The Corner

Business

Dell’s America

Michael Dell delivers his keynote speech at the All Things Oracle OpenWorld Summit in San Francisco, Calif., in 2013. (Jana Asenbrennerova/Reuters)

Amid all the current gloom, it was refreshing to read this in a New York Times interview with Michael Dell by David Gelles:

The first eight years, we grew compounded 80 percent per year. The six years after that we grew about 60 percent per year. Any number you start with, if you put that into your calculator, you get like tens of billions of dollars. That’s what happened. America, what a country.

Then, the New York Times being the New York Times, comes this:

Last year at Davos you said you didn’t support a steep increase to the individual tax rate on the wealthiest Americans. Can you say a bit more about that? Why isn’t a higher individual tax rate a good thing at a moment when the federal government clearly needs real resources to do things like educate our kids?

Gelles appears to muddy the difference between a “steep increase” and a “higher . . . rate,” which are two different questions (although I’d oppose any increase) and then, inevitably, brings in “our kids.”

As a reminder:

In 2016, the United States spent $13,600 per full-time-equivalent (FTE) student on elementary and secondary education, which was 39 percent higher than the average of Organization for Economic Cooperation and Development (OECD) member countries of $9,800 (in constant 2018 U.S. dollars). At the postsecondary level, the United States spent $31,600 per FTE student, which was 95 percent higher than the average of OECD countries ($16,200).

Part of the problem might be, I suspect, not the amount of money that is spent, but how it is spent.

Corey A. DeAngelis, writing for Reason, writing earlier this year:

On average, the United States currently spends over $15,000 per student each year, and inflation-adjusted K-12 education spending per student has increased by 280 percent since 1960. In California, where the previously mentioned football coach resides, inflation-adjusted spending on K-12 education has increased by 129 percent since 1970. Furthermore, data from the U.S. Census Bureau show that nearly a third of all state budget expenditures go toward education.

This is a particularly pernicious myth in the education debate because increased education spending generally isn’t associated with better results. Stanford University economist Eric Hanushek reviewed nearly 400 studies on the topic and concluded that “there is not a strong or consistent relationship between student performance and school resources.”

That shouldn’t surprise anyone. Pouring more money into the same broken system won’t fix the deeper problem — government monopolies have weak incentives to cater to the needs of their customers by spending money wisely.

Dell diplomatically avoids a direct answer to Gelles’s question:

It may very well be. My wife and I have a foundation. We focus a lot on education. We’ve contributed $2.5 billion into our foundation, and it does enormous work in the education space in the United States and around the world. You’ve got myriad proposals out there for how to improve the system. We’ll let the marketplace of ideas do its thing. I won’t be shy in saying that I believe in entrepreneurship. I think having a system where you can take risk and innovate is incredibly important. Now, all that has to be balanced with the public interests. There you go.

Back to Gelles:

Many of your contemporaries are not shy about saying, “The system’s broken.” Marc Benioff is out there saying, “Capitalism’s broken.” Ray Dalio is out there saying it. Do you have those sort of same existential concerns as some of them?

Dell:

Probably not as inflammatory. Is it a perfect system? No. Can it be improved? Yes. But let’s go back to the entrepreneurship and risk-taking, the innovation. We have, in this country, an engine that is creating a lot of new businesses, and a lot of new innovation that is globally relevant. I think any of those other countries would love to have that, right?

Gelles:

Is your contention that high taxes stifle that entrepreneurial spirit, or that innovation?

Dell:

No, my contention is, I’m not a tax policy expert, and I’m not going to be setting tax policy. It’s just not what I do.

If I had to guess, some of the changes that are now being talked on the left about capital-gains tax, whether it’s significantly higher rates or moving to a mark-to-market system would, in fact, be devastating, particularly for young, private companies proceeding through successive rounds of venture financing, hopefully at higher values: Forcing those companies’ entrepreneurs to sell stock to pay tax doesn’t seem very smart.

Gelles:

When you talk about a system that supports entrepreneurship and innovation, what does that look like?

Dell:

We have something pretty precious in our system that’s a combination of culture and capital. As we tweak it and improve it, we want to make sure we preserve that, so that new, small businesses and entrepreneurs are able to be created in the process.

Indeed.

Perhaps it’s worth quoting part of a sentence from John McGinnis’s review for Law & Liberty of Matt Ridley’s new book, How Innovation Works:

Of Europe’s 100 most valuable companies, not one was created in the last 40 years.”

Food for thought.

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