11. The Capitalist's Secret
Pablo’s Note: This piece is very long, and though it outlines the beginnings of the economic argument for contributism, it is not necessary for the casual reader. If you are more interested in society than in economics, or simply in a hurry, I recommend moving on to entry #12 and returning to this piece later.
The Contributist and the Capitalist, Part III — The Societal Actor
Laila is the chief policy director of what has become one of the largest tutoring organizations in the state of California. The organization has partnerships with over a third of all high schools in the Bay Area, and employs over one hundred full-time tutors.
Laila has shaped the organization’s approach to grant-seeking from the beginning, and this is in large part what has fueled their expansion over the last ten years. She is a charismatic presence and an excellent storyteller, which has made her one of the most effective grant-seekers in education.
These traits and her success as a networker are also what led to her being asked to present the keynote speech at a conference hosted by an esteemed local public policy organization. There are hundreds of attendees, including a few state legislators, as well as top executives from several well-known businesses and nonprofits. Knowing that these big names are in the audience, she’s a bit nervous when she strides onto the stage, but she’s never been the type to hold back or defer to authority — that’s part of what people find so charming about her. She is also a woman of ideology, and very smart — that’s what makes people stop and listen when she speaks. The title of her speech is: The Capitalist’s Secret: How Organizations Win.
Laila The Capitalist
“Good evening. I am the founder and policy director of Laila’s Touch, which I am proud to say is the largest and most successful tutoring organization in the Bay Area. This is in no small part thanks to the contribution and partnership of many of you present in the audience today. So please, give a round of applause to the legislators, donors, and collaborators who have helped make our vision possible.
Let me tell you a story. Ten years ago, I was a tutor in Fremont, working at a small business with only three employees. The founder was a phenomenal tutor and a kind woman, but her ambition was greater than her capacity to lead. She had scaled up too quickly, and the business contracted after COVID. Within months, its income dried up, and I was laid off from the company.
This stung of course, but it was not the first time I had been laid off. Before becoming a tutor, I worked as a policy analyst at a small housing non-profit. That organization relied on government grants for most of its income. This worked for some time, but they were caught off guard one year when the government’s funding priorities shifted, and the grants which sustained their work were no longer on the table. As I learned afterwards, the organization did no lobbying; they didn’t even know about the new funding bill until after it was passed. Whether this was because of understaffing, or just naïveté — an unwillingness to “get their hands dirty” — I don’t know. What I do know is that their cash quickly ran out, and the organization fell apart within a year.
These experiences taught me an important lesson — capital, like God himself, is no respecter of persons. Whether you are a business or a non-profit, you cannot win unless you are first and foremost a good capitalist. What leads an organization to success or failure is not its good intentions, its ethics, or even the quality of its product. An organization lives or dies by its economics. Today, reflecting on my early failures and later successes, I can tell you that I have learned the secret to success as a modern capitalist. So, let me tell you about economics, and how organizations win.
The great philosopher Adam Smith, who originated the field of economics and with it the theory of capitalism, famously recognized that the capitalist works only in his or her own self-interest, and that this is not a flaw in our humanity, but a strength. By recognizing us for who we are, Smith, and the economists that came after him, taught us how to harness this fundamental self-interest for the good of our whole society. In Smith’s words,
By directing [his] industry in such a manner as its produce may be of the greatest value, [the capitalist] intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention. . . . By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it.
It is with this context in mind, with the knowledge that we can in fact be better members of society when we act in our self-interest than we are when we attempt to act in the interest of others, that I will speak to you tonight about how we have become better capitalists in the two hundred and fifty years since Adam Smith wrote those words, and how the best organizations today are, indeed, still the best capitalists.
A common understanding of capitalism is that it operates like Darwin’s natural selection — a sort of “survival of the fittest” process in which government sets the rules of the game, and the organizations which play within those rules most efficiently and effectively rise to the top, while less efficient and less effective organizations die out. We like to believe in this story, because it means that anyone can succeed, no matter how small, simply by creating a better product or a more efficient process than their competitors.
But the capitalist’s secret is that no part of this story has ever really been true, and it has become less and less true as our economies grow in scale. The best capitalist is not the one with the most efficient process, the most effective product, or even the one who best plays by the rules of the game. The best capitalist is the one who best pursues his own interest, the one who, as Adam Smith wrote, “intends only his own gain.” By pursuing self-interest, the capitalist increases his own wealth and power, and this is what makes him able to outmatch his competition.
