WEBVTT NOTE How to Get What You Want 1 00:00:00.000 --> 00:00:12.800 One of the fascinating things about life on this planet is that whoever designed it didn't 2 00:00:12.800 --> 00:00:18.960 arrange for equal distribution of anything. We have natural resources of certain types 3 00:00:18.960 --> 00:00:24.300 in certain parts of the world and a complete lack of them in other parts. Human abilities 4 00:00:24.300 --> 00:00:28.900 also are not equally distributed. Some men have a great deal of ability, a great deal 5 00:00:28.900 --> 00:00:37.140 A few men have very little and I guess there would be some who have none. We have almost 6 00:00:37.140 --> 00:00:43.500 infinite variation in this planet, and so it works out that for us all to survive and 7 00:00:43.500 --> 00:00:52.360 to maximize our chances of survival, we have to serve each other. Now this is a concept 8 00:00:52.360 --> 00:00:57.500 that probably is going to take a little bit of explaining because in talking with businessmen 9 00:00:57.500 --> 00:01:02.700 Man, and I have talked to a great many of them, they take a sort of a pride in saying 10 00:01:02.700 --> 00:01:08.300 they are in business for their own profit. And I have a tough time explaining to them 11 00:01:08.300 --> 00:01:15.340 sometimes that they are the softest-hearted and sometimes the softest-headed people around. 12 00:01:15.340 --> 00:01:19.980 Because in point of fact, even though it is true, they are certainly engaged in trying 13 00:01:19.980 --> 00:01:25.740 to make profits for themselves, there is only one way they can do it. And that is by keeping 14 00:01:25.740 --> 00:01:30.900 in mind constantly that if they're going to make any money, they're going to do it by 15 00:01:30.900 --> 00:01:32.900 serving other people. 16 00:01:32.900 --> 00:01:36.540 The people who have the money they want are the people they want to serve. 17 00:01:36.540 --> 00:01:43.080 And so they've got to constantly concentrate on figuring out a way of providing a good 18 00:01:43.080 --> 00:01:49.180 or a service or both that other people will voluntarily pay for. 19 00:01:49.180 --> 00:01:55.380 And they've got to be so good at it that they can provide a good or a service cheaper or 20 00:01:55.380 --> 00:02:01.500 more better or faster or more conveniently or a combination of these things than the 21 00:02:01.500 --> 00:02:03.940 person can do it himself. 22 00:02:03.940 --> 00:02:07.820 Because if they can't do that, well then the person can take care of himself. 23 00:02:07.820 --> 00:02:13.180 The only way that it would be possible for me to serve you would be for me to get you 24 00:02:13.180 --> 00:02:18.660 something in a superior way better than you could get it for yourself. 25 00:02:18.660 --> 00:02:20.580 Otherwise, what good am I? 26 00:02:20.580 --> 00:02:26.500 So if we are going to serve each other, then we have to understand each other. 27 00:02:26.500 --> 00:02:33.380 And if we are going to make profits, the only possible way of making a profit is to figure 28 00:02:33.380 --> 00:02:38.460 out how to help the other fellow better than he can help himself. 29 00:02:38.460 --> 00:02:44.640 So that's what we try to do in this world if we expect to succeed. 30 00:02:44.640 --> 00:02:51.180 The person who succeeds and rings up the highest level of profits for himself is simply going 31 00:02:51.180 --> 00:02:59.380 to be the person who has had the best vision and executed it with the greatest skill relating 32 00:02:59.380 --> 00:03:08.540 to his service to others. Now, that's a fascinating thing, but that's the way it works. Curiously, 33 00:03:08.540 --> 00:03:12.960 and I suppose it was Adam Smith that first caught on to this and he used the phrase an 34 00:03:12.960 --> 00:03:19.520 and Invisible Hand, and talked about it in discussing how marketplace transactions occurred. 