know one of the things that really makes the founding of America unique in human history is that before the founding of America, who did your life, every individual's life belonged to, didn't belong to you. Before the founding of America, the understanding of who your life belonged to was always your life belonged to the tribe, to the group, to the country, to the king, to the queen, to the leader, to the pope. But certainly not to you. What makes America unique is this is the first country in human history where they declared, they didn't practice this consistently, unfortunately, but they declared that your life belongs to you. First country in human history where that declaration is made. And that idea that your life belongs to you and therefore you get to act and nobody has. Nobody has authority over you. Nobody has the right to stop you, to control you, to tell you how to live. That was brand new. And that caused human beings to start creating wealth in a way that was unprecedented and astounding. All the wealth we have today, almost all the wealth we have today was created in the last 240 years, which is amazing, amazing to be born and to live in an era where we are so wealthy. And the system that allowed that is the system of freedom. And the name we give that system is capitalism. Capitalism is the system of free markets, markets that are free of coercion where property is privately owned. And the only job of government is to protect your rights, your property rights and your other rights. That's it. But otherwise leave you alone. The amazing thing is that every country in the world that is adopted just a little bit of capitalism, just a little bit of freedom, a little bit of free markets, suddenly you see massive wealth creation. If you look at East Asia, if you look at East Asia, they didn't spike up in 1776. Indeed, they stayed flat. They stayed flat for a long time. And then they spiked up. When did that happen? Somewhere around, depends on the country, 1978, when China opens up a little bit. And if for India, it was 1991 and 1992. But what's unique to all these stories is that if you take a poor country and you adopt the rule of law, property rights, and you set them free, they start creating enormous amounts of wealth. And with that wealth, health improves, life expectancy improves, child mortality goes down. All the things that we associate with human well-being improve dramatically. Capitalism is an unequivocal, unquestionable success story. It is amazing when you look at what it has achieved in the last 240 years to the extent that it's tried. Because granted, there's never been a purely capitalist country. There's never been a country that completely adopted these ideas. China certainly is no capitalist country, but they've given their people a little bit of freedom. And in the places in China where they've left them alone, that's where you get skyscrapers. In the places where the government continues to control, that's where you still get poverty. So this is the mystery. If everything I've said is true and granted, there are probably people in the audience who are going to question that and you'll get a chance to look forward to that. If everything I've said is true, why is it that in the West, in the United States of America, in Western Europe, we are rejecting the system. We are turning our backs to the system. We are moving away from it. We want more controls, more regulations, more coercion, more force on every part of our activities. And we have, for 100 years, the United States has been drifting away from capitalism, away from free markets, away from the idea of liberty, liberty really meaning, leaving you alone, letting you live your life. As long as you don't hurt other people, it does you well. We have been moving away from that idea for 100 years. Why? If it's been so successful, why are we abandoning that success? And look, it has consequences. You know, people talk about the US economy today as struggling and it is. And we all know why it's struggling. Well, I mean, some of us know why it's struggling. It's struggling from over regulation, over taxation, too much government control. You could get this economy to grow at double the pace that it's growing today easily. Again, everywhere this is tried, it succeeds. You cut regulations, you cut taxes, you free up people, you give them freedom and they will go back to work. They will produce, they will invest and the economy will buzz forward. There's a direct correlation between the level of economic freedom and this, you know, how much economic growth you get. This is not such abstract idea. This is a real question. If we know and the economic data is all there, that economic growth is a consequence of economic freedom that wealth creation is a consequence of economic freedom. Why don't we adopt it? Give you one more story about this and that's Hong Kong. Anybody here being to Hong Kong? I would say once in your life, you should go visit Hong Kong. A lot of you are young. You've got plenty of opportunity sometime. Go visit this place, right? Hong Kong is a rock in the middle of nowhere. There's nothing there, no natural resources. Seventy-five years ago, there was a fishing village there. A few tens of thousands of people, that's it. Today, there's seven and a half million people on this rock. The rock has more skyscrapers than New York City. Per capita GDP, which is a measure of wealth, is higher than that in the United States, adjusted for cost of living, adjusted for everything. They are richer than we are and they did it in seventy-five years. How did that happen? All they had on this rock, right, was the rule of law, the protection of property rights, which the British imposed on them. And then they left people alone. A minimal, minimal safety net. No social security, no welfare, no free health care, none of these things. And yet millions of people emigrated onto the rock from all over Asia. They got on rafts. They got on little boats. They came there. Why? Because they were going to be free. So here's this country where we experimented. We did the experiment. We ran, you know, capitalism for seventy-five years. Huge success. Let's learn from it. God forbid, we don't want to learn from actual experience. We want to test our theories out. But right now there's an experiment going on in Latin America. Of the opposite of capitalism, which is socialism. And what does socialism do? We've run this experiment. We got an experiment going on in Venezuela right now. The consequence of socialism are poverty and starvation. Little babies dying from malnutrition. That is the consequence of socialism. That's what's happening right now in Venezuela. Is anybody learning anything from that? No, you guys probably all voted for Bernie Sanders. Who said he wanted to bring socialism to America? Now, nobody believed him. That was probably why. But socialism has been discredited everywhere it's tried. Everywhere it's tried, it's failed. Everywhere it's tried, it's led to poverty and misery. Everywhere. There's not an exception. Socialism is a