My point is that sometimes a person who starts a business often invests EVERYTHING they have, so they are literally gambling their entire live savings on their business.
My wife started her own business with an investment of around $3000 from me. In some cases (skilled trades like electrician or carpenter), the only investment needed is the cost of licenses and insurance – you can use your home as your office to start with.
I honestly can’t see how your analogy relates to whether people would open their own businesses. Do you know how many people open restaurants so that they can work endless hours for razor-thin profits with a 70% chance of failing in the first year? The only people who actually live their lives by looking for Nash Equilibria are economists.
You can invest in index funds that basically track the growth of the entire market and basically no one consistently outperforms these funds. The sure thing is exactly what I outlined - buy a million tickets and let the probabilities sort themselves out. Did some very wealthy people using strategies like this lose half of their billions in 2007/2008? Sure they did. Are they richer now than they were before then? Yup.
When you are very rich you can simply absorb shocks. If you lose $1B and you still have $1B then you are fine, and the money is coming back to you one day.
But again, reality doesn’t bear out the idea that there is really any skill involved. Managed funds don’t outperform index funds. Some people do very well but someone would win a coin flipping tournament as well - that’s not because they are the best coin flippers.
And politicians will always need big donors as long as there are big donors. Making small numbers of people obscenely wealthy is very destructive. We should structure our economy around making sure this doesn’t happen instead of making sure it does.
I don’t think you’ll find any credible person who would suggest that infrastructure investment isn’t worth it from a cost-benefit analysis perspective and we don’t do it because the benefit is to society at large, not to specific individuals. This report talks about automation causing some kind of dystopia. Think about that: We 1) increase production; and 2) Reduce the amount of work that has to be done and the conclusion is… everything is terrible? Shouldn’t making more and better stuff with less effort make us better off? If we live in a system that doesn’t allow that, what would make us think that is a good way to run things?
No, no, no, you say, SOMEONE needs to pay for it, or we need to use slave labour. It’s one or the other. I guess if humanity can’t collectively imagine another alternative then that’s what we’ll get. But the “jokes” about the guillotine growth industry won’t stay jokes forever.
Sometimes people do invest everything they have. If they are wealthy they’ll probably invest a much smaller portion of what they have, or even to invest money that belongs to other people entirely. But the thing about poor people is they may not have any assets to invest at all. If you’re truly poor you’re more likely to be buried in debt than to have a house you can mortgage, so it’s kind of silly to make statements like…
the great thing about this country is that anybody has the opportunity to get wealthy
…as if the difference between a rich person and a poor person is “how much are you willing to risk?”
Actually I think that the difference between rich and poor people could probably be significantly predicted by their answer to that question. It’s just that @Kevin_Harrelson has the causality backwards.
I, too, got where I am today by hard work and determination. Also, unbelievable luck. The kind of luck that seems like magic from a fairy story. I’m pretty sure that for every hard working American success story like mine there are thousands of people who slaved themselves into an early grave.
And whose fault is that? After high school, I worked full-time and went to a community college at night. I did have the advantage of living at home during this period, but that option is open to a LOT of people. Afterwords, I went to a University and worked my ass off. Since my father passed away after I was at college only a couple of months, my mother was not in a position to help me. I got grants and a ton of student load debt. But… I made it through hard work and determination.
Sorry, but there are a lot of opportunities for people out there if they have the courage to grab it. There are trade schools, and anybody could learn to be a machinist, air conditioning repairman, plumber, or mechanic. If you have a driver’s license and a clean record, you could drive a school bus. The only excuse might be if you are young, dropped out of school, and have kids already. However, if a person is in that situation, they did that themselves. Science has proven with 100% certainty what causes children. If somebody drops out of school, why should society help a person who is not even willing to do what it takes to help themselves? To me, the time to help somebody is AFTER they have done everything possible to help themselves.
Sure, nobody ever has that forced on them, or has kids they thought they could support only to have the other parent walk out on them, or makes bad decisions because they don’t have the education to do otherwise, or so on.
You really haven’t the slightest idea what anybody is capable of, because you haven’t paid any attention to what situations other people actually end up in.
Look at it this way: you have been afforded more opportunity than you may realize (a LOT of poor people don’t get the support in their home, school or community to take the path you just described) and yet by your own admission you still aren’t rich despite years of hard work and determination. So how can you argue that most people who were given even LESS opportunity ever had a realistic shot at striking it rich?
