 I would now like to introduce the Henry Hazard Lecture. And it's a distinct pleasure to introduce it. This lecture has been sponsored by a very good friend of the Institute, Hunter Lewis. Our speaker, who is a friend of mine, is Robert Luddy, who is a lifelong entrepreneur. At the age of 20, while attending LaSalle University in Philadelphia, Bob opened the fiberglass manufacturing business and worked it at night. In 1967, Bob sold his company and was drafted into the military. In 1976, he settled in Raleigh, and with the $1,300 in capital, he opened Atlantic Fire Systems in a one-room facility. Recognizing the demand for high-quality kitchen ventilation equipment, Bob purchased the sheet metal shop in 1981 and transformed it into captive air systems incorporated. Captive air is now the nation's largest and most well-respected manufacturer of commercial kitchen ventilation systems. Its clients include restaurants, national chains, and other private and public institutions. Industry dealers and consultants, according to the Food Service Equipment and Supplies Magazine, continually vote captive air best in class. Inc. Magazine has repeatedly named captive air one of the 500 fastest-growing private companies in the nation. In its home base of North Carolina, captive air is among the 100 largest private companies and one of the 50 fastest-growing private companies in the Raleigh Triangle. A strong advocate of excellent education, Bob found schools which help youth develop character and reasoning skills. In 1998, Bob established the Franklin Academy, an award-winning public charter school in Lake Forest, which now serves over 1,200 K through 12 students. In 2001, Bob founded St. Thomas Moore Academy in Raleigh, a classical college preparatory high school. The Academy is one of the 50 best Catholic high schools in the country. In 2007, Bob opened Thales Academy in Raleigh, the first in a network of private community schools offering high-quality K through 8 education at low-cost tuition. In 2006, Bob won the Mises Institute's first ever Mises Entrepreneurship Award. For three decades of leadership at Captive Air, an exemplary, quote, dedication to learning, prosperity, and freedom. Along with the late Dr. William Peterson, Mr. Luddy endowed the Peterson-Luddy Chair in Austrian Economics at the Mises Institute, which I was very proud to hold for three years, where he is a member of the board of directors. The topic of Mr. Luddy's talk this afternoon is Henry Hazlett's Long-Term Economic Thinking, Foundations of Entrepreneurial Excellence. I introduce. Thank you, Joe Salineo, for that introduction. And thank you to Hunter Lewis for sponsoring this talk. In 1946, a book named Economics in One Lesson was written by a man who did not think it would have a great impact beyond the economic fallacies of the time. That amazing man was Henry Hazlett. And Henry Hazlett greatly underrated himself when he wrote that book. Now over a million copies sold, still in print today. And we use that book as the introduction to Austrian economics. And when many people read it, they're almost in a state of shock because they've never heard of free market economics in their lifetime. It is a real personal honor to lecture about Henry Hazlett. He's one of my favorite writers on economics, political economy, and ethics, all very important to our society. Economics in One Lesson is based on, or partially based, on Bostiot's what is seen and was not seen. And many of the fallacies that we run into today are what is not seen, especially in our governmental action. But he debunks many of the prominent economic fallacies of the past and the present, summing up economics as long term versus ephemeral thinking. Now it's interesting that so many fallacies existed during his time, we haven't even more today. So the fallacies seem to grow faster than really good economic thinking. Hazlett wrote 20 books that were thoughtful, incisive, and influential. And he played a significant role in supporting, introducing, and explaining the ideas of Mises and later on Hayek. He's a stellar example of the impact that one person can have on our society. And I think if there's a take home today, each one of us can be a bright light in the world that sometimes and very often chaotic, as Bill Peterson would say. My mentor, Dr. Bill Peterson, was both a student and colleague of Mises. And he and his wife, Mary knew Hazlett very well. So though I never met Henry Hazlett, I did hear much about him from the Peterson family. I also wanted to acknowledge Laura Bennett Peterson, the daughter of Bill and Mary Peterson, who assisted me in this lecture. Laura essentially grew up part of her life with Henry Hazlett, so she knew him very well. Dr. Peterson was very complimentary of Hazlett's writing, his personal courage, especially when he opposed Bretton Woods, because he was sure it would be inflationary. At that time, he worked for the New York Times. And of course, the New York Times had no interest in criticizing this Bretton Woods agreement. So unfortunately, Henry Hazlett had to look for another job, which was predictable in Peterson's opinion. The time would come. Dr. Halsman indicates that Mises, in the last night of liberalism, that Hazlett became one of Mises' first American friends. In 1940, Hazlett received a call from Mises speaking as he described the encounter as if John Stuart Mills was speaking. This was the beginning of a long-term friendship between Hazlett and Mises. By explaining economic theory, Hazlett enables many entrepreneurs to think clearly and correctly. And that's a real critical factor for future entrepreneurs. And one of the things I love about economists is they give us the good theory. And we, as entrepreneurs, have to figure out how to put it into practice. They're both hard, but we have to work together to get those outcomes. Now, we know that most of the world, most of the time, promotes existing ideas and punishes critical thinking and new ideas. This was true in Germany in the early part of the 20th century. It's true in America today. It's true in our society today. Mises was treated quite miserably most of his life because of the way he thought. His thoughts were profound. And very often, thinkers are scorned in their lifetime. This is something that