failure. And yet, it's cool. We all love it. We want to be socialists. Why doesn't America? And we're moving in that direction. That's the mystery, guys. Why do we resent and reject a system that has produced so much good and a sympathetic and admire and respect, a system that has done only harm to human beings. Only harm to human beings. That's what socialism does. And you know, some people say, yeah, we want a little bit of both. Why do you want a little bit of poison? I don't want a little bit of poison. I want only good stuff. And yet, so what's going on? Something's going on here, because it's weird. Now, it's not that we don't understand the economics. It's not like we're scratching our head and saying, yeah, free markets work, but we don't get it. We don't get why they work and how they work. We have great economists who know this stuff. You have some of them here at the University of Arkansas. We've had Nobel Prize winners who've explained it all from Milton Friedman to Hayek to Mises to, there are lots of them. There's no shortage of good economists who've explained why free markets work and why socialism has to fail. Has to fail. There is no world in which is populated by human beings and which socialism can be successful. We know all this. So it must be something deeper. Something else is going on here, because we're acting pretty stupid and human beings are not, typically. That's stupid. So what is it? Well, let's take a step back and let me ask you this. What is capitalism? Oh, what are free markets and free, free of coercion? Truly, would people voluntarily negotiate? What are free markets really about? What are they about? What's the essence of a free market? What do people participate in a free market? What does Steve Jobs make one of these? iPhone, not an Android. iPhone. What does he make one of these? No idea, right? Okay, so he wants to profit maximize. So let's call it what it is. He wants to make money, right? He wants to make money, right? We all go to work because we want to make money. And it's a little embarrassing, right? But it's true, Steve Jobs made a lot of money making these. It's not just about money, though, right? Why does he want to meet consumer needs? Why does he care about consumers? To make money. And what else? Why else do people make stuff like this? Advanced society. Advanced society, you think Steve Jobs would walk up every morning and say, I really want to make society a better place? I don't think so. I think Steve Jobs woke up every morning and said, I want to have fun. I want to, this was passion. He wanted to create something beautiful. And yeah, that would change society. But his motivation, the thing that got him up in the morning, the thing that got him excited was that this was going to be fun. He was going to create something beautiful. He was going to create something amazing that he would love. In other words, Steve Jobs made this for whom? For Steve Jobs. For Steve Jobs. Now yeah, consumers love it because Steve Jobs happened to be a genius and he knew that what he would love, we would love. But he really made this for himself. What motivates great producers is the fun of what they're doing, the passion of what they're doing and the fact that they get rewarded for it. Now, I like to tell the story of my first iPhone. It was 2008 when the iPhone came out and the US economy was spiraling into recession and I went to the mall to buy my first iPhone because I wanted to help stimulate the US economy. Because I know that's why you guys go shopping. You go guys go shopping because you want to help your fellow man. Want to make the world a better place. Want to make sure that people have jobs, right? That pair of shoes you bought yesterday, that nice suit you bought, that's all, you know, you don't care about it, it's all for the benefit of, now why do you go to the mall? Why do you go shopping? Why do you consume? To make whose life better? Yours. You won't. You're going out there to try to make your life a better life, right? You're trying to make your life a better life. So what are markets about? What's the essential characteristic of markets? The places where we come together to do what? To exchange for the purpose of making our own lives better. They're about the pursuit of self-interest. Markets are where we pursue our self-interest. I want to make a lot of money and produce stuff and then when I go home I want to buy stuff because I want to make my house nice or when I have a cool computer but it's for me. Both sides are for me. Markets, the essential characteristic of markets is that they're places where people go in pursuit of their own values and their own self-interest and exchange in order to achieve that. Now this is not a new thought. This is in that book that we talked about earlier in Adam Smith's Wealth of Nations, 1776. Adam Smith says, not a direct quote, but he says, the baker doesn't bake the bread because he cares about you. The baker bakes the bread because he's trying to make a living. He's trying to feed his family. This is the job he does. He might enjoy the job. Hopefully he enjoys the job. But at the end of the day he's doing it for himself. And capitalism is all about people pursuing their own self-interest. That's what makes it work. Adam Smith understood that. You just look around and you can see that this is what's going on. We're doing it to pursue our own self-interest. And yet, what have we been taught about self-interest? From when we were this big. Good thing or bad thing? Bad. Your mother did not teach you to pursue your self-interest. My mother didn't. I grew up in a good Jewish household. My mother taught me, think of yourself last. Think of other people first. Be self-less. Self-lessness is a virtue. Self-interest is typically a vice. Sacrifice. Not trade is what we teach our kids. Sharing, not trade is what we teach our kids. Right? Johnny comes and wants Mark's tractor in the sandbox. What do we tell the kids? You gotta share. Now the parent never does. Stranger comes up to you and asks for the car keys. You're not just gonna share the car. But we wanna project these ideas on our kids so we tell the kids share. Really? How about trade? You give me something, I'll give you something, right? So what we have is a system that's based. That's very nature. That every transaction is involved in. Is associated with a moral system. With a moral idea, self-interest, which morally we perceive as bad, as evil, as wrong. And the exact opposite of it, self-lessness, sacrifice. Giving, that's wonderful. That's virtuous. Well, that's also consistent with socialism. Socialism is about giving. Socialism is about sacrificing. Some people for the sake of other people. Socialism is very self-less. So to me it's not a surprise that we don't trust capitalism. It's all about self-interest and we know self-interest is evil. We love socialism not because it works but because it's consistent with our moral code of being self-less. Think about attitude towards entrepreneurs. So let's take Bill Gates as an example. Bill Gates, richest man in the world today. 