Yesterday morning, on Yahoo Finance’s Live Morning Edition, Yahoo’s Myles Udland said that the First Amendment does not guarantee freedom of speech, but freedom to criticize the government. That’s par for the course if he went to public schools in the US and had politically correct teachers in college. But then he went on to essentially say that the SEC creates wealth…
That’s an incredible thing for a clearly very bright financial analyst to say—though again par for the course if he had politically correct teachers.
Let me come back to that. The context was Elon Musk saying in an interview that he has no respect for the SEC. Musk also said that his comments on Twitter only need to be reviewed if they might influence Tesla share prices. Otherwise, he’s covered by the First Amendment and can tweet whatever he likes.
I didn’t record the session, as I was listening while having breakfast, so I can’t quote Mr. Udland precisely. But he was quick to dismiss Musk’s stance, saying that the First Amendment doesn’t mean we can say anything we want. Musk signed an agreement with the SEC and accepted restrictions on his rights to free speech. That may be true, but that’s a matter of contract, not the First Amendment, which does indeed guarantee Americans their right to say whatever they want.
The highest law of the land is quite brief and direct in this regard:
Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press; or the right of the people peaceably to assemble, and to petition the government for a redress of grievances.
It doesn’t say freedom is for political speech. It simply says freedom of speech is not to be abridged. This is where my guesses (admittedly) about Mr. Udland’s education come in to play. Teachers of recent generations like to say that the Constitution is a “living” document, and should not be interpreted strictly as read. Times have changed, and the Founders could not have imagined so-called hate speech or the consequences of shouting “Fire!” in a crowded movie theater. I think such interpreters underestimate the Founders, who meant exactly what they wrote.
What’s interesting and relevant about this is that Mr. Udland dismissed Musk’s defense as “techno-libertarianism.” The implication, which had the other talking heads on the show nodding in agreement, was that all sensible people know that such libertarian thinking is so obviously wrong, no facts or arguments are necessary. It can simply be dismissed.
Such laziness is dangerous in a financial analyst.
This brings me to the other point. Mr. Udland is not only indignant that Musk doesn’t respect the SEC, he thinks Musk should be grateful to the SEC for making him wealthy.
The reasoning went like this:
- Tesla is a public company.
- The SEC regulates the markets so well, it makes it possible for companies like Tesla to achieve high share prices, making fortunes for entrepreneurs like Elon Musk.
- The SEC made Musk rich, so he should be grateful.
I almost choked on my morning cup of tea when I heard this. It wasn’t Musk’s entrepreneurship, his daring to go against convention, his determination to show that the entire auto industry was wrong, or his 24/7 work ethic that made Musk rich. It doesn’t matter that entrepreneurs have built private companies worth many billions of dollars. Nope. It’s regulators who make people rich. And all the talking heads nodded.
This is part of a larger set of fallacies, such as the belief that governments create jobs in the private sector. Most people also believe that it takes a government to build roads, and that only a government can or should be in charge of the money supply.
The advent of cryptocurrencies is eroding that last idea, just as FedEx and email have shown that the government postal services are unnecessary. But for now, the core idea that governments are the source of economic growth—despite all the evidence to the contrary—remains entrenched.
The ministry of truth has done its job well…
Why this matters is that such breathtaking lack of understanding of the sources of wealth in society is extremely dangerous when it becomes so widespread that intelligent people in major financial media don’t question it. This is very bad news for entrepreneurs, investors, and the future of the entire global economy.
I think it’s important to highlight that such economic errors guide the minds designing financial models, corporate strategies, central bank decisions, and more. This is a huge red flag waving over the mainstream thinkers guiding most of corporate America.
I fear my friend Doug Casey is right when he says that the future will be far better than we can imagine, but that first we’ll have to go through far worse than we imagine. If the elite financial minds of the world today think regulators are the source of wealth in a society, I don’t see how that society can survive.
Investors in mainstream markets beware.
I only wish Elon Musk had quoted Doug in his interview, and called the SEC by its correct name: the Swindlers Encouragement Commission.