Sadly it’s largely a matter of money begetting money. Even low return investments can pay off nicely if you plow in millios or billions, and you have a lot more room to play with high risk ones there. Plus I’m sure you can work out higher interest rates if you’re giving whoever enough 0s
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Actually I think Mindysan33 accidentally answered my question best.
I did? How’s that?
Also, as indicated in the article itself, you hit a point where you don’t actually ahve to spend any significant fraction of your wealth and can instead invest it all. If you’re making $70k and paying a third of that to taxes and a third of that to your mortgage and then you have to buy food, clothes, transportation, etc. then you are investing nearly nothing. If you are making $200k you probably have a more expensive mortgage and more expensive clothes but if you want to you could invest a quarter to a half of your income. When you have $50B you can get by lavishly spending 0.00% of your wealth annually and you get to invest 100% of it.
Plus when you drop below a certain point everything starts to get more expensive. You get charged higher interest rates because people won’t lend to you at lower ones. When a middle class person parks illegally they risk a fine and some lost time. When a very poor person does so they risk losing their car because of an inability to pay the fine. Since the US has reinstituted debtor’s prison (basically) a small debt can mean losing your job (as well as, temporarily, your freedom). Whereas if you are Oprah you could easily pay far less then the price of many goods just by letting the retailer advertise that you shopped with them. If you are Peter Thiel you can make sure people don’t say bad things about you by merely threatening to do what you did to Gawker and it doesn’t cost you one cent to do so. When you have money you have the power to spend the money, which lets you get things without spending money. When you have no money you have to make subpar decisions to avoid risking small losses.
If I knew there was a 50% chance an investment would multiply my money by 10 in a week but a 50% I’d lose it all, how much would I put in? I could probably afford to gamble a grand or two (that’s partly risk aversion on my part). Bill Gates could throw in $100M just to see what happened. Others would just have to pass it up. Money lets you take opportunities.
The ways in which money makes you powerful are impossible to enumerate.
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And when you’re rich enough parking illegally makes you money because you got there faster. This particular point could be fixed by taking Finland’s example though: all fines are a percentage of your income. A few years ago (I think it was featured on here as well) a businessman over there got fined €54,000. Switzerland does the same: they fined a guy the equivalent of $1.1m, which was a record both for highest speeding ticket ever and highest highway speed ever in Switzerland.
I really like the Finnish system, as taken from that article: take half of someone’s spending money for a day, that’s a good starting point for a fine. Adjust the amount of days as necessary.
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Never been on BB, but felt compelled to respond since the replies are hogwash. Maybe I’m taking the bait or maybe this community is extremely self-selected to be so extreme in their views but here goes-
The claim in the title is nowhere a conclusion given the article’s argument. Bill Gate’s net worth increased more during this time period than the earlier time period, therefore the nebulous term “capitalism” is a thing that rewards sitting on a pile of cash more than working for it.
If he made the initial pot of money in entrepreneur mode, couldn’t this second time period of faster wealth growth be considered a delayed reward for his work during that time? Isn’t the entire idea of investing for the future that you give up spending the fruit of your labor now to gain even more in the future and over time? The only mechanism that makes that work is an expanding economy (or manipulative FED) and the only way an economy can expand is by the efforts of people like Gates to innovate and improve the efficiency of current energy utilization. I mean isn’t it axiomatic that the people that help society the most through entrepreneurship get rewarded the most? The society that is able to pay a high dollar for Microsoft shares is a society that is successful in part due to the existence of Microsoft. Gates and MS aided society and set it up to continue to thrive and therefore continues to get more reward. If his actions and MS hurt society, no one could afford to buy the shares of the company-- or wouldn’t agree to buy the shares at that price. The fact that no one is forcing anyone to buy MS shares at such a price means the people that make it possible for Gates to convert his shares into dollars think the deal is fair. If the people ultimately giving Gates money for his company think its a fair deal, who the hell is being screwed over? Who is being robbed? Who is doing anything wrong here? If you use a term like ‘systematic’ or ‘institutional’ to answer this, don’t bother unless you can give a concrete example of someone robbing something else or otherwise defrauding them. Then we can prosecute the criminals together.
