This process of wealth creation is offensive to levelers and planners because it yields mountains of new wealth in ways that could not possibly be planned. Unpredictability is fundamental to free human enterprise. It defies every econometric model and socialist scheme. It makes no sense to most professors, who attain their positions by the systematic acquisition of credentials pleasing to the establishment above them. By definition, innovations cannot be planned. Leading entrepreneurs -- from Jack Simplot to Michael Milken -- did not ascend a hierarchy, they created a new one. They did not climb to the top of anything. They were pushed to the top by their own success. They did not capture the pinnacle; they became it.
This process creates wealth. But to maintain and increase wealth is nearly as difficult. A pot of honey attracts flies as well as bears. Bureaucrats, politicians, bishops, raiders, robbers, revolutionaries, short-sellers, managers, business writers, and missionaries all think they could invest the money better than the owners. All owners are besieged by aspiring spenders -- debauchers of wealth and purveyors of poverty in the name of charity or idealism or envy or social change. In fact, of all the people on the face of the globe, only the legal owners of a business have a clear interest in building wealth for others rather than spending it on themselves.
Leading entrepreneurs in general consume only a tiny portion of their holdings. Usually they are owners and investors. As owners, they are initially damaged the most by mismanagement or exploitation or waste of their wealth.
As long as Bill Gates is in charge of Microsoft, it will probably grow in value. But you put Harry Homeless in charge of Microsoft -- or as Harry's proxy you put a government bureaucrat in charge -- and within minutes the company would be worth half its present value. As other software companies, such as Oracle and Lotus, discovered in the early 1990s, a software stock can lose most of its worth in minutes if fashions shift or investors distrust the management.
As a Harvard Business School study recently showed, even if you put "professional management" at the helm of great wealth, value is likely to grow less rapidly than if you give owners the real control. A manager of Microsoft might benefit from stealing from it or turning it into his own special preserve, making self-indulgent "invest-ments" in company planes or favored foundations that are in fact his own disguised consumption. It is only Gates who would see his wealth drop catastrophically if he began to focus less on his customers than on his own consumption. The key to his wealth is his resolution not to spend or abandon it but to continue using it in the service of others. In a sense, Gates is as much the slave as the master of Microsoft.
The government could not capture America's wealth even if it wished to. As Marxist despots and tribal socialists from Cuba to Angola have discovered to their huge disappointment, governments can expropriate wealth but not appropriate it or redistribute it. In the United States a leftward administration could destroy the value of entrepreneurial property but could not seize it or pass it on. In general, all the captured banks and savings and loans of recent years accelerated their losses under government management and regulation.
Under capitalism, wealth is less a stock of goods than a flow of ideas. Economist Joseph Schumpeter propounded the basic rule when he declared capitalism "a form of change" that "never can be stationary." The landscape of capitalism may seem solid and settled and thus seizable; but capitalism is really a mindscape.
Volatile and shifting ideas -- not heavy and entrenched establishments -- are the source of wealth. There is no bureaucratic net or tax web that can catch the fleeting thoughts of David Sun of Kingston, Gordon Moore of Intel, or Michael Milken, lately of Pleassanton.
Nonetheless, in this mindscape of capitalism, all riches finally fall into the gap between thoughts and things. Governed by mind but caught in matter, an asset must have an income stream that is expected to continue if the asset is to retain its value. The expectation can shift as swiftly as thoughts, but the things, alas, are all too solid and slow to change.
Like the deep gas of Oklahoma, the commercial real estate of Houston, the steel mills of Pittsburgh, the railroad grid of New England, the great printing presses of a decade ago, the supercomputers of a year ago, the giant nuclear plants of yesteryear, and the sartorial rage of last week, the physical base of entrepreneurial riches is a trap of wealth, not a treasure chest. The last decade saw the demise of scores of oil and real-estate fortunes in Texas and Oklahoma. The underlying oil and buildings did not change. In all those cases, the things stayed pretty much the same. But thoughts about them changed. What was supremely valuable in 1980 plunged to near worthlessness by 1990.
Overseas interests could buy the buildings and the rapidly obsolescing equipment and patents of high-technology companies. But they would probably fail to reproduce the leadership, savvy, and loyalty lost in the sale. If the Japanese or Arabs bought all of Silicon Valley, for example, they might well do best by returning it to the production of apricots, oranges, and bedrooms for San Francisco. The capture of the worth of a company is incomparably more complex and arduous a task than purchasing one.
