Create or Transfer Value

Create or Transfer Value

There is no mechanistic test for whether one is creating value rather than simply transferrging value. Each person must examine their own situation to make this determination.

Some professions, such as the law, tend toward value transfers, rather than creation. But this bears closer inspection. A lawsuit for the enforcement of a contract may result in moving money from one party to the other, without creating any new or better product of any sort, or more of any thing. But is justice a value that can be created? Sure. If there is more justice, there is more value in the world. But most lawsuits have little to do with justice; a frivolous lawsuit simply seeks to get money for one party; the vast majority of lawsuits citing some sort of discrimination or harassment have little to do with justice and everything to do with greed.

A lawyer working to protect an intellectual property right can be creating value, as we would not be writing this material if we did not expect to have some control over its distribution. On the other hand, patent claims are often a form of extortion; someone will file a patent not because they intend to actually produce a new product, but because they know they can force the real producer to pay them a fee.

Most investment bankers are simply moving money, not creating money. For those that engage in trading, that is generally a zero sum game; what is one party’s loss is another gain, and no net value is created. If one wanted to be very charitable, one might say that more trading results in greater liquidity in any market, but most modern markets are already very liquid. Someone who focuses on creating liquidity, like a market maker in certain illiquid stocks, is creating value. But the computerized super trading that is driving stock market trading volumes today is certainly not creating value.

On the other hand, an investment banker who engages in raising capital for a productive company is helping to create value. One who raises capital for an unproductive company is not.

Most charitable ventures do not show any profit, per se, and may or may not be creating value. A charity that trains guide dogs for the blind is surely creating value by helping the blind lead fuller, more productive lives. A charity that spends most of its money on administrative expenses and fund raising is not. It should be noted that intention is not what matters in creating value. The people who created the We Are The World intended to send money to X to feed those who suffered from hunger due to famines, but the money was actually used by the Ethiopian government to buy arms; Thus the charity was really funding warfare, not famine relief.

Warfare is of course generally a value destroying activity. Buildings are destroyed, not built; bodies are killed, not saved. But some violent activities are productive; sailors who fight pirates and discourage piracy are productive. While World War II resulted in an almost unfathomable amount of death and destruction, it is also true that the Allied Forces created great value by defeating Germany, Japan, and Italy. And while any military action may or may not create value, what really matters is what an individual did within that action. A soldier who saves the lives of his comrades through valiant action is a value creating hero regardless of the larger aims of the war. A soldier who uses war as an excuse to rape or inflict needless violence is a value destroying villain in any war, just or not.

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