35 00:03:19.520 --> 00:03:26.960 You see, the more the man in business concentrates on making a profit, the more it works out 36 00:03:26.960 --> 00:03:33.120 that it's almost as though there's an invisible hand that benefits everybody else at the same 37 00:03:33.120 --> 00:03:42.480 time it benefits the fellow looking for profit. So even if the man is greedy, grasping, selfish, 38 00:03:42.480 --> 00:03:49.800 and narrow. It doesn't really matter because if he lets those traits dominate his thinking 39 00:03:49.800 --> 00:03:53.800 then he will not think about other people and if he doesn't he goes broke and it couldn't 40 00:03:53.800 --> 00:03:59.320 happen to a nicer fellow. If he wants to stay operative then he has to concentrate on what 41 00:03:59.320 --> 00:04:07.040 the other people want and thus in serving them and serving them with fantastic success 42 00:04:07.040 --> 00:04:14.320 and Effectiveness then he accumulates a level of success for himself. Now I'd like to give 43 00:04:14.320 --> 00:04:22.480 you a model to keep in mind at the present time as to how this works. You see, having 44 00:04:22.480 --> 00:04:28.560 made something in the way of a good or service by virtue of the fact that abilities are not 45 00:04:28.560 --> 00:04:33.400 equally distributed and raw materials are not equally distributed, nothing is equally 46 00:04:33.400 --> 00:04:46.920 When we get down to cases, we are going to find stockpiles of goods or services appearing 47 00:04:46.920 --> 00:04:56.140 in certain places and, in other places, great lacks or great dirts of those same goods or 48 00:04:56.140 --> 00:05:03.380 services. It is almost as though the whole world could be viewed as a giant ocean with 49 00:05:03.380 --> 00:05:10.300 with swells and waves and tides and ripples and currents and little rivulets and so on. 50 00:05:10.300 --> 00:05:16.380 Because in effect that's what happens. Where there are stockpiles of goods or services, 51 00:05:16.380 --> 00:05:21.900 it's as though you build up a giant wave. And of course, where there isn't such a good 52 00:05:21.900 --> 00:05:26.940 or service, then you have what appears to be a trough or a depression. 53 00:05:26.940 --> 00:05:34.260 Now the natural tendency of a free market would be for, well it would be the same tendency 54 00:05:34.260 --> 00:05:39.500 that you would detect in an ocean. That is, the waves that are high would tend to topple 55 00:05:39.500 --> 00:05:46.580 over and fill in the troughs that are low. And so in the end the effect would be a completely 56 00:05:46.580 --> 00:05:51.540 smooth ocean. But if any of you have ever paid any attention to the ocean and watched 57 00:05:51.540 --> 00:05:56.340 it or seen it even, you are well aware of the fact that the ocean doesn't smooth over 58 00:05:56.340 --> 00:06:03.340 in the World of Money and Credit in the World of Money and Credit in the World of Money 59 00:06:26.340 --> 00:06:31.380 the things that have been produced and other people are trying to produce them. It never 60 00:06:31.380 --> 00:06:37.920 comes out even. The market is always seeking equilibrium, but it never becomes static any 61 00:06:37.920 --> 00:06:47.180 more than the ocean does. Just as the waves tend to topple into the troughs, so you find 62 00:06:47.180 --> 00:06:53.000 this action occurring in the market. Where there is a stockpile of goods or services, 63 00:06:53.000 --> 00:06:58.200 What we could call negative value factors begin to manifest. 64 00:06:58.200 --> 00:07:05.240 The more we have of a given good or service, the less we value it in each of its units. 