Lecture #4, Optimization Theory

Human Actions Principles
February 26th, 1995
Lecture Number Four

We’re continuing with a discussion of the most important subject of study there is, namely, understanding the causes of things. I hope you will come to the realization that it is also the most exciting subject and the most challenging subject. For our human race, in the beginning, the causes of everything were a great mystery. Why the great mystery? Because the true cause of virtually everything is hidden from view, as I have said, and will continue to say.

I gave you this quotation, “Things do not come neatly labeled cause and effect. We have to decide ourselves when and where to pin labels.” The problem for all of us, then, is just how do you decide when and where to pin all of the labels? When the question is when and where to pin labels on the causes of physical actions, the physical sciences have been giving us better and better labels. When the question is when and where to pin labels on the causes of biological actions, the biological sciences have been giving us better and better labels.

But when the question is when and where to pin labels on the causes of human actions, the so-called social sciences have been giving us a lot of mislabels. As I will demonstrate, what has been missing in the social sciences is one thing: Science. In the name of science, much of the mislabeling has been based upon entrenched dogma and popular superstition. The result of this mislabeling is a continuation of the major social crises of our time.

Thus we are forced, in the interest of our own survival, to employ a true scientific approach to the labeling of the causes of human action phenomena. I call this approach the Science of Human Action. I call what I’ve developed here, Optimization Theory. If we’re going to throw out a dogmatic approach, if we’re going to scrap superstition, where should we start?

What are some of the characteristic features that distinguish a scientific approach from every other approach? Let me ask this question. Where does science begin? It’s common to start a science by attempting to identify something fundamental to your subject of study and research and so we’re looking for some fundamental constant. The most fundamental fundamental is the fundamental constant.

If the subject is human action, then is there some fundamental constant that will correctly identify the essence of all human action? I’ve already given you the principle of prosperity and the principle of poverty. Here is a third fundamental constant that is even more fundamental. It is the Law of Human Action. All human action involves the employment of a chosen means aimed at the attainment of some end of greater satisfaction.

Whenever you are acting, then your action has one aim, to attain some end of greater satisfaction. Please note, this law describes all human action, not merely some human action or most human action. When you choose to act, this simplex goal never changes. This law is observationally true. And most important, you don’t have to take my word for it. You can independently observe this law of human action in operation yourself. The law of human action is a part of the unchanging foundation of the science of goal achievement. We all are aimed toward goals. A foundation is always a starting place. We want to anchor our Science of Human Action to a foundation that is constant.

This human phenomenon does not change and we cannot change it. All of us were born with this human characteristic of taking actions to attain greater satisfaction. In your quest for greater satisfaction you have two options. You can; one, choose your own goals and ends; or two, choose the means that you hope will attain those goals. Your success at goal achievement is determined by the answer to only one question, namely, can you choose the correct means that will attain the goal at which you aim? In fewer words, can the means employed achieve the end sought? In more common language, do you know what you’re doing?

To know what you are doing; what does this mean? It means you can apply a means that will actually attain the end you’re seeking. I’m posing this question: When the aim is to solve human caused problems, does anyone know what he’s doing? If those who see themselves as being uneducated, unintelligent, and unsuccessful don’t know what they’re doing, again, I reiterate, this is not a hindrance to our quest to optimize peace, prosperity, progress, and freedom.

Our main focus of concern is those who perceive themselves to be educated, intelligent, and successful. Do they know what they are doing? That’s all that counts. If they don’t know what they are doing, what do you get? International war, world starvation, widespread poverty, economic depression, monetary inflation, epidemic crime, failing education – all of these in spades. The specific human actions that cause these disliked effects are, again, almost entirely hidden from view. This has led to much mislabeling of the causes of these effects. And so we’re here to apply the methods of science to pin accurate labels on the causes of all of these deplorable effects.

In this lecture I’ll introduce you to some scientific labeling. All seven of these critical problems are caused by one specific class of human action. They will be labeled regressive human actions, or they could be called regressive social actions. The term regress means to go back to some worse social condition. The seven unwanted social effects continue to plague us without remission because we’ve been missing some essential knowledge.

The social sciences have failed to build a scientific theory on the causes of regressive social action.

We’ve failed to build a science that can identify precisely which human actions drag society backward. Instead of relying on science we’ve relied on popular superstition and conventional wisdom and, furthermore, the social sciences have failed to build a scientific theory on the cause of progressive social action.

To progress means to go forward to some better social condition – progress. We have failed to build a science that can identify precisely which human actions propel society forward. Instead of turning to science, we’ve continued to follow traditional authoritarian doctrines.

As early as this session, we’re going to begin to depart from these popular but unscientific beliefs on the causes of human progress. We’ll use science to identify specific kinds of actions that will lead to social progress, which means to move toward some better social condition. Let’s begin with this question: Who are the generators of all progress? Do all human beings add to progress, or just some of them? Write me an essay. If you think it’s not all of them, which few, if it’s less than all. If it’s just some of them, who are they?

A major tool of science involves the classification of things into various categories. When you classify the human actors who are the cause of all progress, you come up with a rather amazing result – the people who are the cause of progress fit into just three categories.

Before I label the three builders of progress I have to give you this warning. You have acquired a lifetime of inputs on each category I will identify. You have made generalizations about each category all your life. From your view, the image of each category will be either positive or negative. You will see them either as good guys or bad guys or shades of gray. If you see one of these categories made up largely of bad guys, please don’t let your ideological immune system overwhelm you before I place the category into a scientific perspective. Rein in your ideological immune system a little bit. Fair enough? You can do this.

On the other hand, if you view the category to be made up of good guys, don’t tune out because you think, well, I already know the significance of this, let’s get on with it. Let’s start with a neutral position of the three categories, we’ll start with the assumption they’re neither good guys nor bad guys.

Here is the first category of people who cause all of the progress – not some, not part, all of the progress.

First category: The technologist. Our word ‘technologist’ comes from the Greek word meaning skillful artist. A technologist is a skillful artist who creates new inventions, new methods of production, new designs, new products, new processes. Since you were a child, you have been hearing about the creative genius of the most famous technologist, at least in America. All of you know of this man from the time you were a babe or shortly thereafter.

