The Chaebol Returns To The Presidency 1967 [EN]: Chapter 117

117. Sucking America Dry

Korea Investment Corporation, President’s Office.

Once again, the President visited late at night to provide information to President Jung, who was about to depart on a business trip abroad.

The President, drawing on his experience from his time as Chairman Wang, explained the fundamentals of finance.

“President Jung, do you know why it’s so difficult for ordinary workers to buy even a small house, even if they work hard and save diligently?”

“It is strange, isn’t it? People who work hard should be well-off, but somehow, the harder they work, the poorer they seem to become. What’s going wrong?”

“Diligence, integrity, and thrift are virtues that caution against laziness and wastefulness, but they have economic blind spots. Even if you diligently save your salary, you’ll gradually fall behind.”

“Hmm, that’s quite pessimistic. Then how can ordinary people prosper?”

“For ordinary people, money is directly tied to their time. They need to work long hours to earn a decent income. In short, they live an hourly wage existence.”

“……”

“But money is constantly being printed, and its value decreases [inflation]. Limited tangible assets, on the other hand, rise in value. Fixed wages can’t keep pace with inflation. That’s why salaried workers often can’t afford a house their whole lives, and it’s hard to keep up with rising *jeonse* prices [Korean deposit-based rental system].”

“……”

“The wealthy invest in tangible assets like real estate and businesses, not hourly labor. The wealthy earn money even when they sleep or play. Rental income, dividend income, real estate investments, *gap* investments [leveraged real estate investment]… They generate income 24 hours a day without the constant expenditure on basic necessities that workers face. Is it any wonder workers can’t compete with them? The Jewish community understood this aspect of money early on and entered the finance industry.”

“Ah! I understand now.”

“Since one side’s losses become the other’s exponential gains, the income gap inevitably widens. Even if they work hard, they feel trapped, so ordinary people gamble on stocks and such out of frustration. It’s their only perceived way to rapidly increase their wealth.”

“Hmm….”

“But 8 or 9 out of 10 fail. In a gambling game, the one with the most capital wins. So, the idea that it’s better to work hard than to gamble stems from diligence, integrity, and thrift. It’s simply maintaining the status quo. You won’t starve if you work hard, but the path to becoming rich is different.”

“So, Your Excellency created the retirement fund. Because saving alone can only maintain the status quo.”

“That’s right. It’s a substitute for financial planning, a way to earn income that outpaces the inflation rate.”

“Hmm….”

“Do you know why some wealthy individuals invest in art?”

“Well, I don’t understand it at all. I can’t believe that even a good painting can cost tens or hundreds of millions.”

“When the Jewish financiers on Wall Street had excess capital, they initially bought buildings. But that was too cumbersome, so they assigned value to diamonds and art and invested in them. They created a new investment method that gave limited-edition artworks the value to purchase a 50-story building in New York.”

“Ah….”

“They constantly create intangible products, assign them value, embed more value in a smaller volume, and amplify the overall value. In a capitalist society, Jewish financiers often control the mechanisms that determine the value of money. That’s why Jewish capital is so formidable.”

“It’s even more concerning now that I understand.”

“To win in a gambling game, you shouldn’t rely on lucky bets, but think about buying the entire casino, like the Jewish community often does. Now that you understand the landscape, I’ll explain the business to be conducted in the mecca of capitalism.”

The President explained in detail what President Jung needed to accomplish.

The operation was codenamed ‘Sucking America Dry.’

*

San Jose, California, USA.

President Jung visited the nascent Silicon Valley.

The San Jose area had been home to HP and a few electronics companies since 1939, but it still retained the undeveloped feel of the American West.

No one could have foreseen that Silicon Valley, which would one day dominate the world, would emerge from this place.

Silicon Valley was the centerpiece of an ambitious plan by the California state government.

The East Coast, with its heavy and chemical industrial complexes producing automobiles and steel, was quite developed, but California in the West was primarily agricultural, resulting in lower incomes and less developed cities.

Betting their future on attracting the burgeoning electronics business rather than heavy industry, they offered significant tax incentives.

Intel and AMD were established in quick succession.

However, the growth rate of venture companies was slow. This was because they struggled to attract top talent.

When the state government analyzed the cause, they discovered that it was due to the ‘non-compete clause’ in employment contracts.

The founders of Intel and AMD included a non-compete clause in their employment contracts to prevent employees from working for competitors for at least one year after leaving the company, in order to protect trade secrets and technological competitiveness.

Although there were excellent universities such as Stanford nearby, talented individuals were hesitant to leave their current companies and join venture companies.

In response, the California state government banned the ‘non-compete clause’ in employment contracts.

As a result, talented people who left their companies with innovative ideas began to launch their own businesses.

In the electronics industry, diodes and transistors are used commercially as key components, and these products were semiconductor devices that used semiconductors.

Silicon (Si) was primarily used as a semiconductor material, so the electronics industry was called the silicon industry, and the San Jose area of California, USA, where silicon industry-related startups were concentrated, was called Silicon Valley.