The L’Oreal heiress didn’t work for it, but her father did. The wealth she has was given to her by her father, which is an ever-growing reward for supplying people with things they want to make their lives better. The company continues to grow and make things for more people, and her wealth continues to grow also because she owns that company or the money from the company went to buy pieces of other companies that are doing stuff. So the fact that she doesn’t work doesn’t have any relevance. If we say it is relevant to the argument, then we also say every birthday gift is illegitimate because that person didn’t work for it. “But its a gift” “So was L’Oreal.”–I don’t see the point.
But the argument doesn’t work on many more levels. I make more money on one day at the end of a two week period when I get my paycheck than the previous two weeks I was working and got nothing. Therefore that one day earns me more money than the two weeks and our ‘system’ is broken because working isn’t rewarded?
There is also a complete lack of considering other factors in all this. For instance, during much of this second period of wealth growth the value of stocks has been skyrocketting relative other assets because of the FED lowering the interest rate. Money has to grow itself because of inflation, and if it isn’t doing something its losing value. With artificially low interest rates money can’t be lent out to earn a return, so it gets pumped into stocks and assets. If you happen to own stocks or have a giant net worth made up of shares in the company you founded, you stand to get a huge boost in your wealth. This isn’t capitalism’s doing, its the actions of the FED raising interest rates at nod of the government. But sure, lets pretend the obsolete machine-age struggles of worker and manager are relevant here.
I bring up this old argument’s obsolescence because the ‘us vs them’ mentality is not only infantile, but completely fails to identify the mechanism of action causing income inequality. The real threat we should all think about as a universe VS humanity struggle instead of a labor vs the man struggle is the declining usefulness of most humans. We are mostly redundant in the modern world. We used to be able to say that consumers are necessary if only to buy the stuff the capitalists make and therefore the two groups are inextricably linked. But no longer-- the money that is gained by the top of society is only of value if it can buy them things. But automation is so insanely awesome now-a-days that hoards of previously necessary people to make the elite’s lives elite are not needed If and when enough automation occurs, there isn’t a need for consumers like there used to be to support an elite lifestyle at the top. The number of people needed to maintain the world shrinks every day. Those people still needed are important and their abilities scale more than ever, and the most needed people get richer than ever because the number of unnecessary people that used to have to be paid gets larger every day too.
Furthermore, everyone is conflating the idea of net worth with wealth, mostly because of how we colloquially refer to these things. But really these figures of billions of dollars are the dollar amounts of the shares people own of the company IF all those shares were sold. The kicker is if that many were sold at once its hard to believe there are enough buyers at that price point. Additionally, its a floating valuation, not some kind of concrete ‘wealth’ that someone like Bill Gates has in his magic wealth basement. If electricity generation suddenly because super expensive I doubt Microsoft products would command top dollar.
Many have mentioned the fact that we all live and benefit from being in a society where in many senses we are all connected. Many take a leap by saying therefore the rich owe everyone else money, for without such connection the rich wouldn’t have been able to become rich. But the opposite can be argued with the same logic. The rest of society wouldn’t have benefited from the products and services provided by the rich either. So the rich deserve money from the rest of society-- which, coincidentally, in our system where no one is forced to by consumer products at the point of a gun – they do get rich.
Finally I will close by saying, despite all of the above-- or rather even if none of the above were valid-- there is no moral argument against someone having more money than someone else if that person didn’t steal or gain it through fraud. Make an argument with evidence that Wall Street Financiers defrauded people to get the money and I will support you all the way. But it is not enough to say because someone has more and someone has less, the person with more must have obtained it through a fraudulent ‘system’ or that its wrong in some morally indefensible way.
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Shit, I take it back - I guess I’ve been thinking about it wrong as apparently it’s an entry into a thriving business, at least in Japan:
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Sorry, but this article is bullshit… First of all, Gates gave up the CEO post in the late 90s when his fortune was about a $100 billion and he started building his fortune in 1975, not 1990.
He went from 0 to 100 billion in 25 years and has since lost about 10 billion.
You can cherry-pick the start and end year and make whatever point you want.
Indeed, that is what Piketty does in much of his book. His entire r>g hypothesis is known to be wrong among serious economists and he is popular only because he gives ready-made talking points to rank-and-file leftists who want free stuff.
And of course, people who are good at managing capital well will stay rich and they should.
You can’t really “work” in the traditional sense and grow your fortune when you are already worth billions. You do it by making other people more productive by supplying your capital. They make higher wages than they otherwise would have and you make a return on your investment.