You recognize the man on the left at least, even though that’s not a direct photograph of his face. On the screen immediately you recognize that it’s Thomas Edison, in his later years, seen here in a conversation with one of America’s greatest electrical engineers, not nearly as well-known but quite important. He’s talking to Charles Proteus Steinmetz.

And what did Edison say about his own genius? You’ve heard this quote many times. He said, quote, “Genius is one percent inspiration and ninety-nine percent perspiration.” That’s a famous quote almost every person has heard.

Much less famous than Edison, but probably in some ways more important, is the American technologist seen on the screen. Does anyone in the seminar recognize this man? Or anyone in the seminar, for the first time recognize William Henry?

On the screen is one of the most important Americans in history. You’ve heard his name at least, even if you don’t recognize his picture. But I often challenge my enrollees from time to time. I will also say this, the more important the individual, the more he has enhanced your wealth in the value of his life, the less likely you will recognize his picture. But you’ve all heard of him if you went to even grammar school only.

Here is the illustrious Eli Whitney. Now, Whitney is known to school children as the inventor of what? The cotton gin. What’s that? Gin is slang for engine, the cotton engine, only it just came out as the cotton gin.

But, I’m not making this up, the same Eli Whitney is little remembered for his role, a supreme achievement that has been equaled by few people in history. Whitney revolutionized production with this simplex idea. He said, “If we can develop a way to machine with great precision every part that makes up a product, then every part can be interchangeable.” Was that a big one? Is that one of the biggest concepts and achievements in the history of mankind? Yes – and then some.

On the screen is Whitney’s milling machine. Here was the first machine designed to make all the parts identical. This gave birth to the interchangeable part. The interchangeable part became the essential foundation of the great revolution in production known as mass production. Now, if I give you an examination on what class of people are the main beneficiaries of mass production, can you give me an answer that can be backed up with observation?

Mass production is production for the masses. How do you know? Is this observable? You can observe it yourself. You cannot have the mass production of products without its corollary and the corollary is, mass consumption of products. It is mass production that has generated a wealth of consumer products for the masses of consumers to consume.

And so Whitney’s principle of the interchangeable part is a fundamental constant of mass production. Eli Whitney, the technologist, the skillful artist, is a member of one of the three progressive classes. His technological achievement of the interchangeable part will continue to shower wealth upon the common man forever.

Now since we’re here to understand the causes of things, technological leadership and achievement – does it have a cause? A lot of people have developed artistic skill, but not very many people aspire to become major technologists. A career of technologist would be a difficult one to pursue – very, very difficult. Here is why. Here are the prerequisites to be a major technologist.

One, you must have possession of extreme high initiative, and two, the courage to assume extreme high risk. These are prerequisites for successful technological achievement. To become a successful technologist you must possess a lot of initiative. The Latin ‘initiate’ means literally to cause the beginning of. You cannot prod an individual to become a successful technologist with a prodding stick. Why? The technologist’s own extreme high initiative will be the cause of the technology.

Furthermore, you cannot pursue the development of a new technology without assuming extreme high risk. One of the risks is there may be no buyers or market for the technologist’s invention. Commonly the technological advancement is only looked upon as an advancement by whom? Its inventor, right? Doesn’t that happen a lot? The inventor says – “Hey, this is really great.” The invention, no matter how brilliant, may be ridiculed. The invention may be stolen, especially if it’s a good one. People don’t usually steal bad inventions; they steal good ones.

This happened to Eli Whitney. His cotton gin was so easy to copy and manufacture that in the end Whitney earned nothing from this valuable invention. All of his wealth went into patent suits to try to claim his invention and get a reward for what he had invented. He failed.

The technologist is first and foremost a skillful artist. His work is therefore not limited to industrial achievement alone. The great masters of music are skillful artists, which makes them music technologists. One of the most skillful artists in the history of music technology was the magnificent Ludwig Van Beethoven. Here is a musician in possession of extreme high initiative with the courage to assume extreme high risk.

Those of you who are Beethoven lovers, and I’m sure there must be a few here, know that he only wrote one opera. It was Ludwig’s favorite composition. Can anyone in the seminar for the first time tell me the name of this lyric masterpiece? Fidelio – thank you. When it was first performed in 1806, one of the critics present had this to say, “Never has anything been written so ill-knit, so disagreeable, so confused and so revolting to the ear with such acid modulation succeeding each other in abominable cacophony.”

Dear friends, if I were going to ridicule a technologist’s music, I don’t think I could ever have summoned up this much caustic language. I mean I don’t think I could possibly have equaled that. This critic, something happened to him. What was it, what do you think happened to this critic? He has been overwhelmed by what? His ideological immune system. Isn’t that interesting? How do we know? Because during the first quarter of the 19th century, Beethoven created a revolution in the technology of musical composition.

But if it’s revolutionary, if it’s a great turnaround, most people can’t handle it, especially if they are educated in the field of knowledge where the revolution is taking place. They can’t handle it. The point is, the greater the magnitude of the technologist’s goal, the greater must be the magnitude of the risk he must be willing to assume and exposure to ridicule is a part of the risk.

If you want to do something really important, you’d better not be afraid of ridicule because, in general, the more important, the greater the ridicule. And you most certainly will never accomplish anything if your prime goal in life is to be popular and well-liked. The two are mutually exclusive. The targets of ridicule never enjoy it – believe me – and there is little that a Beethoven or any other technologist can do to protect himself from this source of misery.

Now we come to a second member of this trio of progressives. If the musical technology of Beethoven is going to reach the ears of the masses, to enrich the lives of the masses, Beethoven needs some help. The help comes in the form of the impresario who is the producer, sponsor, and manager of a concert or an opera company. More help will come from the music publisher who will make Beethoven’s music available to people all over the world. The impresario and the publisher are going to help Beethoven market his music. It’s got to be marketed. Every product has got to be marketed or it’s worthless. Even Beethoven has got to find a market.

Our word publish comes from the Latin ‘publicare’ which means to make public. The Italian ‘impresario’ means an undertaking, and especially an undertaking to make music for the public. And the French have a word, which means to undertake an enterprise. The word is entrepreneur. The French term means a more common term in English, enterpriser. The entrepreneur, like the impresario and the publisher, undertakes the production of something the public wants.

