Hi, I'm Katherine, and I like capitalism, a lot. But in my 20 years as a libertarian journalist, I have started to pick up that some people aren't as fond of capitalism as I am. That's fine, but here's the thing. I think a lot of the stuff that you think you hate about capitalism is actually stuff to hate about government.
Before we get started kvetching, though, I want to sing you a little song, and you've probably heard it before, so feel free to sing along, if you like. Don’t worry, I’m not actually going to sing. It’s fine. 200 years ago, in 1820, the global rate of absolute poverty -- which is defined, imperfectly, as living on less than one dollar and 90 cents a day -- was 84 percent. That's enormous. Today, the World Bank puts that number at nine percent. Over the same period, life expectancy went from less than 30 years to 72, and there were similarly remarkable gains in access to food, water, housing, education during that period. That period coincides so neatly with the rise of global capitalism that I flatly refuse to believe it's a coincidence.
I think sometimes, we get so caught up in talking about what capitalism could or should be that we forget what it has been and what it is. So I wanted to just take a minute to do some, like, greatest hits of capitalism. They include electric light, personal mobile phones, cheap fertilizer, commercial aviation. And current capitalists are working on cool stuff like cryptocurrencies and geoengineering and plant-based meat. I also recently learned that there is a zero-sugar, alcoholic version of Taco Bell's Baja Blast Mountain Dew.
(Laughter)
And I don't actually know if that's a point for or against my argument, but I did feel like you should know.
(Laughter)
So, amongst all of this miraculous market activity, we also have government, and that means we have two problems. The first problem is that governments don't love it when weird new stuff gets born. Second problem is that governments also don't love it when familiar old stuff dies.
So let's talk about the new stuff first. The thing about capitalism is that it is an emergent system. It's, like all evolutionary mechanisms, powered by mutations. And in this case, what the mutations are are very weird people trying new stuff. And when we need really big progress, big new stuff, that means we need really, really weird people. Elon, looking at you, buddy. I don't know where you are today.
(Laughter)
Prior to the rise of modern capitalism, it absolutely sucked to be weird. Best-case scenario -- a new idea ended up kind of dying on the vine for lack of opportunities or resources to go forward. Worst-case scenario, trying something heroic and new could put you at odds with the powers that be in times and places when those powers were absolute. So imagine you have a great plan to open up a new trade route between Europe and Asia during the Anglo-Dutch Wars. That is a brilliant way to get a face full of cannonballs.
I'm not saying that every weirdo has a brilliant apocalypse-averting idea that also happens to be a viable commercial enterprise. Most new ideas are bad. There’s a reason people haven’t done it before. Just like most mutations are evolutionary dead ends. But that's OK, because high-functioning capitalism is characterized by a tremendous amount of corporate failure. Governments don't actually like it when familiar old corporations fail. They prefer to do business with the taxable, already regulated devils that they know. But that's too bad, because my personal favorite thing about companies is that they can die. When companies die, of course, that imposes a hardship on customers, on employees, on communities, on your 401(k). My family wasn't allowed to set foot in a Walmart for a generation, after Walmart put my granddaddy's general store out of business, so I get it. At the same time, failure is the fate of nearly every company, and that is why capitalism works. Imagine, if you will, when a company fails, it releases into the market labor and resources, talent that can be better used elsewhere. Imagine a tree falling in the forest and rotting and fueling new growth. Good news, though, for fans of corporate death like myself: the original Fortune 500 list, in 1955 -- of the companies on that list, only 52 are still on the list. That means 90 percent of those companies either went under, or merged, or fell off the list altogether. And corporate death does seem to be accelerating. The life span of a company on the S and P 500 was 61 years in the late '50s; today, it's less than 18.
To better understand this corporate birth-and-death dynamic, I’m going to tell you two wildly oversimplified stories. The first is about General Motors, and the second is about Facebook. Now, I didn't pick these companies because I think they are particularly evil or even terribly unusual. They're doing stuff that makes sense in a system that's a little bit broken.
So let's start by talking about General Motors. General Motors is actually one of the tiny number of companies from that original Fortune 500 list in 1955 that's still hanging out near the top. And starting a car company is moderately nuts. Really, at any time. It's a pretty impressive thing that they took what was once a ridiculous luxury and turned it into an everyday necessity. But then, government got used to GM, GM got used to governments. And by 1981, government is using the power of eminent domain to wipe out an entire working-class neighborhood in Detroit just because GM wants to build a factory there. That coddling continues through the 2008 financial crisis, when GM received really quite a massive bailout from the government. That's not market failure, that's government failure. Market would have stripped GM for parts a long time ago.
Now let's talk about Facebook. Same deal, right? Sort of, wacky people trying something new just to see if it'll work. And at first, Facebook was fun, remember? We got hot dates and we found lost dogs, and college reunions became totally obsolete, which was awesome.
(Laughter)
A few people made a lot of money, and the rest of us were a little bit better off. But, flash forward 14 or 15 years, and Facebook is being called repeatedly to the congressional carpet to answer for, actually, all the sins of big tech. Mark Zuckerberg, though, takes a conciliatory stance. He asks only to be allowed to help write the regulations that will govern his firm, and, coincidentally, those of his competitors. Here's where it gets a little complicated, though, because even as some legislators are working with Facebook lobbyists to write rules for the industry, others have introduced a bill to break up Facebook and punish it for its sheer size. Meanwhile, an informal poll of the Gen Zers in my life informs me that Facebook is "cringe."
(Laughter)
TikTok is eating Facebook’s lunch, and the first-quarter earnings report of Meta came with a surprise. The market cap of the firm had actually dropped below the level written into that bill to punish firms for being too big. So the joke's on Congress. Facebook is going to end up avoiding regulation by shrinking, but unfortunately, it's going to take its competitors with it.
This is a classic example of politicians being lagging, not leading, indicators. We are rich thanks to two centuries of global capitalism, but we do still have problems. As a great sage once observed, “mo money” may in fact correlate with “mo problems.”
(Laughter)
The way forward is to figure out what the public and private sector can each do best and help them figure out how to stay in their lane. When it comes to government, I am open to the possibility that the answer to what it can do best is ... nothing.
(Laughter)
But we don't all have to become anarchists today. It's clear that liberal institutions, rule of law, functioning courts, private-property rights have been very powerful in this project of fostering innovation. You already know what markets do best. They let people try stuff, they send strong signals when that stuff isn't working, and they have fueled an incredible arc of growth and poverty eradication.
If we are to have optimism for a radically better world to continue this path that capitalism has put us on, we cannot let governments collaborate with business to wreck the engine of the market. Weirdos trying stuff and sometimes being allowed to fail at it are our best hope as a species.
Thank you.
(Cheers and applause)
