This is part 2, following the last short post about Capitalism not being motivated by selfishness.
Let's look at the capital formation process, via a business startup, from the perspective of a capitalist/entrepreneur, henceforth abbreviated as C/E. Our scenario assumes a single C/E, but quite often things commence with a relatively small group of founders, capturing their ideas to solve a problem, on the back of a napkin. The C/E's motive is generally a combination of at least three things:
The desire to engage in the challenge and fun of actually solving a problem
The potential rewards gained from solving a problem
The potential benefit to society
In order to bring an idea to life, a C/E must execute successfully on a large collection of steps, usually starting with the creation of a detailed plan. Upon commencement of plan execution, the C/E encounters many individuals and groups, all whose expectations he must meet, or exceed, to an agreed upon level of satisfaction.
The first group is typically comprised of investors, such as venture capitalists. Investing in a new business venture is very risky. Investors perform extensive diligence not just on the C/E's business plan, but on the C/E himself, and the team he's put together. The process of acquiring startup funds engenders a level of mutual trust, which requires the C/E to be concerned NOT CHIEFLY WITH HIS OWN profit or pleasure. He must NOT lack consideration for others. The C/E MUST have concern ALSO for his investors. It is a part of the process that is not and can't be driven by selfishness.
Another group is comprised of external partners. Depending on the industry, partners can be suppliers, technology providers, wholesalers, distributors, and a host of other business entities necessary to the C/E's business. The process of establishing agreements with partners engenders a level of mutual trust, which requires the C/E to be concerned not chiefly with his own profit or pleasure. He must not lack consideration for others. The C/E must have concern also for his partners. It is another part of the process that is not and can't be driven by selfishness.
Still another group consists of employees. Motivating employees to perform to the best of their abilities requires that the C/E to be concerned not chiefly with his own profit or pleasure. He must not lack consideration for others. The C/E must have concern also for his employees, satisfying basic requirements such as monetary compensation, vacation, job safety, job advancement opportunities, health care, educational opportunities, and a host of other quality of life aspects. It is a part of the process that is not and can't be driven by selfishness.
Lastly, another group the C/E must satisfy, and perhaps the most important, consist of customers. In order to be successful, the C/E must continually deliver a product or service that provides value to others. The process of providing value in a good or service requires the C/E to be concerned not chiefly with his own profit or pleasure. He must not lack consideration for others. The C/E must have concern also for his customers. Specifically, he must understand how his product or service delivers value to them, and he must convince them that it does to THEIR level of satisfaction. It is not a one time process. The C/E must stand behind the product or service, while constantly monitoring and adapting to changes in consumer sentiment, technology, government regulations, competition, and the economy among other things. It is arguably the most important a part of the process that is not and can not be driven by selfishness.
It should be clear that Capitalism cannot succeed through selfish behavior. In fact, it succeeds, spectacularly I might add, PRECISELY because the Capitalist/Entrepreneur (C/E) is not selfish.
Michael Malgeri is the creator of the “Johnny Profit” series of children’s books, which teaches young people about Capitalism. He is co-founder of the #ROCKME movement, a network of emerging youth clubs that believe in the "Rewards Of Capitalism:Knowledge, MORALITY, Empowerment."
He’s also involved in projects that spread Capitalist ideas to the young people of Africa. Finally, he is the co-founder of the annual #GlobalCapitalismAwareness day event, the second of which takes place in October of 2021. Please visit his website at www.Kids4biz.com