With all the talks, debates and different perception about capitalism, consulting an expert can best take us to in-depth understanding of the concept. Yaron Brook, an internationally sought-after speaker, writer, activist and objectivist, walks us through his strong belief in the philosophy and principles and how capitalism should be attached to individual rights and freedom. He explains how we can flourish through capitalism. He also shares how a book handed to him has started his lifelong journey and reinforcement of capitalism started.
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The Philosophy And Principles of Capitalism with Yaron Brook
I hope you are enjoying the first couple of episodes revolving around the topic of capitalism. I have the foremost living expert on capitalism, Yaron Brook. Yaron is an Israeli-American entrepreneur, writer and activist. He is an objectivist, which we’re going to most likely talk about and what that means. He also is the current Chairman of the Board of the Ayn Rand Institute. He also is the Cofounder of BH Equity Research and is the author of several books including called Equal Is Unfair: America’s Misguided Fight Against Income Inequality. Yaron, thank you for joining us. Welcome to the show.
It’s great to be here. I’m looking forward to this.
I find your background fascinating in how you came to understand what you do and why you have such a strong belief in your philosophy and your principals. Would you mind taking a moment and informing the audience of what is your background? How did you come to understand objectivism as well as capitalism? I would say a very strong opinion if those that are in our audience have listened to you or watched you before.
If they haven’t, there are tons of videos. Google my name and you’ll find a ton of content. I was born and raised in Israel in the period of time when pretty much everybody was a socialist. It was a thing to be. The Labor Party in Israel had won every single election until 1977. You were never exposed to any ideas other than the ideas of socialism. In 1977 as it happens, I was sixteen years old. I was getting together with a friend of mine. We were talking and he was spouting these free market capitalist ideas and I looked at him and I said, “Where are you getting this nonsense from? What happened to you?” He said, “You got to read this book,” and he handed me a copy of Atlas Shrugged. I read a lot in those days and I dove right into it and it blew my mind. It completely shook my world. It challenged everything I believed in from the fundamental beliefs I had about ethics, purpose of life, happiness, morality, politics, economics and about everything. I argued with the book. I didn’t want to believe it. I threw it against the wall. I yelled at Ayn Rand, she wasn’t there.
By the end of the book, I was convinced. It completely made sense to me. It was completely logical. I thought I completely understood it. I was still quite ignorant and I didn’t know it, but I got into basics. It was the beginning of a lifelong journey of discovering Ayn Rand’s philosophy, the philosophy of objectivism and her view of capitalism, how capitalism fits into that. I ultimately became a finance professor but my interest is more on the politics and economics. It’s all grounded in this view of morality, which is key to understanding her philosophy and understanding capitalism. I’ve studied her philosophy. I’ve studied economics. I’ve studied the great capitalist economists. The more I study, the more I’m convinced that the revolution that went through my mind at age sixteen was a true one and the rest of the world needs to catch up. What are they waiting for?Capitalism is about freedom of the individual to pursue his values as he sees fit without anybody intervening. Click To Tweet
It’s interesting that your perspective continues to be reinforced it sounds by doing debates, by debating the opposite principles. You experienced it in your childhood growing up, but also you continually challenged both sides of the argument, which is profound and continues to reinforce it. How would you come to understand capitalism? When you acknowledged that word and when you look at its relevance in society and in life what is it that is most compelling and most profound?
Capitalism is about freedom. It’s about the freedom of the individual to pursue his values as he sees fit without anybody intervening where the role of the government is to protect that freedom. The founders called it individual rights. John Locke called it individual rights and they were right. These are the individual rights by the freedoms of action. Freedom of action is the pursuit of values necessary for your survival, the rational values that you need. Capitalism at the end of the day is a socioeconomic system, political system in which the government does nothing but protect individual rights, primarily property rights where all property is privately owned.
The government has complete separation of state from economics. Pure capitalism is where the government has no economic role. There is no treasury secretary. There are no regular agencies. There’s no Federal Reserve. There is no role for government. When we get together, what we decide, how we decide to exchange, what we decide to change, how we decide to produce and how we deploy our resources is completely left to individuals. As long as I am not committing fraud, as long as I’m not punching in the face, as long as I’m not committing a crime, as long as I’m not violating your rights, the government has no business intervening in the transaction between us.
