Back when I was an undergraduate at Washington & Lee University, I made the argument to one of my history professors that low-fee DRIP plans provided an example of where Marxist principles actually overlapped with capitalist principles (I know what you’re thinking right now, and the answer is yes, I was always this sexy). My logic was this: I pointed out to the stock ownership plans that Ford, General Motors, Bethlehem Steel, RJ Reynolds, and Philip Morris offered their working-class employees to demonstrate how these plans satisfied the Marxist appeal to allow the workers to become part-owners of the company if they so desired while also appealing to the traditionally American capitalistic notion that if you work hard, spend less than you earn, and do something intelligent with that spread, you have the freedom to put together a nice life for yourself.
As I’m guessing most readers are aware, this past week marked the 50th Anniversary of Martin Luther King’s “I Have A Dream” speech. In a lot of ways, it feels odd to watch videos about the days of overt discrimination because I grew up in a world where Tiger Woods was the premier golfer, Eminem was the top-billing rapper, and Oprah was the top television personality. Whatever old-school traditions existed about race, I wasn’t there to experience them.
But when I spent some time this week reflecting on The Civil Rights Movement, I thought about how great it is that I get to spend my time writing about investing. Equality is a loaded word with a lot of different branches, but one of the most important forms of equality is this: the uninhibited freedom to build wealth. That’s part of what makes the stock market so egalitarian—it’s the greatest meritocracy in the world. If you own 1,000 shares of IBM stock, you get that $0.95 quarterly dividend. You can’t get denied that dividend because of your skin color or gender. It’s yours because every owner is entitled to the same proportional benefit. I love that fact about stock ownership.
The purchase of publicly traded stocks is free from the BS that permeates the rest of life. If you think BP is worth $70 per share and you want to buy it for $40 per share, nothing can stop you from buying that stock. There’s no third party there to say, “No, this stock is not for you” or “I’m sorry, I don’t want you to be a part owner.” It’s open to everyone over the age of 18 (and, in some cases, younger than that with guardian approval or oversight).
If you compound your money at 11.0% over the next twenty years while I compound my money at 8.5%, you were better at creating wealth than me over that measured time period. It’s entirely straightforward in that regard. The rest of life is murkier—Did she get that promotion because she’s the best looking person in the office? Did he get that job because his dad is a big businessmen on corporate boards all throughout Dallas? Did he get rejected from that country club because he made a $5,000 political donation to the Bernie Sanders campaign? None of that junk exists when we talk about stocks. The market is open to everyone, and it’s all about finding the right intersection between prices and the growth of cash flows.
If you’re a man, you are allowed to buy $10,000 worth of Coca-Cola stock. If you are a woman, you are allowed to buy $10,000 worth of Coca-Cola stock. If you are white or black, you are allowed to buy $10,000 worth of Coca-Cola stock. This equality is awesome—investing is free from all the –isms that dominate the rest of life. The fact that the rewards of stock ownership are based entirely on the proportional ownership principle and allow no grounds for personal judgment/discrimination is what makes it so equal and great.
The free ability to build wealth is a critical component of equality. The fact that anyone living in the United States today can go to Scottrade, Charles Schwab, or Computershare, and open up an account and start depositing funds into their account is one of the most important components of equality realized by the vision Martin Luther King articulated half a century ago.