D P H Williams

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A Delicious Pancake Dinner – Brought To Our Family By Capitalism

pancakesMuch to the delight of our two young children, my wife decided to make pancakes for dinner a few nights ago. The kids thought their mother must have gone mad, as it was their equivalent of being served dessert for dinner. However what is it that made this meal that made it so appealing to their taste buds? I would argue that it was a capitalism since it would have been far more bland, expensive or even non-existent in a centrally planned economy.

To create all the ingredients required for our pancake dinner myself would be immensely time consuming and costly.  Let’s just look at some of the ingredients required:

This would require a wait of at least four months (depending on the wheat variety, conditions, etc) for the wheat to grow and be ready for harvest.  I would require some land to plant the wheat, fertilizer, tools to plant and harvest, irrigation to water if there’s no rain and favorable weather conditions.  On top of all that, I’d also need insecticide to repel the many bugs that would no doubt love to devour my crop before I have the chance.

Once harvested, I now have some wheat that would now need to undergo a milling process.  For a small amount I may be able to do it with some hand tools rather than having to invest in expensive machinery.  But this still requires more time and money.

You don’t have to be a genius to work out what’s required here.  Chickens obviously.  They’d have to be bred or purchased as chicks and then have months of time and money spent on raising them up until the point where they begin producing eggs.  Even if they were purchased at the point of lay then they still require food to be grown for them (I hope you liked the idea of growing your own wheat in my first point).  They also require time to give them their feed regularly and collect the eggs.  On top of this you’ll have to worry about providing them some sort of secure shelter if you don’t want the local fox to enjoy a good meal and send me back to square one of my egg production effort.

Milk & Butter
Off to market we go to purchase a cow.  There’s the up front cost of buying the cow as well as the constant cost and work in providing food.  Of course I have to make sure it’s milked twice a day whether I need the milk or not.  I can forget any future holidays unless I’ve got some very caring friends who would be keen to take over milking duties for a while.  Then there’s even more work, learning, equipment, time and money involved in turning some of the milk into butter.

In similar fashion to the flour, I would need to plant sugar cane, fertilize it, water it, protect it from pests & disease, harvest it and then crush it to gain the raw sugar.

We also enjoyed bananas, blackberries, ginger syrup and maple syrup as toppings on our pancakes.  How could we enjoy all of these ingredients from all around the world for the cost of about 1% of my daily wage?  Because of the self-interested motivation of farmers, truck drivers, warehouse operators, retailers, etc all built on the back of capital accumulation throughout history.  As Adam Smith wrote in Wealth of Nations Volume 1:

“It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest.”

When people are free to produce what they believe will benefit them most and trade as they please, then society as a whole benefits and becomes much more prosperous.  This is the reason that we are not all having to farm our own food, make our own clothes, build our own homes, etc.  By having the freedom to focus on what we do best and trade with others we can become richer while also making others in society around us richer, even if our motivation is self-interest..

Yes, a centrally planned economy may be able to produce some or even all of the ingredients required for our meal.  However it will never be able to produce them in the correct and abundant supplies that a market economy can.  It would also end up costing a far higher proportion of the average person’s income since the whole economy will be run in a far less productive manner.  The best outcomes for society, families and individuals are obtained when there is freedom in the marketplace and – also known as Capitalism.

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A few quick thoughts on society’s obsession with income inequality.

I believe that one key reason why so much of today’s society is filled with entitled, envious brats is due to a lack of knowledge or appreciation for human history. Why on earth is an increasing income gap or wealth gap seen as a bad thing? Society as a whole is astoundingly more wealthy than it has ever been and the wealthy of centuries past could only dream of what the poor/middle class enjoy in many of today’s societies.

There will always be a gap between rich and poor in any free society. The only way to remove the gap is to make us all equally poor and kill individual liberty and ambition.  Yes, there are some who amass large fortunes due to dishonest gain or political connections.  This is of course to be spoken out against and fought.  However this is rarely what the left has an interest in.  Instead, they generally demonise anyone they deem to be wealthy.  It matters not that most wealthy people amassed their wealth because they have done a great deal for society.  After all, if we were in a truly capitalistic society then that would be the only way to amass wealth and fortune.

