Makers vs. Takers – Entrepreneurs Create Wealth, They Do Not Confiscate It

Saul AlinskyCommunity Organizer Saul Alinsky categorized people into three classes; (i) the Haves, (ii) the Have A Little, Want Mores and, the (iii) Have Nots. He wrote Rules For Radicals to instruct, “…the Have Nots on how to take it away” from the Haves.

Mr. Alinsky preached that wealth was relatively static. In Alinskyland, if you were a Have Not, your only alternative to attain wealth was to take it away from a Have, preferably with the assistance of Government-sanctioned coercion. Mr. Alinsky rationalized such legalized theft with the oft-repeated phrase, “the ends justify the means.”

It is difficult to believe that Mr. Alinsky actually believed this fanciful, binary view of reality. Yet the simplistic nature of his Marxist-based Haves / Haves Not argument did not stop him from encouraging a generation of under-educated people to believe that their only opportunity to obtain wealth was to gather around him so he could sufficiently intimidate wealth creators into giving away some of their lawfully earned fortune.

Mr. Alinsky provided a malevolent disservice to his followers. Rather than cajoling his supporters to snatch wealth from the hands of those who created it, he should have encouraged them to become wealth creators, as opposed to wealth confiscators. Mr. Alinsky incited his followers to demand something for nothing. Such thievery is the antithesis of the entrepreneurial approach of creating something from nothing.

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Heroes And Villains

Your opinion of entrepreneurs is likely rooted in your understanding (or lack thereof) of the source of wealth. If, like Mr. Alinsky’s followers, you believe that a finite amount of wealth is controlled by the “Haves”, then you probably consider entrepreneurs “evil” and feel justified in supporting government measures to redistribute as much of their wealth as possible.

Conversely, if you understand that the opportunities to create wealth in the US are open to anyone willing to make the necessary sacrifices and you realize that entrepreneurs’ efforts benefit everyone in society, they you may consider entrepreneurs to be hard-working heroes.

Something From Nothing

PieLet’s say I bake a pie. Mr. Alinsky would demand that I cut slices from my pie and give them to people who did not make an effort to create a pie of their own. This approach would obviously reduce my incentive to make more pies, while only temporarily satisfying the hunger of Mr. Alinsky’s minions. Instead of fighting over a single pie, everyone benefits when they join forces to create a pie factory.

In all of my startups, every employee owned a portion of the pie factory via Option Grants and thus we all were motivated to build a company that created the tastiest pies we could make. This approach short circuits the “us vs. them” mentality that Mr. Alinsky so effectively (and sadly) exploited.

Bill Whittle’s video illustrates how wealth creation impacts all members of a society and not just those responsible for creating the wealth.

LA 1870Consider Los Angeles, California. In 1870 it was home to approximately 15,000 farmers and merchants. In 2000, it was inhabited by 3.7 million people who worked in tens of thousands of industries, each of which created wealth that benefitted hundreds of millions of people locally, nationally and globally.

If Mr. Alinsky had been an effective Community Organizer in Los Angeles, circa 1870, he might have been successful in coercing the owners of the feed stores to give away some of their grain and citrus farmers to involuntarily “donate” some of their fruit to the common good. However, if Mr. Alinsky’s coercive formula of wealth transfer had been in place for the past 100 years, the Los Angeles of 2010 would not be very different from the filthy, destitute pueblo of the 1800’s. As the numerous failed communist regimes so aptly demonstrated, a populace, which knows that anything they create will be arbitrarily “shared” by everyone, will create minimal wealth.

Hoping For A Change

According to Mr. Alinsky, “The organizer’s job is to…get people pregnant with hope and a desire for change…” He preached that the status quo had to be modified for the Have Nots to accrue anything. Ironically, Mr. Alinsky’s goal was legitimate, but the means by which he intended to change the status quo were not – theft, in any form, is never justified.

Fortunately, enlightened entrepreneurs during the latter half of the 20th century did not share Alinsky’s dogmatic “means justify the ends” philosophy. Their means was wealth creation, rather than wealth confiscation. By offering all employees ownership in their adVenture, they effectively transformed everyone into a Have, while simultaneously aligning each individual’s financial rewards with the company’s overall success.

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John Greathouse has held a number of senior executive positions with successful startups during the past fifteen years, spearheading transactions which generated more than $350 million of shareholder value, including an IPO and a multi-hundred-million-dollar acquisition.

John is a CPA and holds an M.B.A. from the Wharton School. He is a member of the University of California at Santa Barbara’s Faculty where he teaches several entrepreneurial courses.
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John Greathouse is a Partner at Rincon Venture Partners, a venture capital firm investing in early stage, web-based businesses. Previously, John co-founded RevUpNet, a performance-based online marketing agency sold to Coull. During the prior twenty years, he held senior executive positions with several successful startups, spearheading transactions that generated more than $350 million of shareholder value, including an IPO and a multi-hundred-million-dollar acquisition.

John is a CPA and holds an M.B.A. from the Wharton School. He is a member of the University of California at Santa Barbara's Faculty where he teaches several entrepreneurial courses.


Note: All of my advice in this blog is that of a layman. I am not a lawyer and I never played one on TV. You should always assess the veracity of any third-party advice that might have far-reaching implications (be it legal, accounting, personnel, tax or otherwise) with your trusted professional of choice.





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