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Just Who Do You Think You Are? – Costco Wholesale Corporation (COST), Las Vegas Sands Corp. (LVS)

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The following commentary was originally posted on, the website of Motley Fool Asset Management, LLC, on March 12. With permission, we’re reproducing it here in slightly edited form.

I don’t want the world. I just want your half. — They Might Be Giants

Honest, I’m not going out of my way to make fun of the French. And it should be noted that France is far from alone in its conflicted philosophy toward capital. On certain levels, every country on Earth has policies in place that punish the very capital that makes their countries’ economies tick. It’s just that the French are just so … French about it.

Costco Wholesale Corporation (COST)

Dang it! I did it again.

There are people who believe that labor makes the world go round, that it has primacy over capital. It’s compelling, and perhaps slightly more romantic, to have this view of the world. But let’s do a little thought test. There are countries that have plenty of labor and very little capital. Others have the opposite condition, of plenty of capital and scarce labor. In the first group are places like North Korea, Sudan, and Venezuela. In the latter are Qatar, Singapore, and Norway. So I’m not saying that labor is worthless — far, far from it — but capital is the primary driver of economic development.

Ultimately, economics don’t operate based upon the beliefs of the majority, or of those in power. Economics operate on inputs and incentives, and at the center of the economic world is capital.

Politics vs. capital
Politics is the opposite, which is bad news for capital in places where its primacy isn’t necessarily appreciated. Unfortunately, economics also isn’t a very good science, because it’s impossible to generate precise repetition of results. Which means that it is really, really easy to do things like compare economic outputs between different presidential terms, but just as easy for many people to forget that most of those comparisons don’t mean a blessed thing, because so many of the inputting factors were entirely different. Political expediency demands that such subtleties be ignored, which is why it ought to be perfectly acceptable to stick your fingers in your ears and scream “LALALALALALA!” whenever a politician attempts to discuss economics.

Here’s the thing about the conflict between capital and politics. Politics wins nearly every single battle between the two. Yet because capital is fungible, capital always wins the war. When capital isn’t respected, it leaves. That which cannot leave, molders.

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