Who Built My Business?

Pablo Picasso created great art. How much credit goes to his father, an art teacher who trained him? How much to his mother, who handed him his first pencil? How much to the companies that fabricated Picasso’s brushes and pigments?

Derek Jeter and Chipper Jones are future Hall of Fame infielders. Should their plaques at Cooperstown recognize the people who stitched their gloves and manufactured their bats?

Nearly 20 years ago, I unpacked a new computer, sat down and wrote a business plan for the company now known as Palisades Hudson Financial Group LLC. Today Palisades Hudson has around two dozen employees, more than $1 billion in assets that we manage for our clients, whom we also help with all sorts of tax and financial matters, and offices in New York, Florida and Georgia. Our first West Coast office, in Portland, Ore., is due to open shortly.

President Obama was speaking directly to people like me when he made his now-famous remark to entrepreneurs: “If you’ve got a business – you didn’t build that. Somebody else made that happen.”

The president was not entirely wrong. I did not build my business alone. Where he went astray – where he showed how little he knows about being a business owner, having other families depend on checks you write and decisions you make, and having customers willingly give you money they could just as easily spend elsewhere – is in who deserves to share the credit.

“If you were successful, somebody along the line gave you some help,” Obama said at a July 13 campaign event in Roanoke, Va. “There was a great teacher somewhere in your life. Somebody helped to create this unbelievable American system that we have that allowed you to thrive. Somebody invested in roads and bridges. If you’ve got a business – you didn’t build that. Somebody else made that happen. The Internet didn’t get invented on its own. Government research created the Internet so that all the companies could make money off the Internet.”

Before we get to his philosophy, let’s straighten the president’s bent facts.

Government research created the Internet (which grew out of the Defense Department’s Vietnam-era ARPAnet), but not “so that all the companies could make money off the Internet.” The defense contractors and academics who first linked their mainframes were not trying to create an infrastructure that Amazon could use to sell books or movies. British computer scientist Tim Berners-Lee developed the World Wide Web’s basic protocol while studying at CERN, the European Center for Nuclear Research. Marc Andreesen, an American software engineer and venture capitalist, laid the groundwork for Web commerce by building Mosaic, the first commercially successful web browser, and by launching Netscape Communications. Internet profits exist because profit-seeking entrepreneurs saw a potentially useful tool and put it to use.

Yes, I had some excellent teachers. So did everyone else who sat in my classes. We all drew upon the things they taught us in our own ways. Our teachers gave us the tools; what we made with them was up to us.

All of us in business owe a debt to our forebears, all the way back to the people who invented written language, double-entry accounting and the uniform commercial code. But this is a debt that runs from our generation to the ones that preceded us. It is a moral debt, not an economic one. The teachers who taught me were paid for their services at the time they were rendered.

The fact that I profit from what I learned does not create any obligation on my part to share those profits with those who sat next to me in class. They had the same opportunities I did, and my teachers understood that. If I studied hard and got a perfect score on a test, my teachers did not reassign some of my correct answers to less-studious classmates in the interest of fairness.

The president notes that a successful business uses public infrastructure such as roads and bridges. True, but irrelevant. Businesses and their owners pay for such infrastructure just like everyone else, in the taxes, tolls or other revenues that government collects. Businesses rent office space and pay for electricity, too, usually from private parties. This does not entitle those vendors to a share in the profits.

The president also credits “this unbelievable American system that allowed you to thrive.” That system is called capitalism, and it did not “allow” anyone to thrive; unlike other systems, it simply did not prevent us from thriving. Private profit was or is largely illegal in places like Cuba, North Korea and the old Soviet Union. These countries maintained atrocious living standards as a result. Prosperity is more heavily taxed or regulated away in many other places, including much of Europe, and these places experience chronically higher unemployment and lower economic growth as a result.

Obama is arguing that a society that “allows” success is therefore entitled to redistribute it. This would level the playing field with places like Europe through the simple expedient of making us behave more like Europeans.

But in my case, the success the president would redistribute according to his preferences is, as he says, not just my own. It belongs in large measure to the colleagues who have joined me in building a successful business. They share in that success, and to the extent the president believes we owe more to society, there is less for my co-workers – as well as me – to enjoy.

Then there are the future workers I might not hire, the offices I might not open, because the president would leave me less discretion about how to use the cash my growing business generates. He’ll take a bigger share of it out of my hands.

Obama finds it convenient to denigrate entrepreneurs because he is running against one, but I have no reason to think that he was not expressing his true feelings in that speech in Roanoke. I think Obama truly believes that those of us who build businesses are indebted to others who help us. I agree. We just part company on the question of who those people are.

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