Today I wanted to talk about Ayn Rand, who was a philosopher and writer. If you have grown up in the US or gone to business school, you have probably been exposed to her writings which have greatly influenced business in America today. Her ideas are hotly debated, and so I am going to share my thoughts on Ayn Rand. WATCH NOW
Ayn Rand was born in Russia and moved to the US in 1926. She wrote the books, Anthem, The Fountainhead, and Atlas Shrugged. These books continue to be best sellers even after her death in 1982. These books are based on her philosophy of Objectivism.
You must understand that people in business love Ayn Rand. Her followers have an almost religious devotion to her writings. Her biggest fans are typically wealthy successful businesspeople who run large corporations, because those are the types of people who are the heroes of Ayn Rand’s writings. She talks about individualism, productivity, and free will, which are all qualities that most successful businesspeople have. So, if you work in business, you should be able to talk about Ayn Rand, because you will run into people who want to talk about her.
The basis of Ayn Rand’s teachings is reason. A person should be able to think and reason out their decisions based on objective reality. Ayn proposes that the best way to do this is through the individual. And so, Ayn’s writings focus on individualism versus collectivism. This translates to the political spectrum of capitalism versus communism. For instance, imagine a situation where someone works hard, builds a business, and becomes rich. Ayn would argue that it would be unethical for the government to tax the rich person’s earnings to pay for a welfare program for the poor.
Ayn Rand provided a philosophy to support the ideas of capitalism. The surprising thing is that she is one of the only one philosophers to talk about this. Communism has a great amount of philosophical writing that forms the basis of communism. But Ayn Rand is the only major philosopher providing an explanation of capitalism. It should also be noted that while Ayn Rand is celebrated in most business schools, she is ignored by academia in Philosophy schools, and is not considered a real philosopher.
I am going to share my opinion on Ayn Rand. I have some positive things to say, but also some criticisms.
To start out with. History has shown us that Ayn Rand is largely correct in her thinking. There are many examples that show the success of free markets and capitalism and the failure of communism, which has always led to tyranny and some horrible atrocities. If you look at a country like China today, they claim to be communist, but it is hard to argue that they are not a tyranny. There is one party and if you argue against the government, you are thrown in jail. They are operating concentration camps where they are committing genocide. It is another example of how communism has led to tyranny and unethical atrocities.
Ayn Rand talks about the basic truth of economics. Money will always move to the area of highest productivity. This goes back to Adam Smith and the invisible hand of economics he describes in his book “The Wealth of Nations” in 1776. You can fight economics as much as you want, but eventually markets will always find a way to reflect where value is being created.
My opinion is I think Ayn Rand’s books are very well written and enjoyable. If you watch this channel, you know I am an advocate of free markets, and so I generally support everything Ayn Rand teaches. However, I do have some criticism of her ideas.
Let’s start with the general idea. Individualism vs. collectivism is a false argument. It does not have to be one thing or the other. Ayn Rand teaches that individualism is good, and collectivism is evil. I think whenever you see a dynamic like this that is all one-sided, that is usually a sign that something is not quite right. In fact, the US economic system today is a mix between giving freedom to the individual while still having large government safety nets for the community. I think there are benefits from both approaches and I do not feel it necessarily benefits us to get to the right decisions by completely dismissing the other side of the argument.
Another problem is that multiple examples contradict the Virtue of Selfishness. Ayn Rand talks that people should be selfish to reach the best decisions. If everyone does what is right for them, it will result in the best economic outcomes. This references back to the ideas of Adam Smith and the truth of economic forces. There was even an episode of Friends where they joke about this. They try to get people to think of a situation where they did an action that was selfless, and any example the friends come up with the characters show how it is selfishly motivated. While it is humorous and fun to talk about, I find that idea is misleading. I can easily find examples of selfless behavior. Anyone who raises children is doing many things that are selfless. The whole point of kids is they cannot take care of themselves and need someone to take care of them. If everyone acted selfishly, no one would have kids, and it is hard to argue how that would be a beneficial outcome for everyone. You could look at the example of Mother Theresa, who spent her life taking care of the sick and poor. Ayn Rand would have said Mother Theresa was wasting her time and the sick and poor should take care of themselves. You could look at the example of soldiers in battle that give their lives for their fellow soldiers. You could look at the events of 9/11, when one of the planes that was heading to destroy the US capital crash landed before it reached its destination when the people onboard fought back, sacrificing their own lives to save the country.
