Kennon-Green & Co. Global Asset Management and Value Investing

Discover Your Economic Worldview with a Single Question

Much of a person’s economic worldview can be understood by answering a simple question:

Do you believe that all men, regardless of actions, behavior or character, are entitled to housing, three meals a day, health care, and retirement security?

You need to answer that question for yourself.  It is important to know the foundations to which your economic philosophy are moored.

As for me?  My answer is a resounding no.  I don’t.  Once a person reaches adulthood (say 18 years old):

  • I believe that if a man is able to work, and chooses not to out of laziness, he should starve to death.
  • I believe if a man is able to learn new skills so he could retrain for a career that pays well, yet he doesn’t (always listing a litany of excuses as to why it is unreasonable to expect him to do so), he should exist on poverty wages.
  • I believe that it is my own – and mine alone – responsibility to save for retirement, study investments and determine the safest and most attractive places to put my money.  If I lose money on a stock or business, it is my fault because I am the one who signed on the dotted line and was ultimately responsible for watching out for my own self interest.
  • I think it is evil to punish productivity and work.  The current regressive nature of the income tax and payroll tax systems are abominations that must be destroyed.  It is much preferable to go to a flat tax that treats everyone fairly and is capped so Congress cannot increase it beyond a certain percentage.  A rebate can be issued to individual families earning less than $35,000 per year or something comparable so it isn’t regressive, effectively transforming it into a cousin of a universal basic income.  Alternatively, we could instead forbid taxation of clothing, food and medical services.  That would achieve much of the same end.

The goal of a free society should be to remove as many obstacles as practically possible in the journey for upward mobility.  For example, I wholeheartedly believe if someone serves in a war on behalf of the nation, their entire college education should be covered and they should be able to qualify for low-rate mortgages to afford their first home.  This allows our military to attract a higher caliber recruit and benefits society in the long-run by providing a better educated work force.

Likewise, I believe that a good, comprehensive K-12 education is a fundamental human right and, even if it weren’t, it would be one of the best economic investments would could make because a better educated workforce is going to give companies higher quality employees to fill the ranks, will lead to a better political system because people will have skills necessary to understand the agenda of both parties better, and makes us more ruthless competitors in the global economy.

But a free society cannot tolerate the belief that everyone is entitled to have a house, a car, a college education and a full stomach regardless of whether or not they earned it.  These things should only belong to those who are willing to work and attain them for myself.  As my dad said a few days ago:

No one has a right to a house or a right to eat.  We have a right to try and attain those things through our own, honest effort by providing goods and services to other people.

After all, the Declaration of Independence does not guarantee happiness.  It guarantees the pursuit of happiness.

The Real Reason I Oppose Such an Economic Worldview

The reason I so vehemently reject the question is the only way we can provide all of the things in the question (housing, etc.) for those who don’t earn it on their own is to take it from more productive members of society.

An engineer shouldn’t be punished for earning more money given the years of schooling he put in to learn his skill.  A doctor shouldn’t be penalized for his high paycheck when he sacrificed a decade of his life to learn how to operate on people’s hearts to save lives.  To take money out of their pocket to give to a 43-year-old guy living in a run down town who has been unemployed for two years and complains about the “lack of jobs” strikes me as deplorable bordering on evil.  It is a perversion of the human incentive system.

I believe that a man should be able to succeed, or fail, on his own.  If I woke up tomorrow and did something stupid, like putting all of my net worth in risky derivatives, and lost everything as a result, went bankrupt, and ended up homeless, it would not be society’s fault, it would not be my parents’ fault, it would not be your fault, and it would not be the fault of the media.  It would be my fault.  Mine and mine alone.  I bear the responsibility of it because I chose, without being prompted or compelled, to engage in a course of action that led to my own destruction.