Episode 15: Wealth Building Tools - Corporations

Dream Toolbox - Corporations.png

We hear a lot of talk these days about “corporate greed” and many people, particularly young people, believe that their chances of success are being “oppressed” by the power and greed of big corporations.

Let me let you in on an important secret: there is no such thing as “corporate greed.”  To understand why that is true requires that we realize that corporations are nothing more or less than tools and the greed or altruism associated with them is no more or less than that of their owners.

Thinking of corporations as some kind of enemy and failing to understand how they really work is a recipe for the failure of dreams.  Think a bit about these things:

1. A corporation is a tool that enables someone with a dream to pursue it without fear that one mistake could destroy everything they have built or created for themselves or those they love.  Suppose you made toys that children loved and were selling like crazy and both children and parents loved them.  Then one day, through no fault of your own, a child injures itself with one of your toys and you are sued for millions.  If the business were a corporation, that could still be very bad, but losing that suit would not mean you lose your home or your car or your savings.  Only the business would be at risk.  A loss would be traumatic, but you could begin again.  That is what corporations do.  They separate the owners’ personal assets from the risks of running a business.

2. That separation is what makes it possible for an entrepreneur to find the capital needed to start a new business.  No one would have invested in Tesla Motors if they ran the risk that one defective automobile could wipe out their life savings.  The same would be true of Uber, or Google or any other successful company.  A corporation is what makes it possible for almost all the new innovations, from iPhones to electric cars, to happen.  Without that thing called a “corporation”, no one would risk their money and nothing would ever get done.

3. But can corporations be used for evil?  Yes, of course, and in time they will almost always be found out and go out of business.  But that will not destroy the lives of the people who innocently believed they were investing in something good.  The founders and managers of the corporation may have great difficulty ever getting money for their next venture, and in some cases might go to jail, and the people who invested will lose their investment---but not their most cherished personal assets.  That is the magic of a corporation, and its power to do good as well.  

4. A corporation is a tool, an incredibly useful one without which your chance and mine of success would be much less.  I use a separate corporation for each business I create or invest in and that enables me to enlist others to invest their money with me because we both know that failure will not destroy us and we can recover to build a new great business.