Due to my last trip to Columbia Business school, I ran into this interesting article by Marjorie Kelly from 1995:

Here's a story that makes me mad. It's a story about the purpose of capitalism, the ways of wealth creation, and for whom the cash register tolls. It's a story about a shoe salesman.

His name is John Ulviden, and I first heard about him from a friend more than a year ago. But as I read headlines about soaring profits and falling wages, I began recalling his story. I'm disturbed that S&P 500 profits continue to soar - up 40 percent last year alone - while real hourly wages keep sinking, as they have since 1973. John's story seems to me a parable of what's gone wrong.

For twenty-one years, John worked as an independent sales representative for Adidas, building his Wisconsin territory up to $7 million in annual sales, and his commission up to $170,000. I mean, this guy was good. And he had a good product, in a period of rapid growth (which he helped create). Out of a national sales force of eighty-five, John was one of the top four revenue producers. And then he was fired.

"Basically, I was making too much money," John told me. "Their philosophy is they don't want anyone to make a lot of money." His tone was matter-of-fact, but I could hear the bitterness. "This happens all the time. A salesperson is always the ugly stepchild."

To get rid of John, his manager used the thirty-day cancellation clause in his contract. "Territory re-alignment," they called it. It took three people to replace him, but the company re-configured the pay system and saved money.

I phoned the manager who terminated John, but he declined to discuss it, saying it was a "personal matter." As for John, he started over with new shoe lines, and his income this year will approach $25,000.

In capitalism we call this a success story. A company re-engineers its sales force. The hard-driving people who build sales are replaced by cheaper folks who can manage existing accounts. Costs go down. Profits go up.

What makes me angry about John's story is how successful he was at creating wealth. After all, wealth creation is the core task of capitalism. It's the genius of the system: Companies end up with more money than they start with, generating profits the way a plant generates oxygen. This is presumably what justifies wealth piling up: Those who create it get to keep it.

Only not quite.