And it is this, the capitalist’s ability to accumulate wealth, not her efficiency, which increases the net wealth of the society of which she is a part. It was John F. Kennedy who first remarked that “a rising tide lifts all boats,” and despite the recent grumblings of under-informed populists and socialists, the aphorism remains unquestionably true. When the capitalist wins, so does her country. This is why we reward those capitalist organizations which understand that their job is not to be efficient, effective, or to play by the rules, but to win.
But what can I mean by this? Aren’t efficient and effective organizations more successful than those that are not? And don’t organizations have to follow the laws set forth by government? These are intuitive assumptions, yes, but the great march of capitalism and American enterprise over the last two and a half centuries has been due precisely to the ability of the greatest capitalists to see past and overturn these assumptions. The modern capitalist understands that the most successful organizations are those which have learned that the basic rules of economics work differently in economies of scale.
The modern capitalist sees that the winner is not, in fact, the organization which is most efficient in its production. In theory, the market favors the most efficient organization, because it can undercut its competitors by offering its goods at a lower price. But the modern capitalist has realized that efficiency is not the only, or even the most effective, way to undercut one’s competitors. In fact, we have found that there is a better way — a method which turns out to be a far more rapid and effective tool than improving one’s efficiency: pure capital investment.
Upfront capital investment has always been a core element of capitalist success, despite most capitalists’ anxious desire to downplay it. Even in the early days of capitalism, one simply could not access the efficiency gains of a factory line without first fronting the significant cost of building the factory and hiring its employees. This means that, since the beginning, the capitalist class has almost exclusively consisted of those who were already wealthy, or those who could first acquire significant capital investment by other means (usually the patronage of one or more wealthy investors). In other words, you have nearly always needed to have money to make money.
But while the early capitalists saw capital investment as only an important step towards creating an efficient organization, we have realized over time that the capital investment itself is far more powerful than we first believed — even more powerful than the factory line.
The strategy of defeating competition through the sheer power of investment, far beyond any claim to operational efficiency, has grown and developed over time. It was perhaps first perfected by Rockefeller, whose immense capitalist success made him the richest man in the world, and reshaped U.S. antitrust law in the process. Today, the strategy has come to define modern capitalism.
What does this strategy look like? In its plainest variation, an organization simply sells its product at a loss. That is, it offers its product at a price lower than the cost of its production. Increased efficiency is a way to lower prices, but it can only lower prices so much. Any such advantage can be immediately outpaced by the wealthier competitor who is willing to simply take a capital loss on every transaction.
Uber is perhaps the most famous success story of this strategy. Founded in 2010, they became quickly ubiquitous for their impossibly low-priced private transit. How did they get their prices so low? Not by operational efficiency — instead, they pooled together investor capital and simply allowed their costs to far exceed their income. They spent over $100 billion before they ever turned a profit. And in doing so, they defeated dozens of less cash-flush competitors, as well as the entire taxi industry.
It is not just Uber — the strategy of capital over efficiency is the new capitalism. These days, most companies compete with each other on operational efficiency only on the margins and secondarily; outside of a small number of highly-technical fields like the production of semiconductors and batteries, the primary locus of competition has shifted away from how efficient a company’s production is to how much capital a company can raise and then spend.
We see this in ways large and small. Even tactics as commonplace as offering a free trial are variations of this strategy — the trial allows the company to gain market share not by having a better product or more efficient production, but because smaller competitors cannot afford to give away their product for free. Decades ago, AOL spent hundreds of millions of dollars flooding the country with free trial CDs, and by doing so became the world’s largest dial-up internet provider. Since then, it has become the norm in the tech industry for a company to spend its first few years operating at a loss, because burning capital has proven to be a much more effective competitive strategy than focusing on operational efficiency.
In fact, in the strategy’s most ideal form, the organization manages to provide their product entirely free of charge, effectively erasing the market advantage of efficiency by making it impossible for anyone to compete with them on price. Google famously began as a free search engine, and now, a quarter century later, is one of the wealthiest companies in the world, with nine free products that are relied on by over a billion people every month. Products like these are commonly understood to be funded primarily by advertising revenue, and while this is partially true, the ads are a diversion from the true business model. The dominance of the product is not due to ad revenue, but to the upfront capital investment that enabled its initial development and spread. Ad revenue always trails market share — it comes only after an organization has already captured a share of the market. These “free” products are the achievement of capital investment, and demonstrate that a focus on efficiency is almost always a losing strategy in today’s capitalist landscape.
