Two years of COVID malaise, with most news from here to Timbuktu so dreary, is there anything to toast this New Year’s? Few fathom it, but yes—beyond the COVID clouds and trials and tribulations since 2019, people and firms have already sown the seeds of a brighter, more prosperous future. Look to this to avoid getting sideswiped by gloom.
Capitalism gets a bad rap, labeled by many very smart fools a dirty system rife with inequalities. In reality, it’s actually the lack of a system in purest form. It’s fertile soil for long-term growth, innovation, problem solving and the improvement of human well-being. When governments let it, the market’s invisible hand directs capital to creative people who deploy it to make things and solve problems that are better than before. Markets create a wide-open space for the profit motive—the mother of all incentives—to do its work for the future benefit of all, not just some.
Starting a business is a risk. Growing one is, too. But the incentive of potentially big profits—if the risk pans out—motivates. Most fail so incentives must be strong. That allure has long driven seemingly crazy risk takers to solve societal problems big and small. It drives businesses to face challenges head on and adapt to changing landscapes—so many examples since 2020 began.
Witness all the firms that didn’t just survive but thrived as the forced shift to remote working created new business opportunities in digital services. Amazon built its own logistics network and amassed a fleet of delivery trucks when locked-down consumers turned to it for everyday goods. “Curbside pickup” allowed retailers small and large beef up their online sales capabilities on the fly. And how about the many brewers and distillers that migrated from booze to hand sanitizer, filling an acute shortage and reaping rewards in route?
Then: COVID itself. The vaccines may have been partly seeded by governments in some cases, but the innovation was largely privately driven. COVID pills that could greatly ease pressure on hospitals came chiefly from the private sector’s work, one prominent treatment founded (and funded) by a husband-and-wife team who saw opportunity and plunged.
Over the longer term, there is no shortage of opportunities for creative people to reap big profits by tackling societal challenges. Climate, a touchstone issue globally, is an obvious example. While governments focus on reducing emissions, there is huge potential for technology to remove particulates from air and atmosphere. Carbon-free power sources that can actually produce energy at scale are another tree with big low-hanging fruit. So is water treatment, desalination, collection and delivery, particularly in the developing world. Ditto for infrastructure improvements to protect coastal communities if sea levels rise, like offshore dikes.
Cancer. Infectious disease. Chronic and autoimmune conditions. Those are just easily visible problems of today—more will arise. How might inventors and capitalists solve these problems? No clue. But know that humanity won’t just cave and utter a collective, “Well, life was fun while it lasted!” Many seemingly crazy risk takers, guided by the invisible hand, will try to tackle the problems. Most will fail. Some failures will seed future successes. And a few will change the world for the better. This force has kept technological advancement rolling—new ideas and inventions morph off old ones. The simple collision of Moore’s Law, which holds that computer power gets exponentially faster and cheaper each year, and similar laws in battery power and disk storage near-guarantee it. Combine that with continued advances in medicine and engineering, and the possibilities are near-limitless as each new development and discovery compounds mankind’s accumulated knowledge.
It’s already started. Britain contracted private manufacturers to build its first mini-modular nuclear reactors—a profit-driven solution to wind and solar power’s intermittent and somewhat unpredictable generation. In 2021, the world’s first self-piloting electric container ship completed its maiden voyage. Pharma firms are researching how mRNA technology can fight cancer.
This will mint scores of those terrible billionaires like me along the way. To some, that is so horrid. But starting a firm that is weird, different and successful is horridly hard and heart attacking until success is in hand. Those doing it often forsake steady income, make big up-front investments and work 90 hour weeks. You up for that? Why? And why shouldn’t they be rewarded? They largely can’t really spend their supposedly ill-gotten gains. Too much. The more self-made billionaires hog the Forbes 400, the more future entrepreneurs will see taking risk is worthy, humane and a social good, not bad. Preserving the system that made them wealthy preserves the profit motive and gives creative thinkers incentive to take a big risk. Super bright fools condemning capitalism be damned. They should be for humanity’s sake.
It also benefits all investors. Every start-up that mints a fortune for a founder when going public becomes a long-term investment opportunity for everyone who owns stocks. Owning stocks means owning a share in the future earnings all of this creative problem-solving will generate—in your 401(k) or after tax savings. It may not make you billions, but it is a steady path to building a sizable nest egg, thanks to the magic of compound growth. Owning stocks—shares in the “ism” that is behind so much of society’s long-term advance—and all things material you have—is the path most trodden to funding a comfortable retirement.