The primary argument I want you to address now and this is the primary argument that we all see in society is that mankind isn’t going to do the right thing. They’re going to exploit people. They’re going to cheat. They’re going to steal. They’re inherently evil. Looking at capitalism, doesn’t that accentuate or magnify those flaws of humankind?
Let’s assume all men are evil, they’re scheming and they’re going to screw each other. Let’s take a small group of men, call them saints and have them control everything. The bureaucrats, the politicians, we know that they’re saints. We know our politicians. Even on its own terms, it’s insane. The fact is that there’s nothing to suggest in history that this is indeed the case. Look at us now. Since the invention of capitalism about 250 years ago, since the founding of this country, which is about the same time as capitalism comes together, not an accident that the two happened at about the same time. Since then, life expectancy has more than doubled. We’re wealthier beyond the most fantastic dreams of anybody living 250, 300 years ago.
Nobody could have imagined an iPhone and the fact that we’d be videoconferencing right now. All the tools that are available to us, they barely could imagine. I don’t think they imagined automobiles, flying machines that turned out to be nothing like the jets we have now. If you look at what human beings are capable of doing, of when they’re left free they produce, of how much benevolence and help and cooperation. Think about capitalism. People think about capitalism and think about competition and cutthroat competition. The fact is that 99% of capitalism is about cooperation. It’s about me hiring you and that’s a cooperative effort.
It’s about even competitors. Do you know that Apple uses Samsung product in its iPhone even though it competes with Samsung? Some of the components in the iPhone are made by Samsung. Even as they’re competing, they are cooperating. Collaboration and cooperation is the essential characteristic of capitalism. You see that on a massive scale and versus every other regime. Look at Venezuela, socialism. Theft, cheating, backstabbing, manipulating and people say, “This is socialism,” it’s really a kleptocracy. That’s exactly what socialism is. It is a kleptocracy. Every single regime that’s not capitalist, even in America, I would argue that our politicians are more corrupt now than they were 150 years ago when we were freer. I would argue that people generally in the culture are less honest. People generally in the culture will cut more corners because the government is intervening more.Pure capitalism is where the government has no economic role. Click To Tweet
I think it’s exactly the opposite, the freer you allow people to be. People are neither good nor bad, but people have it within them to be good. When the right incentives are provided, when they’re left free, when they can benefit or when they can reap the rewards of their own action, they tend to be good. When you try to control them, when you put mother governments on their shoulder to try to tell them what they can and cannot do, they work at corners. They will cheat. I truly believe people are born neither good nor bad, but goodness is a potential in all of us. Capitalism brings out the best in people, the innovation, the hard work, the striving to improve their lives and the value creation that benefits all of our neighbors and everybody around us.
As you debate the opposite opinion because I believe there’s a clear distinction of how humans behave within an environment that’s free. An environment that has laissez-faire, hands-off and one that is centrally planned and influenced to take care of the well-being of all. What is it about the idea of freedom that drives so much disdain amongst people, especially in our quickly changing liberal perspective on things?
I hate to give them the compliment of calling them liberals. Liberals used to be a good word. What drives it is that capitalism demands something of all of us. It demands the best of us. It demands personal responsibility, but not just personal responsibility in the way a lot of conservatives deem it in a shallow sense. Personal responsibility goes deep down on all of our choices. It demands that we pursue a life worth living. Capitalism implies a particular moral code. It implies a moral code of self-interest. Capitalism basically says, “You’re on your own. Go and make the best of your life. Nobody’s going to be responsible for you. Nobody’s going to take care of you. You need to take care of yourself.” It basically encourages that so we reward success. We penalize failure. We reward accomplishment. We encourage and promote and allow for self-interest.
We all know what our mothers taught us about self-interest, about egoism or about even selfishness. Bad things, bad people are selfish. Bad people are self-interested but is that really the case? When Steve Jobs pursued self-interest in making the iPhone and he’s clearly pursuing his interest, trying to make a lot of money and building a product he loves. Is that a bad thing? Is that hurtful to anybody else? No. When great scientists pursue with passion the discoveries they make, that’s not about sacrificing for the world. They’re doing it because they love doing it. They do it to satisfy themselves. Capitalism is about satisfying our own rational values or our own rational needs. As such, it goes against the moral code that almost everybody teaches. This is why on the right among conservatives and among people on the right, they have such a hard time defending capitalism particularly as an absolute. “We need a little bit of capitalism,” they’ll tell us. No, we need capitalism. We need complete absolute capitalism because they’re uncomfortable with the idea of self-interest. They are uncomfortable with the idea of defending and promoting egoism.
