By Mark Skousen
Editor, Forecasts & Strategies

Keynote Address at Annual International Assembly for Collegiate Business Education (IACBE), April 18, 2013, Orlando, Florida

“It is business that creates wealth, not countries or governments.  It is businesses that decide how well or poorly off we are.”   —Shlomo Maital, MIT managerial professor

Tomorrow my wife Jo Ann and I celebrate our big 40th (ruby) anniversary. We were married on April 19, Patriot’s Day, in 1973 in Utah.

Last week we went to Hawaii to celebrate.  When we arrived at the Marriott Waikiki Beach Resort in Honolulu, we were given a small room with only a queen size bed and no view of the famous Waikiki Beach.  I asked the desk clerk if there was any chance we could have a room with a king bed.  He said nothing was available.

I suspect he knew that we used Priceline to get a discount on the room.

In addition, the desk clerk insisted that we had to pay a $25 daily fee, for which we would get free Internet service, two free drinks, and a few other amenities. When we told him we didn’t drink and wouldn’t be using the Internet, he still insisted that it was mandatory for all guests of the hotel.

At some point during the conversation I used the “Two Magic Words” that marketing king Ted Nicholas’s recommends for getting the best table at a restaurant, best seats in the house, or the best room in a hotel:  “We’re celebrating!”  I told the clerk that we were in Hawaii to celebrate our 40th wedding anniversary.

But nothing worked.  A bit disappointed, we headed up to the room and started unpacking.

The phone rang — it was Justine, the desk clerk, telling me he had good news. He had found another room with a king sized bed and asked us if we wanted it. We agreed immediately and changed rooms.

It turned out to be a junior suite with a view of Waikiki Beach — and a complimentary (non-alcoholic) beverage on the house! And he said we could get a refund on the $25 daily fee.

Apparently Ted Nicholas’s “Two Magic Words” technique still works.

It is an honor to be here today and speak before a group of business deans, professors and administrators who know the value of a business education and are doing everything they can to prepare students to be successful in finding work and fulfillment in the exciting world of global business and high finance.

I’ve always enjoyed teaching students over the years.  In addition to writing and running various businesses, I’ve always kept one foot in the academic world by teaching as an adjunct professor at various schools, including Columbia, Barnard, Mercy and Rollins College.  I always have admired the working men and women who have taken the time to go back to school as adults.

Business as the Ideal Social Institution 

You are engaged in a noble work.  As Shlomo Maital, an MIT managerial professor, has written, “The health and wealth of a large number of individual businesses — small, medium, and large — determine the economic health and wealth of a nation.  It is business that creates wealth, not countries or governments.  It is business that decides how well or poorly we are.”

And it is business that generates the jobs, income and taxes that keep a country going.

The late great management guru Peter Drucker contended that the large corporation — not the state, the church, alma mater, or nonprofit organization — is the “ideal non-revolutionary social welfare institution” to provide retirement income, medical and life insurance, advanced education and training, paid vacations, and other benefits.

Gallup recently did a survey indicating that the number one determinant of happiness is a “good job.”  That makes sense since most adults spend most of their waking hours working and developing their closest relationships at their jobs.  And private business is the number one source for satisfying employment.

Drucker was quick to point out that government is a lousy business and is more likely to create problems than to solve them.  In fact, corporate executives are often left to deal with problems created by government.  ObamaCare is a good example.  Congress in its wisdom created an additional financial and regulatory burden on business.  But there’s a silver lining to ObamaCare.  Recently the Wall Street Journal reported that major corporations are now encouraging employees to eat more healthy foods and exercise, and penalizing workers who are overweight.  Why?  Because companies want healthier employees, which means fewer medical bills and lower premiums.

It’s the invisible hand of capitalism at work.  As Adam Smith wrote in The Wealth of Nations (1776), “The constant effort of every man to better his condition…is frequently powerful enough to maintain the natural progress of things toward improvement in spite of the extravagance of government and the greatest errors of administration.”

The Benefits of a Commercial Society

John Mackey, co-CEO of Whole Foods Market, contends in his new book Conscious Capitalism, Liberating the Heroic Spirit of Business, that the commercial society, the voluntary shared passion of individuals, “can create a world in which all people live lives full of purpose, love, and creativity—a world of compassion, freedom, and prosperity.”

Adam Smith taught that commerce encourages people to become educated, industrious, and self-disciplined.  He was influenced by the French political writer Charles Montesquieu, who emphasized the benefits of doux commerce (gentle commerce) as a countervailing bridle against the violent passions of war and abusive political power.  “Commerce cures destructive prejudices,” Montesquieu declared in The Spirit of the Laws (1748), “it polishes and softens barbarous mores…The natural effect of commerce is to lead to peace.”  Commerce improves the political order:  “The spirit of commerce brings with it the spirit of frugality, of economy, of moderation, of work, of wisdom, of tranquility, of order, and of regularity.”

So I salute all of you in this room who are engaged in this great cause.

Creating a Positive New Brand of Capitalism

You face an uphill battle in our effort to create a positive new branding of business.  The science of business management is a relatively new discipline.  From its origins a hundred years ago, it has evolved and improved through the Herculean efforts of management gurus such as Frederick Taylor, Alfred Sloan, Edward Deming, Louis Kelso, Peter Drucker, Steve Covey, Jim Collins, and John Mackey.

Business has come a long way from the “robber baron” days of Carnegie, Rockefeller and Morgan.  Yet even as the global marketplace has raised the standard of living a hundredfold in the past century, the accusations keep pouring in—that capitalism promotes inequality, materialism, greed, environmental degradation, and short-termism on Wall Street, and that fraud, deception, and corporate welfarism would run rampant if it weren’t for Sarbanes-Oxley, Dodd-Frank, and a host of government regulatory agencies (FDA, SEC, FTC, etc.).

In the latest Gallup poll on the trustworthiness of various professions, business executives come out little better than lawyers and used-car salesmen, far below the ethical standings of medical doctors, engineers, and police officers.  The battle lines have been drawn between labor and capital, and between consumers and producers, into the 21st century. Workers live in constant fear of being underpaid, overworked, or unemployed thanks to the upper hand of management, while consumers are deceived by “hidden persuaders” into buying “bads” rather than “goods.”

After countless how-to books and MBA courses on business ethics, leadership, and corporate culture, the question remains: can the business world develop a system beneficial to all the stakeholders in a firm—owners, consumers, workers, investors, suppliers, and the community at large?

I think it can, and I’m sure you in the audience agree.  But we have our work cut out for us to create a balanced stakeholder philosophy, which involves “creative entrepreneurial capitalists”; “loyal, trusting customers”; “passionate, inspired team members”; “patient, purposeful investors”; “collaborative, innovative suppliers”; “flourishing, welcoming communities”; and “a healthy, vibrant environment” (to quote John Mackey in his book Conscious Capitalism).

According to Mackey and his co-author Raj Sisodia, professor of marketing at Bentley University, company can “conscientiously” develop sterling reputations to attract loyal customers, employees, and suppliers and to generate community goodwill. If they do, superior returns can be achieved in earnings and the stock price, but as a byproduct, not as a primary goal.  Everyone in society benefits if a business is run “conscientiously.”

Mackey and many other CEOs have been amazingly successful in achieving these lofty goals.  Whole Foods Market has been the most successful grocery chain in recent history — and he was able to do it without ever taking a business class in college!

My Career in Business

Now I have something to confess.  I earned a B. A., M. S., and Ph. D. in economics without ever taking a course in accounting, finance, or business.  That says something more about economics as a discipline than it does about business.  I’ve always had an entrepreneurial streak in me, and had to learn business techniques on my own.  I’ve written an investment newsletter for 34 years, and run several multi-million dollar businesses (publishing, conferences) profitably without taking courses in running a successful business.

As an applied economist, I’ve had experience in all three sectors of the economy — working for the government (CIA), for non-profits (Foundation for Economic Education), and running several successful for-profit companies.

It’s good to see more business schools hiring successful business entrepreneurs.  The Acton MBA program in Dallas uses only current CEOs and CFOs to teach as adjuncts.  I hope this is the wave of the future.

Three Lessons Teaching at Columbia Business School

In the mid-2000s, I had the privilege of teaching economics and finance at Columbia Business School, thanks to my mentor John Whitney (who himself did not have an advanced degree) and a letter of endorsement from the Nobel Prize economist Milton Friedman.  I learn some important lessons at Columbia.