I’ll use the more general term entrepreneur to include as a subclass the more specific impresario and publisher. The entrepreneur performs a unique function in society. The entrepreneur is an adventurer who builds entrepreneurial ventures where none have existed. The entrepreneur speaks to the consumers in the marketplace, and, he might say, “you know, I’ve organized the production of a new rather exciting product. This product will greatly enhance your level of satisfaction.” The consumers then decide whether or not to accept the entrepreneur’s offer to sell his new product.

It’s interesting to note that the career of entrepreneur is not one that’s sought after by very many people. The price of admission into the career of entrepreneur is so high almost nobody wants in. Well, what could be so tough about being an entrepreneur that would exclude almost everybody? Here are the prerequisites for successful entrepreneurship. You must have possession of extreme high initiative and the courage to assume extreme high risk.

The entrepreneur, instead of orchestrating the production of Beethoven’s 9th Symphony, may be orchestrating the production of automobiles. He must conduct and orchestrate the many factors of automobile production – raw material, machinery, land, labor, management, marketing, maintenance, and much more. It may take years of difficult coordination before the product can finally hit the market. And when it does, the consumer may reject the product altogether no matter how good it might be, just as the opera consumers may reject Beethoven’s Fidelio no matter how good it may be or how good Beethoven thinks it is. He says “This is my greatest work.” If you happen to be the unfortunate entrepreneur, both your reputation and your fortune may be destroyed literally overnight, thus the magnitude of the risk that must be assumed by the entrepreneur is staggering.

Finally, we come to the third and final member of this progressive trio. Most of the time both the entrepreneur and the technologist have a problem getting their products into the marketplace. They do not in general personally possess the financial resources necessary to successfully back the venture. They need someone else’s help – enter the investor or the financier of production.

Investment in production begins with an attitude. Somebody says, “Well, I’m not going to consume everything I produce.” That’s one of the most important things that’s ever happened in history. Somebody says, I’m not going to consume everything I produce. I’m going to invest it in more production. That is a big, giant step forward. When any saver invests his savings in the production of a product or service, he becomes a financier of production. The investor is a financier, or financer to coin a term. There’s no such word in our English language but there should be, the word ‘financer’ of the production of products.

But there won’t be very many people who aspire to become an investor in production. Why? The price of admission is very, very high. Here are the prerequisites for successful investment in production. Possession of extreme high initiative and the courage to assume extreme high risk. Now, why is the risk so high? I don’t know how to tell you this, ladies and gentlemen, but over time most entrepreneurial ventures fail. The investor in production may lose most or all of his investment. Entrepreneurial failure is the rule.

Entrepreneurial success is the exception, especially long term sustained success. Whenever any entrepreneur offers to sell his product to the consumer in the marketplace, there is zero guarantee the customer will consume it. A few may purchase the product, but the entrepreneur may be stuck with a large inventory of unsold products. He may fail to even recover his production costs. It happens all the time, and the investor may lose all of his investment as a result of entrepreneurial loss.

Now one of the difficulties I have in explaining the nature of the social functions of entrepreneur, technologist and investor, is that only three categories of people can understand it as an experience. Guess who they are – the entrepreneur, the technologist, and the investor. They possess the combined qualities of extreme high initiative and the courage to assume extreme high risk. You can only understand the meaning of assuming great risk by assuming it; otherwise it cannot be understood.

These three progressives come together for the purpose of creating a product that will meet the most urgent requirements of a buying public. Buyers reward the entrepreneurs, technologists, and investors who best serve them by saying, “You know, we like your product. To prove it, we just bought it.” And how does one become a member of one of these progressive classes? How do you get into this club of technologist, investor, or entrepreneur? It’s an exclusive club, so how do you get in?

Wherever you have a marketplace where all people have the freedom to buy and sell products, membership is open to everyone. There is never a closed caste system. Membership never becomes a special privilege conferred by some high authority. Membership in this progressive class is never inherited from one’s ancestors. Membership is not restricted to a closed clique of ‘ins’ who have the power to blackball some ambitious newcomer. What do you have to do? To become a member of the progressive classes, as I’ve stressed, just two things will get you in. One, possession of extreme high initiative and two, the courage to assume extreme high risk.

But remember, membership is only open where there is the freedom to buy and sell. Where this freedom has prevailed, history has shown example after example of individuals with average intelligence who possess the essential initiative to build a risk venture and who outshine the more brilliant people who are supposed to have the advantage. It happens all the time. This is not the exception, but rather it is common where there is the freedom to buy and sell.

I’ve identified the three progressive classes. The purpose is not to encourage you to become a technologist, entrepreneur, or investor if you’re not already one of these. The purpose is to give you a scientific understanding of the causes of things. In order for you to enhance your potential to attain your own personal goals in life, it’s essential that you gain a precise understanding of the cause of progress and prosperity. The true cause of progress and prosperity has been hidden from view. We must reveal these hidden causes because, and this is not an overstatement, our survival as humans depends upon it.

The foundation of your understanding of reality will be built upon your own observation of these unchanging laws of human action. For example, your goal as a buyer of products is to purchase the highest quality products at the lowest price. You do this all the time. But do you have to accept this statement of mine on faith, or can you point to scientific evidence to prove this?

The law of human action tells you all of your actions are aimed at the attainment of what? Greater satisfaction. Therefore, every purchase you make is in pursuit of what? Greater satisfaction. You will always go after the highest quality product at the lowest price. How do you know you will always do this? It’s the means to greater satisfaction. But now here is a critical question: What is the cause of the highest quality products at the lowest price? Products do not come from nature. All you get from nature is resources – that’s it.

I’m going to illustrate on this chart the fundamental cause of the highest quality products at the lowest price. Where it says highest quality product, I mean the highest quality product at the lowest price. Where does this come from? The entrepreneur orchestrates the production of the product. The technologist designs the product itself, the methods of production, and the tools of production. The investor finances the tools of production and the development of the product. You are a part of the consuming public. Every day you make choices. This product you will consume and this product you will not consume.

