Entrepreneurs and Capitalists in the Arena of the Market

I frequently diatribe against capitalism in this blog, and in the following homily I would like to offer my perspective on the difference between capitalist and entrepreneurs:

Entrepreneurs and capitalists are two fundamentally different sides of the process of creative destruction that is found in capitalism. On one side there is the ubermensch of entrepreneurship; the heroic and controversial figures who indelibly advances technology through destroying the old ways. On the opposite side are the reactionary capitalist; fearful men of wealth and old ways, who demand a guaranteed return on investment from the state, at the cost of progress for all. It is in the arena of the market the these forces of old and new meet; clashing to see who will be the victor for that day and time. The stadium they meet in is filled with the people of the market; the masses and workers of all type; who are there for the spectacle of the competition, but who also affect the outcome through whom they choose to support in this clash between old and new.

Ubermensch Entrepreneurs

Entrepreneurs are the heros of the incessant revolution that we call progress. They are the champions that take on behemoth risks, and are the ones that put their livelihood at stake in order to see progress in their field of choice. These are the men who choose to be Atlas in our time, and lift the world upon their shoulders to carry us all towards their new vision of the world–even if we do not like it. These are the people who engage in the creative destruction of capitalism, not for the sake of profits, but to create progress.

Entrepreneurs are motivated to change the old order and to recreate that which they seek to destroy in a more productive, profitable, and technologically advanced way. Entrepreneurs are the captains of the ships, the composer of the shows, and the powerful leaders who must motivate and rally the support in order to manifest their vision that shall shift the globe on its axis. They are the ones who insist that the world shall change; and they shall be the ones who demand it. They shall not be relegated to perpetuate old, anachronistic ways of doing things for the profits of another; they choose to create for themselves, or to die trying. It is from the impassioned zeal of the entrepreneur that they are able to recruit loyal followers who will commit to the struggle towards the entrepreneur’s vision of the world.

The Man in the Arena

As the single naked man steps into the arena, in front of the whole world to display his prowls of economy combat, he is insignificant; pathetic and inept looking in front of the Goliath of the state; their reigning champion of the market. Here, in the silence before the fight, the entrepreneur takes a deep breath, armed with his superior product and technology; smugly grinning to himself, for he knowns the greatness that shall come in the following clash:

“It is not the critic who counts; not the man who points out how the strong man stumbles, or where the doer of deeds could have done them better. The credit belongs to the man who is actually in the arena, whose face is marred by dust and sweat and blood; who strives valiantly; who errs, who comes short again and again, because there is no effort without error and shortcoming; but who does actually strive to do the deeds; who knows great enthusiasms, the great devotions; who spends himself in a worthy cause; who at the best knows in the end the triumph of high achievement, and who at the worst, if he fails, at least fails while daring greatly, so that his place shall never be with those cold and timid souls who neither know victory nor defeat.”

–Theodore Roosevelt, Citizenship in the Republic

Workers and the Masses of the Crowd

Torn between this world of entrepreneurs and capitalist, are the workers and the masses. It is the masses for whom the entire battle is fought for; and yet they shall never enter into the arena, and many may never even see the fight. Wholly unbeknowst to them, they are the true arbitrators of who shall be the winner, and direct the outcome through whom they cheer for. It is in this spectacle of the arena that the masses make their choice of whom they shall win: The heroic underdog entrepreneur, or the current champion of the status quo.

The entrepreneurs who chooses to enters the arena must have the crowd cheering and support them. It is from them, the crowd, from which he is able to summon the strength to become the ubermensch of that time; to raise from the crowd the will to power for progress. It is from them that the entrepreneur can find the morale to fight in the arena of the market against all odd. It is from gaining their support, loyalty, and convictions that the entrepreneur can stand to fight against the Goliath. Using his wit, cunning, superior technology, and support from the people to beat back the demon of the past, it is He that shall create the opening for a future of change.

It is here in the arena that the clash against the current champion of the markets is had. The state, the corporate oligarchs, and all of their allies support the Goliath with everything they can, and will conduct a war from the stands by other means. They will use propaganda, create arena rules that serve the incumbent champions, directly sabotage matches, and outright cheating–the state and the capitalist will do everything to ensure their champions of the market remains. With nearly insurmountable odds against the entrepreneur, he steps into the arena, fully aware of the battle that is against him is despondently unfair.