65 00:07:05.240 --> 00:07:09.800 And the less we have of a given good or service, the more we value it. 66 00:07:09.800 --> 00:07:15.120 Consequently, the people who don't have much begin to clamor for the things they don't 67 00:07:15.120 --> 00:07:16.120 have. 68 00:07:16.120 --> 00:07:19.120 And the people who have a lot of it say, well, we'd just soon get rid of some of this. 69 00:07:19.120 --> 00:07:20.560 We've got too much. 70 00:07:20.560 --> 00:07:26.360 And the consequence is that this stockpile of surplus tends to move in the direction 71 00:07:26.360 --> 00:07:30.760 where the demand is highest. The squeaking wheel gets the grease, you see. And the more 72 00:07:30.760 --> 00:07:36.080 we scream about the things we want, the more those things tend to move toward us because 73 00:07:36.080 --> 00:07:40.800 when our screams are loud enough they become practical screams. That is, we put money in 74 00:07:40.800 --> 00:07:46.360 our hands and we say, I'll buy that. Now that's of course an extreme position to think you 75 00:07:46.360 --> 00:07:50.780 You have to pay for something, but when you really want something bad enough, you'll pay 76 00:07:50.780 --> 00:07:54.400 for it. And when you're willing to pay for it, then the man who's made it is willing 77 00:07:54.400 --> 00:08:03.400 to let go of it. And so you find a motion from supply points to demand points. But these 78 00:08:03.400 --> 00:08:09.680 motions are never constant because as a demand is satisfied, then the supplies on the one 79 00:08:09.680 --> 00:08:16.320 on the one hand tend to go down and the satisfaction tends to go up and so the demand tapers off 80 00:08:16.320 --> 00:08:22.280 and the willingness to supply tapers off and it appears to be an equilibrium situation 81 00:08:22.280 --> 00:08:27.480 except that it never is because other demand factors now appear and so you find that's 82 00:08:27.480 --> 00:08:34.480 the way the world works. It is always, that is, the entire marketplace is trying to arrive 83 00:08:34.480 --> 00:08:40.060 live at equilibrium, and it never can and never will because of the various factors 84 00:08:40.060 --> 00:08:41.060 at work. 85 00:08:41.060 --> 00:08:46.160 Now, I'd like to give you a model that explains this a little better than I've just done, 86 00:08:46.160 --> 00:08:52.420 and again, if you've got a pencil and paper, this will help. Draw a fairly good-sized circle 87 00:08:52.420 --> 00:08:59.600 about, oh, possibly three inches in circumference if you've got that much room on your paper. 88 00:08:59.600 --> 00:09:06.400 And mark, pretend that it's a world for the moment, and mark a little point for the north 89 00:09:06.400 --> 00:09:12.480 pole and another one for the south pole, and then put in another point indicating complete 90 00:09:12.480 --> 00:09:16.480 east and complete west. You can imagine it's a sort of a compass. 91 00:09:16.480 --> 00:09:23.800 Now I'm going to use those cardinal points on this circle to illustrate the various factors 92 00:09:23.800 --> 00:09:34.760 that occurs in the process of moving goods and services from a state of non-existence 93 00:09:34.760 --> 00:09:40.240 first into existence and then ultimately into the hands of the individual who has the highest 94 00:09:40.240 --> 00:09:46.560 demand for it. So let's take the North Pole there on your drawing and we're going to call 95 00:09:46.560 --> 00:09:53.520 that the point of investment. Now that's the place where the tools appear. 96 00:09:53.520 --> 00:09:59.700 In other words, in order to produce anything, whether it's a good or a service, we have 97 00:09:59.700 --> 00:10:06.400 to begin by coming up with some kind of a tool that will provide the good or service. 98 00:10:06.400 --> 00:10:13.500 Now whether the tool is intellectual or physical doesn't matter. It always takes an investment. 99 00:10:13.500 --> 00:10:20.400 And what do we mean by an investment? An investment is simply the taking of the available resources, 100 00:10:20.400 --> 00:10:30.360 Whatever they may be and concentrating them in the area where you wish to get something done. 101 00:10:30.360 --> 00:10:35.680 In other words, you could have an investment even under primitive conditions. 102 00:10:35.680 --> 00:10:39.600 Take a man in a state of nature. 103 00:10:39.600 --> 00:10:41.600 Just one man. 104 00:10:41.600 --> 00:10:46.600 He has no clothing, he has no food, he has no tools, he has nothing. 