Book Reviews

This does not mean that questions of money are not important. But it does mean that the X factor of the human mind, if it is permitted to function freely, will override all the other fac tors that make for easy statistical tabulation. Gilder is convinced that we are in the middle of a so-called knowledge revolution whose boundaries defy charting. While the companies com prising the Fortune 500 were having their troubles, and actually employ ing fewer people, the new small busi nesses in the United States jumped from a 180,000 figure for 1963 to 600,000 for 1983. The publisher of Inc. magazin'e, Bernard Goldhirsch, notes that when big IBM was miss ing the mini-computer market, little Digital Equipment Company seized the opportunity to become a giant in its own right. California's Silicon THE SPIRIT OF ENTERPRISE 61 Valley phenomenon was born in the garages of students who had learned their physics and chemistry from some remarkable instructors at Stanford University. The Stanford students didn't have venture money of their own. But the microchip found its way into industry nonetheless.

Roundabout Creativeness George Gilder makes his points about the roundabout creativeness of the entrepreneurial process by telling some remarkable stories. He notes that while the pampered chil dren of "entitled" parents "ache at the burden of laboring from nine to five," the entrepreneurs, willing to hold three jobs at one time, rise be fore dawn and work happily from five to nine. The entrepreneurs ig nore politics. But the politicians who ignore the entrepreneurs are amazed when, in the periods when Atlas shrugs, "the great physical means of production ... dissolve into so much scrap, ruined concrete, snarled wire, and wilderness." In Idaho George Gilder ran into a character named Jack Simplot. Sim plot's father had scratched a living from 120 acres of sand grubbed out of the sagebrush mainly by hand. Though the young Simplot did not abhor work, he saw no need of pun ishing himself when there were more ingenious ways of making a living available. The adolescent Simplot made his first killing by collecting "bum" sheep (extra lambs from broods of twins and triplets that could not be suckled) from neighbor hood farmers. When the time was ripe he sold the sheep back to the farmers for the princely sum of$140.

When the price of pork went below the cost of producing it, Simplot used his lamb money to buy up runt pigs that might otherwise have been doomed to mass graves. He fed the runt pigs on unwanted potato culls. Meanwhile the disgruntled pig farmers were getting out of the pork business. Eventually Simplot was able to dispose of his pigs in a most favorable sellers' market. From his knowledge that even stored potato culls could be worth money, Simplot started to explore methods of keeping vegetables in cold storage. He also began drying potatoes and onions for the army. He emerged from World War II a"bold and happy business warrior," ready with the capital and the technical know ledge to take on a contract for supplying French fries for Ray Kroc's McDonald's chain of restau rants west of the Mississippi. It was at this point that the millions started to roll in. From Gold Mines to Silicon Chips George Gilder's point is that no econometrist in the world could have foreseen the happy accidents that led from Jack Simplot's first purchases of unwanted lambs and pigs to his 62 THE FREEMAN January connection with Ray Kroc's fast food business. The final chapter in the Simplot story is the most amazing.

With money burning in his pockets Simplot planned an adventure in Latin American gold mining. He vis ited the Dominican Republic, where the high price of gold had suddenly made a mine started by Christopher Columbus's son, Diego, extremely profitable. But the Dominican gov ernment proved to be too grabby about the split it demanded from mine profits. So it was back to Idaho for Simplot. Close to home he discovered some young scientists and entrepreneurs who had ideas about crowding more and more memory items on to a sil icon chip. Though he could not have made a semiconductor by himself, he liked what the "farm boys" of the Micron Company had to say. Decid ing to give them a run, he asked, "What'll it take to get her rolling?" The answer was "four million." "All right," said Simplot, "we'll go for it." So the lamb and pig and French fry potatoes money went into a high tech business that has flouted the belief that silicon chips can be as sembled into packages more cheaply in offshore plants than at home. The whole roundabout process bypassed the capital markets of the East and the computers of the econometrists in Cambridge, Massachusetts and Philadelphia.

Going on from Simplot, George Gilder proves that the process he has been tracing from an obscure begin ning in a potato patch is far from being singular. His account of how John Masters, a 1948 Yale graduate, hit upon a great natural gas reser voir in Alberta and British Colum bia is just as thrilling as the Simplot saga. Masters, an unemployed ex plorer from Tulsa, Oklahoma, had no money and owned no oil reserves. But he had some ideas and some bril liant friends. He went into the mountains of western Canada when all of the big oil companies were pulling out. As he summed up his problem, "The process of finding oil is essentially analytical reconstruc tion of geologic history in order to de termine the probable hiding place of oil and gas accumulations that are buoyant, mobile, and constantly seeking upward escape ... It has elements of a detective story, a spy mystery, the search for a hidden tomb."

