Imagine that there is a small community, of say a hundred people. These hundred people slog all day every day merely to survive. They live at the foot of a mountain, and the only water is at a spring near the top of the mountain. They must have water, so every day every one of these people climbs to the top of the mountain, collects his water, and brings it down again.
Getting water takes up a large part of each person’s time each day. Eventually somebody hits on the idea of building a furrow to run some water down the side of the mountain, into a dam which he builds at the bottom. Then he says to the 99 others: “You can save several hours a day, by taking water from my dam, if you will work for me for 10 minutes a day.”
The other 99 agree, so he makes a profit. But the other 99 are also better off, because nowthey have much more time to use for other purposes.
Then, that hundredth man observes how the water running down the furrow pushes stones and wood along ahead of it. He thinks up the idea of providing power from the running water, and builds a waterwheel with which to grind corn. He has more power than he needs for his own purpose, so he says to the other 99: “I will allow you to grind your corn in my mill if you will give me one tenth of the time you save.”
The others agree, so the entrepreneur increases his profit. The others are better off thanbefore because they have still more time to themselves. They use that time for leisure and to improve their houses and their living conditions. One of them spends his spare time making himself good shoes.
The entrepreneur then says to the shoemaker: “I have spare food and shelter andclothing now, because I am being paid by all the people who are using my water and my mill. I will feed and clothe you better and enable you to stop spending your time on necessities, so that you can devote all your spare time to making many of these good shoes. I will then sell the shoes to the others, who will pay me a small portion of the time they save by not having to make their own shoes, and I will pay you a portion of what they pay me.”
So the entrepreneur makes even more profit, but the shoemaker is better off because he receives some of the benefit, and the other 98 are once again better off because they do not have to spend time making shoes.
Then the entrepreneur notices that someone else makes good clothes, so he makes the same arrangement with him, and so on. Eventually, everyone is doing what they are best at, and everyone has more water, and better food, clothes, shoes, shelter and facilities than they would have had if they were spending all their time looking after their own needs, and everyone has more leisure time to pursue other interests.
Now, what would have happened if, when the entrepreneur had built his furrow down the mountain, the others had said: “We will not pay you for your water; you are not working for it. You want to exploit us. We are 99 and you are only one. We will take what we want.”? Then the man who invented and supplied all these wonderful things which benefitted the whole community would have had no incentive to create those benefits. There would have been no further advancement in the community.
But in our example, the “other 99” do not do that. They accept his proposals in mutual freedom, so he goes on to make more and more proposals, all of which create extra benefits. Eventually, there are children in the community, and now there is enough production for some people to devote themselves to teaching the children – because the community is producing enough to free some of its members from having to take care of the production of immediate needs. Art and music become possible, with those who are good at them able to spend their time on these pursuits, giving the benefit of their creativity to others for a share, in return, of the community’s production.
— Originator: Dr. Fred Kent