Fine Grained — Strong Towns

The problem with modern capitalism is that there are not enough capitalists. We need a system that encourages diverse ownership of capital if we want to build and support the middle-class. My worst fear is that we are transition towards a polarized economy – an economy where you have a small group at the top that owns most of the capital, and a large low-skilled, low-paid working class. For example, replacing a family owned grocery store with a chain store would be polarizing as the capitalist that owns the store and the building is no longer the local grocer, but a parent company in a far off city. The parent company pays a manager, but that manager is merely a salaried position, not an owner – their wealth does not include the business and the premises – so the mean wealth may be the same in both scenarios, but the median wealth shrinks as the wealth accumulates in the hands of a few.

We are not in that extreme state yet. There are plenty of startups, entrepreneurs, and small business owners. Right as I am typing this, I’m trying to schedule a plumber to move a gas line in my kitchen, and every plumber I find in the phone book is either self-employed or works for a small business. Drive around town, and you will see antique stores, local pizzarias, and attorneys. These people are capitalists; they own their buildings, their equipment, their vehicles, and that is keeping the wealth and capital in the local community. These people are the middle class. Capitalism needs more capitalists.

The industries that tend to be the most diverse and least polarizing are those that require the smallest amount of capital to start in. For example, with a plumber or electrician – if you have the required skills then starting your own plumbing or electrical business is as simple as buying the tools and the vehicle to get around in. If you already have a car and tools laying around – the cost of starting your business might be close to free. The software industry is another example. If you have the skills and a computer, you can start a business out of your living room.

A fine grained economy is contrasted with a polarized economy that takes a lot of upfront capital (or a lot of high risk debt) to start a business, so those that start a business (to build their wealth) will tend to be those that already have a lot of wealth. The wealth and capital ends up accumulating in the hands of the already wealthy, rather than being distributed more evenly. An extreme example of this is the story on Strong Towns that mentioned you need a net worth of half a million dollars to open a Dunkin Donuts.

Selling doughnuts should be one the cheapest business ventures to try out. In my ideal city, I should be able to ask for a permit, set up an old table from home on the street, bring a doughnut maker or a portable oven, and spend the day making and selling doughnuts. It should be extremely cheap and low risk. Even if I had to borrow $300 from family and friends to get started and it fails, I can easily repay them.

via Fine Grained — Strong Towns.


Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s