70 billion dollars. How do you make 70 billion dollars? Here's a secret to becoming a billionaire. How do you make 70 billion dollars? You can ask Sam Walton too. How did Sam Walton make however many billions of dollars he made? How do you do it? What's the secret sauce? Nobody? Come on. Work really hard. I know a lot of people work really hard. I work really hard. I'm never gonna make anywhere close to that amount of money. I'm a pretty lucky guy. But I'm not in the profession. You're a professor, right? You can work really hard and you can get really lucky and you're not gonna make 70 billion dollars. That's just the reality. How do you make 70 billion dollars? Yep. Yes, you create a value that millions, ideally billions of people are willing to pay for and why are they willing to pay for it? Because it makes their lives better. Otherwise, why would I pay for it? How much? If I pay $300 for the iPhone, how much is the iPhone worth to me? More than $300. We got a finance professor here. More than $300. Otherwise, I wouldn't bother, right? I wouldn't get out of bed. So if I pay for this $300, it's because it's worth more than $300 to me. And it's indeed, if you actually think about it, it's worth much more than $300. It's hard to put a number on it on how much this improves on its life. You've got a supercomputer in your pocket. You can access all the information ever produced by human beings. It's pretty amazing. For 300 bucks. What a deal, right? When Microsoft sold their products for $100 apiece, it's because people's lives were made better by more than $100 every time they bought their products. So the way to become a billionaire is to sell something to lots of people that makes lots of people's lives better off, better off. And you get a percent, you get a piece of that. So yes, Bill Gates made $70 billion, but he changed the world profoundly for the better. He impacted the lives of almost every human being on the planet. Think about what Microsoft connectivity standardization has done to the world. It's a different place for the better than it was before. So what's $70 billion? For what is probably what trillions of dollars in actual wealth created out there. Changing the lives of every person on the planet. Helping poor people all over the world through technology. And yes, he made money doing it. What do we view him morally? As a businessman, we love him. As an entrepreneur, we admire him. Morally, what do we think of him? Yeah, he's a selfish guy. And at best, at best, you might think, what's morality have to do with it? But mostly we think $70 billion, nobody should have $70 billion. That's too much. That's just wrong. That's just too self-interested, too selfish of him. He changed the world. He built something, he created something. He employed thousands and ultimately, if you count all the industries, the spoon because of Microsoft, maybe millions of people. He made the world a better place in profound ways. And yet morally, eh, we barely care. Not building statues, not naming streets after him. But wait, wait, maybe we can resurrect him. Maybe we can make him a good guy. How do we make Bill Gates a good guy? Well, he's already done it, right? By leaving Microsoft, God forbid he make any money. And now he's just giving it away. And now he's a philanthropist, and he's got a foundation. And now we all say, oh, now we like Bill Gates. Now he's a nice guy. Really? So making stuff, building stuff, creating stuff, changing the world doesn't count, but giving it away does. That's perverse. That's crazy. He wouldn't have had the wealth if he hadn't produced it, but the fact is that even if he gives every dime away to charity, he won't have one iota of an impact on the world as he did running Microsoft. It's just not on the same scale. Charity doesn't change the world. It improves the lives of some people, but that doesn't change the world. Business does. But we don't like business, because it's self-interested. We love charity, because it's perceived to be selfless. There's no benefit that the producer's getting. Now how do we get Bill Gates statues and names, you know, boulevards named after him? How do we, in a sense, make him a saint? What would it take for Bill Gates to become a saint? We still don't trust him completely, right? He's still rich, he still lives in a big house, and he still seems to be enjoying what he's doing. Not qualifications for naming boulevards after you. What has to happen to Bill Gates? Give it all away, move into a tent, and suffer a little bit. Just show us a little bit of suffering. And then, then he would become a Marlowe hero. Again, that's nuts. That's crazy. He is one of the most productive people in human history who had more of an impact on the human beings than almost anybody, and that's how we treat him. And yet, if he gives it away, that's somehow good, that's somehow positive, that's somehow noble. Why? And as long, but this is the morality we have. And as long as we have this morality, we will not adopt capitalism. Capitalism is a system that encourages the behavior of Bill Gates. It rewards the behavior of Bill Gates at Microsoft. It's not the system that encourages or rewards the behavior of Bill Gates as a philanthropist. I mean, I've got nothing against philanthropy. Philanthropy's fine. It's just not that important. What's important is what you build. What's important is what you create. What's important is what you've devoted if you're in business, most of your life towards, which is building a business, making money. Making money is a good thing. It means that you've sold products to people or services to people who value those products and services more than the price they pay for. So all those people's lives are better off because of you. That's a good thing, not a bad thing. And yet, we give it no value morally. So I believe that to really, to really, if we have any hope of going, getting back to capitalism or adopting capitalism more purely, we have to rethink our moral code. And I don't know how many of you have read Ein Rand, but I heavily suggest that you do. I think it's Atlas Shrugged. There's an important book for everybody to read. But what Ein Rand suggests, she asks a really simple question. She asks, why should I be selfless? Why should I put other people before myself? Why is their well-being more important than my well-being? Why is your life more important than my life to me? And there is no answer. There is no answer. In my view, morality shouldn't be about sacrifice and selflessness. Morality should be about a code of values and virtues that help you live a successful, flourishing, happy life. Morality should be about living the best life you can live. It should be about human flourishing, individual human flourishing and individual human success. And other people play a role in that, but other people are not the primary. You are the primary. It's your life. It's not somebody else's life. This is the very idea this country was established on, that we each own our own lives to pursue our own happiness. So a morality that