I expect that the sharpest minds in the audience already understand that the same is true of a focus on the effectiveness of the product. Even the capitalists of old knew that efficiency would always beat effectiveness in the long run; that as long as the cheaply-constructed and mass-produced shoe met some minimum bar of quality, it would eventually put most makers of hand-crafted shoes out of business, leaving only the highest end of the market — the most exclusive, expensive hand-crafted shoes — untouched.
Since efficiency beats effectiveness in the market by undercutting it in this way, and capital investment undercuts efficiency, we can see by the transitive property that effectiveness succumbs to capital investment even more heavily. And the most industrious capitalist sees in this an important opportunity. By lowering the price of the product beyond what efficiency could ever do, capital investment allows us to push the minimum bar of quality that the consumer will accept even lower. This allows the capitalist to reduce their production costs even further by creating an even lower-quality product. If the shoe costs pennies on the dollar, who can complain about the quality of its fit?
To be clear to any would-be detractors, this downward spiral in quality should not be understood as detrimental to the consumer, because it is accompanied by a downward spiral in price. Quality may decrease, but production and affordability increase — now, even the poorest citizen can afford to buy shoes, even if they won’t last quite as long as the shoes of yesteryear. (And thankfully, the market of exquisite hand-crafted shoes will always remain untouched and safely available to the wealthy capitalists.) This is how the capitalist’s rising tide lifts all boats. The capitalist’s self-interest leads them to direct their wealth to artificially lower the cost of goods in order to choke out their competition, and the result is that the working class gets more stuff at a lower cost.
And while it is true that the wise capitalist will always raise their prices once their competitors have been effectively tamed (and never increase quality), it is also true that this price increase is only temporary. It is only a matter of time before an even wealthier capitalist comes in and begins the cycle anew, lowering quality and price even further than before.
This is how wealth begets wealth, and size begets size. In any and every modern capitalist race, the favored competitor — and indeed, the one who nearly always wins — is not the one with the best product or process, but simply the one who can flood the race with the most capital, drowning their competition.
And it is worth noting that, although in many cases this is the wealthiest competitor, it is not always so. The largest pool of capital usually comes not from a single wealthy individual or organization, but from the alliance of a team of very wealthy individuals and organizations, either in the form of direct investment or coordinated oligopoly. It is good to be wealthy — it is far better to have wealthy friends.
So we see that the best capitalists — the winners — have long ago put aside the naïve notion that efficiency or effectiveness are the path to success in a capitalist environment, or even that these traits are worth pursuing on their own merit. The capitalist improves their society not by improving the quality of products or processes, but by increasing the overall sum of its production and its wealth.
Perhaps you are beginning to see why I, the policy director of a non-profit organization which relies on grants for much of its funding, have such an interest in capitalism. If capitalism has become about dominating through raising and spending capital, then the operations of the for-profit organization, which raises funds primarily from investors, and the non-profit organization, which raises funds primarily from donors and grants, are not so different.
In fact, the term “non-profit” has always been a bit of a misnomer. One of the great misunderstandings of non-profit organizations is that they do not seek to make a profit, and are therefore not capitalist. To the contrary, it is a basic rule of finance that every business must be profitable, or else it cannot survive. The difference between a non-profit organization and a for-profit organization is only that the non-profit carries certain restrictions on how it distributes its profits to its owners, and in exchange of this, it receives a series of advantages from the tax code, and is more often eligible for all types of grants.
This understanding is what leads us to the final, and most consequential, part of the capitalist’s secret. We must put aside the silly notion that the for-profit company is the true self-made capitalist, and the non-profit organization is some socialist endeavor reliant on government handouts. This is important not just as a personal point of pride, but because it represents a fundamental misunderstanding of the capitalist’s success. In reality, the capitalist attains success not by eschewing government support, but by finding ways to make the rule of law work in their own favor. And the very best capitalist — the one who wins — is not the one who simply follows the rules of the law as written, but the one who is able to bend those rules, and the entire government, in their favor.
