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The Greatest Invention in History

Some events are truly world changing.  I don’t know if we can ever be sure that an event will be world changing until quite some time after it happened, and we can see the effect.  My hyperbolic title can be argued with because I’m not going to discuss the inventions of fire or the wheel. 

In 1788 the Constitution of the United States of America was ratified, and the world changed dramatically and possibly forever.  Many things changed with the birth of the first great democracy of modern times.  But what really changed the world was the commitment to free enterprise.  This especially became true just a couple of years later when, in 1790, President George Washington signed the Patent Act.  The combination of the protection of intellectual property and free enterprise became a powerful engine lifting living standards of billions of people over the last two centuries.

Throughout history humans have tinkered.  Fire, the wheel, tools, metals, and on and on and on.  Some good ideas were shared, some were kept secret like the secret ingredients to a great recipe.  What changed with the founding of the United States was that now people who tinkered had the chance to get rich. 

The great inventions of the last two hundred years have often become the foundation of new companies whose primary purpose was to capitalize on the new invention – in short – to make the inventor rich.  From Thomas Edison’s General Electric Company to Woz and Job’s Apple Computer Company, the same principle has been at work. 

Who are today’s wealthiest people?  Business people.  In some cases, they were inventors and in other cases they advanced someone else’s idea.  I’m not sure the wealthiest man in the world, Jeffrey Bezos, invented anything, but he definitely has advanced many ideas from other people. 

It is not that Alexander Graham Bell, Wilbur and Orville Wright, Thomas Edison were smarter than so many other tinkerers before them.  Yes, they were brilliant, as were all their other fellow tinkerers.  But what was different was that now, because one could get rich from one’s invention, they had a powerful motivation to not only persevere but also to bring those ideas to market.  Thomas Edison had 3,000 iterations of the electric light bulb before he settled on one to bring to market.  He founded the General Electric Company to then get rich on delivering electricity to homes and businesses to power his invention.  Alexander Graham Bell founded the Bell Telephone Company, forerunner to AT&T.  The Wright Brothers started the Wright Aircraft Company.  The point here is that they all started companies in hopes of getting rich off their inventions.

And here’s where it gets especially interesting for people like you and me that never invent something great.  Follow along because it gets really good.

The inventors and entrepreneurs of the world all, or almost all, need one thing.  They need money.  They can get that money by borrowing from banks and/or by selling their invention.  In most cases they will have to do some of both.  They can sell the ownership rights of their invention to a large company, and get rich that way, or they can start a company and sell part of their rights to the ownership in their new company. 

They then share the ownership of their company with other people, each of whom now own a share of the business.  This is why stocks are often referred to as company shares, because that’s what they actually are!

What I’m describing here is one of the all time greatest inventions.  Shares are bought and sold in a market that is often referred to as a capital market because it’s where business owners can raise capital by selling pieces of their business to the investing public. 

These capital markets are a place that inventors, entrepreneurs and top business people can get rich by selling part interest in their businesses, and it’s where people who are not inventors or entrepreneurs or great business managers can go a long for the ride and maybe even get rich themselves. 

Capital markets are one of the greatest inventions in history because they provide a place that tinkerers can get rich.  The invention of capital markets changed the world. 

And how lucky are we investors?  We get to be participants in great businesses and great inventions that other people invented, other people run for us.  How great is that?


Hal Masover is a Chartered Retirement Planning Counselor and a registered representative.  Investment Insights LLC is at 508 N 2nd Street, Suite 203, Fairfield, IA 52556. Securities offered through, Cambridge Investment Research, Inc, a Broker/Dealer, Member FINRA/SIPC. Investment Advisor Representative, Cambridge Investment Research Advisors, Inc., a Registered Investment Advisor. Investment Insights LLC and Cambridge are not affiliated. Comments and questions can be sent to hal.masover@emailsri.com These are the opinions of Hal Masover and not necessarily those of Cambridge, are for informational purposes only, and should not be construed or acted upon as individualized investment advice. Investing involves risk. Depending on the types of investments, there may be varying degrees of risk. Investors should be prepared to bear loss, including total loss of principal. Past performance is no guarantee of future results.

Indices mentioned are unmanaged and cannot be invested in directly.

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