First, ivy-league B schools should hire economists who have business experience to teach their economics courses.  I was surprised to learn that CBS’s economics courses were taught purely by academics, and their textbooks were not that practical for MBA students.  It was a lot of high theory.  That’s fine in the economics department at Columbia, but at the B school the professors should have real-world experience.

My own textbook, Economic Logic, starts with the P&L statement, which students find useful in understanding the dynamics of the global economy.  Supply and demand are drawn out of the income statement.

Second, MBA programs should have courses on the history of Wall Street and financial crises to help them navigate their businesses when the next recession hits.  There is a trend in economics and finance to eliminate courses in history.  The focus now is almost entirely on what works now, not the evolution of financial institutions.  MBA students were taught all about how zero coupon bonds work, but knew nothing of their origin.  I argued that the MBA student who does not know history is condemned to repeat it.

My recommendations were initially rejected by the dean, but then the financial crisis of 2008 hit, and I noticed that Columbia recently introduced a popular new course on “History of Financial Crises” and the “History of Capitalism” into their curriculum.

Third, MBA students need to be taught the importance of balance in their lives.

I well remember my first class at Columbia Business School, when I wrote this quotation on the blackboard by Lin Yutang, the great Chinese philosopher known for the “art of letting go.”

“Those who are wise won’t be busy, and those who are too busy can’t be wise.” 

The quotation was not well received.  A third of my class, stooped in a 24/7 mindset, dropped my class (fortunately the remaining members gave my class high marks).

Yet there is wisdom in Lin’s statement. If you are too busy in your work, you don’t have time to learn new ideas, to discover new truths, to enjoy life’s little pleasures, or perhaps to pick a winning stock! Beating the market requires you to look down untrodden paths, and you need the free time to do it.

Lin Yutang criticizes most Americans for being too busy, and therefore slaves to the business culture and the old ways. They worry themselves to death. In his book, The Importance of Living (1937), Lin writes, “The three American vices seem to be efficiency, punctuality and the desire for achievement and success. They are the things that make the Americans so unhappy and so nervous.” Gee, I thought they were American virtues!

Life in the West, according to Lin, is “too complex, too serious, too somber, and too involved.” Following Taoist philosophy, Lin warned against “over doing, over achieving, over action . . . of being too prominent, too useful, and too serviceable.” The “perfectly square” house, the “perfectly clean” room, and the “perfectly straight” road rankle in him. He goes on to say, “O wise humanity, terribly wise humanity! How inscrutable is the civilization where men toil and work and worry their hair gray to get a living and forget to play!”

Lin offers the secret to success for the businessman (busy man?) in this statement: “Actually, many business men who pride themselves on rushing about in the morning and afternoon and keeping three desk telephones busy all the time on their desk, never realize that they could make twice the amount of money, if they would give themselves one hour’s solitude awake in bed, at one o’clock in the morning or even at seven. There, comfortably free, the real business head can think, he can ponder over his achievements and his mistakes of yesterday and single out the important from the trivial in the day’s program ahead of him.”

But the West has won the cultural war. Today, 70 years after Lin’s critique of the three American vices, it is the Japanese, the Chinese, the Koreans, and the Indians who dress in Western business suits and spout the Western philosophy of efficiency, punctuality, and goal-setting, and who work 14-hour days and forget to play. In the new China, the roads are straight, the houses are perfect, and everything works. I suspect Lin Yutang would not like the new Asia, especially the regimented Singapore. It’s a paradise lost.

I didn’t last at Columbia.  After one semester, the chairman of the department (a hard-core Keynesian) decided not to renew my class.  I’ve often thought of this event as well as others where I was “let go.”  If you haven’t been fired, you haven’t lived!  By a show of hands, how many of you have been fired from a job?  [About half the audience raised their hands.]  At the time, it might have been traumatic, but how many of you agree that looking back it was the best thing that happened to you?  [Almost every hand went up.]  We live in a dynamic economy of “creative destruction,” as Joseph Schumpeter called it.  I dare say workers who are permanently employed by a firm (like IBM employees years ago) are likely to find life ultimately unsatisfied and unchallenged.

Sadly more and more Americans are either permanently employed (by the federal government), or permanently unemployed (on welfare or ousted from the labor force by minimum wage laws and other government regulations).  According to the latest data, only 63% of able-bodied adults are employed, the lowest rate in US history.

However, there’s an exception.  Employment is actually rising among seniors age 65 and over.

Traditionally the idle class has been the wealthy seniors, and the working class the young, and we worried about not having enough young workers to finance Social Security and Medicare payments of the elderly.  But we are witnessing an upside down world, where the new working class is the elderly and the new idle class is the young.

The labor force is the most dysfunctional market in the country today, where discouraged workers are on the rise, and 40% of male black teenagers are out of work.  This trend cannot last without creating a cultural and financial disaster.

You have your work cut out for you to train students to get productive employment when they graduate.

But if you do it right, we are capable of entering a new Golden Age of Capitalism.  There are visionaries among us — giants in the land — who are showing us the way.  They include Charles Koch and his Market-based Management, which has catapulted Koch Industries into the world’s second largest private company….John Allison and his Objectivist/Randian Model that transformed BB&T into the fastest growing regional bank in the country (he is now the president of the Cato Institute)…..and John Mackey, co-founder and co-CEO of Whole Foods Market, who more than anyone has developed the revolutionary “stakeholder” model in Conscious Capitalism.  I urge all of you to read and study his new book.

This year at FreedomFest, we are going to have a session, “The Libertarian CEO Panel,” that will compare and contrast these three incredible successful firms by having representatives speak on Koch’s Market-Based Management, Allison’s Objectivist/Randian model, and John Mackey’s Conscious Capitalism.

Their work reminds me of one of my favorite quotes from Benjamin Franklin, the father of American business:  “It is incredible the quantity of good that may be done in a country by a single man who will make a business out of it.”

Whole Foods’ Better Business

Conscious Capitalism: Liberating the Heroic Spirit of Business, John Mackey and Raj Sisodia, Harvard Business Review Press, 368 pages

Ever since the robber barons stalked the earth and Balzac expostulated that “behind every great fortune is a crime,” the media has attacked Wall Street, Madison Avenue, and anything to do with corporations. In the latest Gallup poll on the trustworthiness of various professions, business executives come out little better than lawyers and used-car salesmen, far below the ethical standings of medical doctors, engineers, and police officers.

Even as the global marketplace has raised the standard of living a hundredfold in the past century, the accusations keep pouring in—that capitalism promotes inequality, materialism, greed, environmental degradation, and short-termism on Wall Street, and that fraud, deception, and corporate welfarism would run rampant if it weren’t for Sarbanes-Oxley, Dodd-Frank, and a host of government regulatory agencies.

But corporate management has come a long way since the dark days of Carnegie, Morgan, Gould, and Rockefeller. The first glimmer of hope came when Henry Ford instituted the $5-a-day wage in 1913 and recognized that workers deserved to participate in the company’s fortunes. Ford’s decision to more than double their daily pay allowed employees for the first time to buy the cars they were making and helped toward dispelling the Marxist charge of exploitation and alienation.

Still, battle lines have been drawn between labor and capital, and between consumers and producers, into the 21st century. Workers live in constant fear of being underpaid, overworked, or unemployed thanks to the upper hand of management, while consumers are deceived by “hidden persuaders” into buying “bads” rather than “goods.” All this despite the Herculean efforts by such management gurus as Frederick Taylor, Alfred Sloan, Edward Deming, Louis Kelso, Peter Drucker, Steve Covey, and Jim Collins. Big government and non-profit organizations seem a necessary countervailing power to a deeply flawed private enterprise system.

In response, utopian visionaries have sought to transform capitalism into a system that is “humane,” “social,” “enlightened,” “good,” and even “better.” But after countless how-to books and MBA courses on business ethics, leadership, and corporate culture, the question remains: can the business world develop a system beneficial to all the stakeholders in a firm—owners, consumers, workers, investors, suppliers, and the community at large?

Enter John Mackey, cofounder and co-CEO of Whole Foods Market.  He and his co-author, Raj Sisodia, a professor at Bentley University, have created solutions they call “conscious capitalism” and “firms of endearment.” The authors offer a balanced score card, with chapters on “loyal, trusting customers”; “passionate, inspired team members”; “patient, purposeful investors”; “collaborative, innovative suppliers”; “flourishing, welcoming communities”; and “a healthy, vibrant environment.” Mackey and Sisodia conclude that business is not a sporting event, “a zero-sum game with a winner and a loser. It’s a win, win, win, win game.”