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I see I’m not missing anything important. Carry on.
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the job itself is surprising, but not the origin…
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I’m sorry but Piketty supports his hypothesis using carefully collected data on the perfomance of several national economies stretching back over a century. A lot of effort was put into normalizing the data specifically for Piketty’s study, so I may be wrong but I was left with the impression that a study based on such a comprehensive set of historical economic data has rarely if ever been undertaken before.
Meanwhile, there are a number of “serious economists” who still insist on the invisible hand and the rational actor with perfect knowledge, even though these theories have never been proven empirically despite floating around for a very long time. So I’ve got to call bullshit. Which economists “know” that it’s wrong, where is their evidence, and let’s be honest have you read any of it or are you just saying Piketty is wrong because you heard someone else say so?
You haven’t read it, have you? You can’t have read it. Piketty uses all of the data he could find. Anything that could be reasonably compared. He goes to quite some lengths to make data comparable, going out of his way to avoid doing exactly what you’re accusing him of. What are you talking about? Are there specific examples in Piketty’s work that you could point to?
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Nice to meet you too. You sound quite determined that you aren’t going to make any friends here, which is a shame.
Sure, why not? I think you might have missed it but the point of this discussion is not whether or not Bill Gates deserves to be rich. The point is only that if you gave Gates’ entrepreneur-period riches to some other schmuck who didn’t earn them, that schmuck would normally be able to use that cash to earn money faster than entrepreneur-period Gates. Whether Bill Gates is personally deserving of the amount of money that he has is a moral question, but Piketty is an economist and his hypothesis is amoral. His hypothesis is essentially “the rich get richer,” and yes that claim in the title is absolutely supported by the fact that investor-Gates is leaving entrepreneur-Gates in the dust.
Your argument appears to be more or less “rich people deserve to get richer,” while Piketty is arguing “rich people will get richer.” You may or may not be right but you are mistaken if you think that makes Piketty wrong.
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Actually most of the replies are made by people who have already thoroughly thought through and discussed the position you are taking and don’t feel the need to bring it up every time we talk about economics. Sort of like how I didn’t go over my times tables in every calculus class.
You talk a lot about interest rates and automation’s effect on society for someone who is only interested in individual actions and not in systems. The effect of your system of morality is people starving in the streets in a society that has enough food for everyone. Why would we hold onto a morality with that outcome? Did you get it directly from some god or something?
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Citation needed. Also cite the source where you’re copying and pasting this from.
This claim is seriously undermined by the facts. As has been well established he started with both money and connections that gave him a major leg up.
Also–welcome to BoingBoing!
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Aren’t appeals to vaguely defined authorities like “serious economists” enough for you?
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Serious economists
Ok got it. Completely infowlable. Sorry infallable.
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Citation needed. I mean, sure, he’s a well respected academic, and some policies have been claimed to be inspired by his works, but he’s far less influential than someone like Jacques Attali, for example.
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Yeah that’s fair, and I don’t have a citation for you. Maybe he’s just a freeloading ivory tower egghead making bold claims to get headlines. I should confess I only got about half way through Capital before I decided that I was just going to have to take his word for it, I’m pretty far from an expert on this stuff so I couldn’t argue over just how influential he is. But it’s true that it’s what he’s known for, so maybe the usual skeptical caveats apply but I think it was a fair response to @Israel_B’s question.
He’s on talkback radio often enough and his ideas seem to be pretty well accepted into the political discourse here, but like I say a lot of it’s over my head and not just for the language barrier. So yeah, debatable, but put alongside Gates’ contribution “through the market but also job creation” I think not especially so.
Using the numbers from the article, Gates generated a 13.5% avg annual rate of return between 1990 and 2010 ($4B to $50B). From 2010 to 2016 he generated an avg annual return of 10.3% ($50B to $90B). So this example actually REFUTES Pikkety’s thesis.
Entrepreneur Gates created wealth at a faster rate than Investor Gates.
My impression of Gates’s background was that his family was already rich, and that it had made its money in the law. And thus that it should have surprised nobody that Microsoft’s version of “innovation” amounted to buying or copying other companies’ successful products and then using shrewd contracts with large clients to muscle out the competition. And thus also it should then have surprised nobody, once ordinary people became computer-literate and the business market was eclipsed by the consumer market, that Microsoft’s advantages went away. But the founders were already gazillionaires by then.
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