We have been taught since we were this big that what’s good is to be selfless. What’s good is to sacrifice. What’s noble is to think of others first. This is what blew me away in Atlas Shrugged. Ayn Rand asks a simple question, “Why is your happiness less important than other people’s happiness? Why isn’t your happiness the most important thing to you?” If you understand how you get happiness, it doesn’t come by exploiting other people. It comes by creating values, but why is your life less important than other people’s life? Why should you live for the other rather than live for yourself? To me, the real essence of capitalism is the morality of self-interest and that’s what the left but also the right, find disdainful. Why the left condemns capitalism and why the right, for the most part, cannot defend it or defend it so poorly.
These ideas are old ideas. I haven’t revisited this in a while in detail, but Adam Smith before he wrote The Wealth of Nations and The Theory of Moral Sentiments, he talked about how we’re driven as a human being where we do have this self-interest. I wouldn’t say it starts with making sure that we stay alive. We feed ourselves, we clothe our self and we fit into society. Then it gets to the point where we’re driven to make a contribution and do things and ultimately by pursuing that, you provide for the well-being of others as a result. The intention of the left, I would say, by forcing people to give up money or to do this so that they can distribute to everyone. Ultimately, the best thing for everyone comes about by a person pursuing that self-interest. What are your thoughts around that?
This is why Ayn Rand is such a revolutionary because she fundamentally disagrees with that of Smith in this sense. Adam Smith correctly observed in The Wealth of Nations and in The Theory of Moral Sentiments that the baker doesn’t bake the bread for you. He baked the bread for himself. He likes baking bread. More importantly in the context of the baker, he’s trying to make a living. He’s trying to feed his family. He’s trying to feed himself. He’s motivated by self-interest. Adam Smith says, “Self-interest is not good. It’s not a model trait. It’s not a virtue. We tolerate it because if you add up the self-interest of all these people, you get a better social outcome.”
Ayn Rand says, “I don’t care about the social outcome. What I care about is your right as an individual to pursue your happiness, your self-interest. I care about the baker as the baker, not what he does to other people but the baker. I want the baker to be able to be happy.” For the baker to be able to be happy, he must be free. Free to make his own choices. Free to have his own ideas. Free to bake whatever bread he wants to make, whether it fits into the regulatory regime or not. As long as his customers want it and as long as it doesn’t hurt them, he commits fraud or he’s putting poison in the bread. He should be able to be free to make his bed as he sees fit and pays employees as much as he wants because I care about the baker.People are neither born good nor bad; goodness is a potential in all of us. Click To Tweet
It turns out that if you leave people free to pursue their self-interest, the society, if you can even define that term, is better off. Everybody who’s willing to work, everybody’s willing to produce is better off. That is not the reason to defend capitalism. The reason to defend capitalism is in the sense that the founders wrote in the Declaration of Independence. You have an inalienable right to pursue your own happiness. Not society’s, your own. The only political-economic social system that leaves individuals free to pursue their own happiness is capitalism. To me, that’s the moral foundation. It’s about the individual and it works because when you leave people free, they take care of their own property. That’s why capitalism also produces the cleanest environment because private property is clean. It’s a public property that’s polluted.
When the wall came down in Berlin, what we discovered was the filthiest place on the planet was communist East Europe because everything was public property and nobody cared. Everything dumped their garbage in the public space. When you have your own private property, we take care of it. You take care of yourself. In order to make a living, you have to produce values that other people want and therefore you are helping them. When I buy an iPhone for $1,000, my life is better for that. My iPhone is worth much more than $1,000, tens of thousands of dollars if this enhances my life. I’m willing to give up $1,000 because my life is better off by doing so.
Think about that. Every transaction we go through every day when we buy groceries, when we go to a restaurant, when we buy iPhones, or when we consume electricity. Whatever it is that we do, we are benefiting more than what we’re paying. Otherwise, we wouldn’t do it. Capitalism is a system through trade, through the win-win relationships that trade creates. Capitalism is a system that everybody is constantly better off through it as long as you’re working and producing something and earning something. It’s a win-win relationship. Because I’m selfish, because I want to produce, because I want to have a better life, I’m making everybody else’s life better as well because I have to trade with them. That’s the beauty of capitalism and that’s the beauty of this morality, the small defense of capitalism.
