has a purpose most of you have at one
point probably sacrificed money in time
to the green mermaid in exchange for
caffeinated heated water don’t worry I
did the same thing this morning by doing
this not only have you helped build one
of the most ultra successful companies
that we know today but you have also
participated in what we call the free
market unfortunately the free market
does not mean you got your coffee and
pastry for free but rather that you had
the free choice to buy that coffee and
pastry you had the free choice to reach
into your pocketbook and wallet to pull
out some money and exchange it for
coffee
I believe that learning about the free
market will not only change the way we
think but also change the way we live so
today I’d like to take a few moments of
your time and explain not only what the
free market is but also how and why it
works the way it does simply put the
free market is an economic system with
limited government intervention people
are free to choose how they use their
business their money and their resources
as they see fit
often this pure economic system does not
exist there’s no such thing as a pure
free market all governments have some
regular of some level of regulations
taxes or policies aimed at controlling
their economy so we’ll be looking at the
general concept behind it now when I
started writing this a couple months ago
I found myself sounding less like a 19
year old and more like an ancient
English professor so instead of doing it
in lecture format we’re going to engage
in a bit of a thought experiment and see
these principles in action let’s say
some friends and I decide to open our
own coffee business we’re going to need
pretend I actually have money in order
to
make this work but let’s say I have
money that I can give an investor or
something like that
well the first thing we’re going to need
to do is open up a store space we’re
going to have better wages and we’re
going to need to have competitive prices
so let’s look at the store space first
we’ll need to locate it in an area
that’s attractive in an area with good
rent we don’t want to pay too much and
nor do we want to be in some
out-of-the-way place where no one will
visit us across college campus might be
a good idea because everyone knows
students literally live on coffee
in addition I have an interior decorator
friend who’s offered to design our
interior space well have good Wi-Fi
we’ll have nice music playing and the
comfiest chairs you can possibly imagine
sound like any place you know in
addition we’re also going to have better
wages we want employees from our
competitors to come over to us so we’ll
have slightly higher wages than our
competitors do and hope that we can
attract some good experienced
professionals to work in our environment
in addition we’ll also have lower prices
we want people to shop at our coffee
store whether than our competitors so
we’ll make sure our prices are at least
lower that at the same preferably lower
than theirs so what our competitor is
going to do about this there aren’t just
going to sit idly by and watch as their
business goes to us so they’ll hopefully
do the same thing ideally they’ll say
well they lower their prices will lower
ours they raise their wages we’ll raise
our wages we want to retain our
employees after all and they have a very
comfortable space so we’ll make our
space just as comfortable for our
customers what has just happened not
because we opened and improved and a
better restaurant our competitors did
the same thing they improve theirs they
lower their prices raise their wages and
their customers are happier as well but
what happens if they turn to an
alternative solution imagine if they try
to make us an offer that we can’t refute
and say what if they turn to the
government there’s multiple ways this
could work out Oh what if they go to the
government and say well you know we want
to do something
the government’s can for example tell us
no you can’t go in a coffee store there
we already have a perfectly fine coffee
store think of something else for
example just not that or the government
a well you’ll need to raise your minimum
wage then to the point where we can no
longer afford to pay our employees watch
shutdown generally they might say you
can’t locate your business there you
can’t stay open this long and a number
of other things when the free market
begins to collapse in and on itself
generally it doesn’t work out all of a
sudden the government’s dictating to you
how you can spend your time your
resources and your money inevitably
there will be consequences
so let’s look at this let’s say the
government steps in and says your food
and safety standards will need to be
high so high in fact that none but the
already rich companies in place can even
remotely begin to afford it the smaller
local businesses can’t even maintain the
high level of safety standards necessary
so they’ll have to shut down the
government might say you’ll need to
raise your employees wages by three
dollars an hour and the business will
have to shut down they can’t afford to
pay their employees or even worse little
they’ll need a way off some and continue
on but what happens the companies will
have to charge more their prices will go
up they have to cover the cost when
prices go up their consumers stop coming
when consumer stop coming their profits
decrease when profits decrease that
means someone’s going to either have a
wage cut or worse be laid off when
layoffs occur the people who are just
laid off no longer have money that they
need in order to go and buy other things
which means other businesses suffer when
the government steps in there’s going to
be a negative economic impact of some
kind now I’m not going to say there
should be no regulations I for one very
much like being alive and the people I
owe student debt to probably want me to
be alive as well to pay it off so I
think that we should for example have
some regulations on things like
restaurants for safe food safety
standards things like planes I very much
enjoy them staying in the air and
hospitals I don’t want to be operated on
an area full of bacteria and disease but
no more than is absolutely necessary
so why does this matter you might be
thinking well if I’m going into business
shirt
this is very applicable if I’m going to
business if I’m going to finance
probably also need it there as well and
if you’re right in charge of the
government yeah you probably want to
know this stuff but wait a minute
who elects the people goes into the
government you do now we just had an
election so I don’t think anyone wants
to repeat that particular cycle again
but in a couple of years we will be
electing new leaders and you will have
the ability to choose who you want it’s
going to be important that you elect
people that you know can abide by
certain economic principles namely they
via that inevitably when the government
decides to regulate something costs will
go up but when the free market takes
over costs generally go down let me give
you example here my house
there’s my dentist I’ve been going there
for more than seven years now which for
me is more than a third of my life and
get across the street there’s another
dentist a hundred yards down the block
there’s another dentist if you go on
Google Maps and type in my address
within five miles there’s going to be
over 20 dentists I know I looked at it
but I still keep going to my dentist
why because I think that he is the best
in town I know some people would
disagree with me but my dentist is the
best and yet I have the ability to
choose to go to a different dentists
don’t I no one’s forcing me to go to dr.
Curtis I like dr. Curtis I think he’s a
great dentist but no one’s forcing me to
go there I can go to any one of a dozen
dentists in my area and if I really want
to get creative in the Greater Los
Angeles area there’s thousands I have
the free choice to choose where to spend
my money and I think frankly you do too
you like being able to choose where does
my money go but you might be thinking
okay so is there an example of what
happens when we do the opposite well yes
there was something of an experiment run
it was a bit of an unintentional one
during the Cold War
one group of country is decided to abide
by free market principles Western Europe
and United States things are still going
pretty well the other group was led by
the USSR it didn’t work out so well
and nicely this is what matters we have
reached a point where we have the free
ability to choose where to spend our
money and we like having that free
ability choose where to spend our money
don’t we we like being able to say I’m
passionate about this thing I like this
thing I want to continue so I’m going to
give my money to it we like seeing the
smaller businesses stay we like seeing
the things we enjoy staying around so we
spend our money on it having someone
dictate to us exactly where our money is
going to go just seems to run completely
against our grain so I’ll leave you with
this you have the free ability to choose
where to spend your money and think
frankly I think you enjoy it
I do too if you do well you can think
you
[Music] you