is focused on your flourishing as an individual and what it means to be successful as an individual, what would that require? What would be the primary, the most important thing if you cared about human individual flourishing, human individual success? What makes possible everything we have in the world around us? Where does all this come from? The camera, the seats, the clothes that you have, the food that you ate earlier today? Where does it come from? And don't tell me the supermarket. Where does all that stuff come from? What? People who produce and what makes it possible for them to produce? What makes it possible for people to produce? Anybody here have the gene for agriculture? You just know how to do agriculture? No. Gene for clothes making? No. Gene for anything. So what do we as human beings need to do in order to survive? We need to produce, but how do we produce? How do we know how to produce? We get to choose to choose what? What makes us human? What's uniquely human that no other animal has? Basic stuff, right? What is it? What made it, thumbs? Some anthropologists believe it's thumbs. What is it that makes us special? We're special, look. We're in this warm, nice place when it's cold outside. What? Consciousness, but it's a particular type of consciousness. Dogs are conscious. What is human consciousness? What's that? Thinking. We have the capacity to reason. We have the capacity to think, to be rational, to look at evidence, to integrate it, to discover new knowledge. That's uniquely human. Their most important thing you can do in life is cultivate your reason because from your reason comes everything else. Somebody had to figure out how to do agriculture, figure out the relation between a seed dropping to the ground and it being watered and something coming up. That is not obvious. I know it's all obvious to us, but it took mankind, I don't know, about 200,000 years to figure that one out. And then somebody had to come along and say, oh, wow, cool invention. Let me turn this into an industry called agriculture. We can do this on a mass scale. So that's science and this is engineering or entrepreneurship or whatever you wanna call it. Both achievements of the human mind, somebody had to figure it out. You know, we just take clothes from granted, we get them off the rack, but somebody has to know how to skin animals and dry the pelts and probably experiment it many times until they got it right and then cut it and sew it. Every single one of those steps, every single one of those steps required human ingenuity, human invention, the human mind, human reason. Nothing just comes to us. It requires hard work, but hard work of the mind, hard work of reasoning, thinking, figuring stuff out. So to be self-interested is to be a thinker, is to follow reason. What do most people think self-interested means? When we were in the school yard, pointed at the kid and said, he's selfish, what do we mean? Remember he's a thinking human being, trying to promote his own life? No, what did we think? He's greedy, which means what? What's he gonna do? What actions do we associate with self-interest? He'll do anything it takes. He'll lie, steal, or cheat. He'll stab us in the back to get his way. And yet, lying, stealing, cheating are not particularly good tactics for achieving human flourishing. I don't know how many people you know who regularly lie, steal, or cheat that are not in jail. And even if they're not in jail, they're miserable. It's not. I don't know how many of you lie there in life. I'm not gonna ask. But lying is like the dumbest strategy ever for achieving anything. You almost always get caught, which is not good, in business. How long do you survive in business if you lie? You don't. You don't. And the same in life. If you're not convinced of this fact, try it with one of your relationships. Friend, lover, spouse, just spend like two days just lying and see what happens. Disaster. Lying's not good. For you. I'm talking purely from a selfish perspective. Your life is not better off if you spend it lying. Your life is not better off if you steal and cheat. It's worse off. So a better life is a life lived by reason, by the mind, by thinking, by using the unique tool that we have as human beings to live our lives. But remember, our concepts, our ideas are like little fire folders that we have in our mind. And we have this fire folder called self-interest. And in that fire folder we have all the businessmen we know, because after all they're after-profits and they seem to be enjoying themselves. And we have all the cooks that we know because we associate self-interest with bad guys, with bad behavior. And they're all lumped into the same concept of self-interest. So when we think of businessmen, we often think they're cooks almost automatically. Almost automatically. What we need to do is separate those two out. It's not in your self-interest to be a cook. It is in your self-interest to be a businessman. And self-interest is a good thing, not a bad thing. To really understand capitalism, to defend capitalism, to move ourselves towards capitalism. We need a culture that respects, admires, self-interest as a moral ideal. Again, not in lying, stealing, and cheating. That's not self-interest in the rational sense. In the sense of the pursuit of one's own life long term, using one's mind. And then if you are such a person who wants to live your own life for your own sake, using your own mind, what kind of world do you want to live in? The world where government tells you what you can and cannot do? How to use your money? Where it takes stuff from you, uses force on you? You want to live what? You want to make your own choices. You've got a mind. You have the ability to make your own choices. You want to live your own life the way you want to live it without other people telling you, forcing you to live it differently. In other words, you want freedom. People who are self-interested, rationally self-interested, want to be free, want to be left alone, want to be able to pursue their own life free of authority, free of people forcing themselves down their throat. And this is really, again, going back to the foundation of this country. This is really the idea on which this country is founded. In a Declaration of Independence, it says you have an inalienable right, and rights mean freedom of action. They mean freedom from coercion, the freedom to act, to act for what? For your own life. For your own liberty means to think, your own thoughts and express them any way you want to. As long as you're not hurting other people, you are free. And in the most self-interested statement really ever in a political document, the founder said, we all have a right to pursue our own happiness. Capitalism is just the political system that allows us to do that. That gets out of the way and leaves us each responsible for our own happiness with the freedom to pursue it. What we need is a moral code, a moral code of self-interest to make that possible. Thank you all. We got plenty of time for questions. If there are any. We've got