You had gone down and talked about this notion of happiness and achievement. You talked about how people pursue achievement. Achievement gives them a notion of self-worth or confidence and that happiness. Would you define happiness in another way or is it in line with that sequence?
Happiness is the sense you get about life that comes from achieving your goals and achieving your values, as long as those values are rational. I don’t think somebody who has irrational values can be happy. If your value is to bring about socialism, you’re not going to be happy. You’re going to be miserable because the existential reality of those values is going to be detrimental to your life. The values have to be rational, pro-life values. Happiness comes from achieving those values. Ayn Rand defined happiness as a state of non-contradictory joy. You have this positive sense about the world and nothing is contradicting it. Nothing is fighting it. The world is good. It doesn’t mean you don’t have problems. It doesn’t mean you can’t be sad. It doesn’t mean tragedies don’t happen to you and you could be depressed for a while.
Overall, your attitude towards your life, your standing order in terms of life is life is good. I achieve stuff I can. I can make my goals. I can achieve my values. People sitting at home, for example, one of the great tragedies of the welfare state is that it basically prevents people who receive welfare from ever being happy. It robs them of opportunity to be happy because without work at whatever level you are capable of, without the challenge, without building, creating or making something. Whatever level you can do it, I don’t think you can be happy. You have to be able to achieve values. If you’re sitting at home playing video games and collecting a welfare check, that’s out the window for you. To me, the welfare state is immoral to a large extent because of that.
I’ve thought about that a lot. I thought about with people and what they achieve. Oftentimes, it comes as a result of hardship and error or mistakes in certain areas and their ability to overcome that and learn and achieve because of it. I don’t think there’s anything that can replace that. I look at a free society and how that allows for those opportunities. It does allow people to understand what they’re capable of. I’m not sure if there’s another way to do that. I don’t think there is.
At the end of the day, you go down to freedom. You have to have the freedom to try. You have to have the freedom to experiment. You have to have the freedom to fail, but you also have to have the freedom to succeed and to benefit from that success that so that everything else is motivated. That’s what capitalism provides. Capitalism is the system that leaves you free to do all those things. That’s how you get great innovation. People try stuff out. They come up with crazy ideas. Everybody around them I’m sure said, “That’s nuts. You’re insane. Nobody can do that,” and then they go do it.Capitalism basically says you're on your own. Click To Tweet
Sometimes those crazy ideas turn out to be crazy and they fail. Sometimes and maybe less frequently, they turned out to be brilliant and they turn out to be what changes the world. The socialism you don’t have there, socialism under any political system where the state is involved. You basically have to get permission in order to innovate. If you take any great idea in human history and you put it in front of the committee, it’s going to fail. Is Earth going around the sun or is the sun going around the Earth? The committee of the Catholic Church decided, “The sun goes around the Earth. Galileo, you’re all wrong.” They shut him up and they imprisoned him or they put him on house arrest so he could not articulate this fallacy. In a free society, Galileo is out there, “I made this incredible discovery,” and speed at which science would have developed after that would have been so much faster. We would be so much richer now. Everything got slowed down because the committee couldn’t decide if this was a good idea or a bad idea. I always ask my audiences, “Imagine if this was designed by a government committee. What would this look like?” You don’t need to even get the answer. You know what’s going on inside of people’s heads. They can see some monstrous machine that’s too big and doesn’t work and is a disaster. Steve Jobs didn’t need to get permission. He didn’t ask anybody. He just did it.
It’s stifling and it’s interesting what’s going on in our country with the government shutdown and 800,000 people not working.
I would love to see the Federal government fire 800,000 people. We as a country would be richer. We as a country would be safer. We as a country would be far more capitalist and far more innovative if we got rid of these bureaucrats. My only concern about the government shutdown is these people are going to get back pay. I would like to see them fired. I would like to see the government shrink by 80%. You could probably get rid of 80% of government officials. Keep the military. Keep a few policemen. Get rid of everybody else. What do we need them for? They only constrain our lives. They only hinder our lives. They don’t add anything to it.