Armed with his revolutionary cause to create change, to smash the very essences of which he fights against, the entrepreneur steps into the ring with the smile of a man ready to meet death. It is from this kind of leadership, passion, and geist that he inspires others break away from their cubical prisons of meaningless dullness and drab, into a free world of harder work by ones own choosing. He inspires men to toil under his yoke for the convictions for which he plows. The men who choose to join him shall not be granted a 401K, or the safety of permanence, but they shall be given his respect, and a portion of his ship for helping him build such a vision.

Reactionary Incumbent Capitalist

Capitalist are scum that do everything in their power to halt progress every step of the way. They are the cowardly parasites that hide behind that jackets of politicians like scare children; begging for their protection, and the oppression of anyone who challenges them. Their interested extends only to their families, friends, cronies, and kickbacks; at the direct expense of everyone else. Morals, ethics, and purpose are concepts that are completely foreign to capitalist–the profit motive is the only thing that matters to them. The capitalist masquerade with phony, transparent, vulgar ideology that makes little sense, but nevertheless sever as slogans and political stances that can be passed out to the masses as candy. The capitalist, like monopolist, oligopolist, and fascist, believe themselves to be entitled to whatever they may be able to forceable extract from others under the manipulated and corrupt laws of the sovereign.

Capitalist love the law, the state, and most especially the police. For it is the state who protects the capitalist scum, who defends their every move, makes excuses for their human rights abuse, and most importantly, offers an excuse for the justification for the unholy destruction of the natural world in the name of a prophet called Profit. It is the state who protects these evil men from the knives of justice, and who allows for them to exploit countless untold souls for little more than 30 pieces of silver. The capitlist love the state more than profit, for they know that it is the state who allows for them to create the world as it is–The State is the one true god of the capitalist.

The Capitalist never sully their hands with the hard work of battle that the entrepreneur faces in the arena. They may have risen though the ranks of the arena, but once they join the upper echelons of society, there is no need for such, ‘theatrics’ as fighting in the arena. Their battle was won long ago by other means, and now they believe they are entitled to the pedestal upon which they have mounted themselves. From here there is no need to work or fight–the work is for the proles, and the fighting is for the mercenaries–no need to life a fat finger when one has the power of capital.

This is where we can see the quintessential difference between the capitalist, and the entrepreneur. The capitalist is part of the system as it is now, and they would like to see it frozen in time. The monopolies and oligopolies that the capitalist have acquired for themselves are like the false champions whom they have helped stand in the arena: bought with dirty money, and made the victor not by strength or wit, but guile, and deception. The capitalist care not how the money is made, their only interest is in creating a return for themselves. They have no interest in the progress of man, and prefer a guaranteed return on investments–even if immoral–than to take on an abnormal risk to creating something profound. One would suspect that the profit motive would be their first motivational force, however, it cannot be. Prophets–profits of the capitalist kind–can only exist within the theology of the current economic, political and legal systems. One must offer their tithing of dollar and sense to the God of the State, along with the delirious conviction that the State commands all.

Everything and everyone can be bought and sold; including the laws themselves. This is how the battle for supremacy within the market has always been fought: on unfair terms, with unfair rules, created by an unfair system.

Weltgeist and The Will to Power

“I saw the Emperor – this weltgeist – riding out of the city on reconnaissance. It is indeed a wonderful sensation to see such an individual, who, concentrated here at a single point, astride a horse, reaches out over the world and masters it . . . this extraordinary man, whom it is impossible not to admire” –Georg Hegel

There is another type of man who cannot be shoved into the role of the capitalist or the entrepreneur of the arena. It is he who is the true champion; someone who is not known by the title of what they do, but rather, it is their being, their geist which can only be represented by their name. These are men like Ford, Carnegie, Tesla, Jobs, and many more; men who through their own personal zeal and drive to build something bigger, something different which could not be contained in the small confines of the arena. These are the men whom the venture capitalist (the entrepreneur of the world of capitalism) gather behind. The VCs have cashed out of the capitalism game and see the vision of the true lords of the market and arena: the men who forge progress.