independent thinkers have to learn to deal with and not be too concerned about. It's predictable. Today, we witness in our universities which were created for the purpose of learning and thinking. They actually suppress original ideas, suppress thinking. That's going to have to change. So this talk is going to focus on three of Haslitz's central themes and concerns. His book, The Foundation of Morality, establishes a very high standard of morality. Current events demonstrate a lack of morality in our society. Every single day, we read these reports of people who thought short term and are now paying the price for it. His second is thinking as a science. I've got copies of these books here for any individuals that are not familiar with those books. So he took thinking to an entirely new level. Today, everybody is thinking outside the box. Have you heard that? But the reality is most of them aren't thinking at all. In his book, Economics in One Lesson, he introduces classic liberal thinking, which is foreign to most Americans. In our schools, we teach the classic curriculum. And when we first started, we named it traditional curriculum because nobody knew what classical curriculum was. Jeff Dice knows what it is. It's so foreign now. It's been pushed out because it didn't help us make money next week, next month, next year, so we don't need it. We pushed it out of our schooling system. But the classic curriculum and classic liberal thinking is the only way that we grow our society in a proper way. And that's one of the reasons that we have so many problems and challenges in our society is we have abandoned classic liberal thinking for ephemeral thinking. Hasla wisely points out, along with Mises, that economics is a description, explanation, analysis of determinants, consequences, and implications of human action and human choice. We don't hear much about human action in conventional economics. The core, the basis of Austrian economics is not taught in our university systems for the most part. Thankfully, we have the Mises Institute. Hasla's economic thinking is writings, are grounded in human behavior, totally. The recent gyrations of the stock market based on fears of tariffs and high interest rates, today it's low interest rates, illustrates how many markets react in time in real time to current events. So back in October, when the market was reacting to tariffs, many economists and many financial journalists were saying, oh, well, the tariffs will only affect our economy by two-tenths of 1%, three-tenths of 1%, what nonsense? Today I heard on this morning, and a financial journalist was criticizing the Fed because it can't predict long-term or short-term interest rates. Can you imagine? We know you Austrians don't make predictions, but this financial journalist expects the Fed, who can't predict anything, to make very precise predictions of what the short-term interest rates and long-term should be six months from now, 12 months from now, 18 months from now. How ludicrous is this? Hasla was a giant in financial journalism as noted by Jim Grant in his Hasla lecture in 2014. He was also a public intellectual with unique insights into morality, thinking, and the political economy. We'll begin with Hasla's understanding of morality as embedded in long-term thinking. So, morality is long-term. So if it's moral, it's very likely to hold up for the long-term. Conversely, if it holds up long-term, it's very likely moral. I was never taught that in school, and I went through the classic curriculum. And one of the things that we've observed in this process of education is many of the most important things that we need to learn in life, we don't learn in school. So I think that we're gonna have to rethink education so our future students learn the most important things along with all the other things they need to learn. But too many of these are completely skipped. Hasla was so good at this. This is so powerful. Moral thinking is long-term thinking. It's the basis of good economics. It's the basis of successful entrepreneurs. We don't hear that in the marketplace. As a matter of fact, very often and too often, we hear about the importance of immediate success. Get some cash in fast, have a big success, sell it, retire on the beach, or be a serial entrepreneur, whatever the heck that's supposed to mean. And when that's drilled into our youth, they get the total wrong impression. It takes a very, very long time to build a company, an institution, to be a good writer. To be anything, it takes a long time, much longer than one would anticipate. So let's talk about Hasla's moralities, essentially, not the subordination of the individual to society, but the subordination of the immediate objectives to the long-term objectives. He realized that long-term interests of the individual serve the long-term interests of our society, and the long-term interests of the individual depends on cooperation within our society. We don't hear a lot about cooperation in the political area anymore, do we? Do we ever hear anything about cooperation in politics? We hear about chaos and fighting and nonsense. So the solutions come from the private sector. Hasla knew that, Mises knew it, Peterson knew it. So it's incumbent upon every single one of us to be part of the solution, and it's not gonna be political. Any casual observer would figure that out. So the long-term interests of the individual depends on cooperation. Social cooperation is the foremost means by which the majority of us attain most of our ends from the foundation of morality. That's a quote directly from Hasla. At my company, we stress cooperation on a continuous basis, and we also make it clear the cooperation does not mean that we agree. So we can disagree about everything, but we have common goals, things that we're working toward, and cooperation allows us to reach those goals, and it's good when we disagree. That's part of the process of how we grow as a society and as individuals, but it requires cooperation, requires humility, and humility is too often lacking within companies, within societies, and within individuals. So humility is kind of a baseline for cooperation, and when there's no humility by the very nature, there cannot be cooperation. So even in a relatively small company