Wealth

In a post that’s nominally in reaction to an op-ed by Stephen Moore in yesterday’s Wall Street Journal, Pete Abel, writing at The Moderate Voice declaims:

I passionately agree that the most reliable, proven path to economically benefitting the most people is by constructing a society that consistently encourages “the entrepreneur, the risk taker and the cultivator of wealth through human intellect.”

followed by a mild defense of the progressive income tax.

The op-ed, the post, and the ensuing comments betray so many misconceptions about wealth and income that I was moved to write this post.

While inherited wealth and position are factors in being wealthy and having a powerful position, they’re not the only factors. If you don’t believe me, look at the list of America’s wealthiest people. Bill Gates, Warren Buffet, Sheldon Adelson, Sergey Brin, Larry Page, and Kirk Kerkorian aren’t the beneficiaries of inherited wealth and position. You need to get down to #9 on the list before you find somebody who inherited his wealth and, if you look at the entire list, only a minority inherited wealth.

The list of CEO’s of Fortune 500 companies tells the same story: inherited power is a factor but it’s not the most important factor.

Wealth or income are not the consequence of entrepeneurship, risk-taking (they’re the same thing), or cultivating wealth through human intellect or at the very best they are by-products of those things. However our American Calvinistic prejudices may tell us otherwise, wealth is not the consequence of moral excellence or intelligence or God’s favor or hard work.

There are only three ways that one becomes wealthy: luck, force or guile, or one does something that somebody is willing to pay for (the workings of the market). The notion that we reward risk-taking or hard work or anything of the sort is poppycock since it is the result that is being rewarded not the effort or the risk.

I’ve known a number of very wealthy individuals and a number of very powerful individuals over the years. It has not been my experience that they are particularly creative or even particularly bright. They are hard-working but not IMO they do not work a great deal harder than tens of millions of other people in the country who aren’t similarly wealthy or powerful.

My experience has been that most of the wealthy and powerful are canny manipulators of the system who’ve had a bit of luck. It’s not clear to me that either of those qualities are ones that deserve any particular subsidy.

16 comments… add one
  • Americans hate the importance of luck to success. It’s undemocratic. It’s amoral. But there is a certain amount of random chance in every element of life. Americans have to believe that everything is a matter of hard work and right living. I suppose it’s not the dumbest myth, but it becomes problematic when we find ourselves in crisis situations and must make very big decisions, and then follow the myth and ignore the reality.

  • Sometimes you read my mind, Michael.

  • Hope this one gets a lot of links. It deserves to be read.

  • This is a bit of a hijack, but I think a great book could be written on the challenge of having national or cultural mythologies — which any people needs to rise — and the need to govern and live as a nation based on hard realities. How do you keep both? Who within the culture tends the garden of myth and who plumbs the morbid sewers of reality? Athens, republican Rome, France, Britain, America.

  • Brett

    That’s certainly a pessimistic, but probably accurate, view Dave. Don’t say it too loudly, though – odds are you’ll give the columnist Thomas Friedman a heart attack.

    It strikes me that that is something that I haven’t seen on a book list as of late. Something like “1001 Lucky Breaks that Changed the World” or the like, examining where sheer dumb luck swung an outcome drastically.

  • Funny, I don’t see it as pessimistic any more than I’d reckon that getting wet when you walk in the rain was pessimistic—merely the way things are.

  • PD Shaw

    Hasn’t the myth evolved? As I recall the Horatio Alger myth, it was about hard work and determination allowing one to escape from grinding poverty, not as a means to the Fortune 500.

  • PD Shaw

    I blame inflation of expectations.

  • I think that inflation of expectations is part of our problem. It’s natural for kids to aspire to what their parents have in their prime rather than what they had before the kids came along.

    I stopped interviewing youngsters for jobs when they all expected to make what my senior guys did. Experience had shown us that it was a solid year before a new trainee would be able to bill his burden let alone make any money.

    However, the unrealistic expectations aren’t limited to people starting out. I think that physicians have extremely unrealistic notions about their own income expectations. Half of their salaries are being paid out of tax dollars, after all.

    Similarly, civil servants have unrealistic ideas about what they should be getting. White collar positions like theirs outside of government haven’t been seeing explosive growth in compensation.

  • Not to mention public school staff. Whenever I read the quotes in local news stories on teacher union contract negotiations, I don’t know whether to cringe or guffaw.

  • I would place a modest bet that access to the highest levels of education depends more on one’s parental access to high levels of education than access to the highest levels of wealth depends on one’s parental access to high levels of wealth.

  • Are you familiar with “Outliers?” The anecdotes are fascinating, whether it passes the test of rigorous study (unlikely) is a different matter.

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