Yet skepticism abounds. Capitalism may be cooperative, but it can also be ruthlessly competitive. How can one avoid being labeled a “selfish and greedy businessman,” exploiting customers with high prices and misleading advertising and employees with low wages and high turnover?

Having read dozens of business books over the years, I can say with considerable authority that Conscious Capitalism is the most ambitious management model ever conceived, and if implemented it could catapult the world of business to what Adam Smith described eloquently as the “highest degree of opulence.” Indeed, if Mackey’s application of higher consciousness had been in the boardroom a generation ago, I like to think that we could have avoided the suffocating regulations of Sarbanes-Oxley and Dodd-Frank and the dire straits of companies like GM, Sears, and Citibank (even Enron).

Mackey wants firms to stop focusing exclusively on the bottom line—he would replace the traditional “shareholder” philosophy with a “stakeholder” philosophy. “Business is not about making as much money as possible,” he asserts. “It’s about creating value for stakeholders.” Companies must develop sterling reputations to attract loyal customers, employees, and suppliers and to generate community goodwill. If they do, superior returns can be achieved in earnings and the stock price, but as a byproduct, not as a primary goal.

Conscious capitalism is not just high theory: the book contains numerous case studies, starting with the $16 billion grocery-store chain that Mackey has been directing since the early 1980s. In the grocery business, traditionally known for its low margins, Whole Foods has achieved high margins and does so with little advertising: customers are the stores’ best advocates. Despite volatility, its stock has handily outperformed every index, has a return on equity of 13.7 percent, and is near an all-time high.

Whole Foods has been listed on the Fortune 100 Best Companies to Work For rankings since 1998. Employees—“team members”—receive above-average wages and benefits, including medical savings accounts and “wellness centers.” There are lots of built-in incentives to improve performance and earn more.

Whole Foods has created some of the most innovative labor policies anywhere, including a.) a cap on total compensation, including bonuses, for any employee at 19 times the average pay of all workers; b.) total transparency in salaries and wages; and c.) the same benefits, including stock options, for all full-time employees. This radical approach seems to be working: the company has a turnover rate of less than 10 percent a year.

Throughout the book, Mackey and Sisodia highlight other companies with a similar philosophy and equal success, such as Starbucks, The Container Store, the Tata Group, Costco, Google, Southwest Airlines, Panera Bread, Twitter, Trader Joe’s, and Waste Management.

Mackey and Sisodia don’t pull any punches. They are critical of Wall Street’s short-term quantitative metrics. They express reservations about Jim Collins’s list of “good to great” companies, such as Circuit City, Fannie Mae, and Altria (formerly Philip Morris), all of which Mackey says have embraced “unconscious” policies. Under his definition of good capitalism, some companies might have to change their product line or their corporate culture, or simply disappear. Mackey is critical of big pharma for its unethical and aggressive promotion of drugs with dangerous side effects.  And he rejects out of hand GE’s policy under Jack Welch of firing the bottom 10 percent of its workforce each year.

Although he calls free enterprise and entrepreneurship the source of “unprecedented prosperity for humanity,” Mackey challenges the philosophical vanguards of capitalism, Ayn Rand and Milton Friedman. He rejects the Randian notion that “selfishness” and “greed” are virtues and denies Friedman’s view that the only responsibility of capitalist firms is to maximize profits to their shareholders.

If there’s one undeveloped section in the book, it’s how to deal with failure. How do owners, workers, and suppliers respond to the creative-destructive nature of global capitalism—downturns in the economy, failed product selection, heavily unionized industries, foreign competition, and sectors in secular decline? Most companies go through tough times where they must downsize, turn around, or go bankrupt, leaving workers unemployed and bills unpaid. How would conscious capitalism apply to their situation?

The authors only briefly address this. Are they suggesting that if business leaders follow the tenets of conscious capitalism they will never fail, that they can always adjust to the new demands of fickle customers, obsolete technology, and government regulations, that firms will seldom if ever have to lay off workers in mass or close stores? The authors seem uncomfortable with the idea of firing anyone. How would they advise a company going bankrupt like Hostess, which faced entrenched union demands? Most importantly, how do companies avoid the danger of stakeholder imbalance, giving too much control to executives, team members, or the wider community?

In an appendix, Mackey and Sisodia compare their model with other philosophies of capitalism, such as Bill Gates’s “creative” capitalism. They distance themselves from the “corporate social responsibility” plan adopted by many companies—they claim it is often more PR than an integrated model—and warn against “charismatic” leadership. Unfortunately, they don’t discuss Charles Koch’s market-based management (MBM), which has catapulted Koch Industries into being the second largest private company in the world, or John Allison’s Objectivist model that transformed BB&T into the fastest growing regional bank in the country. It would be fun to have Koch, Allison, and Mackey compare notes in a public forum, especially with regard to whether a successful company should be public or private. (Koch Industries is private.)

Mackey’s conscious capitalism faces an uphill battle to satisfy everyone, including union bosses—Whole Foods workers remain non-union—environmentalists, and animal-rights activists (despite Whole Foods’ advanced policies). His ideal manager can’t completely avoid such troubles as store closings, layoffs, and other inevitable effects of a dynamic global economy. But he’s gone further than anyone to build a better world: as Benjamin Franklin once wrote, “it is incredible the quantity of good that may be done in a country by a single man who will make a business out of it.”

In sum, Mackey appears to have discovered how business can achieve the goal that Peter Drucker described as the “ideal non-revolutionary social welfare institution.” For Mackey, it’s not the state, church, alma mater, or nonprofit organization but the place most people spend most of their waking hours working and developing their closest relationships—the private company. Mackey cites a Gallup world poll indicating that the number one determinant of happiness is “a good job.” He steadfastly believes that business, the voluntary shared passion of individuals, “can create a world in which all people live lives full of purpose, love, and creativity—a world of compassion, freedom, and prosperity.”

That’s a rather an ingenious discovery for a kid who never took a business class in college.

Mark Skousen is the editor of Forecasts & Strategies and the producer of Freedom Fest.

See the original American Conservative article: http://www.theamericanconservative.com/articles/whole-foods-better-business/

We are delighted to announce Daniel Brackins as the winner of the FreedomFest Slogan Contest for his suggestions “FreedomFest: For the 100%!” We believed his slogan concisely summed up the inclusive nature of FreedomFest — we welcome all people, from all parties of thought, for coherent, insightful and open discussions…all while having tons of fun in Las Vegas. We also believe that the true principles of liberty are a benefit to everyone in the world.

Daniel will receive a genuine silver dollar, the symbol of FreedomFest, as his prize for coming up with the winning slogan.

Other slogans that made the top round for selection:

“FreedomFest: It’s not about left or rights. It’s about what’s left of our rights.”

“The Barbarians are at the Gate”

“Round up the usual suspects.”

“We the Market.”

“Breath freedom.”

“Live FreedomFest, or Die Hard”

We hope to see all of you at FreedomFest for our first conference at Caesar’s Palace, July 10-13, 2013. This year’s theme is “Are We Rome?” and it promises to be the absolute greatest FreedomFest yet. To register and find out the latest news on planned events, speakers and debates, plus the incredible Anthem Film Festival, visit http://www.freedomfest.com

Special Rate at Caesars Palace

Note: We also have reserved a room block for us for only $129 a night (considering that every room at Caesars is like a suite, this is a bargain). Sign up today!

We’re also adding details soon about luncheons, breakfasts, special events, and our gala Saturday night banquet.

See you in Vegas in July!

Yours for peace, prosperity and liberty, AEIOU,

Mark Skousen
Producer, FreedomFest
“The world’s largest gathering of free minds”
July 10-13, 2103, Caesars Palace, Las Vegas

I just returned from the Global Financial Summit in the Bahamas, where over 200 attendees came from all over the world to learn about new investment opportunities and market solutions to the world’s problems.  We were welcomed by the cabinet members of the Bahamian government, who emphasized how the Bahamas is a first-rate financial center and investment paradise.  It has no tax on income or investments (but does impose a high 42% import duty).   I visited Albany, a new development for the superrich such as Tiger Woods.  I am not surprised they are moving there in droves, given the huge tax increases imposed in 2013.

My family and I lived in the Bahamas in the mid-1980s and I saved enough in taxes to buy a flat in London (without giving up my citizenship).  My story can be found here.