like Captivere, 1,300 employees, every week I stress cooperation, and if we fail, I bring it up, we didn't cooperate, and we are going to cooperate to reach mutual goals. So these themes are difficult, and that's one thing I wanted to really drive home. The economic theory that you bring forward is sound, it's beautiful, but it's hard to work in the marketplace. So we as entrepreneurs, you as economists and teachers have to continue to stress the importance of each one of these values. Today we witness a parade of lobbyists seeking governmental favors, from the auto industry to the US steel industry to name a few. I might add our universities who get a good portion of their money from the government. I have an article in the American Spectator today that says, well, if the universities want the government to fund all these students, then the universities ought to guarantee those loans, and they ought to pay for the losses. We'll see, that won't go over too well. As a matter of fact, one college president told me, please don't send that article out. He said, we'd be out of business in one semester, next semester we'd be gone. That shows you what Peterson or Haslett would tell you, don't be tethered to the government. There's no long-term there. It's all short-term. Now think about this, as our automakers and our steel makers want tariffs to protect them. We have a German manufacturer, BMW, in South Carolina. And BMW exports 75% of every SUV they make in South Carolina export around the world. Is there a better, can you think of a better model for America? It's a beautiful model, whereas our old-line companies can't even sell internally without some kind of protection with tariffs. Haslett reminds us that dying industries absorb labor and capital that can be released to growing industries. So it's not a tragedy when companies go out of business because they've been rejected by the market. And the market can use those resources more effectively. Haslett believed that bailouts and tariffs were short-term solutions. I'd like to make the case, they don't even work in the short-term. So how long have we had steel tariffs, about a year? None of the steel companies are better off. And in matter of fact, in the long-term, they're gonna be way worse off. So if you think about it, if my company was protected by tariffs and we could raise our price 25%, it would undermine the whole competitive nature of the company. So it would be good for a year maybe, but in the long-term, we'd be destroyed because every person involved with the company would want more money. Nobody would wanna work quite as hard as they did in the past. So tariffs undermine the competitive nature of our companies and our country. The conduct we call moral, this is a quote from Haslett, should be considered to lead toward the most satisfactory situation in the long-term. Notice he keeps coming back. Morality is long-term thinking, and it's the only way you get anywhere. Immoral actions nearly are always short-sighted, ephemeral. Some of these principles are completely lost on our society today, where we think ultra short-term instead of long-term. The challenge for entrepreneurs, we must focus on the long-term in spite of tremendous pressures to think short-term. Markets are very, very competitive, and that pressure is always to do the wrong thing, to do the short-term thing, to win today and not worry about tomorrow. But short-term decisions can be very costly in the long run. It's imperative that we teach our students and our society and our companies how important this long-run moral thinking is. Haslett spent his life trying to teach us that. In the long run, the steel industry will be worse off, anybody impacted or protected by tariffs will be worse off. In many cases, the current steel tariffs are undermining and destroying small businesses within the United States, that will never be around again and they'll never recover because they're paying a higher input cost than the people down the street in Mexico and Canada and Asia and Europe are paying. And that undermines those companies. Today we witness a parade of successful entrepreneurs of all walks of life that fall from grace because of lack of morality. These individuals have brilliant ideas, but they lost sight and failed to learn the lessons that Haslett taught us. Think long-term, think moral, and there will be a long-term. High integrity is required for the sustainability of any enterprise over the long-term. I'll repeat that, high integrity is required for sustainability, there's no substitution, cannot be abridged. Our society promotes loud and unethical leaders such as Elizabeth Holmes. How long did she stay up there? How much money did she take in? All based on essentially being a fraudster. The real entrepreneurs don't make a lot of noise. They're in their shops and their offices producing, but they're not making noise. I'll give you a great example, I think of Steve Jobs. He never promised anything, but he delivered big and it took him a long time to do that. That is a correct model. Don't promise deliver because the market only rewards delivery. And these unethical practices impact companies as well as individuals and customers. Think of Volkswagen. We'll never quite think of Volkswagen the same again over this software snafu that never should have happened. Think of Lehman Brothers, Tesla and now Boeing. I will guarantee you, and it's interesting to listen to modern day financial reporters. They'll make statements such as, oh, this is a software glitch. Only a few hundred people got killed. It'll be fixed in a couple of months. Nobody will ever think about it again. The powerful Boeing company will roll on. Read the news every day. There's two stories, two headline stories of Wall Street Journal today about Boeing. They even have a criminal investigation underway. So these short-term decisions have an enormous impact on companies, on individuals, on customers, on investors. And we have to change that mentality within our society. The market requires moral leaders and the market cannot function without integrity. Does anybody go to eat anywhere where you might get sick? Even on the suspicion that you might get sick. We don't do a dewey, Dr. Halsman. We implicitly trust those that we do business