Woodford Foundation for Limited Government

                            Free Enterprise and True, Responsible Capitalism

It is the mission of the Woodford Foundation for Limited Government and the Colorado Springs Bastiat Society to promote free enterprise and true, responsible capitalism in the Pikes Peak Region while also publicizing the international Bastiat Society's mission of "promoting the fact that the world is getting better, and that it's the creation of wealth through business that is doing it."

Most people generally understand, appreciate and respect "free enterprise." But "capitalism" has meanings both good and bad, so people often are both pro-capitalism and anti-capitalism at the same time. "Capitalists" are either good or bad depending on the definition of "capitalism" being used.

In their 2007 book, Good Capitalism, Bad Capitalism, and the Economics of Growth and Prosperity, authors Baumol, Litan and Schtamm group "capitalism" into four types, two "bad" and two "good" (pp.60-61):

"Bad"                                                               "Good"

A. State-guided ("crony") capitalism               C. Big-firm (but not "crony") capitalism   

B. Oligarchic capitalism                                   D. Entrepreneurial capitalism

"True Capitalism" is either C or D above, definitely not A or B; "Responsible Capitalism" puts the consumer first (not the producer) and requires integrity, ethics, honesty, plus economic freedom, defined as "the freedom to choose how to produce, sell and use your own resources, while respecting others' rights to do the same.......a simple concept, economic freedom is the engine that drives prosperity in the world and is the difference between why some societies thrive and others do not." (Heritage Foundation definition). In its best form it subscribes to what we term the "profit sharing culture", where both owners and employees prosper together.

Capitalists are individuals with discretionary capital to invest -- they need places to employ capital; sometimes those involved in free enterprise ("entrepreneurs") need capitalists, but many enterprises generate sufficient cash to provide their own capital and do not need capitalists for investment. When capitalists and entrepreneurs come together it's often difficult for the entrepreneur to sustain the enterprising, innovative spirit. Good capitalism often has a tendency to drift toward bad capitalism which is detrimental to a robust, thriving economy.

Both the Woodford Foundation and Colorado Springs Bastiat Society urge all Pikes Peak area business to be models of good capitalism, avoid the pull of state-guided crony capitalism, and embrace the profit sharing culture in their business operations.

Joe Woodford

Woodford Foundation Trustee and Managing Director, Bastiat Society of Colorado Springs

August 12, 2014

Woodford Foundation for Limited Government       Bastiat Society of Colorado Springs

Colorado Springs, Colorado

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Rekindling The Unappreciated Spirit Of Capitalism, One Company At A Time

By BARTLEY J. MADDEN, In Investor's Business Daily, 7/13/16

The ongoing debate about capitalism is further intensified by the embrace of Bernie Sanders' brand of socialism by Democrats and Independents. The popular narratives about capitalism are primarily negative, churned out by its critics, not its leaders. And under the radar of public awareness is how capitalism's focus on experimentation, innovation and adaptation has contributed mightily to human progress.

Widely unappreciated is that capitalism has enabled today's lowest-income people to have better educational opportunities, transportation and health care than even the richest people had a few centuries ago.

Business leaders need to get in the game and proactively communicate to the public the foundational purpose of their firms and their progress in achieving that purpose. This can help shift public opinion to support for free-market capitalism, in which what counts is what you can do for customers, and away from crony capitalism, in which what counts is who you know in government.

A first step toward improved communication is to permanently discard three words used widely in both business schools and corporate boardrooms -- maximize shareholder value. The proposition that the purpose of the firm is to maximize shareholder value gained prominence primarily due to its mathematical utility in delivering logical consistency to financial theories.

However, in practice, management failures -- reflected in large-scale layoffs and an excessive focus on meeting Wall Street's quarterly earnings expectations -- have been labeled as what to expect from "maximizing shareholder value." While this is inconsistent with the theoretical intent of finance academics who use this phrase, nevertheless there is a compelling reason to abandon this concept altogether. Maximizing shareholder value is best positioned not as the purpose of the firm, but as the result of achieving the firm's purpose.

A firm's purpose consists of four interrelated components.

First, a stated vision that inspires and motivates employees to commit their working lives to making the world a better place. This can be as specific as Illumina's vision "to improve health by unlocking the power of the genome." Or as broad as "3M technology advancing every company, 3M products enhancing every home, 3M innovation improving every life." In addition, Brad Smith, CEO of Intuit, which is well known for its Quicken financial software, describes Intuit's vision as improving their customers' financial lives so profoundly they can't imagine going back to the old way.

Second, is to survive and prosper through continuous innovation and efficiency gains. Nothing works long term if a firm consistently fails to earn the cost of capital. When management nurtures a culture of ethical behavior, experimentation, and feedback (i.e., an effective knowledge-building culture), employees continually improve their problem-solving skills as the firm expands its capabilities and adapts to new opportunities. Meanwhile, long-term underperformance or outright failures are likely outcomes from bureaucratic cultures in which employees are treated like cogs in a machine, tightly controlled by managers whose primary focus is to do whatever it takes to meet short-term accounting targets. For example, leading up to its bankruptcy, Kmart had a revolving  door of CEOs whose short-tem accounting goals were woefully inadequate in competing against Wal-Mart's relentless process improvements.

Third, continually develop win-win relationships as an integral part of achieving the firm's vision. The public needs to be exposed to plain-speaking narratives such as Amazon's CEO letters which, for example, explain how Kindle Direct Publishing creates widespread win-win opportunities for developers, entrepreneurs, authors, and readers, while generating profits for Amazon. But how do employees win when working in a retail store that sells low-priced merchandise and management views employees as costs? Skilled management can, in fact, make this a win/win relationship. Retail firms like Costco have developed highly efficient business processes in which well-paid employees are treated not as costs to be minimized, but as partners that drive productivity gains.

Fourth, take care of future generations. This involves management's commitment to environmental sustainability. Begin with designing products, services, and management processes that truly minimize waste and harm to the environment. Lean manufacturing firms are on a journey to reduce waste throughout the entire value stream of product, including raw material procurement and end-of-life recycling. That is taking care of future generations in a major way, yet how many Bernie Sanders supporters are aware of the lean manufacturing revolution?

What about corporate social responsibilities? Rather than seeing it as an ethical add-on to a firm's operations, corporate social responsibilities are actually embedded in the firm through a commitment to achieving its four-part purpose.

Getting the purpose of a firm right is a vital step in shaping a society with a spirit of capitalism. A society must embrace new ideas and encourage dynamism, and its people know that the opposite of innovation is not stability but stagnation. Such an opportunity-rich society  enables people to rise as high as their skills and determination can take them.