Entrepreneurs, technologists, and investors are associating to accomplish one important social goal, to create a product that will enable you to attain what every consumer wants, greater satisfaction. And of course the road to greater satisfaction is the highest quality at the lowest price. There’s a principle of human action that explains what every buyer is going after – the principle of buyer preference. Where there is the freedom to buy and sell, every buyer will purchase the product he believes to be the highest quality at the lowest price. Since this is a principle, there will be no exceptions to this generalization.

Where there is the freedom to buy and sell, the buyers take this attitude; I’m only going to buy from those sellers who serve me in my quest for greater satisfaction. Let me ask you this. How does the consuming public view this entire social process that gives birth to their most cherished products? What do you think? The consuming public doesn’t view it at all. Why? Because all of the real causes of their favored products are hidden from view.

One reason they’re hidden from view is because to consume the product, there is not one thing you have to understand about the cause of the product. True? Whatever the consumer may think is the cause of the highest quality product at the lowest price, it is generally a misidentification of the true cause. The consumer has thus acquired a gross distortion of reality. He carries this distorted view of reality around with him every day of his life.

You might say, well, so what? Especially if his interests are largely limited to earning a living, raising a family, socializing with his friends, pursuing his favorite sports, or watching TV. It is because this distorted view of reality can cause the consumer to choose those means that will completely fail to attain the ends that they’re seeking.

The individual who does not understand the causes of things, especially the causes of the highest quality product at the lowest price, anyone who does not understand this, I will demonstrate, simply doesn’t have the foggiest idea of what’s going on. Regardless of how long he’s gone to school or how many books he’s read or how high his IQ may be. He doesn’t have a clue as to what’s going on if he does not understand something as fundamental as where the highest quality products at the lowest price come from.

If it is not apparent now, it will be in this lecture series. We’re nearing the conclusion of the early lectures. I’ll be showing you the connections of all these things. Remember, I will commonly make sweeping generalizations in the early sessions that I can’t support necessarily at the time that I make them, but they will be supported later. If you don’t understand, for example, something as fundamental as where the highest quality products come from at the lowest price, this can cause you to fail at being a parent – it can cause total parental failure.

For example, the failure to understand the cause of the highest quality products at the lowest price can cause a student to fail at being a student. It can cause, and does all the time, an entrepreneur to fail at being an entrepreneur. It happens all the time. It can cause an individual to fail in his quest for internal tranquility. And if you’re educated or intelligent or successful, your failure to understand the true causes of the highest quality products at the lowest price can result in the failure of our entire species, Homo sapiens, to survive.

You might say, well, other than that, Mr. Snelson, how important is it to understand this? Let’s turn our attention to the impact that the failure to understand the causes of things has upon entire nations of people. During this discussion I’ve made repeated reference to the statement, such-and-such a condition will prevail only where there is the freedom to buy and sell.

Consider a nation such as the Soviet Union for example. You know it no longer exists as a political entity. But consider for example the Soviet Union where there was essentially no freedom to buy and sell. The Soviet government, as you know, determined largely what the Soviet consumer would consume.

Where the people’s freedom to buy and sell is taken away by force, does this have any effect upon the three progressive classes? What do you think? Well, for one thing, the entire progressive class of entrepreneur is entirely missing, isn’t it? Furthermore, the entire progressive class of investor in the tools of production is totally missing. Finally, there is one other class. Are there any technologists in a Soviet Union? Are there any technologists? Thousands? They’re measured in tons. There are tons and tons and tons of technologists in a place like the Soviet Union.

But please note, there was very little of what could be called native Soviet, or if it’s in Russia, native Russian technology. Almost all of the technology that was used by the Soviets was developed outside of the Soviet Union in primarily five countries: England, France, Germany, Italy, and the United States. There wasn’t any Russian technology or Soviet technology at all. It was American, British, French, Italian, and German technology. Tha? (What is supposed to make this a complete sentence.) the finest espionage system ever designed in the history of espionage. The most pervasive and ubiquitous system ever devised in espionage. (Not a complete sentence)

Please note, the governments of these countries, for example such countries as England, France, Germany, Italy, the U.S., the governments of these countries have generally allowed entrepreneurs and investors to at least exist. But without entrepreneurs and investors in a Soviet Union, what is the quality of Soviet consumer products? Uh oh, the Soviet consumer gets to stand in a long line for the privilege of purchasing, in general, a very low quality product at a high price and then he gets to stand in another long line to pay for it.

Furthermore, the variety of products is limited, indeed, if the product is available at all. One thing worse than a low-quality product is no product at all. Wherever you take away the entrepreneur and the investor by force, at the same time you always, always, always – no exceptions – take away the highest quality products at the lowest price.

There is almost complete failure of people, in general, to understand the cause of progress and prosperity. What does the average consumer believe is the cause of all these remarkable products that he buys, many of which weren’t even available to his own father? The consumer has accepted a myth. He believes that there is a spontaneous generation of progress. He believes it’s a natural thing for new and better products to continually evolve to satisfy his thirsty demands. What he will not see is that his favorite products owe their very existence to the progressive actions of entrepreneurs, technologists, and investors.

And to whom does the average consumer and worker give credit for the amazing rise in the productivity of the factory worker? As everyone knows, most commonly he will give credit to the man on the assembly line or to perhaps organized labor. A man on the assembly line sees himself as the major cause in the rise of the productivity of labor, and the subsequent prosperity that follows.

But now we have some principles to understand causality, and we will start using them. Now we can scientifically refute this myth with one simplex principle that says something about where prosperity comes from and has how many causes, five, three, two? The principle of prosperity. There is only one means to societal prosperity, the accumulation of the tools of production at a faster rate than the accumulation of people.

The failure to understand clearly and precisely the true cause of prosperity is nearly universal. It is a common belief among workers, professionals, and intellectuals that the working man is the victim of entrepreneurial exploitation. And what is the popular image of the entrepreneur? A man who in his quest for more and more profit leaves his workers with a good deal less than their fair share of this profit. That’s a very common view of the entrepreneur.

