Tuesday, May 27, 2014

Would That We Will Be Able To Say "Free Enterprise Survives!"

 "Some people regard private enterprise as a predatory tiger they can shoot.  Others look on it as a cow they can milk.  Not enough people see it as a healthy horse, pulling a sturdy wagon."

Winston Churchill (1874 - 1965)

Winston Churchill always cut right to the quick.

Consider the alternatives he proposed here as regards FREE enterprise.  These are simple and easy to understand.

What is a predatory tiger and why would it be shot?  The predatory tiger sneaks up onto an unsuspecting victim, grabs it and hauls it off for food.  It keeps its catch for itself, to do with as it will.  Obviously if such a tiger, doing what it is supposed to do, invades places it should not, like a village, and takes weak victims unable to defend themselves, this practice has to stop.  This tiger has gotten out of its normal bounds, and has gotten used to its easy source of prey.  It will not stop unless it is stopped.  So it must be shot.

The term "free enterprise" contains the word FREE!  Freedom is not predatory, does not slink around and take for itself in a sneaky way.  If a practitioner of FREE enterprise does something long term that is not in tune with the law or proper business practice, like a scammer or a snake-oil sales man, the market will grind him out.  They do not last long.  They are eventually found out and people choose not to give any more toward their efforts.

FREE enterprise survives in the long run, and grows.  

It is accepted and develops a legacy.  It should not be hunted and shot.

Oh, how many think that FREE enterprise is a place to sidle up to and take at will!?  Gubments, which have nothing that isn't taken first from somewhere else, are the best practitioners of the hook on and suckle approach!  And who does gubment get to go along with its actions?  Certainly those in the bureaucracy it creates to manage and administer the milk!  That is a group that forever grows.  But there are others!

Who?  Those gubment politically convinces are deserving of a portion of the milk, groups who feel entitled in fact, and gubment designs a portion intended to keep those so convinced to stay on.  The portion is never enough to be able to go away on its own.  The portion is insidious, which means designed to gradually entrap.  And like frogs in the slowly-heating water they oftentimes find themselves unable to jump out.

And the word FREE in free enterprise takes on a different meaning!  What so many do not understand is that the free lunch is never FREE.  It must be paid for, somehow, somewhere, sometime by someone!

FREE enterprise survives in the long run, and grows.

It will continue to grow if it is not drained by those who, like gubments, feel to derive windfall profits from its success.

If FREE enterprise was instead seen by most, if not all, as a healthy horse pulling a sturdy wagon - think of the images this brings to mind!  Healthy horses are kept that way through great care, devotion and love.  Sturdy wagons are built for the long haul, cleaned and oiled, and maintained to do its job.

FREE enterprise does not have to be gotten rid of (shot)!
FREE enterprise does not work if drained of more and more of its bounty (suckled)!
FREE enterprise is the workhorse that keeps private property intact and protected, individual rights supported and protected, and the pursuit of happiness abundant!

John Adams died on the same day as Thomas Jefferson, exactly 50 years after the signing of the United States Constitution.  Adams knew he was dieing, but felt happy in the knowledge that Jefferson would remain to carry on the great objective of individual freedom and individual rights.  His last words were, "Jefferson survives!"  Not knowing Jefferson's fate, after a long life Adams died happy and confident that freedom was left for his country to benefit from.

Would it not be wonderful if we, too, after a long life, could feel happy and confident that FREE ENTERPRISE would indeed remain to be enjoyed and carry on its great objectives?

Would it not be wonderful if we, too, after a long life, could happily and confidently say -


Tuesday, May 20, 2014

With Free Enterprise There Are No Guarantees

 "Capitalism offers nothing but frustrations and rebuffs to those who wish - because of claimed superiority of intelligence, birth, credentials, or ideals - to get without giving, to take without risking, to profit without sacrifice, to be exalted without humbling themselves to understand others and meet their needs."