mics. Wait. Wes, Wes. Yeah, it works. There we go. So I want to know who to thank for bringing here. Wes. Thank you, Wes. My question is, I'm a big fan of Atlas Shrugged, big fan of capitalism. And I'm struggling to some extent to fully reconcile the idea that in the modern world, things happen very quickly and often with disproportionate impact. So on the one hand, I want less regulation. On the other hand, sometimes things happen awfully quick. They cycle very, very quickly these days with extreme adverse impact to people that sometimes don't have adequate representation. So that's kind of the idea on how do you reconcile that? Well, I mean, I don't think, I don't think the issue here is speed and what the government does is not that it slows stuff down, it stops stuff and it distorts. So give me an example. The best thing is what would be if you hadn't any example. Deepwater Horizon, BP. Yeah. So Deepwater Horizon, you remember Deepwater Horizon, the big BP offshore rig that exploded and spilled all over the Gulf Coast. Now, you have to take a number of steps backwards when you see an event like that. If you actually look at what BP was doing, it was, the whole of BP's mentality, was to meet minimal regulatory standards because that was cool, right? As long as you met the minimum regulatory standards, they'd got some government official set, you were cool. So the reason it exploded to begin with was because they squeak by regulation. They did their job, right? What if there's no government regulation? Who controls it? So Exxon, for example, doesn't do that. Exxon has a policy of they have their own standards which forexceed what the regulators demand and they're safer, generally, at least with the drilling. What would happen in a free market if you didn't, and we'll get to the effects once the spell happens because accidents will always happen. What happens if you don't have a regulatory body that inspects these things? Why would companies stay safe? What's the incentive to be safe? Yeah, in the long run, they're on existence. By the way, even that is distorted by regulation because the government capped oil companies liabilities. Now it turns out that they withdrew the cap after the fact, but after the fact is after the fact. The incentive, by capping it, this creates huge moral hazard because you take away that internal incentive that's a long term. If there's a spill, I get wiped out. So, but there's a short term issue, right? Can we imagine a market solution for the short term problem? Now, I can't right now, figure it out what it would be for oil companies, but take drugs, right? Sort of, you know, entities, private entities that certify the drugs. Let's say we did away with FDA and we had private entities now that researched the drugs, that did the experiments, and let doctors know, and they competed with one another and now they had an incentive to provide the correct information. Any time there is asymmetry in information that's important to bridge, there is a profit opportunity for somebody to enter and close that gap and make money doing it. So, even if we can't imagine in every case what it's going to be, I can imagine it for drugs, not sure yet about the oil companies, have to think about it, I'm confident that somebody's going to do it because there's profit opportunity that's what entrepreneurs do. They find these profit opportunities and they close the gap. And generally, private regulation far exceeds and is better than government regulation. I'll give you an example. I listen to a lot of NPR, National Public Radio, and they have these shows on farming in California and they talk about that with the farmers about food quality and food safety, particularly if there's an outbreak of something. They always talk about this and it's fascinating to listen to the farmers because they say stuff NPR doesn't want them to say, I'll give an NPR's political bias. The farmers often discuss two types of regulation that are imposed on them. One is government, the FDA, and they're not worried about the government regulator. They always pass. Who are they really worried about? Who regulates them that they're really worried about? The supermarkets. Supermarkets have their own people that they send to the farms to inspect the food. And the supermarket has a financial interest in the food being good. So they're going to be much tougher on the farmer than the FDA is going to be in the farm. Because what will happen if there's an outbreak? What happens to the guy from the FDA who inspected the food and he missed it? And a lot of people got sick. What's going to happen to that person? What's that? Nothing. He's probably got tenure, some form of tenure, because he's a government employee. He's not going to lose anything. He doesn't have any revenues associated with the fact that he's an FDA inspector. But notice that we trust the FDA inspector, this goes to my moral point, we trust the FDA inspector more than we trust the supermarket inspector. Why? Because the supermarket inspector's in it for the profit. And the FDA inspector's in it for the public good, the common interest. He's just doing it for all of you. Now when I hear anybody tell me they're doing something for the common good, I run as fast as I can. Every human atrocity in human history was done in the so-called common good. There is no such thing as the common good. What's good for me is not necessarily what's good for you. But somebody doing it for the profit motive, that I understand. So the incentive structure, and we've got a whole field of economics that does public choice and understands the incentives of regulators and why the perverse and so on. So I think markets deal with the speed better. Now what happens when the spill happens? Now you've got private property and you've got property rights and you've got a court system that handles these things. And do you have to put into place, does the government have to put into place emergency courts because there's such a massive number of claims? Sure, there are lots of ways to do it that I think are much healthier and much more productive than the way it's done, where the government goes to Exxon or whatever it is and squeezes them for money and then allocates the money the way they think and it never goes to court system. We've got a court system for a reason, to allocate damages. And yes, maybe it's a little slow to speed it up. So that's what the government could do. Put some money into speeding up the court system. My view of the financial crisis was, let the banks fail and take a few billion dollars and establish huge numbers of bankruptcy courts specializing in banks and have them operating 24 hours a day to deal with all the bankruptcies of the banks and nothing would happen, right? Big deal. So banks would go bankrupt. Companies go bankrupt all the time. And if there's a lot of them, make sure that the courts are fully stacked so they can deal with them. But instead, we had top, you know, almost a trillion dollars where we hand checks to the banks to avoid them. God forbid they should go