Here’s a short summary (expect more detail in the March Forecasts & Strategies newsletter):

Jeffrey Saut, the chief economist at Raymond James, is convinced that Wall Street is in a secular bull market and expects the Dow to hit new highs, based on the Dow Theory (where the Dow transportation index and the industrials confirm each other at higher levels).

John Allison, new president of the Cato Institute and former CEO of BB&T, expects only a slow recovery, higher interest rates and higher inflation (gradual).  A major crisis is headed our way in 10-15 years with the unfunded liability problem.
Peter Schiff warned that the euro and the dollar will inevitably collapsed and must be replaced by a gold standard.
International tax attorney Jeffrey Verdon said state tax havens like Nevada, Texas and Florida, are booming….and wealthy Americans are moving there or outside the US.

Steve Moore of the Wall Street Journal says that many states, especially in the South, are considering eliminating the state income tax.  He felt that the Republicans have the upper hand now in the deficit debate, if they don’t botch it.  And we could be energy independent if the radical environmentalists don’t intervene.  “How ironic that the most pro-green president in our history may oversee energy independence from the oil & gas boom!”

Moore is traditionally optimistic about the future of the country, but he has turned decidedly pessimistic after the election.  He confided in me, “I fear for the future of the Republic.”  He wants to put the “Republicans on Trial” at our mock trial this year at FreedomFest.  That’s our plan.

Yaron Brook, president of the Ayn Rand Institute, and I clashed on John Mackey’s stakeholder model of “conscious capitalism.” I defended Mackey’s statement that “business is not about making as much money as possible, but creating value for stakeholders.”  Brook declared, “We must stop apologizing for capitalism.”  Expect a major debate on this subject in July.

After the poolside closing buffet at the Atlantis Resort, two subscribers John Edison and his son Paul took me to the craps tables to educate me on the winning ways of gambling.  I guess it was beginner’s luck, because in one hour I had turned $200 into $735.  It reminds me of the old saying on Wall Street, “Never make a profit on your first trade, you think it’s easy.”

But I did learn two lessons from the Edison’s:  First, manage your risk.  Following their advice, I increased my bet when the odds were in my favor.  The long-term odds favor the House, but you can reduce your risks and increased potential return with proper management.  Second, walk away when you have a big profit.

Big News! John Stossel Coming to FreedomFest!

Dear FreedomFest attendees,

Lots of news to report about this year’s big show.  First and foremost:

When we ask past attendees, what famous libertarian they want to speak at FreedomFest, John Stossel is their #1 choice – by far.

Your wish is our command:  We are happy to announce that John Stossel is coming to FreedomFest and will be taping a special edition of his Fox Business show, STOSSEL, at FreedomFest on the first day of the conference, Thursday, July 11, 2013 (just think 7-11). And you all are invited!

John Stossel is famous for his investigative reporting on ABC’s primetime newsmagazine 20/20, and since 2009, on Fox Business Network.  I always love his confronting government officials and business leaders for their bad policies and stupid mistakes.  He is the host of “Stossel” (Thursdays at 9 PM/ET), a weekly program highlighting current consumer issues with a libertarian viewpoint. Stossel also appears regularly on Fox News Channel (FNC) providing great analysis and debunking myths about the government and the economy.  His latest book is “No, They Can’t:  Why Government Fails But Individuals Succeed.”

John will be drawing from our list of great speakers for his show, including Steve Forbes, Art Laffer, Jim Rogers, Steve Moore, Charles Murray and many more.

We’ve been producing and growing FreedomFest for several years and this is the first time we will have a major TV network coming.

As a FreedomFest attendee, you will receive a complimentary ticket to the STOSSEL show and preferred seating. Sign up now at www.freedomfest.com or call Tami Holland at 1-866/266-5101.

Important Note:  NOW is the time to take advantage of the early bird special, $100 off per person/$200 per couple.  The discount ends March 15, only six weeks away!

John Mackey in the News!

Second announcement:  This week’s Barron’s printed my review of John Mackey’s revolutionary book, “Conscious Capitalism: Liberating the Heroic Spirit of Business.” It’s my first book review in Barron’s. You can read it here.

John Mackey is a long-time friend and co-ambassador to Freedom Fest (along with Steve Forbes). At this year’s conference, we are planning a unique panel called “Just Business: Libertarian CEOs Debate the Best Capitalist Model.” Which model is better? John Mackey’s “Conscious Capitalism”… Charles Koch’s “Market-Based Management”… or John Allison’s “Objectivism,” based on Ayn Rand’s philosophy? Don’t miss it.

Libertarians Do It Better! (Make Money, That is)

We’re also putting together another great session at FreedomFest:  “The Libertarian Hedge Fund Panel” with investment gurus Jim Rogers (original partner with George Soros), Art Laffer, Donald Smith and Cliff Asness, with Steve Forbes as moderator. What a powerhouse panel of successful investors.  This will be part of our 3-day financial freedom seminar.  Only at FreedomFest.

100^th Anniversary of the Federal Income Tax and the Fed

Last Sunday was the 100^th anniversary of the 13^th amendment to the US Constitution, the federal income tax—the engine of big government.  It was technically never ratified but we are stuck with it nevertheless.  We’re arranging a panel on “In Search of the Ideal:  Fair Tax, Flat Tax, No Tax?” with top libertarian tax experts (TBA).

The Federal Reserve, the engine of inflation, was also established in 1913 – and we’ve suffered the Great Depression and the Great Recession, and never-ending inflation ever since, all because of the Fed and the end of the discipline of the international gold standard.

This graph tells the sad story of the Fed:

So we can see that before the creation of the Fed (1913), inflation was relatively tame and occurred only during wars.  But after 1913, inflation increased 30 fold, or 3,000%!

The Fed is doing its part to finance the out-of-control deficits, buying $85 billion a month in Treasuries and mortgages. The money supply (M2) is now growing at a 10% annual rate.  More inflation is on the way!

Our distinguished panel of free-market economists will discuss this topic:  “End the Fed?  Now What?” with debates on the gold standard, free banking, or a monetary rule.

Who Are the Modern-Day Gladiators?

As you know, our theme this year is “Are We Rome?”  We will have debates and panels on this vital theme.  Has America seen its best days?  The Heritage Foundation just released its Economic Freedom Index, and shows a clear decline in economic freedom in the United States.

We face serious headwinds in America.  Last week I met with George Will (“the most powerful journalist today” — Wall Street Journal) at his offices in Georgetown, and he was decidedly pessimistic about our monetary system and the fiscal insanity in Washington.

“When the economy recovers, interest rates will explode upwards and the federal budget will be out of control,” Will warned. He expressed concern that the economic recovery will be cut short.

Will is a big fan of FreedomFest, and would like to come (though he has yet to commit).  He’s also a big baseball fan as you can see here.

We are planning a special panel on sports called “Who Are The Modern Day Gladiators?”  The answer is of course the booming sports industry.   To paraphrase Keynes, “Better that a man tyrannize over his favorite sports team than his fellow man.”  Can competitive sporting events replace war to fulfill man’s desire to fight?

Other speakers on this “Rome” theme:  FEE president Lawrence W. Reed will speak on “The Fall of Rome and Modern Parallels.” 

Steve Forbes on his book, “Power Ambition Glory: The Stunning Parallels between Great Leaders of the Ancient World and Today . . . and the Lessons You Can Learn.” 

Charles Kessler, editor at Claremont Review of Books, will speak on “Cicero:  The Life and Times of Rome’s Greatest Politician.”

Jo Ann Skousen, entertainment editor of Liberty magazine and a professor of English literature at Mercy College, will be giving three lectures on “Greek and Roman Mythology:  Everything You’ve Always Wanted to Know.”  It should be fun.

And don’t forget the exhibit hall, “The Trade Show for Liberty,” where you will encounter over a hundred freedom organizations, think tanks, and financial exhibitors.

Plus the ever-popular Anthem film festival.

As in the past, Laissez Faire Books is our official bookstore — and will be hosting their own “Laissez Faire Day” at FreedomFest with speakers Jeffrey Tucker, Doug French, and many more.

You can see why Steve Forbes attends all three days.  FreedomFest is the greatest libertarian show on earth.  “FreedomFest is where the best ideas and strategies are fleshed out.  I wouldn’t miss it for the world.”

Join Steve Forbes, John Stossel, and thousands of others like-minded free thinkers July 10-13 at Caesars Palace.

