Golden Geese and The First Law of Capitalism

[Philip Copeman]

First Law of Capitalism is that Capital compounds cumulatively.

K(t+1) = K(t) *(1+r)

or

K(t+n) = K(t) *(1+r)**n

For example if you start with R 100 and can double it with r = 100%, you will have R 200. If you can do that 10 times you will have over 1000 times the amount you began with.

(1,2,4,8,16,32,64,128,256, 512,1024)

The faster you are able to achieve "r" the faster you will be able to increase your Capital. So to become a Millionaire you need only to begin with R 1000 and to double your money each month for 10 months in a row. Do it slower and it will take you longer.

This is the legend of the Golden Goose. Suppose you find a goose that lays Golden Eggs. Waht do you do? Fertilize your females and hatch their eggs. Never eat the eggs and kill only the Geese that have stopped laying. Keep doing that and start building Barns to house your layers. Sell franchises of Barns and list the whole operation on the stock market. Take the Capital you make there and diversify into other markets.

You may have to sell a few eggs along the way to buy gold filings for food, barn doors, delivery vehicles, but never sell eggs to buy indulgences. Keep building your capital - the number of egg laying birds. 

If you are never able to replicate the Golden laying you may be left with  keep ing a feeding the laying goose un keep doin g that until it stops laying. Never be tempeted to do what the fabled farmer did and kill the laying bird to get the eggs inside.

Yes , it gets tricky and along the way there are robbers and pitfalls a plenty. A fool and his Capital are soon parted. The biggest fool is your own ego and weak desire to consume the profits (eat the golden eggs instead of hatching new Geese). The second is the Institutional consumers, the tax man, those that will collect your eggs in the name of social progress and destroy them in an omelet.  Thirdly avoid your fellow Capitalists who would sell you a new sports car instead of a new Barn. 

Fortunately in South Africa we live in a country where our Government will almost not tax the emergent Capitalist. (you have only to endure a minor turnover tax, and an input tax of vat on all your purchases from big business) All around you are opportunities that are missed because we have grown a culture of workers.  It is into this golden dawn that foreign micro Capitalist pour and take up these opportunities.

Do not listen to those egg eating politicians, who would tell you that all we have to do is rise up, kill the farmers, take their Geese and all will feast. Such a feast would be a once off affair, followed by famine - The killing of the the Golden Geese. The irony is that only  those that can stand back from the feast, only those that can promise you little more than to sell you non producing Geese can be the only true guardians of the Barn. It is from such a small group that the thin line of Capitalism is formed.

So before you spend that next R 1000 to buy lunch for a lady, consider the possibilities if you bought yourself a Golden Goose instead.