These are the men who like Spartacus could not be relegated to be anything other than themselves. Men who propelled themselves to greatness not because of their role given to them; but because of the force that resided inside of them that demands greatness. It is here that the men who have chosen to become Gods smash out of the confines of any role given to them, and passionately build their own.

This is not from their arrogance, or haughtiness of their strength; but from the true power which commands them. These are the men who are driven to create a better world for all, and have the personal ability to manifest it because they are anointed with the power of the Weltgeist. These are the men who battle valiantly in the arena, not for the spectacle of the sport or to stand over the body of another; but so they may stand in that arena and point their sword towards the royal box, silently warning them of what is to come. These are men who fight not for the thrill of battle, but for their personal drive to create change. These are men who are willing to gamble it all, throwing caution into the wind so that they may stab towards destiny.

The entrepreneur is the ubermensch of economics; he is the one that rises to the occasion and seizes the moment for himself not to make money, but to make progress. He is not a man of cool and calculated numbers, but of impassioned bold moves, striving towards the change that he demands to manifest in the world, or to fail spectacularly in his attempt. The entrepreneur is the radical that insists the old, ineffective, static version of what is now be destroyed in the name of something better. He is not doing this to become rich–any man can become rich with petty material things. He does this to become Great, to be the Ubermensch of our time.

The Creative Destruction of Bitcoin

A little more than a year ago I covered bitcoin’s creative destruction, and how bitcoin is more efficient money system on several economic levels. We also explored how the near-zero transaction cost of cryptocurrencies creates a monetary system that shall always be more efficient than fiat monetary systems. It is because of this fact that we shall see bitcoin destroy the contemporary models of finance, banking, and monetary systems; while as the same time building something new, better, and more egalitarian in its place. As the bitcoin ecosystem grows, we will see a radical shift of money, finance, and banking away from huge institutions that are embedded within the capitalist structure, to a decentralized, global framework of economic exchange divorced from the state. Schumpeter described this process of creative destruction in chapter 7 of Capitalism, Socialism, and Democracy and how capitalism incessantly transforms the economic landscape:

“In capitalist reality as distinguished from its textbook picture, it is not that kind of competition [oligopolistic competition] which counts but the competition from the new commodity, the new technology, the new source of supply, the new type of organization (the largest-scale unit of control for instance)—competition which commands a decisive cost or quality advantage and which strikes not at the margins of the profits and the outputs of the existing firms but at their foundations and their very lives.”

Smashing Monopolies with Advanced Technology

The superiority of bitcoin as a money system is something that will be proven in the long-run of decades. What bitcoin has accomplished in 5 years alone is astonishing. As a non-goverment money system, bitcoin is not subject to the same legal system, taxation, inflation, or political pressures that all fiat money systems must experience. Bitcoin explicitly lacks the charlatan features that all fiat money systems–this is a feature, not a bug.

Bitcoin exist outside the framework of sovereignty of the state. Bitcoin cannot derive any legitimacy from laws or enforcement, but only from its own merits as money. In doing this, bitcoin points out how corrupt our current economic and political system is, while creating a totally new form of money that is a radical alternative. Bitcoin points out the corrupt relationship between the state, institutions of money, and how that relationship creates oppression for all people.

Today, the oligopolist and monopolist have won. A small handful of companies control vast swaths of industry with the full cooperation of the state. Government pay huge subsidies to mega-corporations while child homelessness is at an all-time high. Governments use the money they control not to help those in need, but to make illegal wars both domestically and abroad. Politicians are paid off openly and without shame, while the banks readily kick hundred of thousands of people out of their homes and into the streets with the full support of the law. Police openly murder children and are readily acquitted and protected by the legal system.

This is a form of inverted totalitarianism monopolizes the structure of power through omitting any democratic process from the economy system. The monopoly of banking, the monopoly of the law, and the monopoly of the issuance of money have all been forcibly justified through extreme campaigns of fear-mongering around the ‘need for safety’. This has nothing to do with economics, efficiency, or safety–it is about corruption and using the state to create laws that protect incumbent industries and politicians.