I learned this acutely when I lost my first job at the hands of a government funding bill. Though the non-profit is unique in its access to government grants, for-profit organizations should make no mistake: it is ultimately the government which shapes all of our economic fortunes. Last decade, a study found that the two hundred most politically active for-profit corporations in the U.S. spent a combined 5.8 billion dollars on federal lobbying and campaign contributions over a five year period, and received in return 4.4 trillion dollars in government contracts and support, a 760 times return on investment. And this is just at the federal level. When we take into account the contributions of state and local government, as well as lobbyist successes in reducing the effective tax rates that corporations and corporate investors pay to levels far below those paid by ordinary citizens, it may well be the case that the assertion of government influence is the primary source of capital for for-profit organizations.
But the importance of government influence goes even further than capital. The reality of capitalism is that, regardless of how much capital one accrues, the government has immense influence on the operation of every industry, and no one can be successful unless the law allows them to be so. But the inverse of this is also true — if you can get the government on your side, you can stack the deck so neatly in your favor that it becomes nearly impossible to lose.
We became most familiar with this idea after the 2008 financial crash. The resulting notion that some banks are “Too Big to Fail” was not a fundamental truth about economics or capitalism — it was an acknowledgement that, if these organizations prove incapable of succeeding on their own merit, the government will always step in with new funding or legislation to reshape the economic situation in their favor — changing the rules on their behalf so that, no matter how ineffective they are as market participants, they cannot lose.
It is incumbent upon all capitalist organizations to use the government in their own self-interest in this way. And indeed, all of the most successful capitalist organizations do, to some degree, even if they cannot attain the total immunity that the big banks have achieved by wielding a stranglehold on our financial systems. Over the past century, capitalist interests have reshaped all sorts of laws in their favor, effectively repurposing the government’s power of enforcement — a public resource — into a private service to use against their opponents. Intellectual copyright and patent law has been transformed from a tool designed to protect innovation into one of the most effective strategies for wielding the government as an enforcer to seize and maintain control of a market. Arbitration law has been quietly reshaped to prevent most consumers and employees from filing lawsuits accusing corporations of misbehavior. Property law has always been structured to reinforce the strength of existing power holders, while erecting barriers to entry for newcomers. I have said that it is good to have wealthy friends, but it is far better to be friends with the government — to have influence over those who write the rules.
This is how Laila’s Touch has attained success. We have devoted the bulk of our efforts to our capitalist mission — not efficiency or efficacy, but success. We have found favor with a bevy of wealthy donors and clients, many of whom are in the room today. We have worked with government to ensure that funding laws favor us heavily over our competitors. We have amassed and expended capital, ensuring through high availability and low prices that our under-resourced competition cannot meaningfully compete with us. And where we have resources left over, of course, we use them to help the kids.
This is the capitalist’s secret, and how organizations win. Despite what we like to tell ourselves and others, the story of capitalism is not the story of the efficient and effective defeating the lazy and incompetent. It is the story of those with capital — the wealthy — defeating those without it. It is not the story of the success of those who can best play by the rules as written, but the story of the success of those who can ensure that the rules are always written and rewritten in their favor.
And although this is a very different picture than the one we prefer to paint for ourselves, there is a courage in honesty, and a beauty in truth. The capitalist pursuit of self-interest produces a most effective system, one that is, as Adam Smith recognized, far more productive than any attempt to work altruistically. We must understand that, though the mechanisms of capitalism may at times seem brutal or unfair, they move us always towards a more prosperous future.”
Laila The Contributist
“Good evening. I am the policy director of Strong Minds, which I am proud to say is the largest and most successful tutoring organization in the Bay Area. This is in no small part thanks to the contribution and partnership of many of you present in the audience today. So please, give a round of applause to the legislators, donors, and collaborators who have helped make our vision possible.
Let me tell you a story. Ten years ago, I joined Strong Minds as a disillusioned and restless young adult. I had just been laid off from a policy analyst role at a housing non-profit, and I chose to pivot into tutoring because I had grown jaded about the power of policy advocacy to impact real people’s lives — I wanted to do some direct good for once.
A year into this position, a couple of things came to a head at once. First, I was beginning to realize that, despite my best intentions, I was really not cut out for tutoring. Those kids were damn smart, but boy, could they play dumb, and I loved them to death but I did not have the patience. God bless every one of the Strong Minds tutors for what they put up with on a day-to-day basis to get these kids to the opportunities they deserve.
But more importantly, the business was at a crisis point. Profits were down, and the organization could no longer afford to keep all three of its employees. And as the worst tutor of the three, I could read the writing on the wall as clear as day — the organization could no longer afford to keep me. My boss Olivia had always been direct with us, so I just asked her plainly — was I going to be laid off? I was already having flashbacks to a year prior, when my entire team had been let go by my prior employer with no warning; we had barely had enough time to clear our desks and say tearful goodbyes.