with. And when they prove to us that they cannot be trusted, what happens? We abandon them. One of the things that Peterson has that's stressed is markets work in real time. Governments work in slow time. Jim Grant pointed that out in the Recession Depression of 1929. The market correction was quick. And so therefore, most people never heard of the Recession of 1921. It's a beautiful story. Why don't we teach it in our universities? Because there was no government action, that's why. He points out that in order to have the freedom to succeed, we have to have the freedom to fail. Hazlett's comments on capitalism are instructive. Modern capitalism is not inevitable or inescapable, but it's a system we as Americans chose for our country. It's a system of freedom. Capitalism is freedom. America is about freedom. Think of this. 300 million Americans produced 24% of the world's GDP. In spite of our war, in spite of the problems that we have, we produced almost a quarter of the GDP in the world with 300 million people. Wouldn't that be an indication that our free market system, that capitalism is good for most people most of the time? It's clear and compelling and overwhelming evidence. Too many countries undermine freedom and the results are clear. The EU has slow growth and high unemployment. And they have the highest amount of regulation. They have the highest amount of taxes. Everything is regulated to the hilt and nothing works very well. Your prospects of a young person are not good. Your prospects as an economy are not good. So much so that the Brits decided exit, we're out, leave. Now that hasn't completely played out yet, but it shows the timidity of the politicians versus the people. The people clearly stated leave. Politicians just can't quite do it two years later, almost two years later. So most of the time, common sense is in the marketplace people understand. We need our leaders to understand reality, free markets. In Venezuela, freedom is denied to the point of starvation. People are starving in the streets. They're leaving Venezuela. That's the end game. There's always this concern that the free market creates inequities and failures. Inequities are the nature of life. We all look different. We act different. We're different sizes. We come from different backgrounds. It's the nature of the marketplace. Anyone tries to fix that is basically trying to be superior to God. He created this world. Hazlet points out that a free market system tends to give every social group and every individual within a group the value of what they've contributed to production. I like my friend, Walter Williams' comment. He says, in order to buy something, you have to produce something. This is a new concept to our use. First you produce and then you buy, okay? Socialists refuse to understand free markets. They fail to see that production is based on incentives, not coercion. Some of our politicians live off the fat of the land, but they hate producers. They hate freedom and they hate success. If they hate the producers and they hate success, then I suggest they don't use the products that these individuals produce. It's almost the ultimate irony of our time that non-producers can criticize the producers and get away with it. It would be entertaining to what Hazlet would write about the lunacy of the Green New Deal and massive government debt. Successful businesses have a strong record of morality and must have a long-term view to be competitive and to survive in the marketplace. The CEO of Boeing would probably affirm this statement at least today. Unfortunately, Boeing's marketing group convinced the FAA that the 737, the new 737 MAX, was the same as the 737. So to some degree it appears like they may have deceived the FAA in the way these systems work, but far worse, some of the pilots and some of those pilots aren't with us anymore are actually dead because they didn't understand these systems. That to me is immoral and it's deceptive and hasn't fully come out into the market yet. And even more interesting, one of the alarm systems that are on primarily most of the U.S. planes but not on those two planes that went down are just a software change or an option that you can buy but it's a software change to turn them on. They weren't on those two planes. Why weren't they on those planes? Because probably the American airline industry is more sophisticated and they realized how important it was and maybe someone else looked at it and it was an option so they assumed it was less important. In our business, we always say, if the customer must have it, it's not an option. It's integrated within the system. It's a basic engineering management philosophy. So what happened to Boeing here? Boeing focused so much energy on trying to beat the competition that had a lead on them that they forgot about morality. They forgot about the long-term. They forgot about their customers and they forgot about their passengers. No one will ever think about Boeing the same way. People will begin to check. I'm on a flight tomorrow. Who made that airplane? And that mentality will not go away probably in our lifetime. So the consequences of short-term, bad thinking, immoral thinking are enormous. And as Peterson has that would point out, they're in real time. The government might take years and years and years to investigate. The market has done its investigation. Today in Indonesia announced that they were gonna cancel 50 planes of the 737 MAX. Clear, again, the market reacts in real time and the market can be devastating. So the lesson learned as a CEO, as an entrepreneur, as a leader, you better think long-term and you better think about everything in your organization. And when you take your eye off the ball on anything, it's gonna be a problem. One of the things that we try to do is make sure that we have the emphasis in the right places because there's always pressures from sales and marketing and even customers to do something that's ephemeral, that pressures there every single day. The engineering and the managers have to have the authority to do the right thing every single day. Regardless of market pressures and near-term considerations, industries must be responsible 100% of the time, 100% responsible, no exceptions. If you look to modern day, most of the