John’s Utopia

I’m actually somewhat excited about the upcoming election in the sense that we’re in a period of political change. The old parties seem just that – old. More outsiders are going to be heard and we’ll see what gains traction. We’ve long been on a two-tier economy where the upper end of the upper middle class is doing great, but everyone below that still feels knocked down a peg.

That being said, I’m going to quickly summarize my suggestions for change. I have no say in anything and no one I know of talks about what I’m suggesting, but just for fun I’ll spell out my views anyway.

The way I see the problem…

True growth and innovation comes from small business. While corporations can focus gobs of money on technology upgrades, they are still utilizing only a small number of engineers to tackle a problem in a big corporate way. Meanwhile, more students then ever are learning math, science, engineering, etc. and they can start from scratch to create something unique, like a whole different corporate organization and culture. Think of the young Steve Jobs, Mark Zuckerberg, Michael Dell, and so on.

The modern world is geared to heavily benefit the asset rich at the expense of everyone else. Entrenched companies can buy out competition with abandon – then ultimately dismantle them because they don’t mesh with large scale corporate culture. Captured regulators make it outrageously expensive to start out in an industry. Young entrepreneurs are stopped at the gate, unable to even compete.

Worse yet, large corporations pigeonhole their employees preventing them from developing and utilizing their talents and keeping their wages low. A small business employee needs to learn a lot about how the business runs, and can gain a knowledge set to start a new business of his own. Large corporations get employees to specialize and focus on a small piece of the puzzle so that they have nowhere to turn if they want to change and develop – particularly as competitors become more scarce and non-compete clauses are rampant.

My particular solution…

Regulation needs to be progressive, just like income tax rates. The more money a company makes, the more stringent. For example, getting a home kitchen checked out for a small home bakery should be fine … until your sales hit a point where you really need that commercial-grade license.

Corporations should be forced to compensate employees better as revenue climbs. Two ways I see this … one is to limit total CEO and upper management pay packages to a set multiple of median employee incomes – thus encouraging a pay raise in the middle. The second idea would be to require companies over a certain size to use a unionized labor force. Either way, the idea is to empower people to reach their potentials, either by allowing them leverage against large employers or to make it easier for them to compete if they set out on their own.

Special taxes need to be applied to any business with more than a 10% market share in an industry. This should be highly progressive and quite high when an industry is more than 80% dominated by a single company. If it’s really a natural monopoly it’ll survive – if not then the owners will split it apart themselves.

As you can imagine I have a lot more ideas on how to change things, on financial regulation, combatting fraud, litigation reform, and a host of other issues. That could go on forever though, so I’ll stop here … my main point is that our biggest economic and sociological problems would start to fade if we could just tilt the rules back in favor of small business.

About johnonstocks

I've been trading stocks since 2003, active on Motley Fool's discussion boards and using first Hidden Gems, then Global Gains. I no longer have the newsletters, but I keep up on the WSJ and read David Rosenberg everyday at Education: CFA level 2 candidate MBA-focus in Finance, Marshall, University of Southern California - expected Dec 2010. BS Mechanical Engineering, UC San Diego, June 2002
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