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Varner: Seeing business as a wealth creator

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The theme for today is that business creates wealth. This goes back to Adam, Smith that is, in 1770. He said that WITHIN A FRAMEWORK OF LAW (caps here are important), business venues will be driven “by an invisible hand” to promote the general welfare.

Next it can seem if someone makes a lot of money, they have a larger share of the pie and thus others have less. The reality is that a good venture helps make the pie bigger.

To illustrate how the pie grows, let us look at a celebration in our family. In November 1891, exactly 130 years ago, my great great grandfather Caleb Woodyard bought what we call the Windmill Farm. The windmill pumped water for cattle in a small pasture. In the 1950s, Dad built the corn cribs to store the 80 bushels per acre corn on the cob.

Today our machinery picks, shucks and shells the corn in one operation, so it is called a combine. Sadly, the cribs are gone, and we have modern but less attractive storage bins. Thirty years later, he gave the farm to my grandfather Joe Woodyard Varner.

In the legal conveyance, there is what we call an “in terrorem” provision, I believe written by his soon-to-be father-in-law, a Terre Haute lawyer and my namesake, Carson Hamill. It said that for 10 years he could not sell or take a loan, using the farm as collateral. If he did, the farm would go to other members of the family. Today, my brother and I as well as our children own the farm. Caleb gave land to other family members as well, but all our now distant cousins have sold their land and gone their ways.

Illinois farm records begin right after the Civil War and show yields up and down, but average about 40 bushels per acre. In the 1950s, several agricultural companies looking to make some bucks got to work and while annual yields continue to go up and down, the trend line has been upward and onward.

Seeds used to be taken from a good-looking ear but now, while expensive, from carefully cross-bred strains. Fertilizers and improved drainage also contribute to the record 230-bushel yields on our Windmill Farm. Many McLean County farmers might brag about even more. Think of the wealth increase coming every year from the very same land Caleb bought so many years ago.

Remember in the 1970s it was illegal in the U.S. to own a telephone, but rather Ma Bell rented them out to homeowners and businesses. Telephone service was either a government enterprise like the postal system, or in our case, a heavily regulated monopoly. President Ronald Reagan proclaimed there should be competition and we were off and running in what I believe have been 40 of the most creative years in human history. As I write, Apple stock trades at $150 a share. On my tech student’s recommendation, I got mine at $15. I didn’t buy enough did I? Are you poorer after Steve Jobs and I have taken your money? You could still be dialing your numbers, but today, 85% of us own a smart phone. That includes quite a few who live in what we call poverty.

“Government, stay out of the way” has been my creed, but after swallowing a bit I must admit sometimes they get it right. Thirty years ago, they pushed some grumpy farmers into using a no-till or low-till method, which was more friendly to the environment. A recent presentation began with a picture of a bright red oh-so-cool ’65 Chevy. The presenter then said, this was a picture of a death trap. He then went on, in sometimes gruesome detail, to explain why. I well recall safety did not sell back then. My first car was a Volkswagen Beetle. Dad wondered why I wasted $20 each to have two lap seat belts installed. Recently a friend of mine was in a car accident that totaled her car, driver probably on the phone, running a yield sign. She and her young daughter were obviously shaken but otherwise unhurt. In that ’65 Chevy, survival would be in doubt. I find cars ugly these days, but for the 91% of U.S. households that have cars, they are so much better off and share the added safety created by (although sometimes pushed by government) business.

There is a lot of noise these days that immigrant Musk, college dropouts Gates and Zuckerberg, Bezos and their ilk, in the name of fairness and equality, should be stripped of a significant portion of their holdings. There seems to be a feeling that their money is in some sort of an Uncle Scrooge money bin and just waiting to be taken and put to good use. The truth is that their money or capital, as well as mine in Apple, is working very hard creating better lives or greater wealth for all of us.

Carson Varner is a professor of finance, insurance and law at Illinois State University.


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