most successful companies are gonna be integrators. And those integrators are going to be responsible for that product from inception through its lifetime. Many of our products now are designed to last 20 and 25 years. We have to be fully responsible for that product for the next 25 years. Regardless of how the customer handles it, regardless of what they know about it, we have to be responsible. So we have to anticipate how would the customer use it, how would they misuse it? That's all integrated to modern manufacturing and product design. Has firms in this book thinking as a science that most people are not thinkers. I love his observation. If there's a problem and they need a solution, they wanna look it up. In today's world, we'll just Google it. Well, most of the problems facing entrepreneurs and economists are not in Google. They have to be thought about. They have to be designed. One of the things that's true about legitimate entrepreneurs, they can aspirationally have goals and things they want to achieve. But we don't pretend that we know how to achieve them. We work on them for very long periods of time before they come to fruition. So we are essentially very often working in the unknown. And that's what we need to prepare students for. So we have many institutions suppressing thinking, demanding compliance, politically correct, non-thinking, popular culture. All this undermines entrepreneurial America. Entrepreneurial America is where our prosperity comes from. I like to tell our students and our interns and our employees how you think will determine your future. As we know, too many of them aren't thinking. Someone else is determining their future, essentially. So good thinking and cooperation are cornerstones and are critical to progress in life. Hazel was a great thinker by analyzing the long-term consequences of economic policy such as tariffs, monetary, and fiscal policy. He knew that major thinking would have major consequences for good or for evil. In his book, The Failure of the New Economics, he masterfully refutes Lord Cain's theories, essentially calling them poor thinking, bad thinking. Two great thinkers of the 20th century were the Wright brothers. The Wright brothers were successful in flight for one primary reason. They knew that once the plane got into the air, it had to fly with the help of the pilot. Our friend, financed by the government, Samuel Langley, tried to vault, pole vault the plane into the air, assuming it would fly. And the Wright brothers said it won't fly, it'll just go down. That's exactly what happened. So the Wright brothers, on their own nickel, with their own inventiveness and their own scientific discovery, invented flying with no government money. And with a lot of government money, Samuel Langley couldn't even understand the basis of flight. Although they did name a base after him, I don't know why. So thinking skills are the greatest skill of the entrepreneur. You can know all kinds of things. I mean, you can go to school and get PhDs and know all types of things. It won't make you an entrepreneur, it won't make you a great economist. But thinking skills might, if you think long and hard enough, this would certainly be affirmed by Peterson, Hazlett, and Mises. The greatest resource, as described by Julian Simon, a great economist, is the human mind. And do we focus on the human mind? No, we focus on the human mind, only to the extent that it can memorize and recite information. Thinkers in business applied new principles called exit and disruption. Think of technology as Balas, Sarin, Vassan in genomics and mobile money, Uber, Airbnb, self-driving cars. So exit is gonna take so many existing industries and just, they're gonna be gone. They're not gonna exist as we know them today. These are radical thinkers, but they're good thinkers and they're thinking very, very long term. Harvard Business Professor Clayton Christensen is one of the best thinkers on disruption. And essentially, disruption is a change in the way we approach an existing industry. He describes it so well and he uses Nucor Steel as one example. So you have an upstart company, nobody worries about them. Nucor begins to produce steel. Bethlehem thinks they're a joke. US Steel thinks they're a joke. They're perfectly happy to seed portions of the market to them, pretty soon Nucor keeps coming up. Now, who would have thought in 1960 that Ken Iverson sitting in a small office in Charlotte would create the largest steel company in the United States of America today? Larger than US Steel. I had the great pleasure to meet Ken Iverson in the mid-90s and I had a chance to actually interview him and I realized when I talked to him, this guy is the real deal. He's a deep thinker, he's got it figured out and the work that Ken Iverson did essentially changed the world of steel in the United States. It's a great story. So you're gonna see industry after industry, mundane industries disrupted by new approaches, new technologies. I'll give you example of some of the things that we do. As an entrepreneur, we only have one primary duty, serve our users over the long term. Our total focus is to tell our user, we are with you when you buy our product, we're with you for the next 25 years. Any problem you have, we will fix. If we make mistakes, we will pay for them at our cost. So I encourage our people to be long-term thinkers and if we make a mistake, we admit it immediately, we fix it on our dime, not on the customers. In 2018, when the tariffs came in, it's kind of interesting to see how these play out. The first thing I said is, we're not changing any suppliers because the government decided to put on tariffs. And we're not gonna charge our customers for the tariffs because they're gonna be ephemeral and or we're gonna figure out another solution to the problem. That's garnered us an enormous amount of business and also customers know they can count on us and rely on us for the very long term. Now I'll give you the reaction of some steel companies. Our purchasing department tested a few steel companies and said, how much would we have to pay for steel? Were we to consider using your mill? And several made this comment, well, you're not a regular customer. We basically have no use of you. But if you wanna buy from us, you