It is sad indeed that the once great USA now has a self proclaimed democratic socialist as a Presidential front runner in Bernie Sanders.  He has captured the hearts and minds of many generations, least not the millennials, with his vitriol towards the wealthy.  Everyone is jumping on the “free stuff” bandwagon as long as someone wealthier than themselves are going to be paying for it.  I will end with some wise words voiced by the late Margaret Thatcher a generation ago that many planning to vote for Bernie would do well to take heed of:

“The problem with socialism is that eventually you run out of other people’s money”.

The video below shows just how blessed even the lower class of today’s society really are:

9 Pitfalls To Beware of When Buying From Alibaba For Resale Profit

Alibaba can be a fantastic source for finding cheap suppliers to import goods for resale.  Whether you sell online in something like your own e-commerce store or offline in retail stores or flea markets, there are bound to be a slew of goods and suppliers that you can profit from.  However, as with all things in life, there are a number of risks and things you need to be aware of before diving in.  This is especially true if you’re used to purchasing from places like eBay and think that Alibaba will be similar.  It is in fact a whole different ball game.  So without further ado, here is the list:

1.  Not Doing Your Homework

As mentioned in the opening paragraph, Alibaba is not eBay or AliExpress.  The buyer will need to do far more research and work before making purchasing decisions.  Alibaba is designed to connect buyers directly with sellers with the intent of making bulk purchases.  It is not as simple as finding something you like, checking out and waiting for it to be delivered.  You will have to put research into suppliers, products, potential markets and more.

2.  Not Ensuring Your Capital & Supplier’s Required Minimum Orders Are A Happy Marriage

It’s no use going to all the trouble of researching products that will sell, finding suppliers, ordering samples, arranging freight, testing products and more only to realise you will not have adequate capital to fund future orders.  Many suppliers will be happy to send a sample of one or a few products which they may do free or charge for.  However if there minimum order for standard orders is 10,000 units and you can’t afford to order this many, there is no use wasting your and the supplier’s time in ordering a sample.  Most products list the suppliers minimum order requirement along with other things such as estimated price per unit, production ability per month, payment methods accepted, etc as you can see from a screenshot paste below.

Screenshot of Alibaba Minimum Order Section

3.  Not Having a Clear Freight Price Worked Out Before Making a Purchase Contract

Unlike eBay and AliExpress, freight is either the responsibility of the buyer to organise.  Often the seller will have a company they use and be able to organise it for you.  However you need to discuss this with them and have freight costs in writing, whether it’s being booked by the seller or you.  The sample order is usually fairly simple since the seller will generally send through Chinese Post or a freight company without any hassle.  It is when you are booking a large shipment that you may have to organise things on your end even if the seller is able to organise shipping.  This is because the shipping they organise will simply be to your nearest port.  It will then be your responsibility to have it collected and transported from there to your premises.  Whatever option you and the seller decide to work out, just make sure it’s organised in writing with clear prices per unit or per shipment.  Also ensure that you have terms in writing for situations that could possibly happen if things go wrong (eg. a shipment is late, goods are damaged upon arrival, etc).

4.  Not Using Escrow or a Secure Payment Method

Unlike eBay, Alibaba sellers are not required to receive their payment through PayPal.  This means many only accept payment through methods such as Western Union, Wire Transfer, etc.  If you are making a large purchase or ordering from a supplier without who is fairly new or doesn’t have a lot of feedback, you are best to stick with ones that offer payment via PayPal or Alibaba’s own escrow service that offers buyer protection measures.  The last thing you want is to possibly spend months hoping that your purchase arrives with no way of getting your funds back if it does not.

5.  Buy Brand Name Products

Many newcomers get on Alibaba or even AliExpress and get excited when they see brand name products such as Nike, Apple, Disney, etc.  The big companies have exclusivity contracts with their suppliers meaning that they cannot sell to others in bulk on a place such as Alibaba.  Therefore if you do order these products it will mean at best you will receive a cheap knock off (that is illegal to sell since it violates the trademark of the owner).  The worst is that they will send nothing at all and you have lost any money sent.  Either way is a loss for you and it’s just not worth entertaining the thought from the start.

