John Lounsbury's  Instablog

John Lounsbury
Send Message
John Lounsbury, Managing Editor and Co-founder of Global Economic Intersection, provides comprehensive financial planning and investment advisory services to a small number of families on a fee only basis. He has a background which includes 34 years with a major international corporation, 25... More
My company:
John B Lounsbury CFP
My blog:
Global Economic Intersection
  • Entrepreneurs 6 comments
    Apr 4, 2010 6:38 PM

    Readers - - -

    This is an essay written by a well known economist.  I am posting it here without attribution and hope that you will make a guess as to authorship.  If you don't want to guess by name, would you comment on the following questions:

    1.  Is this person generally considered to be liberal, conservative or non-affiliated?

    2.  Has this person ever been in government?

    3.  When do you think the essay was written?

    If you have read this essay elsewhere and know the author, please don't ruin the fun for others and keep it to yourself.

    I will post the author's name, date and place of publication in 24 hours (Monday evening).

    Here is the essay:

    The paper entrepreneurs are winning out over the product entrepreneurs.

    Paper entrepreneurs — trained in law, finance, accountancy — manipulate complex systems of rules and numbers. They innovate by using the systems in novel ways: establishing joint ventures, consortiums, holding companies, mutual funds; finding companies to acquire, “white knights” to be acquired by, commodity futures to invest in, tax shelters to hide in; engaging in proxy fights, tender offers, antitrust suits, stock splits, spinoffs, divestitures; buying and selling notes, bonds, convertible debentures, sinking-fund debentures; obtaining government subsidies, loan guarantees, tax breaks, contracts, licenses, quottas, price supports, bailouts; going private, going public, going bankrupt.

    Product entrepreneurs — engineers, inventors, production managers, marketers, owners of small businesses — produce goods and services people want. They innovate by creating better products at less cost.

    Our economic system needs both. Paper entrepreneurs ensure that capital is allocated efficienctly among product enrepreneurs. But paper entrepreneurs do not directly enlarge the economic pie. They only arrange and divide the slices. They provide nothing of tangible use. For an economy to maintain its health, entrepreneurial rewards should flow primarily to product, not paper.

    Yet paper entrepreneurialism is on the rise. It dominates the leadership of our largest corporations. It guides government departments, legislatures, agencies, public utilities. It stimulates platoons of lawyers and financiers.

    It preoccupies some of our best minds, attracts some of our most talented graduates, embodies some of our most creative and original thinking, spurs some of our most energetic wheeling and dealing. Paper entrepreneurialism also promises the best financial rewards, the highest social status.

    The ratio of paper entrepreneurialism to product entrepreneurialism in our economy — measured by total earnings flowing to each, or by the amoung of news in business journals and newspapers typically devoted to each — is about 2 to 1.

    Why? Our economic system has become so complex and interdependent that capital must be allocated according to symbols of productivity rather than according to productivity itself. These symbolic rules and numbers lend themselves to profitable manipulation far more readily than do the underlying processes of production.

    It takes time and effort to improve product quality, exploit manufacturing efficiencies, develop distribution and sales networks. But through strategic use of accounting conventions, tax rules, stock and commodity exchanges, exchange rates, government largesse, and litigation, enormous profits are possible with relatively little effort.

    When paper entrepreneurs look for solutions to America’s declining productivity and international competitiveness, they come up with paper remedies to stimulate large-scale capital investment: accelerated depreciation, tax credits, government subsidies, relaxation of antitrust laws. 

    Product entrepreneurs focus on techniques for improving output: better quality controls, improved labor-management relations, more effective incentives for managers and employees, more aggressive marketing and sales.

    If we are to increase the economic pie, we will need to redress the balance of entrepreneurial effort. Which strategies will stimulate more paper, and which more product?  

    Who wrote this?  Robert Reich, former Secretary of labor under Pres. Clinton and currently economics professor at Univ. of California, Berkely.  When did he write it?  In a New York Times op-ed in 1980.

    Reich has been making a lor of sense to me lately.  Here is something he wrote yeterday.