George Gilder

In other words, capitalism demands that one reaps what one sows.

According to Gilder, capitalism's pre-requisite is to give before you get; to risk before you take; to sacrifice before you profit; and to be exalted only after and to the degree that you understand and help others.

You don't just GET in capitalism.
You aren't ENTITLED in capitalism.
You work and aren't SERVED in capitalism.

Which must be why capitalism is derided in some circles as unfair, harsh, and creates economic strata in society.  

And strata would be created insofar as one receives according to what one puts into it.  As has been said so many times and in so many places - one reaps what one sows.

Capital is employed in capitalism.  

And capital can be defined in many ways in capitalism.

Land, labor, capital and entrepreneurship are the factors that create production in capitalism.

In a previous blog I said that capital is both a good that produces and is a produced good.

And for the entrepreneur hopefully the employment of his capital produces profitable results. 


Then where are the guarantees?  Where is the free lunch?  Where is the pot at the end of the rainbow?

In any other economic system where free enterprise does not reign! 

But wait, GUARANTEES you say?  What GUARANTEES?   We want GUARANTEES!

Churchill said that socialism offers a guarantee - it's inherent virtue is the equal sharing of misery. 

Tuesday, May 13, 2014

Great Quality Is The Natural Result Of Free Enterprise

"I realized I could not keep up and maintain any kind of quality.  I thought maybe that if I had the very best ice cream, people would be willing to pay for it."

Reuben Mattus (1912 - 1994)

This is the founder of Haagen-Dazs musing.  What is he talking about?

In the 1950s Mattus found himself, his small horse-drawn company, his product, and his ice cream, in a price war with large manufacturers.  They were able to compete with each other based on size and economies of scale.  His company was caught in the middle.

What did the large producers have that Reuben Mattus didn't?  Low prices.
What did Reuben Mattus have that the large producers didn't?  Great quality.

Let's back up.  Reuben Mattus came to this country from Poland in 1921, with his widowed mother.  As a child only ten years old he joined his uncle in a lemon ice business in Brooklyn NY.  His job was to squeeze the lemons for the ices.  They branched out into the production of ice pops, chocolate-covered ice cream bars and ice cream sandwiches, all sold under the label Senator Frozen Products. These were sold all over town in a horse-drawn wagon! 

Meeting a young lady named Rose, who worked at the Senator plant as a bookkeeper, they married in 1936.  Reuben began to research and experiment with "heavy" ice cream creations. 

He decided to start a new company in 1959.  Wanting a foreign-sounding name, he came up with Haagen-Dazs.  Joking that it means "the best," it really means nothing.  But he wanted something that sounded Danish to recognize the country of Denmark for their treatment of Jews during WWII.

The competition of the time used cheap ingredients, many of them artificial.  Reuben Mattus and his Haagen-Dazs did not - it used more butterfat, had less air, was heavier, and contained only natural ingredients.

He had to compete with the big boy companies!  How could he do that?  His ice cream was costly to produce.  Haagen-Dazs ice cream has none of the additives and preservatives and stabilizers that you read on labels but cannot pronounce.  It uses only cream and sugar, milk and eggs, and natural foodstuffs like chocolate, vanilla beans, coffee, nuts, raisins, etc.


Haagen-Dazs was introduced in 1961.  Yes, it would cost more.  A pint of his ice cream cost 75 cents a pint, versus an average of 53 cents a pint sold by his competitors.  But he was hoping people would be willing to pay for great quality ice cream.  Hence the quote above. 

He was right.  He would market his product to local grocers.  Reuben developed the ice cream.  Rose, his wife, would dress up high falutin', in keeping with how they wanted their product to appear in the market, and she would offer free samples at grocery stores. 

Brilliantly, she would also go to ice cream parlors in New York frequented by college students.  Selling her ware to these parlors the ice cream became an immediate hit.  Growing slowly, Haagen-Dazs ice cream was first distributed by the Greyhound Bus lines to various college towns in the area.