To solve the labyrinthine puzzle in western Canada, Masters took the data from old electric log books and integrated the information with the knowledge acquired by fresh drill ing. Following from outcropping to outcropping, Masters hit upon some massive telltale cliffs of pebble con glomerate which had the "sorting and grading" of an ancient beach. "You could hear the sea gulls," Mas ters said. "They were screaming across a hundred million years of 1985 OTHER BOOKS 63 time." The conglomerate outcrop ping was the key needed to confirm Masters' theory of an immense basin of natural gas. Unfortunately the nationalistic policies of Pierre Tru deau have militated against the full exploitation of Masters' discovery. The new Proposition Two-and-one half property tax limitation in Mas sachusetts came in time to help one of George Gilder's heroes sell a cheap and effective water purification sys tem to the town of Pittsfield. As long as there was no limit to the tax money available to municipalities Milos Krofta could not persuade the politicians to listen to his claims that he had a better purification method that would cost the taxpayers less money. But when the law actually took money away from the town councils, Krofta began to get a hearing.

Gilder's sections on Japanese en trepreneurship point up his purely American chapters. The story of Honda, who owed nothing to govern~ ment, should surprise nobody who is conversant with the story of Henry Ford. Gilder has theories about the spiritual motivation of the entrepre neur, and in many cases they may very well be true. But motivation doesn't really matter as long as the entrepreneur's independence is re spected. The big lesson is to leave the enterprisers alone. If we do, they'll take care of all of us. @ CIVIL RIGHTS: RHETORIC OR REALITY? By Thomas Sowell (William Morrow & Co., Inc., 105 Madison Avenue, New York, NY 10016), 1984 164 pages _ $11.95 Reviewed by David M. Brown "Oh, what a tangled web we weave, When first we practice to deceive!" wrote Sir Walter Scott. Thomas Sow ell recalls this eloquent couplet as he retraces the tortuous path of civil rights legislation from equal oppor tunity to reverse discrimination.

Along the way he overturns many untenable assumptions, exposes con tradictions, and lucidly expounds the logic of liberty. Sowell acknowledges the historic significance of a great nation's vol untary repudiation of "its own oppression of part of its own people" in the 1954 Brown u Board of Edu cation decision, but he detects in the Brown case the seeds of subsequent "political, constitutional, and hu man crises." This institutionalized the pernicious practice of judging people as members of a group, rather than as individuals. It is observed that some groups within society are better off finan cially than other groups. The civil rights vision assumes that wealth differentials result from discrimi nation, which only political inter ventions can remedy. The view im64 THE FREEMAN plies that discrimination alone accounts for significant group eco nomic differences, and that discrim ination effectively suppresses the economic progress of those who are its target.

These assumptions are not re garded as hypotheses to be tested, but as axioms too obvious to be ques tioned. Overlooked in the civil rights vision are the cultural patterns which differentiate one group from another. Cultural patterns influence the lifestyles, and thus the financial situation, of a group's members, and these patterns transcend the imme diate context of any given society. Take the case of the Chinese mi nority of Southeast Asia, which "has been-and continues to be-the tar get of explicit, legalized discrimi nation in various occupations, in ad mission to institutions of higher learning, and suffers bans and re strictions on land ownership and places of residence. Nowhere in Malaysia, Indonesia, Vietnam, Thailand, or the Philippines have the Chinese ever experienced equal opportunity. Yet in all these coun tries the Chinese minority-about 5 percent of the population of South east Asia-owns a majority of the na tion's total investments in key industries."

Political action has been neither successful nor necessary in improv ing the conditions of various immigrant groups in America. Many have avoided politics during their rise from poverty to prosperity-the Jews and the Germans, for example. The Irish, on the other hand, are an in stance of a politically successful group whose economic rise was much slower than that of others until their political machines fell into decline in the 20th century. "It would per haps be easier to find an inverse cor relation between political activity and economic success than a direct correlation. Groups that have the skills for other things seldom con centrate in politics," writes Dr. Sowell. Civil rights legislation in general has not accelerated ongoing trends in the economic improvement of differ ent groups; statistics show that such laws have actually led to conse quences opposite to those intended.

Dr. Sowell does see a possible ben efit to be derived from the modern civil rights debacle. "If there is an optimistic aspect of preferential doc trines," he writes, "it is that they may eventually make so many Americans so sick of hearing group labels and percentages that the idea of juding each individual on his or her own performance may become more attractive than ever." Thomas Sowell's carefully documented re search contributes mightily to that end. @ the Freeman VOL. 35, NO. 2 • FEBRUARY 1985 I'm for the AchieverA Page on Freedom, No. 16 In praise of a winner. The ABC of a Market Economy Voluntary cooperation i$ the key. Miller Upton Henry Hazlitt 67 68 Capitalism-Yes and No Clarence B. Carson 75 Not so much the offspring of private property as a disease of socialism. The Demand for Labor Hans F. Sennholz 83 Nonmarket forces interfere with wages and cause unemployment. The Free Banking Alternative Donald R. Wells L. S. Scruggs 98 Why not try free banking rather than a partially deregulated financial system?