So let's say that you and I go into business together making artificial flowers. Initially we are both sewing them entirely by hand and selling them. We're barely making enough to scrape by, working twelve hours a day. It kind of sucks.
One day, I win a thousand bucks in the lottery and buy a couple of sewing machines for us to use. We can now make, oh, fifty flowers in the time it took us to make one.
Let's assume that the demand for artificial flowers is far higher than we can fulfill. We could work as many hours as we used to and start selling fifty times as many flowers. But instead we work a little less and sell thirty times as many. We're still we're making a lot more money than we used to.
Now. Since I bought the sewing machines with my own money, clearly I should be the one reaping all of the benefits of this new order. I'll take all the money and pay you exactly the same amount of money you were making when we were both sewing flowers by hand. So I'm getting about fifty-nine times as much as you are.
"Hey, Egypt," you say. "Thanks to those sewing machines, I'm creating a lot more value than I used to. Maybe I should be getting, I dunno, twice what I used to get? Or a hell of a lot more?"
And I sneer down at you from atop my golden toilet. "Your attitude reeks of entitlement," I say. "Get back to your sewing machine, Thenews."
Three weeks later, you're fired, and replaced by a guy living in a tent under the Interstate who'll make flowers for half of what you were paying. It's my sewing machines, after all.
But if you have access to machines, then so do your competitors. You won't be generating 50x more profit, perhaps you'll be generating a few percent higher until the market reaches equilibrium and then the owner will make the same as or slightly higher than what he was before depending on how quickly he adapted. The end benefit is the economy as a whole because garments now will cost a whole lot less. Whichever competitor stitches by hand will go out of business within a year so the baseline to make even a cent of profit is with the machine.
Also, the owner took a huge risk and big loans purchasing the machine. If something goes wrong, he's on the hook for it. If the next year, the country decides to implement NAFTA, then the machine is worthless because it can be made in Mexico far cheaper than in his own town, forcing owner to go out of business and eat the costs. Meanwhile, the worker who gets laid off loses no money in his transition to a new job. The economy, however, benifits again because garments are even cheaper than before.
It's also your idea, your implementation, your risk. You made the operation more productive, and that is worth money. It's perfectly fair, after all, your partner can also buy a sewing machine and start his own business competing with you. The fact that he does not is indicative that you provided the value, not him.
that you've also got to maintain, insure, save funds to replace at the end of their life, etc. all while not earning 7% on the original $1000 by letting it sit in the stock market long term.
One day, I win a thousand bucks in the lottery and buy a couple of sewing machines for us to use. We can now make, oh, fifty flowers in the time it took us to make one.
Let's assume that the demand for artificial flowers is far higher than we can fulfill. We could work as many hours as we used to and start selling fifty times as many flowers. But instead we work a little less and sell thirty times as many. We're still we're making a lot more money than we used to.
Now. Since I bought the sewing machines with my own money, clearly I should be the one reaping all of the benefits of this new order. I'll take all the money and pay you exactly the same amount of money you were making when we were both sewing flowers by hand. So I'm getting about fifty-nine times as much as you are.
"Hey, Egypt," you say. "Thanks to those sewing machines, I'm creating a lot more value than I used to. Maybe I should be getting, I dunno, twice what I used to get? Or a hell of a lot more?"
And I sneer down at you from atop my golden toilet. "Your attitude reeks of entitlement," I say. "Get back to your sewing machine, Thenews."
Three weeks later, you're fired, and replaced by a guy living in a tent under the Interstate who'll make flowers for half of what you were paying. It's my sewing machines, after all.