Breaking these monopolies is the kind of creative destruction that bitcoin is engages in through applying a superior technology. The restructuring of economic power into a digital realm will not only dramatically redistribute wealth away from the old order, but it will also radically transform the size and breadth of the financial economy by several fold. The financial and banking systems will become much more accessible, the nearly 10 million american adults lacking a bank accounts today, and the 2.5 billion unbanked all over the world can now have a real opportunity at financial access in a way that has never been experience before. Those who build these new systems, and utilize the power of bitcoin to revolutionize the financial and banking industries, will be the champions of this new digital economy.

The Revolution of Accounting

The creative destruction of bitcoin strikes at the very root–the very object of exchange–of the capitalist economic structure: money. It is through the explicit destruction of the current payment systems, legal tenders, and the monopolization of those, that bitcoin will reinvent the entire economic. From destroying these old model of finance, banking, and exchange; the entire infrastructure around economic exchange will be recreated in a better, more effective model. A similar revolution happen around 800 years ago in the north of Italy with ‘discovery’ of double-entry accounting.

This novel approach to accounting allowed for merchants to have a much better understanding of their total assets and liabilities, as opposed to the old version of just keeping a daily diary of what they possessed. The real revolution that came from this accounting system was the way to measure, value, and utilize various assets and liabilities in new ways–equity was birthed into the world. This transformed non-active capital that was previously doing nothing, into doing something. Adam Smith talks at further length about this in The Wealth of Nations:

“It is not by augmenting the capital of the country, but by rendering a greater part of that capital active and productive than would otherwise be so, that the most judicious operations of banking can increase the industry of the country. That part of his capital which a dealer is obliged to keep by him unemployed and in ready money, for answering occasional demands, is so much dead stock, which, so long as it remains in this situation, produces nothing, either to him or to his country. The judicious operations of banking enable him to convert this dead stock into active and productive stock; into materials to work upon; into tools to work with; and into provisions and subsistence to work for; into stock which produces something both to himself and to his country.”

-Adam Smith, The Wealth of Nations

Though this seems to be the most boring possible topic to be revolutionary, it certainly was. With the development the merchant banks in Northern Italy, now there was a way in which the ‘dead stocks’ of stationary capital could be commoditized. From the ability to much more accurately understand one’s own finances through double-entry accounting, there became a whole new way to utilize, and understand money. This was the revolution that helped create finance as we know it today, and is what also propelled the advancement of capitalism to its place on the world stage it is today.

The great advancement that came from double-entry accounting was the novel approach of pooling money through banks, and then being able to utilize that capital as an active, and productive investment, rather than a dead stock. This meant that many, many more people could access capital for investments than there ever had been available before. This new market for capital and mode to utilize it, fundamentally restructured the economic fabric of life in a way that would indelibly change the future, and advance it towards one of capitalism. This was the first revolution of accounting, and now 800 years later, we are having the second revolution of accounting and measurements.

Building The New in The Shell of the Old

The creative destruction embedded within capitalism can best be understood as a dual force of creative power. It seeks to destroy and defile old ways in the quest to create something more efficient, more masterful of the task at hand. The only way that we can build a new and better world, is through first through destroying the old ways. It is only once we have cleansed ourselves of the inefficiencies of the past, that we are able to fully manifest and powerfully produce the changes we wish to see in the world.

Luca Pacioli–remembered for writing down how to do double-entry account. No one knows who that other guy is.

The revolution of bitcoin is not just in destroying these old financial industries; but building the new system that will be radically better than anything we could imagine. In this brave new world we are quickly coming into, the financial industry as we know it will be crushed in order to make way for the new system of finance. Bitcoin and other digital currencies simply have too low of a transaction cost when compared to the transaction cost of any fiat money system.

The development of the triple-entry accounting system of the blockchain has at its core the same praxis and creative destruction that double-entry account had: to destroy the old order of exchange, to make way for the new, better, and more effective system that can reach and serve many more people than the old system ever could. What is so revolutionary about this new mode of economic organization is now the arbitrator of measurements within the system of exchange (bitcoin itself) is subject to the same accounting standards as all other actors within the system–the bankers and politicians cannot cheat this system for their own benefit. The bitcoin ecosystem has no way it can just make up new bitcoins, as the state and banks can do with fiat money, or how they can debauch commodity-monies. The real revolution within bitcoin is that makes the banksters, the financiers, and the state subject to the same economic laws that govern everyone else.

