Investment basics -- human desires and needs

Sometimes it's good to take a step back and think about the fundamentals. What is business? Fundamentally, business is people taking care of the needs and desires of other people. If we could all satisfy our own needs and desires, we wouldn't need to have businesses. We'd just do it everything for ourselves.

But even when we were cave people we weren't totally self-sufficient. No doubt some cave people were better at making bear skin coats than others, and perhaps traded their labor for extra food. No doubt save cave men were better hunters than others. But perhaps one guy was better at making spear tips.

There does have to be a reciprocity. I satisfy your desire for a terrific bear skin coat only if you satisfy my desire for two freshly killed rabbits to eat. This is how it works between free people. Of course there is slavery, both in the older form and in the modern form of welfare.

Money makes the reciprocity a lot easier. Instead of making a bear skin coat for two rabbits from you, half a deer from Joe, and a pile of eggs from Sue -- I simply charge everybody the same five dollars. This gives the system a lot more flexibility. You earns his five dollars from hunting, Joe from fishing, and Sue from carving necklaces.

All this sounds obvious, but it was a comfort to me when I came to understand that income from a company was safe as long as it met the needs or desires of many other people. As long as it does that, it will stay in business and general interest or dividend income for investors.


investment basics
investment basics