These entrepreneurs, of the biggest businesses especially, are commonly viewed as the dominant figures in this process of exploitation of the laboring class and employees in general. The popular expression, Big Business, which you’ve all seen, is almost always used in a disparaging and uncomplimentary way. Have you noticed? Nobody hears, wow, look at this big business! Isn’t that marvelous. How exciting this big business is. Have you ever heard that?

At this point I do not even want to enter into a discussion of whether or not big business has acquired an image that is consistent with reality. If we can drop for a moment the emotional response that the term big business evokes, let’s look at the concept of a big business versus a small business. I have this question: Is there something innately or intrinsically injurious about the concept of big business? Let me ask you this: Would it be a better world in which to live if all businesses were small? What do you think?

How did we evolve from a time when all businesses were small until today in which almost all businesses are still small, except a few of them are called big. How did this happen? Historically big business had two major causes. One is the perfection of the principle of the interchangeable part by the American, Eli Whitney. Two is the perfection of the principle of mass production of a major product by another American, Henry Ford.

Wherever you apply the principle of mass production, it naturally follows that you will have the production of products in massive numbers. This means hundreds of thousands of units, millions of units. But as soon as you produce massive numbers of products, the immediate problem is what to do with them, isn’t it? You just made a million widgets. What do you do now? Is this a problem? There is only one solution, it’s always the same, you must find masses of buyers. Isn’t that the solution?

This brings us to the entrance of another human action principle, the principle of big business, i.e. mass production of masses of products for the enrichment of the masses. And why do at least some businesses have to be big? If the masses of consumers are going to enjoy the benefits of high quality, inexpensive refrigerators then you cannot produce a million refrigerators in your brother-in-law’s backyard shed. Ma and Pa cannot make a million refrigerators in their one-room shop. Ma and Pa probably can’t even make one refrigerator, let alone a million.

Where the concept of big business is not hated outright, it may be tolerated, you know, we have to put up with this. But this attitude ignores the fact that the principle of big business is one of the greatest benefactors that mankind has ever received. Are you aware of this? It is one of the most valuable conceptions of the human mind. It is only through the successful establishment of big business that it’s possible to achieve efficient, low cost per unit, massive production of products.

It’s a fact that the masses of people are the chief beneficiaries of mass production. And it is the principle of big business that makes it all possible. When a big business produces a million electronic ovens in one year it does not follow that this luxury item is manufactured for the exclusive benefit of the few wealthy buyers. The very fact that there is mass production in the first place is observable evidence that products are produced for the benefit of whom? Masses of consumers.

And so, the goal of mass production is mass consumption. The only means of sustaining mass consumption is to sustain mass production. The two go together. To achieve the mass consumption of major products, here is some simple logic. It’s a logic anyone of average intelligence can follow. Mass consumption can only flourish where mass production flourishes and mass production can only flourish where big business flourishes. This is a principle. It can’t be compromised. But you will find, as simple as this is, hardly anyone has ever understood it.

In this seminar the road to understanding is blazed by science. As scientists, we cannot ignore the observable facts. Where there is the freedom to buy and sell, the workers are the main consumers of products manufactured by entrepreneurs in massive numbers. This is an amazing social phenomenon. Most of this productive wealth is deposited into the hands of the masses. Modern innovations can only be profitably produced where the principles of mass production are applied.

As soon as any new product is mass-produced, it’s immediately available to the masses of consumers. As soon as television sets and electronic ovens are mass-produced, they’re devoured by the masses. Once the mass production of television receivers and electronic ovens begins, these luxuries cannot be reserved for the exclusive use of a few wealthy buyers. In contrast, please note, where television sets and electronic ovens are not mass-produced, where they are custom made, the cost of these products will be so high that who can afford them? Only a few wealthy buyers can afford them. To buy a custom-made television set where every part is custom made, well, you can’t afford it. Is that true?

And if there are only a few television viewers, there will be little or nothing to view because television broadcasting can only be profitably sustained where there are masses of viewers – not tens of thousands of viewers, but tens of millions of viewers. Therefore, if you want to put a high-quality, low-price television set into the living rooms of the common man, then the means to this goal are to allow entrepreneurs, technologists, and investors the freedom to accomplish the efficient mass production of television sets.

This is the means to the generation of prosperity for both consumers and producers alike. And yet you have been told that this procedure will also generate a lot of poverty for a lot of people. One by one we will use scientific observation to refute such popular fallacies. We will refute the fallacies with principles, principles that you can observe. Nothing is accepted here on faith or authority.

As the number of products per consumer goes up, prosperity per consumer also goes up. There is no other possibility. And so, within a free society, the creation of wealth by entrepreneurs, technologists, and investors is not the cause of anyone’s poverty. But, it is said, that where there is a free and unregulated society, some are poor because others are rich. This is a popular, but false explanation of the causes of poverty.

These progressive creators of wealth; entrepreneurs, technologists, and investors can only continue to prosper as long as they meet the difficult and always changing demands of the consumer. What is every consumer demanding? More and better products, which means more wealth. More and better products in your hands means that you are wealthier.

Every time a consumer buys a product, he adds to his wealth, doesn’t he? In contrast, where there are no products to consume, there are no consumers. That means everyone is poor. As I look around the room I can see that all of you are hard to please consumers, right? It’s hard to please you as a consumer isn’t it?

As a consumer each of you has the same goal. The law of human action tells me what that goal is. Here is the law of human action again. You are after greater satisfaction. This means that all of these entrepreneurs, technologists, and investors are striving to create a product or service that will enable you to attain greater satisfaction.

The final decision as to just which product will best attain your goal of greater satisfaction is always your decision and yours alone. Where there is the complete freedom to buy and sell, the seller can never impose his product upon you, the buyer.

And as always, it’s buyer’s choice, which means it is always your choice. The most successful progressives then are those who achieve the best track record of meeting the most urgent requirements of the consumers with the highest quality products at the lowest prices. When these progressives are successful, they are in fact serving humanity by creating those products and services that they believe will best increase their consumer”s or customer’s attainment of greater satisfaction.

In fact, I think it is quite accurate to state that they are performing a humanitarian social function. Now the term ‘humanitarian’ is already in your vocabulary, but because this is a science, I have to assign a precise meaning. Humanitarian: helping to improve the welfare and greater satisfaction of mankind.