will pay higher than the tariff price. We will teach you a lesson that you should have been buying from us at the beginning, literally. So they mark prices higher than the foreign product that included tariffs. Well, you know how long that lasted? About two weeks. There were no buyers. There are no fools in the market or very few fools in the marketplace. So think about short-term, long-term, steel companies do this all the time. We witness these short-term claims and ideas in the market every single day. Think of some short-term, fallacious ideas. Socialism is now being sold hard as a solution to our problem that doesn't exist. Okay, but we're all gonna go to socialism over a problem that literally does not exist. The new green deal to save the planet? Planet seems to be doing fine to me. But they're gonna save it. Have you heard this comment? Debt and deficits don't matter because interest rates are low. Does anybody ask the question? Hasn't the first question would be, what happens to debt when interest rates are high? I haven't heard that question asked. Can you imagine intelligent university graduate in finance or economics making the statement that debt does not matter and deficits do not matter? I hear it over and over and over again because of low interest rates, Dr. Holtzman. God forbid that we would ever have high interest rates. Free trade is now portrayed as the enemy of prosperity. Think of this. In fact, free trade has made us all rich, has made us prosperous, has made a great society. Hayek in the road to surfroom described those who would buy these fallacies as the gullible. We have a lot of gullible within our society. And the reason is we failed to educate them. We should take that responsibility on ourselves. We have simply failed to educate our society to where they should be. Good decisions involve good, great, long-term thinking. And thinking does not come easy. In some cases, we work on problems that take years and years to resolve. Hazards sets a clear long-term path for entrepreneurs. Think long-term. Entrepreneurs have to make hard decisions at the right time based on the known facts, which too are often sparse in the entrepreneurial world. So we have to make decisions based on hunches, on guesses, on experience, on a general idea of where we think the market's gonna go. In 1978, when we began to make kitchen ventilation hoods, the technology to bend metal was pretty bad in the United States. So we had this vision of things that we could do, but the supporting equipment was not there. Now, here's a good example of international trade. A salesman walked in our office in 1983 and he said, I represent a company in Holland called Darley. And we have a machine that we've just developed called Computerized Hydraulics. So we can bend metal based on computer science and hydraulics and we can bend any angle you want and we can bend the length you want with the tonnage you need. And he gave me this about five minutes spiel. He was gonna give me a two-hour presentation. After five minutes, I said, well, bye, get it in here. He said, I haven't finished my presentation. I said, I've been looking for this machine. You don't need to finish your presentation. And salesmen sometimes have a problem with that. They want you to hear the whole presentation. That machine immediately gave us four Xs of production based on what we had on current production. If you fast forward today, those machines today are automated, unthinkable technology, almost all come from Europe. And a production I estimated at roughly eight X, what we could produce with 1982 machinery. Eight X, this gave us enormous competitive advantage. Fast forward to 1988. In the food service industry, they use a metal called 304 stainless steel. It's got international alloys in it. Nickel and chrome and nickel and chrome are subject to commodity spiking. So prices can change rather dramatically. And I decided that we were gonna figure out a way to get unhitched from that wagon. So we wouldn't be as impacted internationally. So we looked around and we found there was a metal called 430 stainless that used a smaller amount of chrome and nickel. It was about 20% cheaper, formed well. And so I reviewed it with the chemical engineers and said if we were starting production of kitchen ventilation today, this was the first day of the industry, would this be suitable? And they said it's perfectly suitable. It was approved by UL and the testing agencies. So we made the switch. That saved 20% of our cost over the long term. And right at the same time, products coming out of the 70s in the US since there wasn't heavy international competition tended to be overbuilt, over specified. So 16 gauge metal stainless steel was common in kitchen hoods. We decided to go from 16, 18 to 18 and 20. That's a 20% savings in tonnage. And we did this concurrently in the spring of 1988. Overnight within about a three month period we had a 40% drop in raw material cost. Now the market doesn't like these things as our salespeople have told me many, many times, Bob, you fail to understand our industry. And I said, you know what? I think I do understand the industry. I don't like it. And I'm gonna change it. And we're gonna be the industry. So these changes don't come down very easily. Now what was beautiful about this outcome, 15 years later, our major competitor decided to capitulate and follow the Captivator standard. 15 years later, we were the dominant company in the producers of kitchen ventilation systems in North America. 