I find it very easy to find examples that contradict what Ayn Rand is saying. People have done heroic things that are selfless and not at all rational, and it is generally actions that are highly desirable that society wants more of, not less.
Another problem is that the concept of inheritance contradicts individualism. The US and most of the world exists within a social structure of passing down wealth between families. I am not saying this is good or bad, it is just what exists, and it results in a small segment of the population being born into wealth. From an individualism perspective, this gives them an unfair advantage, because they have money, not from their achievements, but simply from being from a rich family. This creates a situation where if rich families acted selfishly, it would be in their best interest to use their unfair advantage to oppress and exploit poor people to maintain their wealth. Ayn Rand would argue that inheritance is covered by private property rights. But it is hard for Ayn Rand to argue that everyone should be judged based on their individual accomplishments when people do not start from the same place. In a truly individualist society, parents would look at their kids and say “You are not getting any of my money. Any money you get, you need to make by your own efforts.”
Another problem is that business examples show selfishness does not work all the time. Selfishness works most of the time, but in some circumstances acting selfishly results in the worst outcome. This most famous example of this is the Tragedy of the Commons which relates to things like grazing rights. If everyone does the selfish thing and over grazes the land, then there is no land left for anyone. For these reasons, you must be careful of what I call the “Calculator problem.” You never want to blindly make business decisions based on the output of your calculator without considering whether there are other factors that might make the most cost-effective decision the wrong one. In business in general, there are a lot of other examples where the sum is greater than its parts. The collective is more effective than the individual working in isolation. Some of the best outcomes are from people working in cooperation with each other rather than in competition. Specifically, things like debt arrangements and insurance are based on the idea that multiple people working together create more value for everyone. So, there is an actual financial basis for looking at the overall economy as a collective working together rather than as individuals.
Another problem is that human time spans emphasize short-term decisions. We are all going to die. So, if we made decisions selfishly, we are going to emphasize short-term benefits for ourselves at the expense of long-term benefits for society. A good example of this is when I look at pictures of England. If you look at the countryside of England, there is almost no trees. England has very few remaining forests because the island was deforested a long time ago. This kind of thing can easily happen on an island that has been populated for a long time. People need wood to build buildings, and they chop down all the trees. They acted selfishly, England became rich, but I think it is sad to see photos of England which should be covered in forests. Once the forests are gone, it is hard to bring them back.
You can contrast this with another island nation, Japan. Forests cover 67% of Japan compared to England’s 13%. That is a huge difference. This is a real-world example of how philosophy impacts reality. The culture and philosophy of England and Japan have been very different historically. England is the birthplace of Adam Smith and decisions have been based more on selfishness aligned with Ayn Rand. Japan’s culture and philosophy incorporates other ideas of honor, respect, and harmony. In Japan, it is customary to take your shoes off when you enter someone’s home. Ayn Rand would say that is silly extra work and she would selfishly leave her shoes on. I do not think this approach makes Japan any less successful at business. It is just a different way to thinking about life. In fact, I would argue that Japan is just as good at business as England, if not more. The result of these two different ways of thinking is that Japan has forests and England has very few. The question we must ask ourselves, is what world we want to live in.
