Say I am paying a team of guys to dig a giant ditch with shovels. They can only move so much earth a day with shovels, so I can only pay them $5 an hour. The only way I can pay them more is if they become more productive. This will involve an investment on my part – in capital equipment – in this case an excavator. If I invested $150,000 in an excavator, I can pay the operator $25 an hour. Some jobs will go away (shovel operators) and others will be created – in manufacturing, servicing, selling and marketing the excavators.
Wage growth comes from productivity gains. Productivity gains comes from capital investment (facilities, software, machinery, etc.) But business owners will only make capital investments if they feel safe about the future, feel the risk is worth a potential reward and profits will not be taken away by excessive taxation, and if they have access to financing in stable financial markets.
If we don’t have a safe environment for businesspeople and entrepreneurs, we don’t have capital investments, innovation or wage growth for workers.
Very ,very true! Thanks Larry!I hope they can focus on the world( or in their own back yard) isn’t of themselves!!
Do you think you can teach this to the people in Washington? They just do not get this!
Need more business people in Washington for sure. Just finished the Inner game and it is fantastic. As a 34 year old general manager it is no nice to have the insight at the start to work with! Many Thanks!
Amen!! Tell em Larry! Our country and its position depends on small businesses and their confidence. Increasing pain with higher taxes isn’t a great motivator for entrepreneurs.
“Wealth should be created not distributed”
It’s all about the profit margins for me. How do we keep more of what we make and stop giving the the government a raise ever time we make more profit? invest in more capital equipment agreed. I’m sure there is a cap on investment as well.