6.  Buying “Current Trend” Products in Large Numbers

Keeping up with current trends and fashion can be a good way to turn a profit.  However it can also be dangerous if you make bulk purchasing decision based on current fads or trends.  It is one thing to import 5,000 notepads while it is something altogether different to import 5,000 rainbow style canvas shoes.  The former will always have steady demand while the latter is based upon a current spike in demand which will soon die out.  The danger is that Alibaba normally requires large purchases and often means waiting large amounts of time before they arrive via sea freight.  The waiting period can be overcome through priority freight but this then drives up your cost per unit.  These are considerations that need to be made and in many cases it is better to stick with products that have stood the test of time or are likely to be around in people’s lives for quite a while to come.

7. Failing to Take Fluctuating Exchange Rates Into Account

Alibaba prices are almost always quoted and negotiated in USD.  For someone in Australia who is most likely selling in AUD, this means that there is a constant need to monitor audusdexchange rates and update your sale price accordingly.  Should you be in the situation where you are required to sell the goods at a fixed price for a long period of time, you would be best off quoting with the presumption of very low AUD.  That way even if the AUD does drop to a historically low price compared to the greenback, you are still not losing money.  Should the AUD instead rise or plateau at it’s current rate then profits will exceed projections.

8.  Thinking You Can Easily Resell on eBay Without Doing Extensive Research

In days gone by, there were opportunities to buy in bulk and resell on eBay for profit.  However this is less and less the case.  A huge number of Chinese companies are selling direct to Australian and international customers through eBay and other venues.  The Chinese Post costs very little for small, light items.  Therefore they often sell items for a lower price delivered than it would cost you in postage alone.  When you take into account the high cost of eBay’s fees, there is often no way to compete.  There may well be the odd niche product that you can offer since many people would rather buy from an Australian with fast delivery.  However it will require a good amount of research and could well be a short lived niche since competition is very fierce.

9.  Failing To “Haggle”

The Chinese generally take haggling into account when quoting their prices.  Therefore you will need to spend time negotiating back and forth with them if you wish to get the best price possible.  If it is for a small amount of items on a one off basis then it may well not be worth your time.  However if you are negotiating with a supplier who you hope to buy large amounts from on a regular basis then a few cents per unit can quickly add up over time.  If the seller is providing a freight price for you then also be sure to ask if that is the best price they can do since they often overcharge on freight with the hope of adding to their bottom line.

David works at a grain export container packing company full-time while enjoying writing here in his spare time.  Please leave a comment if you have any thoughts or questions.

How Do Entrepreneurs Succeed?

a person who sets up a business or businesses, taking on financial risks in the hope of profit.

From the dictionary definition above, it is made clear that entrepreneurs take on financial risk in the hope of making profit.  In a free market, the only way for entrepreneurs to make a profit and succeed is to improve the lives of others.  This could be through the innovation of a completely new product that they see a need for.  Or it could be by providing a service in a more efficient and better way than their competition.  They may find a way to reduce the costs of a product or service so that they can provide better prices than others.  Whatever they do, they must find a way to make other people’s lives better.

How To Succeed As An EntrepreneurOf course almost nowhere in the world operates in a true Laissez-faire way.  Wherever you go, you will find government intervention.  Some places are more free than others, such as here in Australia.  However we still have a massive amount of government regulations, taxation and general bureaucracy.  Despite this, many entrepreneurs are still able to find a way to improve the lives of the general public and therefore turning a profit for themselves.  I would however like to list just some of the challenges in place which make life harder for entrepreneurs and decrease the standard of living for all:

  • Income Tax – An obvious but big one.  When you decrease the potential reward for entrepreneurs, it is no wonder that you have less people wanting to take the risks involved in being self-employed and starting small businesses.
  • Minimum Wage Laws – Many entrepreneurs may start up on their own and put in long hours to avoid the overheads of employing staff.  However if they are hoping to grow then they will inevitably need to plan for staff employment in the future.  Knowing that they will have to pay a minimum amount decided by a central bureaucracy, even for staff that have very little skills & experience is no doubt going to dampen the aspirations of some potential entrepreneurs.
  • Barriers To Entry – Federal and state governments love to mandate licenses for almost every sector along with countless regulations.  This is great for the big established companies since it makes it hard for the little guys to get involved and compete.  However it is the consumers who lose out (through higher prices) as well as the small guys looking to get involved and provide a better service, product or price.