105 00:10:46.600 --> 00:10:52.160 First, one homo sapien, and he's in a state of nature. And let's suppose that he would 106 00:10:52.160 --> 00:10:57.400 like to catch a rabbit. Now what does he do? Before he can catch the rabbit, he has to 107 00:10:57.400 --> 00:11:03.400 make an investment. How does he make an investment? Well, he takes his available resources. Well, 108 00:11:03.400 --> 00:11:09.120 you say, well, what are they? He apparently doesn't have any. Yes, he does. He has time, 109 00:11:09.120 --> 00:11:15.480 he has energy, and he has brain power. And if he has enough brain power to figure this 110 00:11:15.480 --> 00:11:20.120 This out, the first thing he's going to realize is that the rabbit has an advantage over him. 111 00:11:20.120 --> 00:11:25.120 The rabbit has four legs and he has two, and if he starts out in a direct chase after the 112 00:11:25.120 --> 00:11:29.280 rabbit, the rabbit's probably going to get away. And he's going to get hungrier and hungrier 113 00:11:29.280 --> 00:11:34.660 and have less and less energy, and the rabbits will have to move only slower and slower to 114 00:11:34.660 --> 00:11:39.820 escape him, and he's on the wrong end of the production line. He's not doing it right because 115 00:11:39.820 --> 00:11:43.800 he isn't making the right kind of an investment. Now if he's smart enough to see this, what 116 00:11:43.800 --> 00:11:49.560 What he'll do first is he'll try to contrive a tool that will multiply his effectiveness 117 00:11:49.560 --> 00:11:51.320 in getting the rabbit. 118 00:11:51.320 --> 00:11:55.520 He'll get a bunch of rocks together so that he can throw stones at the rabbit. 119 00:11:55.520 --> 00:12:00.100 The flying stone will go faster than he can run, and that way he has a better chance of 120 00:12:00.100 --> 00:12:01.100 getting rabbits. 121 00:12:01.100 --> 00:12:11.760 Or he'll devise a sling or a bolo or a spear or a deadfall or possibly a bow and arrow 122 00:12:11.760 --> 00:12:12.760 or something. 123 00:12:12.760 --> 00:12:19.680 come up with some better way of trying to catch rabbits. And the better his tool, the 124 00:12:19.680 --> 00:12:25.200 more his chances are multiplied of getting that rabbit. So the very first action, whether 125 00:12:25.200 --> 00:12:31.040 we're talking in terms of primitive conditions or whether we're talking in terms of advanced 126 00:12:31.040 --> 00:12:36.600 conditions such as you would find in our own economy today, the first act is an act of 127 00:12:36.600 --> 00:12:41.600 investment. You take the available resources, whether they appear in terms of energy or 128 00:12:41.600 --> 00:12:59.840 Now, moving in a clockwise direction, you go over to the east side of your circle, and 129 00:12:59.840 --> 00:13:08.440 there at that point, put down the word production. That's where production occurs. This is where 130 00:13:08.440 --> 00:13:18.080 The great equation mmw equals nr plus he times t has application. Here is where the entrepreneur, 131 00:13:18.080 --> 00:13:25.240 and that's the fellow that enters the market in an enterprising way, where he puts the factors 132 00:13:25.240 --> 00:13:30.280 of production together. And the factors of production are always three in number, natural 133 00:13:30.280 --> 00:13:35.080 resources, human energy and tools. Now the natural resources and the human energy come 134 00:13:35.080 --> 00:13:39.960 Come in there. But the tools have been created at the prior point on the north side of your 135 00:13:39.960 --> 00:13:46.680 diagram. Now the tools come down to join the entrepreneur at the point of production. And 136 00:13:46.680 --> 00:13:52.040 the entrepreneur puts these pieces together in their proper amounts and in their proper 137 00:13:52.040 --> 00:13:56.360 framework in order to create production of whatever it is he's trying to produce. So 138 00:13:56.360 --> 00:14:03.480 he is the fellow that puts the N, R and the H, E and the T together the right way at that 139 00:14:03.480 --> 00:14:10.960 that point. Now the movement goes from the east point of your diagram down to the south. 