Through eliminating the costly, inefficient, slow, burdensome, and corrupt contemporary system of banking, finance, and money itself; there is a whole new economy world to be created. This will exponential increase the productivity of capital, as it no longer has to be subservient to the state, their regulations, or laws that protect their cronies. Bitcoin ensures there is no longer any physical space that must be defended to protect money, so the infrastructure of this new form of capital can extend well beyond the branches of banks, or physical kiosks. Money no longer has any masters–it is free to create the world it sees fit.

What Must Be Done

We have the tools, now we must build the new system. Rome was not built in a day however, and what we are attempting to do is to fundamentally restructure the most prominent aspect of our society and world today: money and wealth. This is an ideological battle of the greatest kind. We are not just trying to address the economic issues at hand, but the mysticism and magic of how money functions. These are huge political, social, and ethical issues that many people today would rather not question or talk about–they would prefer to simply shove their head in the sand and refuse to believe that this is possible.

However the younger, technologically inclined and technology trusting generations will soon come into power against a political and economic system that has willingly and enthusiastically sold them out, disparaging them each step of the way. Spite and the demand for justice is a very powerful thing, and the true revolution is going to come when the youth from all around the globe realize that they can economic and politically organize themselves against the respective systems that have exploit them. The revolution is already in motion; what remains to be seen is how quickly people are going to be willing to seize it for themselves.

—

Next: Hayek’s Promise

Bitcoin’s Creative Destruction

“The opening up of new markets, foreign or domestic, and the organizational development from the craft shop and factory to such concerns as U. S. Steel illustrate the same process of industrial mutation-if I may use that biological term-that incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one. This process of Creative Destruction is the essential fact about capitalism.”

–Joseph Schumpeter in Capitalism, Socialism and Democracy

The process of creative destruction can be thought of as the evolution of efficiency within the markets. This can take many, many different forms with the core premise being to create new profit through innovation–with innovation being the keyword. Creative destruction is the wedge that divides the entrepreneurs from the capitalist.

Creative destruction generally presents itself as a technologically achievement that creates a greater total utility from the new product or process over the old. It can also take place as non-technical innovation, such as the worker assembly line processes pioneered by Ford, or the development of the just-in-time production strategy. These new innovations ‘destroy’ the older models through direct competition, not through using any sort of oppressive apparatuses of the law or monopolism. Disruption tends to be the contemporary word for it.

Creative destruction causes for a total increase in the utility of what is being accomplished–it is making it better. This question of ‘better’ or ‘more efficient’ is decided by free and fair markets though the greater returns that one receives. Thus, the most efficient actor or technology within a market, if not suppressed, should take the largest market share over time due the the fact that it is more efficient that all other options within the market.

Bitcoin is More Efficient On a Micro, Macro, and International Level

The creative destruction that will come from bitcoin is nothing short of earth-shattering. Bitcoin is more efficient on a macroeconomic, microeconomic, and international level. In almost every way it is better money than money itself.

Macroeconomic

As I explained in The Transaction Cost of bitcoin, when you look at bitcoin as a whole monetary system, it is always going to be more efficient than fiat currencies. This is because of a number of mechanisms that bitcoin uses to automatically establish and manage its own monetary system. The needed laws, legislation, and regulation that are needed for any fiat monetary system are handled automatically by the bitcoin protocol itself–Bitcoin users do not need to pay for the legal support of the system itself. Whereas, because of the nature of fiat monetary system, the users of these systems must bear the cost of the legal and enforcement mechanism of that fiat money system, and that is very, very expensive.

How much do fiat money systems cost?

This is a difficult question to ask because the monetary system is implicitly part of the state, and the state is implicitly funded through taxation and seigniorage, which make is difficult to separate one from another. One cost that we can look at is counter-fitting, which costs between 200 to 250 billion dollars per year. The counter-fitting cost with bitcoin is $0.

These sort of savings are simply too dramatic to be ignored for long, and can help business dramatically reduce the cost they they incur from supporting a monetary system that is inefficient and subject to counter-fitting risks. This is not to include other indirect cost such as the actual printing, distributing, transporting, and securing of fiat money. When you compare the transaction cost between bitcoin and fiat money systems Bitcoin will always have a lower transaction cost because it does not need to pay for the legal and enforcement mechanisms that fiat systems must pay for in order for them to function.