Yes, children are something you have to do to cause. Your teenage mistakes cost you less than some other people’s teenage mistakes cost them. I’m not sure throwing people into the slums based on choices they made at 16 is an optimal way to organize things.
The idea that because you made it everyone can makes as much sense in this context as it does for Hussein Bolt standing on the Gold Medal podium. “Why don’t you just do what I did and be the fastest man in the world.” We live in a society that restricts opportunity. As I said above - who is going to pay for that road to be fixed? For the most part we are rewarded for being cogs in the machines of the wealthy, and those machines only need so many cogs. There is only so much money out there and the people who have the bulk of it don’t want to give it to you.
Did you read the OECD report that this comic is likely a response to? They are predicting a future where an increasingly wealthy elite lives in luxury while the rest of humanity struggles to get by. Growing, not lessening inequality.
America is one of the least socially mobile countries in the developed world. If you are born poor then you stay poor more in America than in Canada or Scandinavia or Western Europe. I’m not convinced it’s merely because Americans are lazier and are unwilling to help themselves.
But I want you to answer this honestly: Could you have failed? You say risk is rewarded, but clearly risk is not rewarded some of the time because otherwise it isn’t risk. So what about the guy just like you who worked just as hard and it just didn’t work out. If that guy isn’t left to rot, that guy who could have just as easily been you, then, once again, we are not rewarding risk because it isn’t actually a risk. You can’t have it both ways. Either you are rewarded for risk, meaning that success is hugely luck dependent, or you are not.
I was born smart. I did well on the SAT. Sure, that helped. Even if it did not, I would have still at least achieved some measure of success – if I was not cut out to be an engineer, I could have been a carpenter, or a mechanic. The ONLY other real advantage that I had was that I had parents would would let me live at home while I went to school, and they did not abuse me (well, I also had a face and a body that made sure that I did not get in trouble with girls). I am not saying that everybody has the same advantages, but I am saying that type of circumstance is not entirely unusual. Some people grow up with horrible parents and suffer abuse, but those are the exceptions. Most parents want their children to succeed and will do what they can to help them.
My relative success was NOT luck at all. It was determination. I had to take out a ton to student loans that I will be paying for until I retire. But I am grateful for the loans because they allowed me to get where I am today (I do wish that I were legally allowed to refinance, 7% interest these days sucks). I remember getting a total of six hours of sleep in four days during finals. I did get lucky in that I got a job in Colorado, and after lay-offs, I got another job that allowed me to stay in this great state. But even without such luck, I would have landed a job SOMEWHERE.
Now, if I tried to open my own business, THAT would be risky. No guarantees there. However, being your own boss lets you have the opportunity to make a lot more money, IF you you can lead your business to success.
I used to work on Wall St (not as a banker), and I learned that there are a ton of ways to invest that do not create jobs. First, there are all those derivative products that are merely other products repackaged. But even if I invest in a company (via stocks, say), there are many things they can do with that money that don’t create a single job. They can decide to simply give it to their management cadres (as a reward for being so brilliant that they attracted my investment), they can buy their competitors and thereby cause a net loss of jobs (due to “synergies”, real or imagined) coupled with the price rises and quality drops due to loss of competition, they can invest the money in Western China (Eastern Chinese workers demanding too much money these days)… Actually, it would quite unusual for investments to result in jobs, much less American jobs. Not that it never happens, but it’s rare. The old idea that investing = more factories = more good jobs is so pre-Reagan, back when we had a manufacturing sector and unions.
You didn’t remotely address my point that if we “reward risk” then we also, by necessity punish risk.
Let’s imagine a stock market game where the return of each stock is a known probability distribution. All have equal expected returns. One stock simply always gives the mean and other have very high variance. For example:
A) Will always increase 10%
B) Will either increase 20% or 0% with 50/50 chance
C) Will either increase 110% or lose it all with 50/50 chance
How would you play this game? It depends on the reward structure. If your goal is to come in first and you regard second as the first loser then you bet it all on C. If you win the coin flip your risk was rewarded, if you lose your risk was punished. For every person who takes a risk and gets rewarded there is someone else who lost. The winner of this game is someone chosen at random between those who love to bet big. If we let the winner choose the rules for the next round, we end up with a game ruled by compulsive gamblers who think they are smart.
You can’t simultaneously say we reward risk and that you succeeded because of your merits or hard work.