140 00:14:10.960 --> 00:14:20.240 This is at the base. And right there put down the word distribution. That's where the effort 141 00:14:20.240 --> 00:14:28.280 is made by those who have produced to find out where the troughs are so that their surpluses 142 00:14:28.280 --> 00:14:34.400 will flow into those troughs. And, of course, the deeper the trough, the more the people 143 00:14:34.400 --> 00:14:39.340 in that area will probably be clamoring for whatever it is that's available in the way 144 00:14:39.340 --> 00:14:45.060 of a good and service. So that's what you look for there at the distribution point. 145 00:14:45.060 --> 00:14:52.540 That's at the bottom of your circle. Now, at the west side, you have the point of the 146 00:14:52.540 --> 00:14:56.700 The retailer and the customer, that's where they come in. 147 00:14:56.700 --> 00:15:01.120 So here's the way your diagram would look. 148 00:15:01.120 --> 00:15:06.220 You begin at the top, at the north pole, and that's where investment occurs. 149 00:15:06.220 --> 00:15:12.300 Then you could draw an arrow, a circular arrow over to the east side and that's where production 150 00:15:12.300 --> 00:15:13.420 occurs. 151 00:15:13.420 --> 00:15:17.620 And then there's a circular arrow going down to the south side and that's where distribution 152 00:15:17.620 --> 00:15:23.260 occurs and then going from there back up to the west side and that's where the customer 153 00:15:23.260 --> 00:15:24.260 comes in. 154 00:15:24.260 --> 00:15:26.140 Now, here's what happens. 155 00:15:26.140 --> 00:15:32.580 In a modern economy, the customer comes in with money and the money comes into the circle 156 00:15:32.580 --> 00:15:37.480 and it moves exactly the opposite direction from the flow of goods and services. 157 00:15:37.480 --> 00:15:43.340 So you could put a curved arrow on the inside of your circle indicating that as the customer 158 00:15:43.340 --> 00:15:50.380 buys the good or service at the retail outlet, he puts in money, some of it is retained by 159 00:15:50.380 --> 00:15:55.660 the retailer and then the rest of it flows back and then some of it stops off to take 160 00:15:55.660 --> 00:15:59.940 care of the distributor and the rest of it flows back up and some of it stops off to 161 00:15:59.940 --> 00:16:05.620 take care of production and then the rest of it flows back up so that the investor can 162 00:16:05.620 --> 00:16:10.580 get a payment for having made the investment that has made the whole thing possible in 163 00:16:10.580 --> 00:16:11.580 the first place. 164 00:16:11.580 --> 00:16:17.540 Now that's the way it works. In other words, you have a three-quarter turn on the outside 165 00:16:17.540 --> 00:16:24.880 of your circle and then you have a three-quarter return turn on the inside. Goods and services 166 00:16:24.880 --> 00:16:31.020 flowing in the one direction and money flowing in the other direction. You'll notice that 167 00:16:31.020 --> 00:16:37.500 in the diagram I've explained there isn't anything, any arrow or any explanation relating 168 00:16:37.500 --> 00:17:07.420 When a man decides to invest, the reason that he is going to invest is to make a tool that 169 00:17:07.420 --> 00:17:13.420 will produce something. So there's a logical flow from investment to production. That's 170 00:17:13.420 --> 00:17:19.260 why you invest. You invest so that you can produce. So, once you've produced, there's 171 00:17:19.260 --> 00:17:23.500 a logical flow to distribution. The reason you produced was so you could distribute. 172 00:17:23.500 --> 00:17:28.760 Well, once you get to the distribution point, there's a logical flow to the retail outlet. 