Profits, Politics & People

Let me start by saying: there is no better economic and political system in history than capitalism combined with democracy. No market structure has driven more progress, lifted more people out of poverty, or created more wealth than this one. The U.S. is proof that a collection of random people with ambition and ingenuity can come together and build something incredible.

That said, it’s not perfect. We don’t have a pristine track record. We’ve had slavery, robber barons, manifest destiny, Jim Crow, urban blight, and a long list of historic missteps, but all of this—the progress, the wealth creation, the oppression, the leadership—has brought us to where we are today. In the most optimistic sense, we live in a society where even the poorest Americans have access to education, healthcare, and support that would match the aristocrats of 200 years ago.

I love studying history—not just because of the great stories, but because it helps me contextualize today. Today, business and politics are crossing over in ways they haven’t in 100 years.

·        “Keep politics out of business.”

·        “The government should be more business-like.”

·        “Free markets solve everything.”

·        “Government should protect the most vulnerable.”

I probably overestimate common sense, but I truly believe that business and free markets are the solutions to many of our problems—if government could come back to earth and create a fair, predictable, and easy-to-operate-in framework. Instead, we have a wildly partisan patchwork of laws, written for lawyers and lobbyists, not for business operators, job creators, and everyday people. Let’s break it down.

Profits

In 1976, Milton Friedman won the Nobel Prize for a bunch of economic theories too boring to get into here. His lasting impact? Shareholder Theory, which he first published in 1970. In short: The only responsibility of a company is to maximize profits for its shareholders.

This idea launched corporate raiders, private equity buyouts, and globalized supply chains in search of the cheapest labor. Before Jack Welch took over GE in 1982 and embraced this model, the company bragged about how many employees it had and how much it paid in taxes in its annual reports. That era—where companies took pride in employing people and growing middle-class jobs—was the foundation of Reagan’s and later Trump’s “Make America Great Again” nostalgia. This wasn’t government-driven success. It was people & business-driven.

The recent low point of income inequality in the U.S. was 1980—coincidentally, right before shareholder primacy took off. I grew up in a small town in the ‘80s, in a neighborhood that felt like the best version of America. My dad was a teacher, my mom was a nurse. Our neighbors: A nuclear engineer, bank VP, McDonald’s franchisee, grocery store owner, dentist, doctor, another teacher, and highway patrolman. Find me a neighborhood today with that kind of professional diversity.

Since Friedman’s ideas took over, corporate profits, executive pay, and government entitlements have skyrocketed.

The good?

·        The money funded innovation—faster internet, better healthcare, more efficient energy, more kids in college than ever before.

·        Capitalism + technology = human progress.

The bad?

·        The wealth has piled up in fewer and fewer hands.

·        CEO pay is now 278x the median worker across the top 350 U.S. firms.

·        There are more billionaires today than at any point in history.

Wal-mart is the best example I can think of that illustrates how a company can have both a positive effect on society, while also creating bigger problems in the process.

·       They effectively utilize government incentives when placing stores.

·       Rely on their scale and purchasing power to get the best deals on their inventory and infrastructure.

·       Pass a good chunk of this savings to customers in the form of low prices.

·       While maintaining profitability and paying their fair share of corporate taxes at 22%+.

·       At the same time, the company employs hundreds of thousands of people, with many front-line workers living below the poverty line and having to rely on government assistance just to get by.

I don’t fault us for pushing the ceiling higher. Most us aren’t breaking laws. If you work hard and get lucky, you should enjoy the rewards. I do think we’ve lost something along the way. We stopped taking pride in being good employers and having a middle class.

I’m not saying companies should be forced to overpay or keep workers who don’t care about their jobs, but I do think companies can take 50bps out of quarterly EBITDA margins and put it toward higher wages and benefits for the median worker.

Yes, this takes money out of shareholders' pockets today, but in the long run? Lower taxes, higher GDP, and a stronger middle class is a great return on that investment. This isn’t anti-business—it’s pro-business with a long-term lens.

Politics

Humans are competitive and greedy by nature. That’s why income inequality exists, we love sports, and we’ve survived for thousands of years as a global race. Recent governments let this greed drive capitalism and produce tangible results, I just think we’ve collectively been at the trough a little too long.

Something has to change—but government is the most bloated, inefficient, and ineffective organization in America. Raising taxes just means more waste, fraud, and corruption. What we actually need is a clear set of rules that allow businesses to function efficiently and freely.

No government oversight or rules that try to dictate everything to nth degree are ever going to work. We’re all just rebellious teenagers who know better than a congress that hasn’t accomplished anything in the last 15 years, or an executive who above all else only cares about himself. If the government could trim 80% of the red tape, and rework the remaining 20% to sensible, people centric rules, then we could all react accordingly.

My ideal set of laws and regulations would match up to the NFL. Just give us a set of rules that keeps the game interesting, fair and exciting for everyone, with incentives that require flattening society. When things get a little lopsided, we adjust accordingly. If someone gets out of line they get punished, throw the flag, suspend them. Goodell in 2028…

Alas, when government intervenes, it’s pushing on a balloon:

·        Raise minimum wage → Prices go up → Inflation hurts low-wage workers the most.

·        Raise corporate taxes → More wasted government spending on ineffective programs.

The last time the government truly leveled the playing field was at the turn of the 20th century:

·        Trust breakups, income taxes, labor laws, welfare programs.

·        The pendulum swung socialist because business leaders got too greedy.

·        Spoiler: Rockefeller actually got richer after Standard Oil was broken up, however the majority of American ended up better off.

The difference today?

·        Government is already too big.

·        There are already too many rules.

·        No one trusts politicians.

I don’t think the government is actually going to change things for the better anytime soon. Realistically we can only hope the current tactics don’t break things beyond the point of repair, so a more moderate, thoughtful, popular movement can come in to take the good parts of reform and run with them (sensible deregulation, focus on efficiency, simplified taxes).

People

Winston Churchill said: “If you’re going through hell, keep going.” That’s all we can do as investors and business operators. We could passively navigate the system, maximizing profits, but that’s shortsighted.

If we don’t at least try to show a better way, we’re just contributing to the problem.

·        I’m not talking about DEI initiatives, ESG labels, or woke marketing.

·        I’m talking about actually acting with integrity.

·        Supporting employees, customers, and communities—not because of government pressure, but because it’s right.

We invest in businesses to grow them, not gut them. Our long-term approach needs good people to make sustained improvements, not cogs in a machine to boost short-term profit margins.

·        We look to grow businesses from $3M EBITDA to $10M, over time, with minimal tuck ins, and a lot of organic growth. Our teams deserve a share of those gains along the way.

·        We want our businesses to be the employer of choice in its industry and community.

·        Our company’s success should lift everyone, not just our returns.

We don’t do this because politicians tell us to. We do it because it works. Better teams → Better financial returns → Better society.

Same capitalism. Slightly better distribution.