Special Rate at Caesars Palace

Note:  We also have reserved a room block for us for only $129 a night (considering that every room at Caesars is like a suite, this is a bargain).  Sign up today!

We’re also adding details soon about luncheons, breakfasts, special events, and our gala Saturday night banquet.

See you in Vegas in July!

Yours for peace, prosperity and liberty, AEIOU,

Mark Skousen
Producer, FreedomFest
“The world’s largest gathering of free minds”
July 10-13, 2103, Caesars Palace, Las Vegas

Here is my first book review on Barrons — on John Mackey’s new book, “Conscious Capitalism,” which I regard as revolutionary and encourage everyone to get a copy at either a Whole Foods store (always fun to visit) or on Amazon:

BARRONS
| SATURDAY, FEBRUARY 2, 2013

The Soul of the New Capitalism

A worthy successor to The Wealth of Nations

Reviewed by Mark Skousen

We tend to regard capitalism in these cynical times as the worst economic system, except for all the others. By contrast, in Conscious Capitalism, Whole Foods Market Co-CEO John Mackey and Bentley College marketing professor Raj Sisodia put forward what could be the most ambitious, indeed revolutionary, model for capitalism ever conceived. Had their application of higher consciousness been in the boardroom a generation ago, we might have avoided the suffocating regulations of Sarbanes-Oxley and Dodd-Frank, and the dire straits of companies like General Motors, Sears, Citibank, and even Enron.

Conscious capitalism, according to Mackey and Sisodia, is “a way of thinking about business that is more conscious of its higher purpose, its impacts on the world, and the relationships it has with its various constituencies and stakeholders.”

Conscious Capitalism: Liberating the Heroic Spirit of Business

by John Mackey and Raj Sisodia
Harvard Business Press
368 pages, $27

Although they call free enterprise the source of “unprecedented prosperity for humanity,” they challenge the two celebrity philosophers of capitalism, Ayn Rand and Milton Friedman. They reject the Randian notion that “selfishness” and “greed” are virtues, and deny the Friedman view that the only responsibility of capitalism is to maximize profits for its shareholders.

“Business is not about making as much money as possible,” the authors declare. “It’s about creating value for stakeholders.” Companies must develop sterling reputations to attract loyal customers, employees and suppliers, and generate community goodwill. If they do, superior returns can be achieved in earnings and stock price as a byproduct, not as a primary goal.

Can the authors back up their claims? They include numerous case studies, starting with a $16 billion grocery-store chain, Whole Foods (ticker: WFM), that Mackey co-founded and has been directing since the early 1980s. Whole Foods has some of the most innovative labor relations anywhere, including a cap on executive compensation, factoring in bonuses, at 19 times the average pay of all workers; total transparency in salaries and wages; and similar benefits to all full-time employees, including stock options.

How do employees feel? Mackey’s company has a turnover rate of less than 10% a year, and has been listed on the Fortune 100 Best Companies to Work For since 1998. “Team members” earn above-average wages and benefits that include medical savings accounts and wellness centers. There are lots of built-in incentives to improve performance and earn more.

The company also enjoys superior returns. In the grocery business, traditionally known for its low margins, Whole Foods has achieved high margins, and does so with little advertising; customers are the stores’ best advocates. Investors agree. Since the market hit bottom in March 2009, Whole Foods’ shares are up eightfold, compared with a doubling of the Standard & Poor’s 500.

Mackey and Sisodia highlight other companies with a similar philosophy and equal success, such as Starbucks (SBUX), the Container Store, Tata Motors (TTM), Costco Wholesale (COST), Google (GOOG), Southwest Airlines (LUV), Panera Bread (PNRA), Twitter, Trader Joe’s, and Waste Management (WM). Unfortunately, however, they don’t discuss Charles Koch’s “market-based management,” which has catapulted Koch Industries into the second-largest private company in the world, or John Allison’s “Objectivist model” that transformed BB&T (BBT) into the fastest-growing regional bank in the country. It would be instructive to have Koch, Allison, and Mackey compare notes in a public forum.

Nor do Mackey and Sisodia explain how to deal with business reversals. Most companies go through tough times, when they must downsize, turn around, or go bankrupt, leaving workers unemployed and bills unpaid. Are the authors suggesting that if business leaders follow the tenets of conscious capitalism they will never fail—that they can always adjust to the new demands of fickle customers, obsolete technology, and government regulations—that firms will seldom if ever have to lay off workers en masse or close stores?

But Conscious Capitalism is still an inspiring blueprint for a better world. In The Wealth of Nations, Adam Smith wrote that the businessman is “led by an invisible hand…to promote the public interest.” For conscious capitalists who have read that passage in Smith, the invisible hand has become visible. It’s now up to them to make the most of that conscious fact. In that sense, Mackey and Sisodia have written a worthy successor to The Wealth of Nations. I can think of no higher praise.

MARK SKOUSEN is the editor of Forecasts & Strategies, a former professor at the Columbia Business School, and the producer of FreedomFest, which meets every July in Las Vegas.

I returned early this year from a productive trip to San Diego for the American Economic Association (AEA) meetings, where I met with several top economists, including Nobel Prize winners. One of the most popular sessions was a panel on the 100th anniversary of the Federal Reserve. The most shocking graph was presented by Ken Rogoff, a Harvard economist.

As the graph indicates, there was virtually no inflation prior to 1913, when the Federal Reserve was created (other than wars, which caused temporary inflation) and we went off the classical gold standard. Rogoff noted that since the Fed was created, prices have skyrocketed 30-fold, or 3,000%! This data confirms Murray Rothbard’s contention that the Fed was created to remove the barriers to inflation, not to control it.

Despite the fact that the Fed engineered all of this inflation, caused the Great Depression and failed to regulate the mortgage banks prior to the 2008 crisis, all of the panelists gave high marks to the Fed! (You can bet that won’t be the case at our special panel on the 100th anniversary of the Fed at FreedomFest!)

Another telling sign was the fact that the sessions with super Keynesian Paul Krugman were standing room only, while monetarists including Nobel laureate Bob Lucas had a small turnout.

What does this situation bode for the future? If Krugman has his way, it means greater deficits, more inflation, and higher taxes.

I spent time with the “Anti-Bernanke” Polish central banker Les Balcerowicz when I visited Poland in June at the invitation of Jan Fijor, who has published several of my books in Polish.

Along these lines, I’m happy to announce that the Polish edition of “The Making of Modern Economics” has just been published.

“The Making of Modern Economics” has been translated into five languages — Spanish, Chinese, Turkish, Mongolian and now Polish. The book won the Library’s Choice Book Award, and it is rapidly becoming the #1 book to explain the history of economics on college campuses. My book tells the story of the great economic thinkers from Adam Smith to Milton Friedman, including important chapters on Marx and Keynes. John Mackey (CEO, Whole Foods Market) likes it so much he’s read it three times! For more information on this popular book on the history of economic thought, see the “Making of Modern Economics” page.

If you’d like a copy, call Eagle Publishing, 1-800/211-7661 and mention code ECONP3 for the paperback version ($29.95 plus $5 S&H), or code ECONH3 for the hardcover book ($49.95 plus $5 S&H).

I also have several copies of the beautifully designed Spanish or Polish translation if you would like to buy one. The price is only $29.95, plus $5 S&H. To order, call Eagle, 1-800/211-7661. To order the Spanish-language book, mention code ECONHS and to order the Polish-language book, mention code ECONHP.

This would make a wonderful holiday gift for any student, history-buff, investor or business person.

I’m delighted to announce the launch of a new charitable initiative, the Social Security Pledge. This project encourages wealthier Americans, those for whom retirement is possible without Social Security payments, to donate their monthly payments to a favorite charity or cause. By donating these payments monthly, there can be a significant contribution to good causes, making a big difference in society.

Please see all about the project, including the beginning of a growing list of Americans who can and have taken the Social Security Pledge, at the Social Security Pledge website.

You can also see my recent interview on Wall St. for Main St. where I announce the Social Security Pledge.