173 00:17:28.760 --> 00:17:32.780 The reason you're distributing is to get it into the hands of customers and the retailer 174 00:17:32.780 --> 00:17:36.960 is the one that can do that best. Now, once the customer has it, how do you get back to 175 00:17:36.960 --> 00:17:45.720 of the Investor. That takes a whole new action. You see, the whole economic cycle begins with 176 00:17:45.720 --> 00:17:51.760 the act of investment and there isn't anything in nature that demands the investment except 177 00:17:51.760 --> 00:18:00.200 your understanding. The problem is that many people suppose that there is just a natural 178 00:18:00.200 --> 00:18:05.120 tendency for people to invest. There isn't. There's a natural tendency for people to 179 00:18:05.120 --> 00:18:12.440 Consume. But why would they want to invest? Actually, they probably wouldn't. Most of 180 00:18:12.440 --> 00:18:17.400 us don't want to invest. We would like the other fellow to invest. We want to consume. 181 00:18:17.400 --> 00:18:24.760 We want to use up more and more of what exists. We don't like to put anything back. Isn't 182 00:18:24.760 --> 00:18:29.940 that, in a sense, what's the matter with our ecology today? Isn't that what's puzzling 183 00:18:29.940 --> 00:18:41.340 We're cluttering the whole landscape because we're not putting things back. 184 00:18:41.340 --> 00:18:45.740 We're taking things out because we love to consume. 185 00:18:45.740 --> 00:18:47.140 But what are we putting back? 186 00:18:47.140 --> 00:18:48.940 Well, I don't know. 187 00:18:48.940 --> 00:18:55.860 Unless you have special knowledge in this area, the chances are rather good that you 188 00:18:55.860 --> 00:19:16.860 We won't have any particular motivation to put anything back. And that's why it's so important, and I know this runs counter to popular belief but I can't help it, the fact is that what is really important is that investors make lots of profits because that's the one thing that might motivate them. 189 00:19:16.860 --> 00:19:25.680 You see, there is a supposition that actually it is the increase in population that tends 190 00:19:25.680 --> 00:19:31.460 to make people prosperous. And therefore the more demand you have, which would occur the 191 00:19:31.460 --> 00:19:36.220 more people you have, the more prosperous you are going to be. But now something's 192 00:19:36.220 --> 00:19:41.020 got to be wrong with that because if that's really true and if that's all that matters, 193 00:19:41.020 --> 00:19:45.380 then the most prosperous places in the world today would be those places with the most 194 00:19:45.380 --> 00:19:54.100 and the highest standard of living because they've got the most people. Is that true? 195 00:19:54.100 --> 00:20:00.620 Obviously it is not true. So it isn't the numbers of people and the increase in the 196 00:20:00.620 --> 00:20:07.900 amount of demand that makes for prosperity and a good life. The thing that makes the 197 00:20:07.900 --> 00:20:14.460 difference is the amount of investment that we have, the amount of capital investment 198 00:20:14.460 --> 00:20:20.540 that has been made that tends to move into production, that tends to move into distribution, 199 00:20:20.540 --> 00:20:25.800 that tends to move into the hands of the customers. And that's how it works. So if we're going 200 00:20:25.800 --> 00:20:32.040 to have a high-level productive economy, what is really important is that nobody interferes 201 00:20:32.040 --> 00:20:37.600 with the investors. Now of course actually anybody can be an investor. A customer could 202 00:20:37.600 --> 00:20:44.360 be an investor, a retailer, a distributor, a producer, or a former investor can reinvest. 203 00:20:44.360 --> 00:20:48.720 There isn't anything to prevent anybody from investing who wishes to. 204 00:20:48.720 --> 00:20:54.300 Now another factor here that is so kind of cute, I've talked to a lot of young people 205 00:20:54.300 --> 00:20:59.060 on this point and I suggested to them that investment is very important and they say 206 00:20:59.060 --> 00:21:04.360 well I'll be glad to invest, in fact I agree, you know, I'd like to invest some of my money 207 00:21:04.360 --> 00:21:11.220 when the time comes. But of course I can't really do it until my income has increased 208 00:21:11.220 --> 00:21:16.740 up to such and such a level, and then I take the surplus beyond that and make the investment. 