Again, let me reemphasize this point, 100 percent of the products that you purchase during your entire life are purchased with a single goal in mind, to attain greater satisfaction. There is not one product you ever purchased with the goal of attaining greater dissatisfaction.

The three progressive classes seek to earn their living by actually selling the attainment of greater satisfaction through the marketing of sought-after consumer products. For this reason, I have given the three progressive classes, entrepreneurs, technologists, and investors a name. I call them the super humanitarians.

If a humanitarian is one who helps to improve the welfare and greater satisfaction of mankind, then the entrepreneurs, technologists, and investors have done a super job of it, hence I call them the super humanitarians.

Think about it – these people create products and services that are designed to improve your welfare and greater satisfaction. Their actions are social actions and they are performing a social function.

If you are an American, almost every item of food you have eaten came from this source. Most of your clothing, the dwelling in which you live with its thousands of manufactured products, your entertainment, all came from this source. The motion picture camera, the cameras that photograph your favorite actors came from this source. The motion picture film itself was developed by a great entrepreneur and technologist, George Eastman, founder of the Eastman Kodak Company.

Entrepreneur and technologist Thomas Edison was one of the developers of the motion picture projector, as well as the first producer of motion pictures in America. All super humanitarians are involved in high-risk ventures aimed at creating high-quality, low-priced products designed to give you greater satisfaction.

They are willing to take on many risks because they believe they might be able to achieve a profit by giving you greater satisfaction. If enough consumers vote for the product, there might even be a profit. But in order to earn a profit, a specific kind of social system must prevail. The super humanitarians can only flourish and prosper where there is an open society, a free society.

That means that super humanitarianism can only flourish where this condition exists; the freedom to buy and sell. The characteristic feature of a free market social system is simply that everyone has the complete freedom to buy and sell whatever product they believe will give them the greatest satisfaction, which is what every buyer and every seller wants.

As I will scientifically demonstrate, a free market system optimizes the potential for every individual to attain the greatest level of satisfaction. I will prove during the lectures ahead that a free market system or open society or free society, it’s all the same thing, is the only social system that is in harmony with the law of human action.

But this brings me to the identification of another rather amazing paradox. The popular image of the free market system is not very good, especially among most of the educated, intelligent, and successful people. A paramount question we have to answer is this: if the free market system or an open society or a free society has been responsible for generating more prosperity for mankind than any other social system, then why is the social system of the free market open society damned by so many of those good people who perceive themselves to be educated, intelligent, and successful?

Why is the free society so often defamed by novelists, playwrights, screenwriters, journalists, university professors, theologians, intellectuals in general? Why, if it is so great? Because to be educated, ladies and gentlemen, to be intelligent, to be successful, does not guarantee you will have a correct scientific understanding of social causality.

Not understanding how to optimize humanitarianism, these intellectuals, in the name of humanitarianism, have attacked the super humanitarians. You cannot attack, however, super humanitarians without attacking humanitarianism itself.

I have shown you the three classes of human actors responsible for the generation of all progress. I have not said they are responsible for almost all of the progress. They are responsible for 100 percent of it. This fact is essential to your understanding of the causes of things and what the hell is going on in general.

I am now going to identify what has been the greatest obstacle to progress up to this point in time. We have been missing something, namely a scientific means that can precisely identify when your human and social actions are progressive and when they are regressive.

Without this technology, century after century, educated, intelligent, successful people have executed those human actions that have destroyed progress, impeded progress, thwarted progress, smothered progress, all of this usually in the name of a good and just cause.

This destruction of progress has been caused in part by the fact that almost everyone’s conception of just what constitutes progressive human action versus regressive human action has come from one source. What might that be? Indoctrination. Maybe it is premature to say this, but almost everything that everybody believes on all subjects has come from indoctrination.

One of the most valuable intellectual tools I will be giving you in this seminar is a criterion, a standard that will enable you to break away from all of this indoctrination if you want to do it. Now in this regard I should point out that if you have a self-image of someone who is educated, intelligent, and successful, then the less likely you will see yourself as someone who has been indoctrinated.

It is possible you might see yourself as having been indoctrinated at one time, sometime in the past, but it is not likely that you see yourself as being a present victim of indoctrination if you see yourself as educated, intelligent, and successful. Therefore, I am not indoctrinated is your conclusion, implicit in your mind.

But unless you have, independently of all authority, examined the truth content of all of your most fundamental premises and presuppositions, and furthermore you have examined the validity of the conclusions you have reached starting with those fundamental premises, then you may or may not be a victim of indoctrination.

In fact, the longer you have gone to school, and the more well-read you are, in general, the greater will be the depth and magnitude of your indoctrination with doctrines. One of the most valuable things I promised you in lecture one is that I will be giving you an entire science on the qualitative analysis of doctrines.

This will include a qualitative analysis of a great many of the doctrines with which you have been indoctrinated. I have confidence that you have the fortitude, the self-esteem, the integrity to face this without trepidation. In fact, I believe most of you will find this to be, I hope at least, an exhilarating and a rather exciting experience.

The term ‘doctrine,’ as you know, means a teaching. The term ‘doctor’ means what – teacher. Indoctrinate means to inculcate people with ideas, in simple language, to put ideas into their heads. As far as this seminar is concerned, indoctrination per se is neither good nor bad.

Now as a human actions scientist my only concern is what is the quality of the doctrines with which all of us have been indoctrinated. For this determination, you need a science. And in particular we are concerned with those doctrines or teachings that claim to explain causality.

The reason we build a science in the first place is to understand causality. Your understanding of reality can be no clearer than your understanding of causality. Among other things, I will show you a science on the cause of progressive human action and a science on the cause of regressive human action.

Progressive means to go forward to a better social condition. Regressive means to go backward to a worse social condition.

Progressive human action, of course, has a positive connotation, and regressive human action has a negative connotation. Therefore, it should come as no surprise that everyone thinks of themselves as a progressive and no one thinks of themselves as a regressive or retrogressive, do they?

