His View: Give me some old-fashioned capitalism

I’ve been doing a lot of thinking about our country lately, and how we’re going to pull ourselves out of the current rut we’re in. Some may scream “Trump” and others may mourn for Hillary, but quite frankly, without a proper conceptualization of what’s going on, no one’s going anywhere quickly.

Insights can come from one of the most amazing growth stories of the past 20 years. Amazon, and its story, may be a path toward understanding what’s happened with our entire business sector. Amazon is fairly Jeff Bezos’ creation, and he has two primary goals in his business plan. The first is to make and maintain Amazon as the world’s largest retailer. The second is, with whatever money he wants to spend, to go to Mars. While I have mixed feelings about the whole billionaires-going-to-Mars thing, as well as the annihilation of the retail sector Amazon is creating, there’s no questioning the simple fact that Bezos’ strategy is working regarding the former goal.

What’s the secret Bezos follows? He talks about this in his “Day 1” speeches, and for those interested, I recommend Googling this. The short version is that Bezos emphasizes relentless customer satisfaction, as well as not finding ways to fool yourself about what’s really going on with your business.

There’s no doubt that those two things are important. But there’s something else at work at Amazon. As the primary shareholder, Bezos consistently invests all the money Amazon makes back into the business. If you want to own Amazon stock, don’t sit around waiting for Bezos to buy back his shares to boost the price. That’s not the way he rolls.

What’s interesting is that this idea, while nominally quaint, is actually the way the stock market is supposed to work. Stock is to be sold to raise money for investment to expand the business. Stock is not supposed to be used for corporate compensation, nor is it supposed to be an open casino for rich people.

Yet, that’s what it’s turned into. The New York Stock Exchange is valued at about $18.5 trillion, some 27 percent of the total valuation of all the stock in the world. The options/derivatives market, though, is estimated (no one knows the real number) at somewhere between 10 to 100 times the size of the actual corporate valuation. That means far more money is spent gambling on stock, as opposed to selling stock to invest in companies, jobs and such, that everyone has been brought up to believe is what rich people do. Most rich people don’t even know how their money is invested. That’s the job of someone else, and as long as the returns are above nominal, why would they ask?

Why does it matter? Take the Boeing Company, our Pacific Northwest icon. This year, Boeing spent $18 billion on a stock buyback, along with dividend increase of 20 percent. Boeing’s C-suite gets richer and richer, as much of Boeing’s executive compensation is in stock and stock options. Forget the dividends. That $18 billion used just to boost the stock price could have gone to increased factory capacity — Boeing has plenty of orders for more airplanes. Instead, it went into executives’ and investors’ pockets.

The more I ponder all this, I have come to realize that until we fix this problem, which is so far off most people’s radar screens, we’re screwed. There was another story that came across my desk about a company buying a $14 million piece of land so they could access the Chicago Mercantile Exchange computer 1 millisecond (or something like that) faster, so it could game transactions that much better.

It’s summer. And you may be out arguing about capitalism versus socialism around the campfire. But it’s not the issue, folks. Give me some old-fashioned Bezos-style capitalism. Because what’s really going on in the economy — the casino-ization of our money — is going to sink us. Regardless of who’s president.

Chuck Pezeshki is a professor in mechanical and materials engineering at Washington State University.