The rest is history.

The rest is free enterprise.  Starting with only three flavors - vanilla, chocolate and coffee - the Haagen-Dazs product line expanded to nearly two dozen flavors.  It also began franchising.  The company was eventually sold in 1983 for $70 million.  It has never lost its great-quality mindset.



Tuesday, May 6, 2014

Free Enterprise Engenders Uncompromising Quality

 “My first loaf should have been sent to the Smithsonian Institution as a sample of Stone Age bread, for it was hard as a rock and about one inch high.  So I started over again, and after a few more efforts by trial and error, we achieved what seemed like good bread.”

Margaret Rudkin (1897 - 1967)
Founder of Pepperidge Farm

Moving to a property called Pepperidge Farm in Fairfield CT in 1929, Margaret Rudkin, her husband and three sons began dealing with the Depression.

As difficult as that was, their youngest son's asthma and severe allergies proved just as daunting, if not more.  He was unable to eat most processed foods.  She determined to deal with it.

On the advice of a doctor Margaret began him on a diet of fruits and vegetables, and minimally-processed foods.  However, no matter what she bought, he was unable to eat white bread that did not trigger his allergies.  She decided to bake him all-natural, stone-ground, whole-grain wheat bread.  By doing so most of the vitamins and minerals would remain intact, without processing.

Having no experience in baking bread, the quote above came after her first effort.  But eventually her "good bread" came forth and her son could eat it!  The whole family loved it.

She thought she might try it on a local grocer.  Calling it "Pepperidge Farm Bread," she approached him with a sliced loaf.  At that time bread was selling for 10 cents.  She wanted to charge 25 cents!

He was skeptical only as long as it took him to taste a slice.  He took all her loaves, and by the time she got home there was a phone message asking for more.

She said, "Although I knew nothing of manufacturing, of marketing, of pricing or of making bread in quantities, with that phone call Pepperidge Farm bread was born."

Her husband took it to New York to sell it at specialty shops.  Without a plan Margaret continued to bake bread in her kitchen.  She had to move her now burgeoning operation into the garage.

By 1939 she had sold 500,000 loaves!  Six months later 1 million!  In 1940 she bought a commercial baking plant.  During the lean years of WWII, when the rationing of staples reigned, she refused to produce anything of lesser quality and instead she cut back production.  

But in 1947 she opened a state-of-the-art baking plant in Norwalk, CT.  Still, despite all the machinery, she insisted that all dough be kneaded by hand!  She wanted to maintain that home-made quality of the product.

The rest is history.

True to the common track taken by free enterprise, Margaret's travel and keen eye brought her ideas for product differentiation.  Impressed by cookies she encountered in Belgium she made it possible for her to produce and sell them in the United States.  She made them with the same quality standards as her bread.  And Pepperidge Farm Distinctive Cookies brand was born.  

Seeing the coming wave of the frozen-food industry, she purchased the Black Horse Pastry Company of New Hampshire and began selling frozen pastry.  Among the offerings were Pepperidge Farm Turnovers and Puff Pastry.

Traveling to Switzerland she encountered little goldfish crackers.  Knowing they would be popular in the United States she added Goldfish Crackers to her Pepperidge Farm line up.

She sold the company to another family-owned business, Campbell Soup, in 1961. 

Finally, in 1963, she produced the first best-selling cookbook in the country - The Margaret Rudkin Pepperidge Farm Cookbook.  

Often referring to Pepperidge Farm as a "fairy tale,"  she said, "My explanation for our extraordinary growth is that Pepperidge Farm products are the best of their kind in the world."  And it all began by trying to find something her son could eat!

'Nuff said.  This is perfectly in keeping with the famous Adam Smith quote, "It is not the benevolence of the butcher, or the baker that we expect our dinner, but from their regard to their own interest."

Yes, free enterprise happens out of self interest.  But it also engenders uncompromising quality.