Furthermore, every social reform is said to be a progressive reform, is it not? All political legislation is said to be progressive legislation. All bureaucratic decrees we are told are progressive decrees. Everyone is a progressive, no one ever says “ladies and gentlemen, it’s time to launch a great regressive program, we must oppose all progress, we must unify the regressives, we must lead society into a great march backward.” Who says this, where have you ever heard this? Nobody says this. Have you? Let me ask you, how many of you have ever personally met anyone who openly and sincerely claim to be against progress, anyone? One person. Anyone else? Just one person, and the rest of you have not?

The problem has been that throughout all history there have been the best of men who wanted to cause society to go forward, but the means they have chosen has caused society to go backward. How many of you think these good men pose a danger to society? They have been the most dangerous men throughout history. I hope, when I use the term men to mean both men and women, that it doesn’t bother you at all.

There is nothing more dangerous than a man with intelligence, schooling, imagination, ambition, honesty, and high ideals who doesn’t know what he is doing.

In contrast, the man who is unintelligent, unschooled, unimaginative, unambitious, dishonest, and has no ideals, poses little if any danger to society even though he doesn’t know what he is doing either. And I offer as my proof for these generalizations the entire history of human action.

How then can we deal with the problem? If we follow the advice, for example, of Albert Einstein we have a starting place. Let’s go back to Einstein. Remember he said that “a formulation of a problem is often more essential than its solution.”

Another method of formulating a problem is to put the problem into the form of a question. So a corollary to Einstein’s statement is that the formulation of a question is often more essential than its answer. Why is this concept so important? The quality of any answer can be no better than the quality of its question.

With this in mind I will now share with you one of the highest quality questions ever asked. It is also one of the most important and significant questions ever asked anywhere at any time. The question is: How can we devise or identify a standard or principle that will enable us to make a precise distinction between progressive human action versus regressive human action?

Sometimes I say retrogressive and sometimes regressive. I use those terms synonymously. They mean the same thing. Regressive is a little shorter way of saying retrogressive. In physics and astronomy there is a retrograde movement of which many of you are aware that means to go backward.

If we can answer that question and you can understand how to make this distinction, then you will have gained one of the most important intellectual tools available to anyone. I am going to give you this tool. How you can use this tool to your advantage will be the subject of much of the remaining sessions. Where should we start? We have already started.

Now once you decide your approach is going to be scientific as opposed to everything else, which is non-scientific or unscientific or, at worst, pseudo-scientific. Once you begin, you are going to start with science and that means something very important. You can’t just start anywhere.

You start with something both fundamental and constant. I pointed out that prosperity is an effect and like all effects it has a cause. We have the prosperity effect curve. Again, as long as products are being produced at a faster rate than people are being produced, the effect is always the same everywhere, no exception, it is always the same, every time – prosperity.

However, if you reverse the position of these curves, that’s all you have to do is reverse them, you get an entirely different effect. As long as people are being produced at a faster rate than products, the effect is always the same everywhere, every time, no exception – poverty in spades.

Earlier I gave you a fundamental constant that explains how to attain poverty if that is your goal. If any society wants to get onto the road to poverty there is only one road you have to take, the principle of poverty. One means to societal poverty is the accumulation of people at a faster rate than the accumulation of the tools of consumer production. That’s the road. You want to take that road? Great. You want to take some other road? Fine. If you take this road though, don’t ask me for a handout – I won’t give it to you.

If any society of people decides they are tired of being poor and impoverished, there is only one road that will take them to prosperity, it’s the principle of prosperity. This is another fundamental constant that will never change. I can’t change it nor can you change it. The fact that some people may like this principle and others may dislike this principle is totally irrelevant. This is a fundamental constant. It cannot be refuted.

But in the case of every principle I will introduce, accept it as a principle only when you can independently observe it, corroborate it, and verify it. I will now give you two fundamental constants of optimization theory that answers this very important question – how can we identify the law of nature that will enable us to make a precise distinction between progressive social or human action versus regressive social or human action?

How can we devise a principle that will enable us to make precise distinctions between these two? This is the fourth fundamental constant in optimization theory. The law of progressive human action: All human actions are progressive that increase the quantity, quality, and efficient utilization of the tools of production necessary to meet the consumers most urgent demands for goods and services.

I have just given you another simplex principle of human action. This law says one human action leads to human progress. Accelerate the quantity and quality of the tools of production used to produce consumer products. But remember, we are not merely talking about the tool of production used in a factory.

When the 17th century Italian violin maker, of whom you have all heard, Antonio Stradivari, perfected the modern violin he improved the quality of a major tool of music production. Stradivari created a standard of quality craftsmanship that contemporary violin makers 300 years later are still striving to equal.

With all of our technology of the last three centuries they haven’t quite reached the Stradivarius violin yet. They have gotten close I think, but they’re not quite there. And if you want to own a Stradivarius, you know that will cost a small fortune. Please note the Stradivarius violin is a standard and that the standard per se is a tool of production. It is a guideline to the manufacture of another tool of production, the violin itself.

The major point I am making is that just one human action is the cause of all of the human progress. You must accelerate the quantity and quality of the tools of production that are the direct cause of tangible and intangible products consumers want. Now if there is a law of progressive human action, perhaps there is a law of regressive human action. How can we identify with great precision a regressive human action?

Here’s another fundamental constant, the law of regressive social action or human action. All social actions, human actions, are regressive that decelerate the total quantitative or qualitative accumulation of the tools of production necessary to meet the consumers most urgent requirements.

How you can use these laws to independently determine which human actions are progressive and which are regressive I will show you in later sessions. Most of the human actions that people take are neither progressive or regressive, but it is absolutely essential that you have a science that can distinguish between the two.

I have shown you now five fundamental constants, the principle of prosperity, the principle of poverty, the law of human action, the law of progressive human action, and the law of regressive human action. These five fundamental constants form the foundation of this science, optimization theory.

All of these principles and laws identify and describe simplex human actions. Simplex does not mean easy to understand. It means what? One action. If it is simplex, you have to be intelligent to understand it. If you are unintelligent, you cannot understand it.