bankrupt. Questions. Shy audience. On anything. Did I grow up on a kibbutz in Israel? I did not. You know what a kibbutz is? Anybody know what a kibbutz is? No. So kibbutz used to be a farming community in which it's as close to communism as you can come, right? Everything is communally owned, everything. So nobody has a job, one job. They rotate the jobs. So you spend two months in the field, two months in the factory if there's a factory, two months in the kitchen, and there's no individual kitchens. None of the apartments have kitchens. There's a communal kitchen. Everybody eats together, right? So you spend in the kitchen, and you might spend it washing dishes. So you do every job in rotation. There's no expertise. There's no division of labor. There's continuous. You don't even raise your own kids. So when you have kids, they're taken to the nursery and they're raised with everybody's kids and you do a turn in the nursery as part of the work that you do. Now, these are about as close to communism as you can come, about as close to socialism as you can come without kind of government imposition and authoritarianism. They were experiments that were tried in Israel. The founders of Israel were very socialist. Many of them communists. And they survived about, I don't know, some of them survived about 70, 80 years. But this is the secret. Nobody tells, nobody tells that they've always been subsidized. They were never economically viable entities. They were always subsidized originally. They were subsidized by rich Jews overseas who used to send them checks. When the state of Israel was founded, they were subsidized by the government. And as soon as those subsidies were reduced like in the last 20, 30 years, they keep a team of completely changed the model. Today they don't resemble those old socialized things at all. They were completely broken up. And the other thing people don't talk about is the fact that everybody hated each other. It was the worst kind of community I've ever experienced. While I didn't live on a keyboard, I worked on a keyboard. And people backstabbed and gossiped and hated each other and think, why would this happen? Well, let's say I work hard and I really am diligent in my job. And somebody else is just lazy. And I get exactly the same as the lazy person. I get exactly the same duties, exactly the same jobs, exactly the same income. You know, if somebody wanted to buy a television, they couldn't buy a television because they had no money because the money was shared. And if you wanted a television, everybody had to have a television. So while somebody people worked hard and other people were lazy, everybody, you start resenting. You start hating people because how come I'm doing all the work and he's doing nothing and everybody's benefiting the same? Nothing is a, there's no more sicker, a social environment. It's then a socialist or communist type environment where everybody resents and everybody's envious constantly. So Kibbutz is a great social experiment that failed. Yeah. Why don't you just yell? I don't know. I mean, the best kind of arguments, or arguments like this way, you know, stuff happens and people suffer. And stuff will happen and people will suffer. And that's life. The idea that life is riskier under capitalism. I mean, what we've exchanged in our modern society is we've exchanged growth and I think prosperity and a lot of things for a safety net, a vast safety net that keeps us all comfortably mediocre. And doesn't challenge us to do any better. So I think it's, yeah, capitalism is riskier. Capitalism, you rise and you fall faster, right? People change, people who are poor can become rich, people who are rich can become poor very quickly, relatively speaking. In the 19th century, used to be said from short sleeves to short sleeves in two generations, right? First generation makes it, the second generation loses it. And then within one generation, often people made, lost, made, lost more than once because it was a real dynamic, capitalistic. And there is no example. I mean, I don't know of any, really don't know of any. There's no planned managed economy in the world, in all of human history that's been successful and there's no free market where property rights were properly protected that has been a failure. It just hasn't happened. I mean, to me, it's like the law of gravity. It just is, right? It just is, now granted, a different species might have different system. But we as a species, where we are designed with reason requiring, what is the enemy of reason? What's the thing that constrains one's ability to think? Now, ideology is a framework for reasoning, it might be good, it might be bad, but what really stops thinking? In what sense? Do you think over time? Oh, you don't have enough time. Yeah, well, yes, but what would make the time so narrow? What really, if I put a gun to the back of your head, you can't think. There's no point in thinking. You have to do what I tell you. It's you follow my orders or else I pull the trigger. And in order to live, you stop thinking. You can't think. And that's true of all authority, right? If you're living in the 15th century and you want to do science, you can't. You can't think about science because the consequence of any science is burning at the stake. Or if you're lucky, house arrest, in Gala Lo's case. So there's an authority with a gun placed at the back of your head so you don't think. To have progress, to have success, what we need is to remove the gun and let reason flourish. So as long as reason is the tool by which we know the world, then we have to have freedom. There's just no alternative. Yeah, you wanna follow up? Sure, I mean, this is voodoo economics at best. I don't know, it's a complete nonsense. What drives an economy? What drives an economy? What resulted in the spike up, right? More consumers? I mean, is there any ever a problem if you had money in your pocket to get you to consume? Consumption's easy. Consumption's never the problem. What happened that drove wealth that way? Production. The primary in economics is the producer. It's the entrepreneur, it's the businessman, it's making and building stuff. How do you consume? One, you have to work first. Or somebody has to work so that we can steal his money and give it to you. But somebody has to create the values for you to consume. And then, what are you consuming? Stuff that somebody made. So on both sides of the transactions is stuff, that production. Consumption is the minor part of the economy. This idea that consumption is 70% of the economy is bizarre. Yes, I understand the math that they get to that. But it's not real. It's not what it's actually, so let's take from this group and give to this group and encourage them to consume. How does that work? How does that make us better of the stimulus packages, right? We take from this group, give to, it's all nonsense. The core, if you want, economic growth is to encourage entrepreneurship and business investment. Consumption always follows. Consumption is never a problem. You get money in my