Have you been to CES before in Vegas?
I read about it all the time. It sounds like a great time.
It’s this whole topic. You experience the results of this topic. I was in line doing a demo for the self-driving cars and I was talking to the head analyst at Intel who is creating the technological framework for that. The biggest impediment was the government. It was approving this and approving this. It’s one of those things where it can stifle innovation at that level, but it also stifles it at the lower levels primarily the welfare state. How we’re robbing individuals of an awesome experience to figure out their life and to figure out how to overcome challenges and problems and get employment. There’s so much in a human’s mind and their ability to create and prosper. It’s robbed from them over and over again. It becomes a habit and it destroys human life. I would consider one of the biggest tragedies of our day and age.
It robs us from the productive capacity and it robs them from their productive capacity and it robs us from their ideas. Just because they are on welfare, it doesn’t mean that with the right incentives, if they wouldn’t be the next innovator, the next entrepreneur or the next somebody who created something important. We robbed them when they’re children. Think about the other great tragedy. Under capitalism, education would be private, and education would be competitive. Education would have to be good. Otherwise, I wouldn’t send my kids there. Now, we have an educational system through and through. Particularly, if you’re poor we have an awful educational system that cripples these kids. It doesn’t give them the tools, it cripples them. This is socialism in practice. We have socialism in education. What is the result? Worse than mediocrity, it’s pathetic awful.
Imagine if education was competitive. If entrepreneurs instead of thinking of the next app for the iPhone thought about the next educational product, the next school that they could create, the next chain of schools that they could build where they would drive prices down and drive quality up. Imagine if we saw billboards with, “If your son is inclined towards math, our school is great. Your son or daughter likes to paint, our school is great for you.” They compete on those things and they market and advertise them. That would be a capitalist world. That would be a worthwhile world. What we’re taking is sheer human potential and destroying it by grinding it through a government educational system. I won’t even send a letter through the post. I’d rather use UPS and FedEx. Why would I send my kid to the equivalent of the post office, which is what government education is?Happiness should not come from exploiting other people. Click To Tweet
In 2018, we focused on John Locke’s life, liberty and property and what those principles were. One of the guests wrote the book, Free To Learn, his name is Peter Gray. He talks about the Sudbury School System and how kids are creative. They’re naturally curious about life and he robbed them of that experience by shoving curriculum down their throat.
Competition is we discover which educational system is best. There will be competition and parents might disagree and there might be all kinds of schools. We would all have different preferences and some would be more successful than others. It would be innovative and we would go through the market process of discovery which educational system was best, just like in any other field. We figure out what’s best through competitive markets. The fact that we denied this of our kids and we denied this of our society and our culture is tragic.
We could probably go on and on because there’s so much to talk about because there’s so much application to human life and our experience on Earth. Let’s end with this. As you’ve researched this and debated this and thought about this to the nth degree, what would you say are the most compelling reasons at an individual level to embrace the principles of capitalism?
The most compelling reason is that you value your own life. You want to be free. You want to have opportunities. You want to pursue your own dreams. You want to be happy. It’s difficult to be happy under socialism, certainly under communism or fascism or statism of any form. The most compelling reason to want capitalism is to want to live. It’s to want to go out there and produce, create, build and make stuff. It’s not even about the money. Although money is nice and money comes with all that creation, but it’s about the sheer fun and enjoyment of pursuing something that you love doing and doing something that you love doing. Making a difference in your own life and challenging yourself and setting ambitious goals and achieving those goals.
It’s living. Capitalism is the only system that allows you to do that fully. One of the great tragedies in America unfortunately is we think of America now as capitalist. We’re not. We’re this mixed economy with some capitalism still, some freedom and a lot of regulation and control and fascist, socialist structures imposed on us. If we could only get rid of that and we could get richer, get happier, flourish in dimensions we can’t even imagine. Everything becomes better with freedom. The odds get better. Our spiritual life gets better. Our material life suddenly gets better.
Yaron, this has been a fascinating discussion. If you Google your name, there’s a lot of stuff out there. Why don’t you cover the best ways to follow you? Best ways to learn about the Ayn Rand Institute and learn more about capitalism.