Yours in liberty, AEIOU,
MSkousen

Paul Krugman endorses Say’s law! In a Sept 13 New York Times op-ed, “The iPhone Stimulus,” Paul Krugman blunders by confusing Keynes’ law (demand creates supply) with Say’s law (supply creates demand). He discusses how the production of the iPhone 5 will now bring a boost to gross domestic product (GDP) of something like half a percent. As classical economist Steve Kates wrote, “Krugman uses the production and
sale of a very much value adding item of technology to prove that Keynes was right when what he is really doing is proving that Keynes was wrong and that Say’s Law is right.” Krugman argues that when a private sector firm produces a value-adding good or service, it adds to economic growth. This is not Keynes, this is Say’s law and classical economics, which always has looked at economics from the supply side. Keynes’
“innovation,” a disaster of the highest order, was to argue that you could stimulate an economy from the demand side by simply buying things without having had value-adding production first.

Yours in liberty, AEIOU,

Mark Skousen

Roger Garrison visited me last week at my home in New York during the Austrian economics seminar at FEE.

Today is Milton Friedman’s 100th birthday. He was born on July 31, 1912, just in time to witness the birth of the Federal Reserve (1913). Monetary policy became his top subject in his career, and he made quite an impact. The Economist ranks him as the most important economist of the 20th century, ahead of John Maynard Keynes.

Everyone remembers Friedman’s monetarist views — that money matters, that monetary aggregates are the major cause of the business cycle, that the Central Bank should adopt a stable monetary policy, etc. What they often forget are his fiscal studies that demonstrated repeatedly that aggressive deficit spending has little or not effect in stimulating the economy.

Various groups are honoring Friedman today around the country. I’m headed to Chicago today to attend the Milton Friedman Centennial at the Drake Hotel, sponsored by the Milton & Rose Friedman Foundation for Educational Choice. Chicago was his home town for most of his career as an economist. He founded the modern-day Chicago School of Economics.

In honor of this day, I suggest you read my little essay, “My Friendly Fights with Dr. Friedman,” found here: http://www.mskousen.com/2007/09/my-friendly-fights-with-dr-friedman/ It also includes some photographs — and the famous story of the time I tore up his $20. Need to say, Milton and Rose were not pleased and I almost destroyed our long friendship!
I may have been the last person to have lunch with Milton Friedman in October, 2006, at his favorite restaurant, the Italian North Beach Restaurant. Here’s the photo of me and an unshaven Milton:

We had our own Milton Friedman Panel, “What Would Milton Say Today?” at this year’s FreedomFest, and it was standing room only. The panelists were Charles Murray, Robert Enlow, Joel Stern, and Warren Coats, the latter two getting a Ph. D. from Chicago under Friedman. To buy an audio recording of this session, go to www.miracleofamerica.com.

We spent many hours together over the years, and even had a few debates (nobody ever won a debate against Milton). He was a big fan of FreedomFest, and overall positive about my works. Milton was a dear friend and I miss him and his wife Rose a lot.

Here are some of my favorite quotes from Milton Friedman — sound advice to today’s leaders:

“If a tax cut increases government revenues, you haven’t cut taxes enough.”

“I favor tax reductions under any circumstances, for any excuse, for any reason, at any time.”

“A society that puts equality ahead of freedom will end up with neither equality nor freedom.”

“Competition is a tough weed” (George Stigler). “Freedom is a rare and delicate flower” (Milton Friedman).

“Nothing is so permanent as a temporary government program.”

“Inflation is taxation without legislation.”

“The economy and the stock market are two different things.”

“If government is to exercise power, better in the county than in the state, better in the state than in Washington.”

“The great advances of civilization, whether in archi­tecture or painting, in science or in literature, in indus­try or agriculture, have never come from centralized government.”

“The minimum wage law is one of the most, if not the most, anti-black laws on the statute books.”

“Nobody spends somebody else’s money as carefully as he spends his own.”

“The government solution to a problem is usually as bad as the problem.”

More than 2,000 investors and concerned citizens gathered for FreedomFest last week at Bally’s Events Center in Las Vegas to hear from over 150 speakers, including Sen. Rand Paul, Judge Andrew P. Napolitano, Steve Forbes, John Mackey, Peter Schiff, Doug Casey, Robert Kiyosaki, and a host of financial gurus, authors and think tank experts.

Here are some of the highlights:

–Steve Moore of the Wall Street Journal said that the Supreme Court’s upholding of ObamaCare was “the most important and worst decision in the last 40 years.”

–Steve Forbes went so far as to accuse President Obama of being a “hard-core socialist” who plans to nationalize 16% of the economy (healthcare). These are scary times, indeed.

–A standing room-only crowd heard Dinesh D’Souza talk about his film “2016: Obama’s America,” based on his bestselling book, “The Roots of Obama’s Rage.” D’Souza warned that America could be facing another four years of a stagnating economy and further loss of liberty if Obama gets re-elected.

–Wayne Allyn Root electrified the audience when he reported that capitalists and entrepreneurs were going on strike against wasteful, big government along the lines of Ayn Rand’s novel, “Atlas Shrugged.”

–European expert John Browne emphasized that Europe, with a combined GDP of $17 trillion, is the world’s largest economy and cannot be ignored. However, he was not optimistic about its outlook in the face of the fiscal crisis in Greece, Spain, and Italy.

–Steve Moore announced that he and Art Laffer (of the famous Laffer Curve) have just released a report on 30 major countries that have engaged in aggressive deficit spending to get them out of the Great Recession, and not a single one has seen an economic recovery. I did a special pre-conference session on Austrian economics, which is the only school that preaches a return to sound classical economics of balanced budgets and sound money.

–Tom Palmer of the Atlas Foundation said that Egypt is the “big prize” in the Middle East and has just fallen into the hands of the radical Islamic Brotherhood.

–Keith Fitz-Gerald, editor of Money Map, offered an optimistic note that China won’t collapse like many doomsdayers are predicting (including Bert Dohmen and Ty Andros).

–David McAlvany reported that debt has been growing at a 16% rate since 2001 — an unsustainable rate — and long-term unemployment has doubled in the United States. Job creation and destruction are the key issues in America.

–Peter Schiff said the Fed (or the Treasury) can’t afford to raise rates and will do everything they can to avoid it.

–Sen. Rand Paul detailed his encounters with the Transportation Security Administration and reported on his efforts to privatize and rein in the second-most hated agency of the U.S. government (behind the Internal Revenue Service).

–In the mock trial on Friday evening, “Wall Street on Trial,” Steve Moore and his Wall Street star witnesses were found not guilty, by a vote of 12-0, of malfeasance of the public trust! John Mackey, CEO of Whole Foods Market, and author George Gilder complained that Wall Street needed to clean up its act, not engage in crony capitalism and not get bailouts from Washington.

–At the Anthem film festival, “The Afghan Nightmare,” produced and directed by Norwgegian documentarian Klaus Erik Okstad, won the FreedomFest Grand Prize. Okstad came all the way from Norway to receive the award. In fact, we had attendees from all over the world, including South Africa, Australia, Argentina, and The Netherlands, among other countries.

–In the closing panel, I asked the participants to respond to newsman John Stossel’s comment to me after we both listened to an upbeat speech by Wisconsin Gov. Scott Walker (sponsored by the Manhattan Institute), “We are toast.” All of the panelists — Steve Forbes, Grover Norquist, Erick Erickson, Matt Gibbe, and Sen. Rand Paul — strongly disagreed. They all thought we could turn things around, just as Canada rebounded in the mid 1990s. The panelists were especially optimistic about the November elections. “We are at freedom’s crossroad,” concluded Steve Forbes. Sen. Paul added, “Libertarians have more power inside the Republican Party.”

–We had our first wedding at FreedomFest! Congratulations to Brian and Valerie June for tying the knot at our gala Saturday banquet. “We love FreedomFest and thought this would be the best place to get married — among the friends of liberty!” stated Brian.

The exhibit hall, “the trade show for liberty,” was abuzz with representatives of more than 100 think tanks, freedom organizations, and financial services companies. Manhattan Institute and the Permanent Portfolio Fund were there for the first time, and PERC, a Montana-based, free-market environmental think tank that is celebrating its 20th anniversary, also was represented. C-SPAN interviewed more than a dozen authors and committed to return next year.

And the Anthem film festival, directed by Jo Ann Skousen, attracted huge crowds this year. Documentaries dominated the film festival, covering such issues as the financial crisis, vaccine safety, global warming, states’ rights, the futility of war, and entrepreneurship.

Audio recordings of FreedomFest 2012 now are available! Go to www.miracleofamerica.com.

Next Year We Move to Caesars Palace!

When moderator Chip Wood asked Sen. Paul if he would come back to FreedomFest next year, the lawmaker replied “absolutely!” Sen. Paul told me he considers FreedomFest the most important freedom event of the year and wants to be a part of it.