pocket, I'm out there buying stuff. But how do I get money in my pocket? By producing something, by creating something and selling it, trading. So I have to produce in order to consume. It's, in my view, it's a huge mistake to put the consumer as primary in economics. It's the producer who's the primary in economics. Did I know I wanted an iPhone before I got one? People talk about job-satisfied consumer demand. There was no consumer demand for the iPhone, zero. I challenge you to find somebody who would even imagine that this existed, could exist and would want it if it existed. No, one Steve Jobs made it and showed it to me. I went, whoa, I want one of those. But first, he had to make it and show it to me. So if you want to get economic growth going, you have to support the producer. It's not about the consumer and just printing money and handing it to people. That's not real, right? That is, prices will rise and nothing will happen. You haven't created anything. You've printed pieces of paper. That's not wealth. Wealth is not pieces of paper. By the way, if anybody has an objection to capitalism, I'm eager to hear it. What's your opinion on the Civil Rights Act and its impact on property rights? You want to get me in trouble? What's my opinion on the Civil Rights Act? Look, I completely believe that government has, you know, it's a travesty that government discriminates. And it's horrific that government discriminates. It's evil of the government to discriminate. The whole point is that it's equality before the law. And that means you treat everybody the same when it comes to the law. We all, as individuals, no matter the color of our skin or our gender, have equal rights to be free. So in terms of the underlying idea behind the Civil Rights Act, I agree completely. You know, the government has no right to discriminate. It's when they get to the point of telling private individuals whether to discriminate or not that I disagree with, right? I think your property is like your home. I only invite people I want to my home. I discriminate constantly, never based on race or gender, but I still discriminate. People I like versus people I don't like. Some people are completely irrational. Some would, I would even argue, evil. And they hate people of a different color skin than they are or different religion than they are, right? I want to have nothing to do with those people. They're evil people. They have a right to be evil. The government's job is not to protect us from them unless they're using force and not to protect them from themselves. So if you want to put, if you have a store and you want to put a sign up that says no Jews allowed, I hope you guys would join me in boycotting that store and maybe even protesting in front of it regularly, but the government has no right to tell them not to do it. You have a right to be stupid. You have a right to be evil. As long as you don't physically hurt other people or commit fraud. So I'm against that part of the Civil Rights Act, which gets me in trouble. I think that once you took away state sanction of discrimination, once you took away state sanctioned racism, the whole system would have fallen apart in a healthier way if we had not passed that portion of the Civil Rights Act. And that's what Barry Goldward objected to. He didn't object to the entire Civil Rights Act. He objected to that specific portion that violates property rights. And I agree with Barry Goldward. I think they shouldn't have passed it and I think discrimination, and it would have been 50 years later, what is it, 60 years later, it would have been, we would have been healthier today. Because I think what affirmative action and what these things do is they perpetuate racism because they institutionalize reverse racism, which is not a good thing. Tricky, politically incorrect stuff. Yeah. Excellent. Yeah. So the first question is, with the God of morality, if I'm proposing it's new morality, I mean you approach the morality, how does that relate to organized religion? And my standard answer to that is, that's your problem, not mine. I don't think it fits. I think there's a conflict, but I'm not a theologian. I'm gonna let you figure that out. Again, my primary is reason, is reason is the way we know the world. Use reason in order to guide you to figure out what is good and what is right for you in your life. I think that's what you should do. Other people, and it's not just organized religion, it's other philosophers, it's government, it's other people that are gonna tell you a different morality. You have to choose for yourself. And whether this is consistent with your religion or not, your problem, not mine. As for the issue of, yes, robots, mechanization, artificial intelligence, gonna replace our jobs. Yeah, they are. And I think that's cool, right? Machines have already replaced millions and millions and millions of jobs. And we're richer, happier. We work shorter time frames. We used to work 12-hour days. Now we only work eight-hour days, right? We used to work seven days a week. Now we work five days a week. Maybe we'll get to the point where we're only working four hours a day, and who knows where it takes us. The point is we'll be richer, and there will be jobs, because we'll have lots of money and time on our hands, that we can't imagine today. For example, there are many, many, many, many more entertainers today in the world, Wes's son and my son being among them. Then there were 100 years ago, who had time to pay for entertainment, right? You didn't have time. So there were a couple of singers who went around from Barcelona to Barcelona. But now there are millions of entertainers, why? Because we have enough money to buy their CDs, to go to their movies, to watch them on stage, to consume their stuff. We have time and we have money to do so. So there's a whole profession called entertainers that didn't exist. There are hundreds of these. I mean, think about, I mean, it's hard for you to think because you're so young, but think about restaurants, right? Today, there's such a thing as celebrity chefs. If you had told somebody 100 years ago that one day chefs would be celebrities, they would have thought you were making the most ludicrous statement possible, right? You don't enjoy, food is not to be enjoyed and celebrated. It's to eat, it's to get nutrition. You go and you eat what you can and you get a... But now we're so rich that we can go to a restaurant and we can choose the area of the world from which our state comes from and whether it's corn for breakfast or grass-fed for breakfast or whatever. So there's a whole industry of restaurants that didn't exist before. There are millions of restaurants in America today and they're making good living, millions of them. And 100 years ago, there were very few restaurants, very few hotels. Why were there very few hotels? Nobody went on vacation. Who had time for vacation? Who had money for vacation? We all take vacations all fly over to see our parents for Christmas. You know, when our ancestors came to America, they left Europe knowing they