Sunday, June 11, 2017

Business 101

During the Industrial Revolution (1850-1900), we can see business functioning properly.  Bankers made sure their loans were granted to qualified borrowers and their investments were given to enterprises that showed promise.

Our Industry Leaders knew each other and were all anxious to meet with our best inventers and engineers, who were working on Applied Science, trying to get things to work.

When Edison invented the light bulb, it prompted him to develop electric power generation.  The use of wind and water wheel power were well known. You get something to turn a shaft and the shaft turns gears that turn a grinding wheel.  Turning a shaft would also generate electricity.

It took Tesla to develop alternate current in order to generate electricity for large areas and hydro power plants were built. The use of the steam engine to power a train was also well known.  The coal-fired steam engines were included in manufacturing operations to operate production equipment.

Bankers funded Edison and Tesla and their inventions became companies and the technology they had developed began to appear across the US.  The Bankers provided the capital (money) and profited from their investments as more consumers replaced their oil lamps with lightbulbs.  This happened between 1900 and 1930.  The telephone was added, ice boxes were replaced by refrigerators and air conditioning was on the drawing board. This was done without government subsidies to consumers. These companies kept reducing their costs in order to expand their customer base.

This all worked to benefit individual families and the bankers and industrialists made money. Jobs were created as each invention was deployed and families prospered. All was as it should be. It was called “Capitalism”, referring to the start-up money invested by the bankers.

Smart business people should be able to assess the potential of new inventions based on their utility and their need.  It has to be a device everybody could use and would want.

Henry Ford understood that the automobile needed to be cost reduced to allow more consumers to buy these. His assembly line got the price down from $2000 to $500. The truck version of his Model T was snatched up and used to start delivery service companies, a family business. The Model T replaced the horse and buggy and saved money.

Also, in 1900, city water was cleaned up by adding chlorine to kill bacteria and prevent illnesses.  By 1930, city water treatment was becoming routine.

In 1945, penicillin became available to treat infections. This and other anti-biotics are used to save lives.

These advances are viewed as necessities today. We rely on our electricity to power all of our appliances and lights. We rely on clean water to keep us from illness.  We rely on air conditioning to avoid discomfort from the Summer heat. We use anti-biotics to cure infections that can be lethal.

All we really need, even today, are electricity, our cars, clean water, nutrition, penicillin and a sense of humor.

The prices of these necessities have been protected by following the laws of economics and the free market system that determines prices on the law of supply and demand. If we don’t have to pay for it ourselves, the prices go off the charts. Look at healthcare and education.

These industries have been destroyed by government subsidies. The price for these services is not controlled by the consumers. The only way to force price reductions on these services is to refuse to use them. Government needs to get out of education and healthcare. These services currently have no incentive to reduce their costs.

Norb Leahy, Dunwoody GA Tea Party Leader

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