Next year, we move to Caesars Palace. Our theme will be “Are We Rome?” Mark the dates, July 10-13, 2013. We have lots of great ideas planned, including a debate at the Roman Senate (Sen. Paul’s idea). We have prepared this 2 ½ minute video: https://vimeo.com/45821274.

Naomi Brockwell, an attendee, just wrote me: “I’m counting the days until next year’s festival. Literally. 360 to go….” Me, too.

If you never have attended, consider the following feedback that I received. FreedomFest 2012 was a “blast”… “wall to wall excitement”… and “the best libertarian conference I’ve ever attended — by far.” These are just some of the superlatives I heard this year. I hope to see you next year.

Yours for peace, prosperity, and liberty, AEIOU,

Mark Skousen
Producer, FreedomFest
“The world’s largest gathering of free minds”
www.freedomfest.com
July 10-13, 2013, Caesar’s Palace, Las Vegas

Dear Investors and Friends of Liberty,

I just returned from the “one of a kind” conference, FreedomFest, where more than 2,000 investors and concerned citizens heard from over 150 speakers, including Sen. Rand Paul, Judge Andrew P. Napolitano, Steve Forbes, John Mackey, Peter Schiff, Alex Green, Robert Kiyosaki, and a host of other financial gurus.  One comment overheard: “FreedomFest is wall-to-wall excitement!”

It was electrifying, beginning with standing a room-only (SRO) crowd, listening to Dinesh D’Souza talk about his latest film “2016: Obama’s America,” and ending with Robert Kiyosaki, author of “Rich Dad, Poor Dad,” speaking on “Be The Fed:  Gaining Your Unfair Advantage in an Unfair System.” The exhibit hall, “the trade show for liberty,” was abuzz with more than a hundred think tanks, freedom organizations, and financial services. C-SPAN was there to interview over a dozen authors (to be aired soon).

Our “emergency session” focused on the out-of-control debt crisis in Europe and the United States, with experts from the around the world identifying ways to survive, protect and profit. Wayne Allyn Root warned that capitalists and entrepreneurs were going on strike against wasteful, big government along the lines of Ayn Rand’s novel, “Atlas Shrugged.”

European expert John Browne emphasized that Europe, with a combined GDP of $17 billion, is the world’s largest economy and cannot be ignored.  Tom Palmer of the Atlas Foundation said that Egypt is the “big prize” in the Middle East and has just fallen into the hands of the radical Islamic Brotherhood. Keith Fitz-Gerald, editor of Money Map, offered an optimistic note that China won’t collapse like many doomsdayers are predicting (including Bert Dohmen and Ty Andros).  David McAlvany reported that debt has been growing at a 16% rate since 2001 — an unsustainable rate — and long-term unemployment has doubled in the United States.  And Peter Schiff said the Fed (or the Treasury) can’t afford to raise rates and will do everything possible to avoid it.

Steve Moore of the Wall Street Journal said that the Supreme Court’s upholding of ObamaCare was “the most important and worst decision in the last 40 years.”  And Steve Forbes went so far to accuse President Obama of being a “hardcore socialist” who plans to nationalize 16% of the economy (healthcare).  These are scary times indeed.

In the closing panel, I asked the panelists to respond to John Stossel’s comment to me last week that “We are toast.”  He said this after both of us heard Wisconsin Gov. Scott Walker talk optimistically about his recall victory (sponsored by the Manhattan Institute).  All of the panelists, including Steve Forbes, Grover Norquist, and Sen. Rand Paul, strongly disagreed.  They all thought we could turn things around, just as Canada turned things around in the mid 1990s.  They were especially optimistic about the November elections.  “We are at freedom’s crossroad,” concluded Steve Forbes. “Libertarians have more power inside the Republican Party,” stated Sen. Paul.

When the moderator Chip Wood asked Sen. Paul if he would like to come back to FreedomFest next year, he replied emphatically, “Absolutely!”  He told me he considers FreedomFest the single most important event of the year and wants to be a part of it.  Next year, we move to Caesars Palace and our theme is “Are We Rome?”  Mark the dates, July 10-13, 2013.  We showed a special 2 ½ minute video.

Also, if you would to buy the audio recordings (CD or MP3) of this year’s FreedomFest, go to www.miracleofamerica.com.

This week, Jo Ann and I are flying to Hong Kong and Shanghai to deliver some lectures at the Austrian Economics Seminar in China.  I will have a full report next week.

Until then, this is Mark Skousen saying so long, fellow free-marketeers, and remember, AEIOU!

I’m delighted to announce that Barron’s reviewed Maxims of Wall Street, my compendium of sayings, quotes and pithy witicisms about investing and the stock market, on June 2. Click here to read the complete review. My favorite quote is: ”A cogent collection of quotations from the investing giants, phrasemakers, and chroniclers on the beguiling, heartless, and trying ways of Wall Street….a diverting reference for an avid investor or market-history buff.” You can get a copy of Maxims of Wall Street (a perfect gift for Father’s Day!) from Amazon.com or Eagle Publishing, www.markskousen.com or 800-211-7661. Enjoy!

We’ve just posted an exciting 3-minute video about FreedomFest.  It has powerful imagery and haunting music.  Feel free to pass along to friends and encourage them to come to FreedomFest, July 11-14, 2012. “Where free minds meet!” https://vimeo.com/43399590

I’ve been in Poland and England on a very successful speaking tour — all SRO crowds.  In Poland, thanks for Jan Fijor, many of my books have been translated….In London I spoke at the Adam Smith Institute on “Austrian economics for Investors” and the Institute for Economic Affairs on “Hayek vs. Keynes:  Who’s On Top?”  Needless to say, in today’s crisis mode, Keynes and Keynesian economics are clearly on top.

Speaking of which……

This evening after my wife and I went to “Top Hat,” a fantastic new musical based on Irving Berlin’s film of the same name, we ran into Paul Krugman, the Nobel Prize economist and foremost advocate of “crude” Keynesian deficit spending, who is here in London on a book tour.  I asked him a series of questions:

What did he think of the Canadian success story, how Canada faced a similar fiscal crisis in 1995, and cut federal spending and employment?  All the Keynesian economists opposed it, but it turned out to be a big success — they balanced the budget in two years and the economy boomed.  Then they went on a 11-year supply-side tax cut policy, and reduced capital gains, national sales, and corporate income (rate is now 12%!).    They had no financial crisis in 2008, and no bank failures.

Krugman quickly dismissed the argument and downplayed its anti-Keynesian implications, arguing that a weak Canadian dollar helped exports and got them out of trouble.  (In fact, the Canadian dollar has been up sharply since 1995, and today is on par with the US dollar.)  You can’t win with this guy!  He never admits it when he’s wrong.

He said he his new book “End This Depression NOW!” is selling the best in countries with the most trouble like Spain.  He favors doubling or tripling the high deficits!

I asked, “Isn’t Spain’s problem of 25% unemployment all about inflexible labor markets, the fact that Spanish firms are discouraged from hiring new workers because of government regulations?”

“That’s minimal compared to the macroeconomic collapse,” he said.  “They need to run even bigger deficits!”
Meanwhile, billions are flowing out of Spain for fear of a collapse.

“What about austerity?”  I asked.   He said he opposed it now, but once we are over the recession, austerity would be required.   Unfortunately, we may never get there if we follow his “crude” Keynesian big spending plans.

He seemed to be completely confident of his big spending strategy.  (He reminds me of Mao, who was determined in the 1970s to double up on socializing the Chinese economy — it only made things worse.)  I asked him if he could name an economist who would be his equal in debate.  He couldn’t name anyone!  I suggested Milton Friedman if he were alive, and he nodded but then added,  “Friedman would be considered a radical leftist in today’s Republican Party because he would undoubtedly favor today’s easy money policies to get us out of this depression.”

“But Friedman would not support fiscal stimulus!” I retorted.   He sheepishly agreed.  Friedman was famous for arguing that monetary policy was far more effective in fighting recession than fiscal policy.  He would not be surprised that the deficits haven’t gotten us out of this crisis.

What about Mitt Romney?  He accused him of being an “empty shell” and even “amoral” — with no principles — and will lose the election.  “The November elections won’t be determined entirely by economic issues,” he said.  “Admittedly the job growth numbers are awfully slow, and that’s not good for Obama.”  But he thinks Obama will pull it off.   I think he’s wrong, but we will see.