First, I recommend everybody to read Atlas Shrugged and The Fountainhead, Ayn Rand’s books. They’re American classics. Everybody should be reading them anyway. Go pick up a copy and they’re available in every format known to man. No excuses. A lot of people are listening to them these days. Download it on Audible and take a road trip. You can find about Ayn Rand in AynRand.org. There’s a ton of content, a ton of material there. If you want to study objectivism deeper, there are lots of videos, audios and podcasts and many years’ worth of content that’s available. Some of it is Ayn Rand herself, some who are leading philosophical students who know her ideas and study them. To follow me, there are a number of ways. The easiest is probably going to YouTube and to subscribe to my YouTube channel. There are thousands of videos up on YouTube of mine and I’m constantly producing more. I do a video show at least once a week, usually three, four times a week. There’s a ton of content being produced constantly. You can do the regular follow me on Twitter and follow me on Facebook. I do have a website, YaronBrookShow.com.The only political economic social system that leaves individuals free to pursue their own happiness is capitalism. Click To Tweet
As far as your books are concerned, they’re all available on Amazon or on your website?
They’re all available on Amazon. They’re all available in every format that is available. I have three books. One is called Free Market Revolution: How Ayn Rand’s Ideas Can End Big Government, the second one is Equal Is Unfair and the third one In Pursuit Of Wealth: The Moral Case For Finance. It’s a book about the financial industry and why it’s a noble, productive and virtuous model industry. That will shock a few people. As a companion to that, I do on YouTube a talk called The Morality of Finance.
Yaron, it’s been a pleasure. Thank you for your time. Everyone out there, hopefully this has struck a few chords and got you to think about capitalism, the principles of capitalism and the principles of freedom at a deeper level.
- Yaron Brook
- Ayn Rand Institute
- Equal Is Unfair: America’s Misguided Fight Against Income Inequality
- Atlas Shrugged
- The Wealth of Nations
- The Theory of Moral Sentiments
- Free To Learn
- Peter Gray – Previous episode
- The Fountainhead
- YouTube – The Yaron Brook Show
- Twitter – Yaron Brook
- Facebook – Yaron Brook
- Free Market Revolution: How Ayn Rand’s Ideas Can End Big Government
- In Pursuit Of Wealth: The Moral Case For Finance
- The Morality of Finance – YouTube Video of Yaron Brook
About Yaron Brook
Yaron Brook is chairman of the board of the Ayn Rand Institute. He wears many hats at the institute and travels extensively as ARI’s spokesman.
Brook can be heard weekly on The Yaron Brook Show, which airs live on the BlogTalkRadio podcast. He is also a frequent guest on national radio and television programs.
An internationally sought-after speaker and debater, Brook also pens works that make one think. As co-author, with Don Watkins, of the national best-seller Free Market Revolution: How Ayn Rand’s Ideas Can End Big Government, Brook and Watkins argue that the answer to our current economic woes lies not in “trickle-down government” but in Rand’s inspiring philosophy of capitalism and self-interest. Last year, Brook and Watkins released a new book, Equal Is Unfair: America’s Misguided Fight Against Income Inequality, a book that shows the real key to making America a freer, fairer, more prosperous nation is to protect and celebrate the pursuit of success―not pull down the high fliers in the name of equality. Brook is also contributing author to Neoconservatism: An Obituary for an Idea, Winning the Unwinnable War: America’s Self-Crippled Response to Islamic Totalitarianism and Big Tent: The Story of the Conservative Revolution — As Told by the Thinkers and Doers Who Made It Happen. He was a columnist at Forbes.com, and his articles have been featured in the Wall Street Journal, USA Today, Investor’s Business Daily and many other publications.
Brook was born and raised in Israel. He served as a first sergeant in Israeli military intelligence and earned a BSc in civil engineering from Technion-Israel Institute of Technology in Haifa, Israel. In 1987 he moved to the United States where he received his MBA and PhD in finance from the University of Texas at Austin; he became an American citizen in 2003. For seven years he was an award-winning finance professor at Santa Clara University, and in 1998 he cofounded BH Equity Research, a private equity and hedge fund manager, of which he is managing founder and director.
Brook serves on the boards of the Ayn Rand Institute, the Clemson Institute for the Study of Capitalism and CEHE (Center for Excellence in Higher Education), and he is a member of the Association of Private Enterprise Education and the Mont Pelerin Society.