20 years later, in 2008, the kitchen, the whole kitchen equipment industry made that change. So 20 years later, they figured out it was the right decision. Now how did we make that decision based on good science, based on long-term thinking? And we were told over and over and over again, this product was gonna fail. But we knew it was not gonna fail because we did our research. So today the standard of the food service industry is 430 metal. There was only one producer in 1988 domestically. There was a second producer in Mexico and there was an abundance of producers in Europe. So today it's a standard in many products made around the country. Now to make decisions is risky. So I was essentially risking our reputation as a company long-term as engineers. But we're willing to take that risk because we want it to be a large company and we wanted to have the best long-term answer. So every single change within business and industry is very, very challenging. None of it comes easy. All of it is resisted. In 1925, Andrew Mellon, Treasury Secretary and President Coolidge, they wanted to come up with a tax rate that they perceived to be scientifically correct. And such a thing as a scientific tax rate. But they came up with 25% and they got the marginal tax rate change to 25%. We know what happened. The roaring 20s economy did amazing. Until 1929, we had the stock market crash. So what did Hoover do? He raised the tax rate to 63%. And if that wasn't enough for the economy, they did smooth holly and raised the tariffs on an average of 40% essentially ended free trade for all intent and purposes. We know the results. Haslott points out that when the tax burden grows beyond the bearable size, the problem of devising taxes that will not discourage or disrupt production is virtually insolvable. He cautioned the tariffs do not raise a standard of living. They have the opposite effect. We're witnessing that today. The current concern today on CNBC is a world slowdown, slowing down in the EU. FedEx has said there's a slowdown. Tariffs are a big part of this whole thing. When you destroy cooperation with tariffs, you destroy GDP, you destroy economies. FedEx made that very clear on the call earlier this week. On free trade, Haslott quotes Adam Smith, in every country, it is always and must be the interest of the great body of people to buy whatever they want of those who sell the cheapest. So what is free trade? We trade with the best sellers at the best price. Think about interstate trade. Our founders were so wise, so they created the largest interstate trade system in the history of the free world. So we have 50 states, no tariffs. Does anybody in Alabama know what the balance of trade is between Alabama and North Carolina? We don't tabulate it, do we? Because it's not part of our thinking. Now wouldn't you think if the 50 states were the greatest free trade zone that we wouldn't need a NAFTA agreement or we wouldn't need an updated NAFTA agreement, we'd have no agreement? It would be unilateral free trade. That's where we have to get to. In spite of this compelling evidence, many Americans believe that tariffs are helping us, even though tariffs are direct taxes on what they buy, somehow they think tariffs are good. Tariffs under, steel tariffs under George Bush caused a loss of 200,000 jobs in industries that use steel. Clear and compelling. Hazardous long-term approach is imperative for America. We need to eliminate deficits by reducing spending. We need to educate our children. We need to focus on integrity in the marketplace, not special interests and special deals. These would greatly benefit our economy. Anytime we can reduce deficits and government spending, we're gonna have more private investment. For those of you who are not for sure our K-12 system, we're not getting what we're paying for. We're not getting anything for that matter, for the most part. So in 2007, I opened a private not-for-profit Thales Academy's K-12 and was based on hazeless thinking. Morality, long-term thinking, excellent outcomes. Our K-5 runs 5,000 a year and our philosophy is to produce the highest possible academic outcome, character formation of the student at the lowest possible price. Did you ever hear anybody in education talking about delivering anything at the lowest possible price? It's not in their repertoire. So today, over 10 years later, we never raised the price of education. Now what entrepreneurs do is figure out how to make that a reality. That's still a work in process, but we're making it happen. The idea was to create, we currently have 5,000 students in the Lutty Schools. The idea is to create 25,000 students. So we have a large enough model where people say there is a different way. You can deliver quality at a lower cost. What is entrepreneurism? Deflation, which scares the heck out of most economists, not you guys, but it scares the devil out of the conventional economists. Deflation is a good thing. When you can buy a computer today, when you can buy a phone that's more powerful than the computer in 1960 for 1,000 bucks, that's deflation. That's imperative for our economy. Our central concern forever is serving the customer, serving the user. We make every single decision off that marker. And so we don't have to decide who's fair. In many cases, we go fix problems on job sites that are not our problems that we didn't create. But somehow in some combination, there wasn't a good outcome for the customer. We just go fix it. Do you know what that does for our reputation? It just keep pushes up, up, up and up. And the cost if you tabulated over years is relatively low. Entrepreneurism is risky and it requires good thought, good background, and a good long-term strategy. Entrepreneurs aggressively seek new technologies and new ways of doing things. Entrepreneurs are critical to our society and they're supported by you great economists and the theories that you bring to us. Lastly, I challenge each one of you to take up the mantle of Haslet to be a courageous writer, debater, teacher of morality and long-term thinking. We could use an army of Henry Haslets today, men in William with courage, wisdom, who are unafraid to speak and write the truth. I conclude with these words of Henry Haslet. The times call for courage. The times call for hard work. But if demands are high, it's because the stakes are even higher. There's nothing less than the future of liberty, which means the future of civilization. Thank you very much. Thank you. We have some time for questions. Thank you. You spoke about short-term versus long-term thinking, maybe high-time preference versus low-time preference. Also, reputation and trust. If trust is a crude capital of, excuse me, if reputation is a crude capital of trust, how does government regulation, fiat currency, central banking change or shift incentives either through the carrot or the stick to reduce time preferences from long-term thinking to short-term thinking? And what are the cultural consequences of that? Well, I'll give you an example in the HVAC industry, Heating