Microeconomic

Once upon a time, storing your money within a bank to offer you the security of knowing that your money was safe and secure. In addition to helping one secure their money, banks also found the opportunity to make the use of money sitting in their vaults through allowing easier access to the funds through services like checks, debit cards, and credit cards. As these services evolved, the banking system started taking more and more ‘convenience fees’ for access your very own money! But what is one to do when all banks are part of the greater monopoly that makes up the various national money systems? Until now, nothing–but now because bitcoin challenges this monopoly, and it is much more efficient than this monopoly, it is going to break this monopoly. The fiat money system just cannot compete–it’s too slow, too prone to fraud, and there are too many fees. This is in addition to inflation that has proven itself time and time again to destroy the savings of all the general public. When one see all of the benefits that bitcoin offers and understands how it works, there simply is no good reason to keep using fiat–it’s just shitty money.

When you compare the amounts that one spends on banking fees, from either a consumer or a merchant perspective, to that of using bitcoin, we again see that using the fiat banking system is much, much more expensive because one is paying people to do what bitcoin does automatically. This is why services like CoinBase can offer 0% processing fee for the first $1,000,000 of transactions–because bitcoin is just that much more efficient. If any non-bitcoin services offered this kind of deal, they would be bankrupt within the month. They just cannot afford to do it because of how expensive it is to move around fiat money. Bitcoin will always have a lower transaction cost than using the banking system because it does not need to pay all of the mechanisms and fees to move around money–that is part of the bitcoin program.

Internationally

The world is globalizing at an incredible rate, and is poised to continue to grow in that direction. Since 1995 there has been a dramatic growth in international trade by all countries except for industrialized one (who lost a portion of the international market to developing nations). This indicates that trade is starting to spread more evenly between all nations, instead of the industrialized nations taking up such a large potion of international trade. It is in the field of international trade that bitcoin offers some of its most powerful benefits.

Because bitcoin exist ‘in between’ national boundaries, it is not subject to many of the restrictions that fiat capital is subject to. This means that people and business that are working across boarders can choose to use bitcoin, and avoid national taxes, capital controls, and the intense oversight that is forced onto people and business from governments. Furthermore, when using bitcoin one does not need to deal with changing currencies consistently, and the associated fees and taxes that come with that.

Innovation vs. Crony Capitalism

Bitcoin is clearly a superior currency to its fiat counterparts. This is because Satoshi took all of the best features of both the internet and money and imbued them into one to create the first digital currency: Bitcoin. Bitcoin automates most of the processes that governments, laws, and the banks preform to maintain the money system. This means that the users of bitcoin do not have financially support the very large cost of maintaining a fiat monetary system. The innovative way that bitcoin secures money, protects identity, and allows for transfer to anyone with a internet connection is much more efficient than any monetary system today. With bitcoin, your money belongs to you, and you are the only one with control over it. Hands-down, this makes bitcoin win the economic argument by being more efficient, quicker, and secure.

But the economic argument has nothing to do with what we are talking about though…. because money is NOT about money.

It’s about politics.

Bitcoin is a massive threat to those that are already in political power and the special interest groups that pay them. We are at this interesting crossroads where we all know that bitcoin cannot be stopped, yet it clearly threatens the current financial and governmental infrastructure. What fascinates me about this is that it forces states into a prisoner’s dilemma against one another that they cannot win. The countries that have a clear, succinct, and friendly policy towards bitcoin first shall be the one to win the most economic benefits of bitcoin, and the ones that fail to do so shall lose the most. This is on top of the fact that bitcoin is superior to every country’s fiat money–there simply is no way fiat currencies can ever win over bitcoin. States will have to acknowledge and accept digital currencies as real legal tender, or they will have to suffer the consequences of using a money that is more expensive to use, subject to inflation, can be seized at any point in time, and is forced to pay taxes on it, and is subject to banking fees. At the end of the day, bitcoin is just better money, and it will take over the financial system because of that.

—

Next: The Creative Destruction of Bitcoin

Bitcoin Theory

The Political, Social, and Economic Impact of Bitcoin

Menu

Tag Archives: Creative Destruction