Finally, we talked about FreedomFest.  He agreed to debate Steve Moore of the Wall Street Journal in our big mock trial this year, “Wall Street on Trial,” but wanted a ridiculous six-figure fee that would make a Goldman Sachs partner blush.   Instead, we have Robert Frank, NYTimes columnist.  The Times vs. the Journal.  The sparks will fly at www.freedomfest.com.  See you there!

Cheers, AEIOU,
Mark Skousen
Producer, FreedomFest
“The World’s Largest Gathering of Free Minds”
July 11-14, 2012, Las Vegas
www.freedomfest.com

by Mark Skousen, Investment U Research
Friday, April 27, 2012: Issue #1761

 

“When the facts change, I change my mind. What do you do, sir?” - John Maynard Keynes

As longtime subscribers and readers of my books know, I’m no fan of John Maynard Keynes as an academic economist. His legacy is the welfare state, trillion-dollar unfunded liabilities and uncontrolled deficit spending. (See chapter 13, The Keynes Mutiny: Capitalism Faces Its Greatest Challenge of my book The Making of Modern Economics.)

But when it comes to Keynes the investor, it’s a different story, and the man deserves credit for being an outstanding stock picker during a period of war, uncertainty and depression…

According to a study published last month by two U.K. economists, David Chambers and Elroy Dimson, Keynes was a “star investor” who managed to gain 8% annualized returns from 1924 until he died at the age of 63 in 1946. And this was at a time when there was very little inflation and, in fact, much deflation.

What can we learn from this Cambridge wizard of finance? Here are three key lessons:

The Bottom-Up Approach

First, he became a much better investor by switching from being a top-down strategic macro manager and a technical momentum player to being a bottom-up stock picker and fundamentally contrarian value investor.

In the Roaring Twenties, he boasted of his ability to predict the ups and downs of the credit cycle, and was a bullish advocate of a “new era” of permanent prosperity. He once famously told a Swiss banker, “There will be no more crashes in our lifetime!” Two years later, in October 1929, the stock market crashed and Keynes’s portfolio of stocks and commodities was “wiped out.” Keynes recognized that he had no ability to pick tops of markets. (See my chapter, Keynes as a Speculator in Dissent on Keynes.)

After being chastened, he wisely changed his investment philosophy to become a contrarian and fundamentalist. “My central principle of investment is to go contrary to general opinion,” and to buy stocks that are “cheap” relative to “intrinsic” value and to hold these investments through “thick and thin.” He aggressively bought bank, utility and gold mining stocks in the 1930s, using leverage when appropriate. He was better at buying value near the bottom of markets than selling out at the top. He was, in short, a one-armed contrarian.

Investing in High-Yields

Second, Keynes switched out of fixed-income bonds and into on high-dividend paying value stocks rather than growth stocks. He bought utilities, banks and gold mining stocks that paid on average 6.1% annualized yields. He figured dividend-paying shares offered a much better deal with more upside potential than fixed income bonds.

Keynes’ approach was revolutionary at a time when banks and universities invested 90% or more of their portfolios in property and government bonds. He did almost the reverse in the discretionary accounts he managed at King’s College and insurance companies.

Even though he was anti-gold standard, he had the sense to recognize a good deal when Roosevelt went off the gold standard and raised the price of gold to $35 an ounce. Starting in 1934, he bought heavily gold stocks and profited handsomely.

Stick With What You Know

Third, Keynes avoided extreme diversification, but carefully bought a handful of publicly traded companies that he knew well. He was what we call a fundamental analyst who invested in a few companies where he knew management and the true value of the firms. They were primarily small- and mid-cap stocks. Some say he had insider information, at a time when insider information was legal. (Insider trading was not outlawed in the United Kingdom until 1980.)

I recommend you do the same today. Buy a few well-managed companies that pay rising dividends and buy them cheaply. To find out two energy plays that I’ve been recommending lately, check out today’s edition of Investment U Plus.

Good Investing, AEIOU,

Mark Skousen

Steve Forbes did what in Las Vegas?!

Steve Forbes speaks at hundreds of conferences every year. His normal routine is to come in, give a speech, sign a few books and leave. But he makes one exception: FreedomFest in Las Vegas. There he attends all 3 days! So does John Mackey, CEO of Whole Foods Market: “I wouldn’t miss it for the world, especially the debates.” And Senator Rand Paulliked it so much last year that he is returning this year with his wife – and staying all 3 days.

Alexander Green says this: “Next to my wedding day and the birth of my children, FreedomFest was the highlight of my life!”

Why would speakers say such things? What’s it all about? Everything! For 3 glorious days, the “best and the brightest” get together to discuss and debate politics, philosophy, history, geo-politics, science and technology, art and literature, healthy living, music, dance, religion, you name it. The Washington Post calls it “the greatest libertarian show on earth.” It even includes a 3-day investment conference, co-sponsored by The Oxford Club, with your favorite experts – Alex Green, Keith Fitz-Gerald, Marc Lichtenfeld, Karim Rahemtulla, Steve McDonald, Peter Schiff and many others.

As one attendee told me: “You don’t know me but my name is Tony Tardino from Phoenix, Arizona. I just want you to know that FreedomFest in Vegas is by far THE best conference I’ve ever attended, and I’ve attended all of them.”

To learn more, go to http://freedomfest.com.

On April 19, my wife and I flew to Morocco for the Mont Pelerin Society meetings, the first to take place in an Arab country.  We stayed at the Le Royal Mansour Meridien in downtown Casablanca, a first class hotel with great service, but surrounding the hotel was a lot of dust, litter, and construction.  The city of 6 million did not live up to its romanticized exotic reputation, and was quite “Third World.”  

That evening we went to Rick’s Café for our wedding anniversary.  The restaurant, named after the famous Humphrey Bogart film, is eloquent and first class: www.rickscafe.ma.  When we arrived the maitre d’ announced, “best table in the house for the Skousens!”  We were placed right next to the piano, where the piano player played tunes such as “As Time Goes By.”  We had a great meal, and a wonderful evening.  Highly recommended. 

 Afterwards, we took a three hour train to Fez, the ancient city, for the Mont Pelerin Society meetings.  Fez is much more beautiful and clean than Casablanca.  We stayed at the first-rate Royal Mirage Fes Hotel. 

 The conference itself was quite educational.  I was surprised that only eight Americans came. The rumor was they were afraid to come to an Arab country.  Several Arab speakers tried to make the case that Islam was fundamentally a peaceful religion that favored free-market capitalism.  But it’s hard to get around the prohibition of interest, which is a big negative for capital formation and banking. 

I met up with a lot of friends, including Vaclav Klaus, the president of the Czech Republic, Mario Llosa Vargas, the Nobel prize winner in literature, as well as Tom Palmer (Atlas Foundation), Fred McMahon (Fraser Institute), Andrei Illarionov (Cato Institute), and Atilla Yayla from Turkey, among many others.  One thing I like about the MPS meetings is that it’s a “one stop” quick way to find out what’s going on around the world — I asked experts from Japan, Europe, Latin America, Canada, and got instant analysis. 

I brought some of my 12-page brochures and copies of my books to hand out to Arab economists.  When I introduced myself to Professor Mohamed Abdilaoui, who taught at the top university in Fez (University Sidi Mohamed Ben Addellah), he asked me, “Would you like to give a lecture on Keynesian economics tomorrow morning before several hundred of my students?” 

 I jumped at the chance.  Prof. Abdilaoui picked us up around 7:30 am, and he gave us a tour of the campus, introduced us to the dean and fellow faculty, and then had me address hundreds of students in a big hall, and then a dozen or so graduate students.  They all get free tuition. 

Mark and JoAnn Skousen with students at University Sidi Mohamed Ben Addellah

 On my lecture about Keynesian economics, I started with the classical model of Adam Smith, and show how Marx and Keynes departed from these positive policies.  I went out of my way to be critical of Marx because I was told that Marxism is strong on campus.  I pointed out that economists have disproven Marx’s claims of exploitation, alienation and crisis.  Keynes is more difficult to disprove, but I basically had only time to show the legacy of Keynes — the welfare state, massive unfunded liabilities and excessive national debt. 

At the end I offered them a choice between a 200 dirhams or a silver dollar to demonstrate sound money.  Even though the silver dollar is worth much more than the 200 dirham note, most of the students wanted the paper banknote (worth about $25)!   Overall, they were quite enthused about our visit there, and invited us back.