209 00:21:16.740 --> 00:21:20.320 And you know, I'd like to suggest that that's exactly the wrong way of looking at it. The 210 00:21:20.320 --> 00:21:28.080 first thing you want to do is invest. The very first. I hear some people saying, you 211 00:21:28.080 --> 00:21:33.780 ought to pay yourself first. And that's not bad. But I'd like to suggest that even before 212 00:21:33.780 --> 00:21:39.800 you pay yourself, you pay your environment. The very first expenditure you should have 213 00:21:39.800 --> 00:21:46.120 out of whatever your income is, is something that you take out of the normal consumptive 214 00:21:46.120 --> 00:21:52.160 channels and you plow it back in to pay back for some of what you've already gotten. 215 00:21:52.160 --> 00:21:57.320 Now that would tend to balance both the economy and the ecology, and you might think about 216 00:21:57.320 --> 00:22:02.620 that. I think it would be extremely helpful. I know of some people who are alive right 217 00:22:02.620 --> 00:22:09.440 now who began work with as little as $3 a week. And you know something? Out of the $3 218 00:22:09.440 --> 00:22:17.980 a week wage, they saved a quarter every week and invested it. That's smart. That's smart. 219 00:22:17.980 --> 00:22:25.180 So it doesn't really make any difference how much you're earning, providing you get the 220 00:22:25.180 --> 00:22:32.100 regular habit not just of saving, but of investing, because that's where you make your profits. 221 00:22:32.100 --> 00:22:37.980 I don't know, well, I guess there would be a few. There would perhaps be a few people 222 00:22:37.980 --> 00:22:45.660 People around who are very well fixed, inordinately wealthy, who have done it only on their wage. 223 00:22:45.660 --> 00:22:51.120 But I would say there would be very few. In fact, the people who make fabulous wages such 224 00:22:51.120 --> 00:23:03.340 as sports, athletic people who are in the major sports and get big pay, and movie stars 225 00:23:03.340 --> 00:23:10.220 and people of this sort who draw down fabulous wages when they work. I can tell you that 226 00:23:10.220 --> 00:23:17.380 the woods are full of the story of the rags to riches to rags in their own lifetimes. 227 00:23:17.380 --> 00:23:22.540 Many people who have made hundreds of thousands of dollars for a few years while they were 228 00:23:22.540 --> 00:23:31.060 at their prime end up broke because they haven't learned how to invest. And other people who 229 00:23:31.060 --> 00:23:36.620 who haven't had any opportunity like that at all, and never would have, never be in 230 00:23:36.620 --> 00:23:42.660 a position where they can make $1,000 or $2,000 a week or something like that. That type of 231 00:23:42.660 --> 00:23:48.860 wage at the present time is probably limited to a few people because of especially rare 232 00:23:48.860 --> 00:23:54.740 skills that they have. But it doesn't matter because the person who is making a relatively 233 00:23:54.740 --> 00:24:01.940 few dollars per week, but we'll get into the habit of thinking correctly in this area, 234 00:24:01.940 --> 00:24:09.140 and we'll think in terms of making investments of plowing some of that back in to balance 235 00:24:09.140 --> 00:24:18.620 the ecology and the economy, you see, then that investment will tend to support him and 236 00:24:18.620 --> 00:24:21.420 to make him wealthy. 