And I strongly oppose this sort of behavor. I am also against “temporal arbitrage” in the form of high-frequency trading.
I never said that ALL investing in companies results in jobs. I do know that if there is NO investing, that there will be no jobs. We live in an imperfect world.
The company that I work for was started by one engineer with $30,000 back in the 80’s – an amount that was less even than the cost of a run-down house in Florida (my parent’s house was $50,000 back then in a very old neighborhood in West Palm Beach). That investment grew to a 5,000-person company, and many of those jobs are in the US. So, investment is no guarantee of jobs, but sometimes it does work out.
Oh, come on and grow up here. You are talking about two different things. The risk that I was talking about earlier was investing or opening up your own business.
I never “bet the farm” on any one business. I succeeded in college because it is NOT random. The system is set up to help students succeed if they put the work in. Colleges are NOT in the business of randomly failing students. The screening process at colleges are designed to weed out those without aptitude. If somebody fails as college, it is usually because they do not have the determination. Most people can get some type of college degree if they are willing to work hard. Community colleges do not cost much and will accept pretty much anybody with at least a GED. There is very little luck or risk in college.
As far as succeeding after that, I had good grades. I was bound to get a job offer some where! I did not have my entire career hanging on getting a particular job at a particular company. That is called “being an employee.” The rewards are smaller, but so are the risks.
If you are willing to work hard and sacrifice, then you can be reasonably guaranteed of “success” which simply means getting a job that can pay the bills. You should be able to get married, crank out a couple of kids, and own a small house in the 'burbs. You should be able to afford a decent used car, keep groceries in the fridge, and keep the lights on. This is the path that I chose. No yacht, no Ferrari, no trips to Europe.
Now, the big risk comes up if I decide to open up my business, or if I decide to put all of my money in the stock market, or invest in some other business, or invest in real estate. In those cases, you are putting your eggs in one (or a few) baskets, and there is NO guarantee that you will succeed. This, however, is the best path to getting rich.
Instead, I went the “employee” route where I did not put my eggs in any one basket. I just hopped in somebody else’s basket and am along for the ride. If my current company goes bankrupt for some reason, I am out of a job. The investors are out everything. Being just an employee, my rewards are relatively modest, but so is my risk.
I’m not sure you have a monopoly on being grown up here. Seriously, do you recognize that if people take risks and succeed then they can also take risks and fail? Does that make sense?
But really, I think everyone here has heard you that you are firmly convinced your success is not entrenched in luck. On Thanksgiving you say, “And I’m thankful for nothing because I earned everything I have.” Have you seen the recent research (confirming what anyone who was paying attention knew anyway) that narcissists do well in job interviews? Maybe finding a job wasn’t so hard for a reason beyond hard work.
We’ve talked a lot about how you worked for your success. It’s just weird to me that you don’t realize that you could have done the exact same things and ended up in a completely different and much worse place. It happens to other people.
And lest you think that I’m just some disappointed sucker who blames his lack of success on luck, I had good grades too. I had a high 90s at one of the world’s most prestigious mathematics programs despite walking out of my exams in under an hour. I also stayed up all night during finals but it was just to play board games because I didn’t need to study. I didn’t go to class for the first half of my last term because I was too busy playing the most recent Final Fantasy. I missed a midterm in one of my classes that was worth 20% of the mark. I got 80% in that class.
None of that makes me one slight bit more deserving of wealth than a person who dropped out of highschool and became a janitor (as if you can even get a job as a janitor without highschool these days). If you want to talk about our economic value I’m a worthless functionary, at least they get floors clean. The people who take care of my kids during the day get paid a fraction of what I do but every single one of them directly allowed six of me to go to work. There is no metric under which they are not more valuable. And even then I only have my job because of people I met. I probably couldn’t even do the janitor’s job because any job that didn’t allow me to make up for my laziness with my intelligence would be a real bust for me. Plus, if I had a worse job and couldn’t afford my brain medication then I would be on a slide into disability support or homelessness instead of being extremely high functioning. So yeah, luck, luck and more luck.
Your “I worked hard and earned it so why can’t others?” sounds as ridiculous to me as if I said, “I’m a genius so why aren’t others?” They are both just ways of saying, “I am what I am and things worked out so I like this system because it works for me.”