Just before the venture boom, President Jung arrived in San Jose, California, under a special order from the President to invest in American companies.

The first place he visited was IBM, and the second was ‘Intel.’

President Jung met Intel’s founder, Moore.

Moore shook hands with President Jung and said bluntly.

“I was very curious because an Asian was investing. I’ve heard Asians have a similar appearance to yellow apes.”

It was a racist remark, but President Jung brushed it off as a joke.

“How does it feel to meet a talking monkey in person? I also have money to invest in your company.”

“Hahaha, I’ve come to realize that skin color is just clothing.”

The conversation flowed smoothly.

President Jung used the information the President had given him.

“Intel is having trouble finding applications for its semiconductors, isn’t it?”

“How did you know that?”

Moore, who had initially regarded him as inferior, was surprised.

Founded in 1968, Intel created the Intel 4004, known as the microprocessor, which was first released to the market in 1971.

It was an innovative device that would change the future, but by itself, it was just a component.

They were looking for an electronic product that could utilize this innovative computing function.

“From my investigation, it seems best to cooperate with IBM.”

“IBM?”

IBM originally started as a company that manufactured cash registers for stores.

They also produced guns during World War II.

They were looking for an innovative and fast computing computer to surpass their competitors.

“When I met the president of IBM, he said he wanted an innovative computing product that didn’t exist in the world.”

He was startled.

“Did you visit IBM?”

“Yes, I had a long conversation until late yesterday.”

“Ah, I see. What did IBM say?”

He was eager to know the results.

“They suggested creating a personal computer (PC). Intel’s semiconductors have excellent computing functions and are lightweight, making them suitable for portable devices.”

“You’re well-informed! Did you graduate from an electronics engineering college, President Jung?”

“Haha, if you want to invest in the future industry, you have to study more than just college.”

He would have been shocked if he knew President Jung was from the military.

He asked.

“Does IBM have any intention of pursuing this?”

It was an important device that performed central control, but it was a component that only generated sales when the finished product, the PC, was sold.

“It was conditional approval.”

“Under what conditions….”

“The condition is that Tiger Fund invests in IBM. As you know, new product lines require a significant amount of capital.”

“So, did you agree?”

“I also agreed conditionally.”

“What conditions did you present?”

“That I have to invest in Intel’s shares.”

“Hahaha, so you’re investing in both companies after all.”

“You can’t conceive of a PC without semiconductors or semiconductors without a PC. From an investor’s perspective, both companies are essentially one entity.”

“Good. We’ve been researching for years without launching new products, and our deficit is snowballing. We need investment to produce products anyway. How much investment are you planning?”

“It’s 51:49. I’m going to increase capital by 49%.”

“As much as 49%?”

“Yes. In fact, 51% would be even better.”

However, venture companies often suffer if the founder is not the largest shareholder, as they may not risk everything on research and instead become complacent salaried employees.

Ownership is a strong motivator for success.

“We have two co-founders with the same stake, so we have to divide it into thirds.”

“No. The two of you must retain 51% of the shares.”

“Hmm, that’s a difficult condition. I’ll discuss it with my colleague.”

In fact, he made the same proposal to IBM and obtained approval for a 49% equity increase investment.

It took several days to receive their reply.

In the meantime, President Jung flew to the East Coast.

*

New Jersey.

President Jung shook hands with John Bogle, who was in his early 40s.

John was from New Jersey, USA, graduated from Princeton University with a degree in economics, worked at Wellington Management, an American asset management company, and was preparing to start his own business after leaving the company.

John was skinny and tall, so President Jung had to look up at him as if he were over 2 meters tall [approximately 6’7″].

“Nice to meet you, John.”

“Nice to meet you, President Jung. But how did you know about me?”

“Tiger Fund is a new company that is less than a year old. While searching for talent to expand into a global investment company, someone on Wall Street recommended you.”

“I’m not famous enough to have my name cross the Pacific Ocean from the East Coast.”

“Hahaha, everyone is unknown until they become famous.”

“But what brings you here?”

“I’m looking for a new investment method. Existing stock investments are highly volatile and have high risk and high return. It’s closer to speculation than investment.”

“I agree. If you follow the general public (retail investors) who invest directly, you’ll likely fail. Investment should be simple and based on common sense.”

“So, I’m looking for a long-term indirect investment method that generates continuous profits. It’s better to buy the haystack than to find a needle in the haystack. For example, a stock market index or something similar.”

These were terms learned through the President’s intensive tutoring.

John’s eyes, which had been passive, lit up.

“Index! Wow! What a coincidence! I was also planning to start an index fund.”

An index fund is a fund that selects an index of listed companies or futures in the target sector and manages it to generate the same rate of return as this fluctuation index.

For example, the Nasdaq Index, the Electric Vehicle Index, the Crude Oil Futures Index, etc.

It is designed to allow individual investors to hold listed stocks evenly at a low cost.

It also has the advantage of lower fees due to reduced fund management costs.

The reason President Jung was looking for John was that, during Chairman Wang’s time, John Bogle was known to be the future founder of ‘Vanguard Group,’ the world’s largest asset management company.