would never, ever, ever see their families again. That was life. Today, we just buzz around all over the world. You know, in a few hours, you can get anywhere. It's amazing the life we live. So I don't worry about where the jobs are gonna come from because I know that I lack enough imagination to figure out what those jobs will be. I leave that to science fiction writers and let them figure out all the kinds of jobs that will become available when we become so rich that computers can do all the manual labor that we hate to do, right? I mean, I remember being a student and washing my clothes by hand because we didn't have a washing machine in Dwaya and there were laundry mats. This is in Israel where we were relatively poor, right? I wouldn't think of calling myself poor, but cleaning clothes by hand. When I discovered when we got a washing machine, that was so cool. Or dishwasher, right? So you want machines to replace manual stuff that we do. And if AI can replace some of the menial thinking that we can do, great. Can machines ever recreate human consciousness? I believe the answer is no. It's a biological phenomenon. It's not a mechanistic phenomena. So we'll always have the ability to be creative to do things that machines cannot do. And that's where the jobs will come in, stuff which only human beings can do. Yeah. Well, a famous economist by the name of Ludwig von Mises was once asked, if he was elected dictator of the world, what would be the first thing he would do? Well, not quite as drastic. He said, resign. You can't impose. So first I'd say you can't impose. You can't impose freedom on people. People have to want it. Now, granted, if I were elected, it would mean a lot of people wanted it. So what kind of steps would you take in order to achieve more capitalism in America? I mean, I've done this on my radio show. I've done my first 100 days as president, right? And I would start with what I would call the end cronyism bill, right? And it would have a number of components to this bill. One, no more subsidies to business. Zero, everything is wiped out from day one. No more subsidies to business, right? No, not for corn, not for farms, and not for solar panels, and not for anything. Zero subsidies, right? Then I would do a zero corporate income tax rate, because corporations don't pay taxes anyway. Corporations are just legal entities. You pay taxes, and all corporations do is they pass on the tax to consumers or to their employees. All the research I've seen shows that the consumers and employees pay, shareholders don't pay the taxes. So zero corporate income tax, and that takes away cronyism too, because now I've got no reason to lobby what I can deduct from my taxes, right? Which is what companies do all the time. They constantly lobby for special favors in the tax code. And then, so zero subsidies, zero corporate income tax, or at least a very flat, simple one with no deductions. And what's the other aspect of cronyism? I mean, those are the two big ones. And then I would have a massive bill that starts deregulating everything, everything in sight on a massive scale, not a little bit, but massively. So I don't know, every six months we get rid of 10 years worth of regulations. I'm making stuff up, right? But you can easily get rid of soybeans, oxy, tomorrow, and nothing bad would happen. Lots of good would happen. Banking regulation a little bit more tricky, but you have to start with deposit insurance. Shrink it. How many of you have $250,000 in your bank account? Yeah, I didn't think so. Who are we protecting by having deposit insurance of $250,000? Really, really rich guys. Can those guys afford to figure out if the bank is safe or not? Yes. Okay, so you want to protect the real poor people who might suffer, have deposit insurance for $10,000, right? Fine, and then start deregulating everything else, get rid of all the regulations, and then we can privatize deposit insurance ultimately. But at least there's a phase one, lower deposit insurance to $10,000 and get rid of all banking regulations. Because all banking regulations are there as an excuse to protect deposit insurance, to protect the little guy. But of course that's BS, right? Nobody cares about the little guy. So get rid on a massive scale of regulations. So that's cronyism, regulations. Then I would do, you know, you could take any one of these. You'd have to privatize healthcare. But to privatize healthcare, you really have to reform Medicaid, Medicaid, which is gonna take a little bit of time. It's not easy to do, but you gotta privatize them all. And then you go from there, right? And the last thing I would do, the last thing I would do is cut welfare. I would cut it, I would ultimately eliminate it, but I would do it slowly over time. It's unfair to go to poor people and say, you're gonna get nothing while we're subsidizing solar panels for which suburbanites in California, right? That's absurd. So get rid of all the subsidies and then start cutting the back on welfare. And the last thing I would do also is cut taxes, right? Not the last thing, but close to last, right? Because unless you got spending, what's the difference? Either you're taxing people or you're sucking it up through the bond market, but you're sucking money out of the private economy. I want money in the private economy, right? So you cut taxes as much as you can based on how much you're spending. And as long as we have Medicare and Social Security, we're spending huge amounts of money. So taxes are not going down dramatically. I would want taxes. You know, in the 19th century, federal government spending never exceeded more than, I think, three and a half percent of GDP. Today, government spending is around 20% of GDP. 19th century, the economy was like that, right? So you could cut government spending today about 80%, right? 90%. Basically- We have time for one more question and we'll be fairly short. Do you think we'll- The guy behind him has asked a question. Do you think we'll trend more towards or away from free markets during the new administration? Oh, so you want to end in a political question? I think we'll trend away from free markets during the Trump administration. I think to, I don't see anything about Trump that suggests that he's a free market guy. I don't think he'd know a free market if it hit him in the face. Will it trend slower towards away from free markets than under Hillary? Yeah, maybe. Would it trend slower away from free markets than it did under Obama? Yeah, maybe. But the idea that Trump is gonna move us towards free markets, I think is wishful thinking. I mean, he said nothing, nothing, since he's been elected, to suggest that he's a pro-free market guy and his attacks on free trade are a great example of that. But it's not just that. It's the way he wants to reform Obamacare. He doesn't want privatized health care. He wants universal health care. On every issue, he's neither here nor there, but potentially doing more harm than good. Iran, thank you all. Let's give Iran a round of applause if you would. Appreciate it. Thank you.