    Disclosure: No stocks mentioned.
Back To John Lounsbury's Instablog HomePage »

Instablogs are blogs which are instantly set up and networked within the Seeking Alpha community. Instablog posts are not selected, edited or screened by Seeking Alpha editors, in contrast to contributors' articles.

Comments (6)
Track new comments
  • W.C. Varones
    , contributor
    Comments (33) | Send Message
     
    Going out on a limb here, I'll say Alan Greenspan wrote it in the 70's. While he's portrayed as libertarian/conservative in the media and indeed once held libertarian/conservative views, he's long since become drunk with power and become a full-on statist central planner.

     

    Left and right don't align automatically on this issue. Matt Taibbi and I are on one side, and Barack Obama and Goldman Sachs are on the other.
    4 Apr 2010, 08:10 PM Reply Like
  • W.C. Varones
    , contributor
    Comments (33) | Send Message
     
    Wow, just saw who it was. That guy is on a roll having said eminently reasonable things recently about the Federal Reserve and the causes of the financial crisis.
    4 Apr 2010, 08:26 PM Reply Like
  • John Lounsbury
    , contributor
    Comments (4046) | Send Message
     
    Author’s reply » W.C. - - -

     

    I can't believe what 'you know who' is saying in the past six months or so. He actually makes sense some of the time.
    4 Apr 2010, 10:47 PM Reply Like
  • Mayascribe
    , contributor
    Comments (11197) | Send Message
     
    I'll hazard a guess, and give myself about a 2% chance of being correct: If it's not Greenspan, then...I would have said Richard Nixon, except for your, "past six months hint." It's not Gietner, either: I don't think he can/could put together such meandering, "listy" sentences in this context.

     

    So I'm going with GS's CEO, Blankfien, the chief charlatan of the greatest paper manipulators on the planet.

     

    Second guess...Bernie Madoff.
    4 Apr 2010, 11:25 PM Reply Like
  • Tom Sjodin
    , contributor
    Comments (2) | Send Message
     
    It was written about 30 years ago. Don't know if he was a Conservative or Liberal. President Eisenhower would be called a flaming Liberal today, too bad politics have shifted so far to the right.
    As for "paper" or "product" entrepreneurs, as I see it, for the last 10 years the people of the United States of America have been taken by both. Wall Streeters and the Military Industrial Complex have both used scare tactics on the middle class to make us believe that "Corporate Welfare" is for our best interest, while welfare for the middle class is against our own best interest.
    It's become an upside-down world and we are closing in fast on becoming a Fascist nation (look up the definition). Back when this was written the ratio was 2 to 1, I wonder what it is now with the paper entrepreneurs selling our country out to China, Mexico etc.?

     

    Tom, a veteran of another useless war, but not for the Military Industrial Complex, Vietnam.
    9 Apr 2010, 05:25 PM Reply Like
  • Tom Sjodin
    , contributor
    Comments (2) | Send Message
     
    Right on and written about 30 years ago. Don't know if he would be considered a Conservative or Liberal today. President Eisenhower would probably be called a flaming Liberal today, too bad politics have shifted so far to the right.
    As for "paper" or "product" entrepreneurs, as I see it, for the last 10 years the people of the United States of America have been taken by both. Wall Streeters and the Military Industrial Complex have both used scare tactics on the middle class to make us believe that "Corporate Welfare" is for our best interest, while welfare for the middle class is against our own best interest.
    It's become an upside-down world and we are closing in fast on becoming a Fascist nation (look up the definition). Back when this was written the ratio was 2 to 1 paper vs product, I wonder what it is now with the paper entrepreneurs selling our products and our country out to China, Mexico etc.? Maybe I should say "the last 20 or so years". Shameful.

     

    Tom, a veteran of another useless war, but not for the Military Industrial Complex, Vietnam.
    9 Apr 2010, 05:36 PM Reply Like
Full index of posts »
Latest Followers

StockTalks

More »

Latest Comments


Instablogs are Seeking Alpha's free blogging platform customized for finance, with instant set up and exposure to millions of readers interested in the financial markets. Publish your own instablog in minutes.