But what Olivia said next surprised me. She told us that her priority was not protecting the business at all costs, but protecting our ability to do the work that we cared so much about. She communicated to us that, while capital mattered as a means to an end, she saw in us something more than the capital value we provided to the business, and that what mattered to her most was protecting our right to give.
In that moment, something in my mind clicked together, and a lot of things that had been muddled became surprisingly clear.
It began with the realization that, up until that moment, I had feared Olivia. This wasn’t any special or acute kind of fear; I only feared her in the background way that most people fear their bosses — like a dictator, she had an ultimate power over me that she could wield at any moment, and although we got along well, I knew in my heart that when it came down to it, our goals were not fully aligned. Even if we shared the ostensible goal of helping the kids of our community, this goal was always secondary to capital. For her, this meant protecting the business’s capital at all costs. And for me, it meant protecting my own capital income at all costs, by ensuring that my capital value to the organization was never in question. I didn’t recognize it at the time, but this underlying adversarial tension was stifling both my capabilities and my imagination. How could I be free to find the best way to contribute to our shared goal of helping the kids in our community, if I was always busy carrying the anxiety driven by my primary goal — my constant attempt to prove my capital value by asserting that I was great at my job?
But when it became clear that Olivia’s true goals were actually aligned with mine — and with my well-being — we were suddenly no longer adversaries. She had extended not just an invitation to a truce, but an actual peace treaty. I felt a weight lifted. Rather than fear her as a dictator, I became free to respect her as a partner and leader. And I became free to loosen my capital-first mindset as well. Instead of seeking first to protect myself, I was free to do whatever I could to help advance our shared goal. This shifted the dynamic within our organization so greatly that Markus, my co-tutor at the time and the purest soul I’ve ever met, even offered to give up a portion of his income to help stabilize the business. I was not yet so trusting, or so selfless, but I couldn’t deny feeling a new sense of security and devotion to the organization and its mission. And this improved focus is what gave me the idea — and the courage — to ask Olivia soon afterward to allow me to pivot out of tutoring entirely and into policy and grant-writing.
But all of this got me thinking even further. I began to realize that the fear that I once had of Olivia was not just one individual’s fear of her individual boss, but a culturally pervasive fear of bosses in general — or more specifically, a normative adversarial relationship with the capitalist employer, who wields power over her employees but whose capital-first goals are fundamentally mis-aligned with their well-being. And as my specific fear was stifling to me — preventing me from doing my most effective work — so I realized that this general fear was acting to stifle the effectiveness and quality of output of all employees of capitalist employers in general.
And it was at precisely that moment that the scales fell away from my eyes, and I saw the capitalist’s secret — a truth which, once seen, cannot be unseen. It became clear to me that capitalism is not as strong as we have believed. To the contrary, the capitalist organization hampers its own efficiency and effectiveness, takes a trajectory that is in many ways self-defeating, and can only succeed when propped up by significant government favoritism. It is this recognition, the discovery of the capitalist’s secret, which has led to the considerable success of our organization, and which I believe is of great importance to our whole society.
Because if my individual fear of Olivia could be dismantled, then this means that this general fear too can be dismantled — that it is not in fact a necessary or unavoidable fear, but a contingent one. The fear exists because of a particular counter-productive and adversarial relationship between the employer and her employee — between the entrepreneur and the worker. A relationship defined by their underlying economic warfare, not by their humanity and shared goals; a relationship that actively works to reduce both parties from humans — individuals capable of morals, passion, commitment, and imagination — to mere economic actors.
But if we can restore to both the worker and the entrepreneur their humanity, then we can create not just better lives, but stronger organizations, and a more prosperous nation. I will describe how this can be done, how we can transition to a dynamic better and more effective than economic warfare, but in order to do so, I must first explain to you the capitalist’s secret.
In 1776, the philosopher Adam Smith published The Wealth of Nations, his magnum opus, which many credit as having originated the modern field of economics, and the theory of capitalism. It is a large book, spanning many subjects, and one that is quoted with confidence by far more capitalists than have actually taken the time to read it. But it is worth understanding the scope and thrust of Smith’s argument, if we want to understand the scope and trajectory of capitalism.