Ventilation Air Conditioning. It completely undermines the industry. And I'll take it further into the building construction industry. The game today is, in order to build a building, you have to get a permit. In order to occupy that building, you have to get a CO certificate of occupancy. So the whole entire industry focuses on one thing. How do we get the building permit? How do we make the government happy? And that undermines all the other good thinking that should go into that building. Not to say that some amount of requirements aren't important, they are important. But the fact of the matter is that the government is typically 10 to 20 years behind the times in technology. They tend to focus on the wrong things. So in my mind, it totally undermines the industry. If you look at the current HVAC industry, a rooftop package that goes on your roof is heavily regulated by the government. And the government's trying to save energy, but they don't really know how to save energy because they don't even know how these products actually operate. So the game is to make a product that the government approves and the building inspector approves and then don't change it because you've already got it locked in and then just sell as many as you can. So the technology to improve is very difficult. Now I'll give you an example of what's happening. If you look at this exit concept, the government does all testing at a point. So they'll say XCFM operations at X static pressure and they have a point and that's where the testing point is. In fact, most of the time, these units aren't running at that point. So the actual efficiency at that point is almost irrelevant. New technologies will essentially exit or bypass government thinking. So think about this. The new concept is DOE as direct outside air units. They're controlled by microprocessors. We make this product. There's a number of companies in this business. They modulate. The government doesn't know how to regulate modulating HVAC units. So it essentially bypasses government, at least for now. If you look at the big three in the United States, Carrier, Lennox and Train, none of them make that product. They should have been the first people on the market with that product. But they probably feel like they don't need to make the product because they can sell their boxes. Their government approved is gonna stamp them and move them into the market. So you see companies like Diken from Japan, Captivere, not even in the HVAC business and others making this product. And it's gonna have a long-term profound impact on the market, but only because it was able to bypass government regulation. So in the future, you're going to see technologies that bypass current regulation. Maybe ultimately they're regulated. Same process begins again. So to me, regulation totally undermines progress. As a matter of fact, the FAA let Boeing self-regulate on aspects of that matched jet. So if you think you're getting an FAA approved and they let Boeing self-regulate, exactly why is the FAA involved in this process? Our international countries have figured that out. Okay, so they've lost confidence in the FAA over that issue. Another question. All right, following up on that too, that all right, it's, you know, when I teach I always try to think of being on the other side, you know, or I'm giving, making a point. And the interventionist would say, we'll see, you've talked about these, these unregulated technologies and they work fine. Well, government didn't regulate Boeing enough and now they've had a couple of air crashes. So don't, this and the answer, more regulation. And how, okay, how do you come back to that? The answer is, and this would be from Peterson and Mises, that company is 100% responsible. And if they make wrong decisions, they're gonna pay a high price for it. Boeing is gonna pay the high price because of the decisions they made, whether the FAA knew about them or proved or didn't approve them. So ultimately, it should be up to the companies to make that decision. And then a rational buyer would say, well, this is a Boeing approved, do I want a Boeing approved product? At Captivere, one of the things we did, and we went around the country, explained this to code officials. Here's what the code requires for commercial cooking. Here's what Captivere requires. Peterson made this comment that companies can become governments and in fact, are governments. So we tell our customers what the requirements are to put in a Captivere system. Some of them don't like it because our requirements are stringent. But the good news is the customers figure this out over time and the companies that self-regulate correctly will be the most successful companies. Mostly the federal regulation undermines appliance makers, everything they touch, they undermine that product, both in cost, innovation, and long-term quality. Yes, sir. All right, I have a question about Thales Academy. If you have any plans to expand outside of North Carolina and if so, what states to which you would extend and what sort of regulatory barriers you might be facing if you were to try to go to another state? We do. One of my current goals is try to get enough people enlisted to say there should be 1,000 new private schools in say the Southeast, maybe five to 10 states. Because if we could build a largest enough model with a coalition of individuals and companies, we could break the back of the public school system because it would become the new entitlement. Why don't I get a chance to go to a really good school? So yes, we do tend to expand and the only way that you can change industries is new models, exit, disruption. So we're a disruptor and we plan on expanding throughout the Southeast. One of the things that I've done in my career is we move forward and then we hold that baseline to make sure we have a solid baseline and then we move forward again. If you don't take those little pauses, you tend to get stretched thin and more things go wrong. So we've built a really solid baseline. We're building a lot of leadership and we're getting coalition partners but it's a massive undertaking to think you would build 1,000 schools. But that's what's needed and I think it's gonna happen. Thank you very much. It was a pleasure being with you today.