Despite the various barriers, there are still many new entrepreneurs and companies starting up each day and improving the lives of consumers.  One such company is Uber which has faced, and continues to face, constant opposition from government due to heavy lobbying by the established taxi industry.  Uber makes life for the general consumer far better.  They can easily book the exact type of vehicle they require (or prefer) while viewing ratings and feedback of potential drivers.  It is also often cheaper than a taxi.  Drivers earn more than traditional taxi drivers while passengers pay less.  Everyone is happy right?  Everyone except for the taxi industry and this is why Uber must be stopped.  In many cities around the world, it costs massive amounts of money to gain a taxi license.  Not to mention the mountains of paperwork to appease the regulatory requirements.  However the taxi industry quite likes this because it was keeping potential competitors out of the game.  That was until companies like Uber came along.  Surely the taxi industry must work at improving their service, lowering their costs or coming up with an innovative way to compete with Uber?  No.  It is of course far easier to spend big on lobbying government for tighter regulations to close any “loopholes” that are allowing Uber and similar companies to compete.

Cornelius VanderbiltThis is why you will often hear politicians, unions & the media badmouthing Uber and warning of how dangerous and risky it is.  However demonising innovative companies such as Uber for improving the lives of the general public is nothing new.  In fact, some of the greatest entrepreneurs in history are now looked down upon by the history books as if they were criminals.  One such case is Cornelius Vanderbilt, the great nineteenth century businessman.  He truly did face an uphill battle.  He was not born into massive wealth and he chose to compete in industries that heavily favoured his competition through crony capitalism.  He entered the steamboat industry against government favoured monopolies.  In doing so, he managed to overcome the opposition and bring passenger fares down drastically while creating many new routes and services.  He then entered the railway industry and done the same thing.  While his competition were benefitting from government contracts, he went alone and prospered.  HIs competition were being rewarded for waste by being paid for each mile of railway line they laid down.  This gave them incentive to increase the length of routes, plant their routes to go over mountains and through rugged territory, etc.  Despite all their government assistance and favouritism, many of these competitors went broke and had to beg for government bailouts or go bankrupt.  Yet Vanderbilt was able to lay down new routes and bring passenger & freight fares down dramatically.  It is therefore ironic that many history books will claim that Vanderbilt was a monopolist who is to be frowned upon.  Many will claim he and others like him are the reason why we need government intervention to prevent monopolies.

Western society has prospered and flourished immensely through strong private property laws and relative free trade.  It is also the culture of society which has in the past valued entrepreneurs, small businesses and others who trade, produce and innovate.  Yet it is this culture which seems to be under threat in much of western society.  Instead of valuing those who produce and create jobs, we are looking at ways to tax them more or burden them with even more regulations.  Many people are envious of those with wealth and use this envy to downplay or even attack their roles in society.

Often people will hold “public servants” in higher esteem than private entrepreneurs.  Yet in reality it is the entrepreneurs that serve the public.  Entrepreneurs and business owners are meeting the demands and wants of people.  They can only profit if they provide the market with something they want.  This is not the case with “public servants”.  Their wages come from taxation.  People do not decide that they want public servants creating something or doing some service in a voluntary way.  Should we then attack, abuse or belittle “public servants”?  Of course not.  However we should hold the private sector up higher and value it’s importance.  We should be voting to decrease the size of government and allow the market to provide more.  Continuing on our path of praising big government and chastising private enterprise is not going to produce a society where we can prosper and live as well as otherwise.

I will finish this post with an excellent video explaining why cronyism (or crony capitalism) is such a problem:

David works at a weighbridge company full-time while enjoying writing here in his spare time.  Please leave a comment if you have any thoughts or questions.

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