237 00:24:21.420 --> 00:24:26.220 So far as I know, all of the major fortunes in the world are based on investment, not 238 00:24:26.220 --> 00:24:31.980 on salary. I don't know of anybody. I do know of some people that are making fabulous 239 00:24:31.980 --> 00:24:37.980 salaries. But they end up, as I say, not being wealthy. Sometimes they end up as paupers 240 00:24:37.980 --> 00:24:43.100 unless they have learned not only thrift, which is only a part of the story. It is the 241 00:24:43.100 --> 00:24:47.780 investment, the plowing something back at the beginning of this cycle, right at the 242 00:24:47.780 --> 00:24:59.780 Now, I'd like to show you something else while we've got this little circle in front of us. 243 00:24:59.780 --> 00:25:16.780 Again, there is no G in this diagram. There isn't any part in the whole process of making things and getting these things into the hands of customers that requires government. 244 00:25:16.780 --> 00:25:20.340 Government does not have a part to play here. 245 00:25:20.340 --> 00:25:27.420 However, government does come in, through processes of taxation, with the ultimate idea 246 00:25:27.420 --> 00:25:33.540 that what it's there for is to protect everybody so that the flow of goods and services can 247 00:25:33.540 --> 00:25:39.000 be unimpaired, and we would maximize the flow that way. 248 00:25:39.000 --> 00:25:45.460 Whether that works out, in fact or not, is going to be the subject of a later lecture. 249 00:25:45.460 --> 00:25:53.380 But at least that is the justification for the emergence of the state and its intrusion 250 00:25:53.380 --> 00:25:56.320 at various points. 251 00:25:56.320 --> 00:26:03.740 The argument given is that this is necessary in order that these exchanges and these investments 252 00:26:03.740 --> 00:26:11.080 and so on will occur without interruption, without intervention. 253 00:26:11.080 --> 00:26:18.160 So the curious thing is that now the government intervenes in order to prevent intervention 254 00:26:18.160 --> 00:26:25.420 from occurring, and so that theft will not take place or other actions of molestation, 255 00:26:25.420 --> 00:26:33.760 the government now moves in and extracts funds from the flow of money out of this cycle. 256 00:26:33.760 --> 00:26:40.000 Now I showed you that the money comes into the cycle at the west side, flows south and 257 00:26:40.000 --> 00:26:43.040 and then East and then ultimately North. 258 00:26:43.040 --> 00:26:48.920 Now what happens when taxation occurs would be the same type of action that you would 259 00:26:48.920 --> 00:26:55.480 get if you had, say, a pipe with water flowing through it and then you put a branch from 260 00:26:55.480 --> 00:26:56.480 that pipe. 261 00:26:56.480 --> 00:27:01.680 Say you had a three-inch pipe with a full head of water and you put a one-inch pipe 262 00:27:01.680 --> 00:27:07.560 as a branch on it, below the place where that joint occurred there would be less water 263 00:27:07.560 --> 00:27:12.400 are in the main pipe, right? Because you're draining some of it off. Now the same thing 264 00:27:12.400 --> 00:27:20.440 happens in the economy. When the government inserts its tax funnel, it drains money out 265 00:27:20.440 --> 00:27:27.320 of the economy and so there would be less in the economy below the joint where the draining 266 00:27:27.320 --> 00:27:35.620 occurs. That's the way it works. Now the major drain today occurs through an income 267 00:27:35.620 --> 00:27:38.860 Tax, which is paid at the point of production. 268 00:27:38.860 --> 00:27:42.900 And the interesting thing is, that doesn't hurt producers. 269 00:27:42.900 --> 00:27:48.640 It just means that there's less money in the channel to reach the investor. 270 00:27:48.640 --> 00:27:54.780 Because that's where the drain comes out, so it injures the next fellow down the line. 271 00:27:54.780 --> 00:28:00.100 If we're going to have a viable, productive, dynamic economy, we're going to have to see 272 00:28:00.100 --> 00:28:06.240 See to it that these drains don't completely destroy the operation so that we do have a 273 00:28:06.240 --> 00:28:11.720 viable market that will supply more goods and services for more people at less money. 274 00:28:11.720 --> 00:28:12.560 Thanks very much.