Smith frames his book as an inquiry, and so he begins it by asking a simple question — why do some nations have a great deal of wealth, while other nations have very little? The rest of his book aims to answer this question, and his argument can be boiled down into three main points. First, that worker specialization — the division of labor — multiplies our productivity. Second, that when everyone works in their own self-interest, markets arise that are more productive than those created by altruistic cooperation. And third, that the role of government policy is to encourage rather than stifle market competition. These three ideas make up the fundamental idea of capitalism: that when entrepreneurs are free to direct the labor of specialized workers to the production of goods for their own profit, the ensuing market competition increases the productivity of the entire society.
Notice three things about this argument, and you will begin to understand the capitalist’s secret. First, notice that the scope of Smith’s leading question is limited to wealth, that it says nothing of human thriving. And this has been the rarely-mentioned limitation of economic theory ever since — a good economic system is understood as one that most increases our wealth. Any impact that such a system has on human dignity or happiness is incidental and, despite the warnings littered throughout conventional wisdom — “Money can’t buy happiness,” “you can’t take it with you,” “the love of money is a root of all kinds of evil,” etc. — the economists always seem to assume that the impact is unquestionably positive.
Second, notice that the scope of capitalism’s success is measured in total output — productivity — rather than quality of output — effectiveness. These measures are related, but not equivalent. As we know from the rise of fast food, fast fashion, and social media, a vast increase in output does not necessarily correlate with an overall increase in quality, and can sometimes mask a decline in effectiveness. But capitalism specializes in increasing productivity, not effectiveness, and so that is what we primarily measure and seek to improve.
These first two observations are why America’s gross domestic product (GDP) has always towered over that of every other nation, but in every life quality measure — happiness, life expectancy, leisure time, etc. — our performance is middling. We are a nation of capitalists, and so we excel at increasing our wealth and productivity, but this comes at a cost of quality of goods and human thriving.
The final observation, and the hardest to notice, is that there is an inherent tension between the second and third points of Smith’s argument. If everyone is working in their own self-interest, it actually becomes very difficult to maintain government policy that encourages rather than stifles competition. This is because every rational capitalist will attempt to skew government policy in their own favor to the detriment of their competitors — otherwise they would not be working in their own self-interest; they would not be capitalists. No self-interested actor is pro-their-own-competition; and as capitalist actors become more and more wealthy, they have more and more power, and can only be expected to use that power to influence government policy.
And indeed, this is what we have seen over time. Government policy has become increasingly aligned with the interests of the wealthiest corporations, to the point that the wealthiest corporations are both more dependent on and more influential in government policy than perhaps any other group.
Combined, these three observations tell a different story about capitalism than the one we often believe. The capitalist’s success comes not from producing a better product more efficiently, but from their ability to use their wealth to mass-produce, and to seize power over markets. The impact of capitalism on society is not necessarily an improvement in the quality of goods and human thriving, but an increase in overall production and wealth. And the trajectory of capitalism is not to bend society towards more competitiveness, but towards consolidation of power into the hands of the wealthiest capitalists.
And this is the capitalist’s secret. It is of paramount importance to the capitalist that the focus of our measurement remains on production and wealth, because when measured by these specific metrics, the capitalist is quite successful. But when measured by any other metrics, especially the metrics that really matter — the efficiency and quality of their output, their impact on human thriving, and even their basic ability to win by merit — the capitalist organization is actually far from optimal. Measured by any of these metrics, the capitalist impulse is instead seen as a form of self-defeating gluttony — the natural trajectory of the capitalist organization is to become wasteful, uncooperative, and distracted by its own greed.
This may sound essentially identical to what Marx and the socialists identified. They would argue that capitalism’s greatest success is its persuasiveness as a story told by the wealthy to the public to justify the status quo. Like all successful aristocracies before them, the wealthiest members of American society maintain their power not by being more worthy than the rest of society, but by ensuring that we believe that they are. And as long as they can preserve this belief, we will even support them in maintaining their position above us, revering them only because we cannot see past the story that they have told us — because we have learned not to see possibilities beyond those that they have constructed.
But while socialism has correctly understood capitalism’s flaws, socialists have historically failed to see the root and extent of them. Marx believed that capitalism’s inherent contradictions would inevitably spur a workers’ revolution, because eventually the workers would see that capitalism is simply a disguise for class warfare. The workers, seeing capitalism’s inherent imbalance in favor of the wealthy, would rise up violently against their capitalist overlords, seize control of society, and bring about a system of equality.
