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All too often I've heard someone say "What do you
need money for, you can't take it with you when you die." To which, I
rebuttal; that is the point. You leave your wealth here when you die.
"There
are really only two good reasons for having a significant amount of money: To
maintain a high standard of living and to ensure your personal freedom."
Writes Doug Casey who goes on to state that other reasons such as to leave a
legacy or perpetuate your genes are psychological foibles in The Point of Being Wealthy. While some degree of personal
freedom is the prerequisite for all other advancement, I'd argue that it is
only the middle tier in the individual economic hierarchy and that Casey and
others are missing the larger picture.
In 1798 Thomas
Malthus theorized that life in its natural environment will reproduce
exponentially until it over consumes its resources (food) causing starvation
to reduce populations below a sustainable consumption level. This pattern can
be observed in the growth of everything from bacteria to deer populations;
however it has yet to be witnessed on a grand scale in human population.
While the Malthusian concept has reemerged into theories of peak oil, peak
resources, and even the environmentalist movement, others have argued that
the reason why the human population has continued to increase exponentially
over the last 5000 years is its species' unique practice of economic and
technological advancement. In other words, rather than simply consuming,
reproducing, and dying as other creatures in nature do; humans develop, save,
and pass on knowledge and tools to support their subsequent generations.
Or at least
they used to save, develop and pass on better tools.
It's worth
noting that both forces of Malthusian starvation and economic advancement are
real and powerful forces. In order for the population to grow, wealth must
not be just maintained it must be increased. When growth slows, people starve
and die. When growth increases, people prosper. Thus the true purpose of
wealth is to create capital which produces more than it consumes and
eventually improves the lives of not only yourself but of all those that
follow you.
Many people of
Western culture including many wealthy people and outspoken billionaires
believe that each generation should create their own wealth from scratch.
However, it is only the act of inheritance that separates human prosperity
from Malthusian catastrophe. Without inheritance of both capital and
knowledge, a much smaller human population would be still living in caves.
The taxation, confiscation and elimination of inheritance threatens
to undermine the progress of human kind.
It is natural
to desire a high standard of living and enjoy the comforts that wealth can
buy. However, you can only consume so much champagne and caviar. You can own
many cars and many homes but only sleep in one bed and drive one car at a
time. The overconsumption of resources beyond productive means threatens to
squander wealth and opportunity. It is unfortunate for all of human kind that
many of the world's wealthiest people including Buffett and Gates have chosen
to squander their accumulated productive wealth not just on themselves but on
futile social programs which arguably do more harm than good. If you teach
people to fish they can use the knowledge to sustain many generations of
life. If on the other hand, you give free fish to people so that they become
hopelessly dependent, as soon as you run out of wealth to squander, they will
starve and die. For this reason, most charities are immoral. But the choice
to voluntarily give charity is still better than having one's wealth coercively
stolen for someone else's agenda. Interestingly, the shareholders of
Berkshire Hathaway and Microsoft have also seen no gains since Buffett and
Gates abandoned their productive posts to squander what they took lifetimes
to accumulate.
For successful
capitalists with more creativity than Buffett and Gates, I'd like to offer
the achievements of Thomas Edison as inspiration. Not only did Edison create
wealth for himself, as a founder of General Electric one of the largest
companies in existence today, he also can be credited for literally
enlightening the world. The wealth that he created through the development of
the light bulb not only increased the standard of living for his children, it
raised the yardstick of economic advancement for virtually everyone on earth.
Make no
mistake in confusing wealth with money. Wealth is capital with the means to
produce, whereas money is a means to exchange capital with other people. As
such, in the long run the majority one's savings should be allocated to
capital reproduction and growth rather than a nonproductive or depreciating
means of exchange such as fiat currency. In an economic environment such as
the current one, it may be necessary to hold precious metals as a store of
value in order to preserve wealth, however income
producing capital investments are necessary for growth over the long run.
Whatever your
field is, you can add value. Acquire a rental property and provide someone
with a home. Start a small business and provide one other person with a job.
Create self replicating machines. Decode proteins
and cure cancer. Create sustainable controlled cold fusion. Not only will you
create thousands of jobs, if you are successful you'll bring wealth and a
higher standard of living to every human being.
If only today's
leading capitalists had the same virtues, the economy and world would be much
better off. Today's knowledge and technological advancements are of such
complexity that significant amounts of labor, capital must be levered in
research and development. Capitalists with the means to create life changing
wealth, not only have the potential to make the world better; I argue that
they have the moral responsibility to do so. Elon
Musk, the founder of Paypal who parlayed his wealth
to become the founder of Spacex may be one such
potential capitalist. Over the coming decades, Spacex
has the potential to make space travel affordable for the common person and
facilitate access to the abundance of resources in space.
Chris Mack
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