By placing oatmeal solutions in a pattern that matches the Tokyo subway districts scientists found that slime mold grew into a very close replica of the Tokyo subway system. That’s how much hard work matters. We are all as replaceable as car parts.
Yet when I wrote…
…your response was
Well, no, actually, not just anybody has the opportunity to get wealthy. r > g, man.
What is there that the people without much income can risk?
I am not saying that I did not get “lucky.” I did not get a horrible disease. I did not become a victim of a horrible crime. My parents never abused me. In that sense, I was “lucky.”
What I am saying is that I chose a safe path that required a lot of hard work. I did not have a silver spoon. Nobody gave me any special hand-outs. I am thankful that I was born with an aptitude that lets me pick up on technical stuff quickly, but that also left me with a harder time with personal relationships, so my gift also comes with a corresponding curse.
Are you saying that I was “lucky” because I was willing to work hard? Was I “lucky” that I did well enough in a community college to get into a university? Was I “lucky” that I chose a marketable major? Was I “lucky” that I had to get a metric ton of student loans to get my MSEE? Fine then, I was “lucky” if that is what you choose to call it.
Yes, that is WHAT I HAVE BEEN TRYING TO SAY. I worked hard to get a reasonable amount of “success.” which, to me, means getting by. I have not TAKEN ANY REAL RISKS. I have not started my own business where if it fails, I am screwed. I have not taken out a ton of loans to invest in real estate. I will not get rich this way, but I also do not have much to loose.
Those people who take risks are the ones to get loans and work the 80-hour weeks to build a company that they HOPE will make it. Those are the ones who retire early with tens of millions. Those are also the people who sometimes see their business fail, taking their life savings with them. I am not one of those people.
Hard work and determination, but without risk, CAN take you down the middle road – where you are not poor, but you are not rich – the middle class.
However, if you are middle-class and you want to be rich, you have to accept that there is also a possibility that you could become poor again (but no rule that you have to stay poor if you happen to wind up there).
A narcissist I am NOT. In fact, quite the opposite. What I am saying is that I am convinced that if people are truly willing to work hard and are not hampered by poor choices earlier (like having kids too young), that they have a shot of making it.
Sometimes. But unless something completely random happens (illness, for example), you can fairly safely predict the course of your life short-term. As an example, if you get a degree in accounting, you should be able to get a job as an accountant. Your grades and how well you interview will determine WHERE you get the job and how much you are paid, but you can be fairly confident that you will get a job as an accountant. This varies a lot by career choice, however. A history major will have a MUCH harder time finding a job than somebody in the medical field. But, that is part of doing your homework before you choose a major. What are the career prospects for your chosen field? In that case, it is NOT random, but just poor planning.
There is such a thing a “luck” in what you are born with. Some people have an aptitude for science or mathematics. Some don’t. It is what you choose to do with the hand that you are dealt that makes the difference. In your example, the janitor. There is a reason that is pays rather poorly – no education is required. Is there a reason that a person chose to be a janitor? When they were young, could they not have gone to a trade school and learned to be a mechanic or a barber? Not glamorous and you won’t get rich, but it is a living. If you are willing to work some overtime, plumbers make quite good money. Are you telling me that it takes a special aptitude with pipes to be a plumber? What about a carpenter? I understand that a phlebotomist can make rather good money with just a little bit of education.
You can’t CHOOSE to be a genius. You CAN choose to work hard.
Yes, we are all replaceable. But some car parts are pretty expensive. Would you rather be a bolt, or an engine control module?
Yes, and I CHOSE to have a ton of student loans because that was the cost of getting my degree. My student loans were an INVESTMENT in my future. I understand that sometimes things happen (medical emergencies and stuff) that force people into debt. However, if you are young and don’t have kids, most of the time debt is a self-inflicted wound in order to have something like a house or a car that you can’t afford (again, not always, but this is usually the case). When was the last time that somebody forced you to take out a loan? Medical reasons are about the only thing that comes to mind… Well, and feeling obligated to help out relatives (siblings or parents). Those are the ones that I truly feel bad for – the ones who have responsibilities that are thrust upon them such as being responsible for someone who is not their child.
Having all those things means you were luckier than a huge portion of Americans. Yet even with all that luck, a high estimation of your own intelligence and years of hard work, you’ve got a healthy dose of debt and little prospect of retiring rich. So if you can’t do it, how can you continue to claim with a straight face that any poor person in America has a decent shot at getting rich if they just work hard enough?