The problem with this socialist theory of change is that it fails to recognize that, although capitalism favors the wealthy, the capitalist spirit is not limited to the wealthy, nor is it rooted in class dynamics. The fundamental idea and spirit of capitalism is egalitarian, even if its outcomes are not. The socialist worker who wants to see a fairer distribution of wealth may very well still be a capitalist in spirit, and in fact, is usually so. What makes someone a capitalist is not their interest in upholding the economic status quo, but their self-interested efforts in directing labor towards their own profit. A socialist who works to advance socialism because she sees how it would work better in her favor than the current capitalist oligarchy which works against her, is simply a shrewd capitalist. This is why the socialist revolution always ends up collapsing in on itself — because both the socialist and the aristocrat she aims to overthrow are usually operating from the same spirit of self-interested labor, of capitalism.
If we want to move beyond capitalism, we must address and replace it at its motivational root. The dysfunctional relationship between the capitalist employer and her employee is capitalist on both sides — both employer and employee are working in self-interest, aiming to direct labor to their own profit. If we simply act to strengthen the employee’s position against the employer, we have not actually introduced an alternative to capitalism, we have only shifted power from one capitalist to another. It is taboo in some circles to say it, but this is one reason why unions have a sour reputation in America, despite the mountain of good that they do for the unionized employee. They serve as a powerful corrective force to corporate self-interest, but when they grow too strong, they too have been notorious for corruption, and have been known to stifle innovation. The status quo capitalist is correct when they point out that strengthening the worker’s position over the employer does not always strengthen the organization, and at times may in fact weaken it.
This is what the socialists usually miss. Though they correctly challenge the capitalist oligarchy, they rarely challenge the spirit of capitalism itself and in fact, they usually encourage it in their followers. By advocating for class warfare as their solution — whether violent or just political — they condemn the capitalist spirit in the upper class while affirming the capitalist spirit in the lower. They exhort the poor to act in their own self-interest, while simultaneously telling the rich not to. In doing so, they fail to take heed to Audre Lorde’s wisdom: "the master's tools will never dismantle the master's house.” Ultimately, they have still failed to see beyond the possibilities that the capitalist has constructed.
But what would it look like to see past the possibilities that the capitalist has constructed? What would it mean to advocate not for more rounds of the endless capitalist warfare, but for lasting peace? Allow me to tell you the story of Strong Minds’ success, and of our spirit of contributism.
A decade ago, when the three of us left that crisis room, we were all freshly oriented towards our shared goal — contributing to our community as effectively as possible through our tutoring business. As I noted earlier, it turned out that my most effective contribution was not actually tutoring, but grant-writing.
Strong Minds was originally incorporated as an LLC, but I convinced Olivia to convert it to a 501(c)(3) non-profit. Doing so didn’t change the operation of the business in any noteworthy way, but the non-profit designation saved us money on taxes, and enabled us to apply for a wider variety of grants. Perhaps a capitalist CEO would not have made this decision, because the biggest consequence was that it made it harder for Olivia to extract profit for herself beyond a reasonable salary. But Olivia was a contributist, not a capitalist, so she was not concerned about extracting profits for herself; she was concerned about giving to her community most effectively. This decision — to commit to allow the profit of the business to be reinvested into the shared goals of the organization rather than her own pockets — made the business more efficient.
If Olivia had fired me, she would have saved the business some expense, but she would never have known what she lost — in that first year, I was able to secure grants worth thirty-thousand dollars, which, in addition to the tax savings from our re-incorporation as a non-profit, far outweighed our existing deficit. This came because Olivia refused to fire me unless all other options were exhausted, because she placed a strong priority on my ability to contribute.
But that was just the beginning of our success. Because Olivia had, from the beginning, been unwilling to compromise her focus on contributing to her community, she had worked with parents and students to develop a tutoring model that was both more efficient and effective than her competitors. The kids especially loved the group tutoring sessions, because they built community while staying small enough to allow for learning. The consequence of this was that our organization was not just competitive on price, but notably more impactful than our competitors by a number of metrics.
This measurable impact was what allowed me to expand the scope of our fundraising. I began to make inroads in state and local government, convincingly arguing that the government should shift its funding criteria to prioritize organizations that were effective in the measures that mattered most to the community (which turned out to be increasing college enrollment rates, lifting students’ grades, and reducing their involvement in crime), rather than those who spent the most on lobbying. Not only did this work heavily in the favor of our organization, since we were effective on merit, it also encouraged our competitors to shift towards our tutoring model.