Another problem with Objectivism is that it is easy to misuse to justify bad behavior. I have seen rich people screw over other people, and then point to Ayn Rand to say, “Hey, she said this was okay. Selfish behavior is good.” They are using her books to make themselves feel better for doing horrible things. I am sorry, but you cannot push someone down the stairs and then justify it by saying, “He was in my way.” Now I think that is a misinterpretation of Ayn Rand’s books, but people do it all the time. That is one problem with having a philosophy that says selfish behavior is good.
Let me summarize. In general, I agree with Ayn Rand’s philosophy that free markets are good and reflect the truth about how economic forces work. However, I criticize her philosophy for the following reasons.
- Individualism vs. collectivism is a false argument.
- multiple examples contradict the Virtue of Selfishness
- the concept of inheritance contradicts individualism
- business examples show selfishness does not work all the time
- human time spans emphasize short-term decisions
- easy to misuse to justify bad behavior
I also think Ayn Rand had a hard life. She grew up under the communist revolution and saw firsthand the evils it created. She saw the government take her family’s business away. She saw the government move people into her family’s house. She had to escape to America, where she experienced what it means to have freedom, and became one of the most successful authors of her time from her own talent. I think she was really traumatized in her youth and spent the rest of her life fighting the evils of communism.
But we cannot forget, there are also evils of capitalism. There is evil on both ends of the spectrum. Every recession has been the result of capitalist systems running unchecked, and when the market crashes it creates enormous pain and misery. So even though Ayn Rand would disagree, I do not think it is unreasonable to put checks and limits on business. For instance, like preventing monopolies. Without these checks, free markets can go out of control. We know from history that certain economic indicators like inflation and income inequality lead to social unrest. Selfishness can make inflation and income inequality worse, which can lead to a breakdown in society. That is when you get things like the French Revolution where the poor people kill all the rich people. There are atrocities on both extremes.
I think the greatest benefit of Ayn Rand is that it highlights a decision point that sits at the intersection of individualism and collectivism. Do you choose what is best for yourself, or what is best for the community? Imagine you are eating your lunch, and you see a starving child on the street. Do you give that child your sandwich and go hungry? Ayn Rand would say that you need to eat that sandwich because you need your strength, and that child needs to learn to take care of himself. How do you answer that question? Only you can decide for yourself. As a businessperson, you will run into these types of decisions all the time. Do you cut down the forests so you can make a quick buck, or do you save them for future generations?
The way you answer these questions is ethics. You need a clear understanding of your ethics. What is right and wrong? In my opinion, the right answer is not always selfish. But you might have a different opinion. This is a very real question we all face, which is why I think Ayn Rand’s books are so interesting and still popular today.
While Ayn Rand is correct, that everyone must recognize the truth of economics, you should consider other ethical obligations to your community as well. Even though economics tells us we must go from point A to point B, it matters how we get there. In other words, the end does not justify the means.
In my opinion, I think you can have a system where both individualism and collectivism can work together. I think you do want people in society to act selflessly sometimes. And I think most people share that sentiment. Business should not be about exploiting your workers for selfish gains. The best business decisions, from my experience, is when you can bring everyone up and grow together. You want your business to get the most out of people. You want to give people a helping hand, because one day, you might need a helping hand yourself.
I want to leave you with a scene from an old movie called Star Trek: The Wrath of Khan. This is a spoiler alert, at the end of the movie, the character of Spock dies while repairing the ship’s warp drive. As he dies, he tells Captain Kirk, “The needs of the many outweigh the needs of the few.” He then gives his own life to save the rest of the crew. Now, I am sure Spock’s statement would make Ayn Rand furious. She would leave the movie theater in anger, call the Federation a communist collective, and demand her money back. But I think most people recognize that what Spock did was selfless and heroic. Each of us must decide what type of person we want to be. We only have one life. You can spend that life always chasing a buck, or sometimes you can give up that dollar to make a difference in someone else’s life.
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Neither Zach De Gregorio or Wolves and Finance shall be liable for any damages related to information in this video. It is recommended you contact a CPA in your area for business advice.