Capitalistic Renaissance 3: Fundamentals
Capitalism is based on the public corporation harnessing the future value of cash for present use. From the shareholder’s point of view, shares are acquired today because the value of the shares may increase tomorrow. There are no guarantees, hence the risk. The financial value of the shares is called “equity.” Public corporations exist to create equity for shareholders.
There is nothing wrong with this view and the acquisition of shares. The structure of the corporation is legally divided into equal “capital” pieces of itself, i.e. “risk shares.” Appreciation of share value is not guaranteed. Only an astute few are able to harness the “hidden equity value” to their advantage – their reward for taking a risk. But the economic crisis has increased the risks and reduced the rewards for all – a threat to the status quo.
The venture capital industry, for instance, is bloated with billions of dollars but lacks the fundamental understanding of capitalism to find any worthwhile investments to make. This is why venture capital that used to fund ideas without guaranteeing the customers in their funding model is now sick and broken.
Now we can have direct universal consumer inclusion into pure capitalism. This inclusion is vital for capturing this “hidden equity value” so that everyone can benefit from guaranteed share prices and lower risk. Thanks to advances in communications technology and accounting reporting, we can deliver this all-inclusive property of pure capitalism to consumers.
What was not known until this study was exactly how and why the public companies can create so much equity! The creation of equity is like the transformation of a small seed into a gigantic tree laden with fruits. Prior to this study, any tree analogy used to describe equity creation could not have been much more than a tree stump with a glimmer of life.Go to Section 4: Productivity