A capitalist might see this type of emulation as a threat, but we saw it as a success. Because of our actions, our competitors became better givers — more effective contributors to our shared community. This meant that more students were being served effectively, and our community became stronger than if we had been working alone. What the capitalist often fails to see is that, outside of capital, success is never zero-sum. When goals and incentives align to promote effective contribution, collaboration between competitors becomes a breeding ground for innovation. Rather than attempting to beat out our competitors by stifling their growth, we see the value of healthy competition and import ideas from them as often as they learn from us. And in many cases, we have actively collaborated with them — with their help we were able to successfully advocate for an overall increased allocation for tutoring in the state budget.
Soon, we began to partner with schools, and this allowed us to hire more tutors. We pay them well, but I suspect that our total staffing costs are still lower than nearly any of our competitors, because we have an extremely low turnover rate. We have one of the highest employee satisfaction rates in the state, despite having a lean HR department, because our employees are mission-aligned. They are less prone to burnout, and when they do find themselves approaching their limits, we find them better roles. We make it our priority to give to them as much as we are able, and they give back to us.
Our culture has not been wrong to believe that the strongest organizations will prevail; but we have been wrong to believe that the strongest organizations are capitalist. Capitalists have only been so successful because we have ceded all power to them for so long.
We are more efficient than the capitalist. Our workers are motivated, loyal, and flexible, while the capitalist organization is at silent war with their workers, and attempts to compensate for this with inflated salaries and lukewarm HR maneuvers.
We are more effective than the capitalist, because our ultimate measure of success is the impact we have, not our profits. The capitalists, on the other hand, are distracted by their greed, taking every opportunity they have to funnel wealth away from their product and into their pockets.
And we are able to win by merit, while they cannot succeed without the state creating and enforcing laws in their benefit. Rather than working to rig the game in favor of ourselves, we have worked hard to unravel the capitalist’s unearned advantages. We have advocated for government grants, spending, and favorable tax policy to go to the most effective organizations, not to the best lobbyists or the too-big-to-fail. And ultimately, we have bested the capitalists at the game that they pretend to have perfected, by playing by a better strategy than they are capable of even attempting.
Our capitalist oligarchy is showing its age. The historians have already begun to call our modern era late stage capitalism, because it is plain to see that we are butting up against the unpleasant end of the capitalist trajectory. As capitalist industry consolidates into the hands of fewer and fewer organizations, for whom capital is king and efficiency and effectiveness are merely afterthoughts, the world’s political order is changing — America’s dominance on the international stage is being challenged on all ends by countries whose innovation is not as stifled by capitalist greed. We once maintained our position atop the global economy by the efficiency and quality of our production; now the extent of our imagination with regard to global competitiveness has been reduced to debate about how steep our tariffs on imports should be, a hapless attempt to delay the rise of more efficient international competitors. And where America once stood out for our optimism and the sheer power of our collective spirit; we are now increasingly known for our cynical and divisive politics and our collective disillusionment — the stubbornness of our inequalities and our fundamental inability to get along. We can only expect this decline to continue if we do not escape our trajectory, if we refuse to change course. We must be ready to see and move beyond capitalism not just because we want to win as individual organizations, but because we care about the success of our nation.
It is better for our nation when our organizations have real positive impact on our communities. It is better for our nation when our employees are fulfilled, motivated, and efficient. And it is better for our nation when our organizations don’t need the rules to be rigged in their favor to be successful — when we are capable of winning by merit. Let us have our capital, but let us also put it to productive use. Let us become contributors rather than leeches; let us be givers rather than hoarders. Let us design our policy in ways that rebuke the capitalist’s solipsistic individualism while affirming her will to innovate and participate. Let us restore to her, and to all of ourselves, the right to give.
This is not some far-fetched utopian vision. I am not advocating for a revolution, but a restoration — a reanimation of ourselves as humans, a re-evaluation of our goals as organizations, and a reorientation in our approach to policy. The shift from capitalism to contributism can occur in an individual in an instant, in an organization in a day, and in a society within our lifetimes. It simply requires that we have the courage to take on a new lens through which to see and a new approach to our labor, to take off the old mantle of capitalism, and to move forward to something better — the courage, in a word, to call ourselves contributists.”
Read next: 12. The contributist society