If you can quickly grasp these simplex principles, this does not mean they are less important than if you had to struggle to understand them, either. Furthermore, simplex does not mean obvious. Obvious means easily discovered or understood. In the history of science, I do not know of one principle of nature that was easy to discover in the first place or one that was easy to understand in the second place.

In nature there are no obvious principles. Nature’s principles are always hidden from view. Their discovery has always required an immense effort. After the discovery of a new simplex principle, those who do not reject the principle in the first place by claiming – well, that can’t be the principle or that can’t be the cause, they may then say – well, you know, this is obvious, the principle is obvious.

Implied in the claim that the principle is obvious is the challenging question, so what is the big deal? In other words, if the principle is obvious and amounts to common knowledge, then what is there to get excited about? The goal of this seminar is to give you a rapid increase in your scientific understanding of the causes of the effects that you like and dislike. I will demonstrate that our understanding of causality can be no better than our understanding of principles.

The “that’s obvious” challenge interferes with our ability to grasp the meaning and importance of principles. If we think that a principle of nature is obvious, what does this do? It downplays its importance and in so doing you will miss its significance.

The German poet Christian Morgenstern tells us “The obvious is that which is never seen until someone expresses it simply.” The point is, in nature there are no obvious principles. And even when a principle is expressed to you for the first time in simple language, it still may not be obvious.

A principle of nature only becomes obvious, easy to understand, after we make a large investment in understanding it. In order for me to entertain you by engaging your mind in an enjoyable way, I have to keep you from getting bored. This entire seminar involves a presentation of principles. The characteristic feature of a principle is that it never changes. Don’t let the sameness and the regularity of principles presented here bore you. Don’t let the regularity of a principle bore you.

It’s this never-ending sameness, regularity, and predictability that give the principle all of its value. There is nothing more valuable than a principle. Without principles as your foundation of understanding, you will never gain a fundamental understanding of anything about anything.

This is true of all three domains of knowledge, the physical sciences, biological sciences, and human action sciences. And one reason you never have to get tired of a principle is that you never can reach a maximum comprehension of a principle.

The opportunities for new applications of old principles are almost endless. Where there is a science, each newly discovered principle will modify our view of all of the earlier discovered principles. This process will never end. The aim of science is to find better and better explanations of causality. It is not the aim of science to find ultimate or final explanations of causality.

I pointed out that historically, when these better explanations of causality have been advanced, especially if they are revolutionary, the most common response has been ‘that can’t be the cause.’ Some of the most intelligent people in history have allowed their ideological immune systems to protect them from gaining value from some of the most revolutionary and profound advancements in history.

But the ideological immune system can obstruct the introduction and acceptance of new simplex principles in a much more subtle way. Instead of the outright rejection of a new principle, someone might say – “Well, you know, I am in pretty much complete agreement with you, sir. In fact, I have always thought this way except you articulated it better.”

To agree with an idea is not the same as to understand an idea or to recognize the significance of the idea or its originality. Agreement is not synonymous with comprehension. One means of measuring your own understanding of any idea is to follow what I call the rule of articulation; you understand what you can articulate.

This means you can clearly understand what you can clearly explain to another who has at least enough knowledge to comprehend your explanation. To enhance your ability to articulate the law of human action, let’s look at the law again.

The prominent aspect of being human is that you are continually aiming at greater satisfaction, therefore let’s give some sematic precision to the term ‘satisfaction.’ Satisfaction is the transition from a state of lower preference to a state of higher preference.

Most people who are hungry would like to go from a state of being hungry to a state of being full or satisfied, which is to go from a state of lower preference to a state of higher preference. Preference is the liking of one thing more than another.

Most hungry people would prefer to have their hunger pangs removed rather than to keep them. Where millions of people go hungry, whatever their level of satisfaction may be, it’s far lower than they would like it to be. Where hunger is pervasive and endemic, there’s a general failure to understand the causes of greater satisfaction. In street language, an awful lot of people don’t know what the hell they are doing or what the hell is going on.

One fact they are not sensitive to is that wherever there is a general condition of prosperity for a great many people, there are three classes of humans acting in harmony to generate all the prosperity. Guess who they are? You have got it already, right?

Furthermore, these billions of hungry people have been insensitive to the fact that where there are the greatest number of super humanitarians building prosperity for the common people, there’s also the greatest amount of freedom to buy and sell.

That raises this question: Is there a cause and effect connection between the freedom to buy and sell and prosperity? Well, these hungry billions seem to have failed to notice that where there is the freedom to buy and sell versus where this freedom does not exist, the entrepreneurs and investors have been either eliminated or excluded.

There’s another important conclusion on the attainment of prosperity: The greater the number of super humanitarians in society, the greater the societal prosperity, and the greater the scope and the magnitude of the humanitarianism.

And so the law of human action states that all of us are after a greater satisfaction. Nature has given you a purpose in life, so to speak, but nature stopped there. Nature has not shown you one action that you can take that will cause you to gain greater satisfaction. Nature does not pin labels on the causes of greater satisfaction or the causes of anything else.

Nature does not, however, intend us to live as hermits. As soon as you decide not to be a hermit you have to be concerned not only with your greater satisfaction, but you have to be concerned with the greater satisfaction of others. Metaphorically speaking, nature has given us what I will call the universal social problem; how can we identify those human actions that will cause the greatest satisfaction for the greatest number.

It’s a difficult problem to solve because the true causes of all of this are hidden from view. As a result, there has been a lot of mislabeling. If we continue to follow traditional dogma, popular superstition, conventional wisdom, we will continue to mislabel causality.

I know one escape from this predicament – I don’t claim it is the only escape, but I know of one, it is the application of more and better science as the key to our understanding of causality. And so as we near the conclusion of this session, one of the aims of this Principles of Human Action seminar is to apply the methods of science to build a science of human action and to demonstrate the true means to the optimization of the greatest satisfaction for the greatest number.

If this goal sounds too grand or too universal, you can apply the same science to achieve greater satisfaction for you. As the seminar unfolds you will see ways of applying your understanding of these fundamental constants towards the optimization of your own greater satisfaction. However, this is the completion of only about 20 percent of the seminar and I don’t necessarily expect you this early on to integrate these fundamental constants with all of your present actions, but we will have much more to say on this.