complain about rich people being rich, I will blow a gasket.

The Forbes recently released their list of richest people in the world (LINK) and naturally, the fact that their average wealth increased 13% and that many NEW Billionaires were added to the list has got many an average person in an uproar.

So let me start off this rambling entry with a little background info. I am an economist, I realize and have been educated for many years to realize that there is a need for motivation in order to get someone to do anything. My parents provided me with small gifts that I got to unwrap every time I successfully went to bathroom in the toilet; I was “potty-trained” in a week.

Tell me, would you go to work if you didn’t get paid? Would you go to work and work as hard as you do if you received a pay-cut? No, of course you wouldn’t…money has become the number 1 motivator in our modern economy. So if you’ve agreed with everything I stated above, then why on earth why might you stand there and complain that people are making millions or even BILLIONS of dollars?! What if YOU were the one making those millions?!

I will ONCE AGAIN give you an example that I gave many moons ago on this blog of the rat trap inventor in 14th, 15th, or 16th century Europe. So keep in mind from the previous post that that time was not exactly the time of enlightenment and people were dropping from the black plague like flies in the presence of water-filled plastic bags. Times were tough. And certainly were very tough in this one town where crops were being decimated by rats! Families hardly had any of their crops left to put food on the dinner table, much less sale any at market to make a profit.

So one man saw a demand for help and came up with the idea of a rat trap.

This man produced these goods in-house at first selling only a few at a time, but as fast as he could make them. Farmers were more than willing to pay for them because they would allow their families to eat and even make a profit from their surpluses at market. Then the trap-maker began to outsource his work and called on the local blacksmiths and store owners to produce and sell his goods. This allowed the trap-maker to accumulate incredible wealth. He bought a small hill in the area and built a large house at the peak. He wore nice clothes and had a gorgeous horse. He was the millionaire of his day.

So are the people of the town WORSE OFF because of his wealth? Because he now has money, do you think the people of the town are living less high-on-the-hog? Maybe they are IN COMPARISON to the trap-maker, but think back to their lives 5-10 years ago before said trap-maker. They were living in mud, eating any creature who was unfortunate enough to be too slow to outrun their knives just to make ends meet and seeing their crops eaten literally overnight by rodents.

NOW, their crops are healthy, they eat well, their families are living longer because the rats are no longer spreading disease, the blacksmith has more business than he can handle, the stores are all getting profit beyond their wildest expectations (compared to 5-10 years ago), the tailors in town are getting business not only from the wealthy trap-maker and his family, but also others in town – the blacksmith and store owners as well as the prominent farmers have all seen their wealth increase. People without jobs are now farmhands because the crop yields have increased so much that the farmers’ families cannot harvest them all without help! The people shopping at the market are now provided with healthier food and larger quantities at better prices since supply has increased (simple supply and demand). The farmers will need better transportation to get such an increase in food to the markets, so the horse breeders and wagon and wheel makers will have more work, etc. etc. etc. etc. etc. etc. Shall I keep going?

All that to say, the ENTIRE town, or rather the ENTIRE AREA, is better off thanks to this one man who saw the need for a rat trap, developed a design, took the risk of producing it, marketing it, selling it, then went on to manage the use of his design to get the blacksmith to properly produce it, the stores to sell it and then customers relations and guarantees, and work 90 hours a week to meet demand etc. etc. etc. So do you think the people of the town are sitting in their refurbished cabins, in their new(er) clothes, listening to the fire pop thanks to the wood they can now afford, eating a warm dinner that would have previously been reserved for the kings they could only imagine – and do you think they’re sitting there COMPLAINING about how much the trap-maker has made?!?!?!?!

I’d like to link you to this article HERE. Whenever we think of wealth, many people think of Bill Gates – the richest man in the world for many years and the co-founder of Microsoft.

I quote the article:

“The research predicts that in 2007 Microsoft-related activities are responsible for 14.7 million jobs from an IT industry total of 35.2 million people — 42 percent of total IT employment globally in 2007 — and more than $514 billion* in tax revenue worldwide.

“The research found that for every $1 that Microsoft earns in 2007, companies working with Microsoft will earn $7.79. In addition, according to the research findings, in 2007 more than 640,000 vendors in the Microsoft ecosystem will make more than $425 billion in revenues, and invest $100 billion in research development, marketing, sales and support in local economies. … Microsoft’s business model creates average revenues of more than $7 for other companies for every $1 Microsoft takes in. Countries such as China, India and Russia see earnings in excess of $16 to $1.”

So would you still like to sit there and complain that Bill Gates is rich? Bill Gates did not inherit his billions, he worked hard for them. They were his motivation to work long hours for DECADES to get to where he is. He took on risk unimaginable to most of us and I don’t think even he would disagree that a degree of luck was certainly on his side.

But think of all the jobs that Microsoft alone has created…all the wealth for OTHER people that Microsoft has created…and how our lives in general have improved thanks to it.

For another example, I was reading a historical list of wealthy people and on that list was Frederick Weyerhaeuser with a wealth of $76.5 billion. I, personally, am THANKFUL for his wealth! My father worked for the company Weyerhaeuser for many years and as well as thousands of other people. F. Weyerhaeuser’s ability and skill to grow his company into one of the largest timber sellers in the world created wealth and opportunity for my family and hundreds of thousands of other people over time – and continuing into the future!

No one (other than royals, possibly) have created a personal wealth in the millions or billions without somehow helping other people. Even Cornelius Vanderbilt, known for his ruthless business practices and running other people out of business, still provided jobs for thousands of people and created wealth outside of his own bank account. He may have run competitors out of business, but did so by providing consumers with better prices and reasons to prefer him over his competitors. I will not pretend to know all of Cornelius Vanderbilt’s business dealings and whether they were all “kosher” – because I’m quite sure they were not – but you would have a hard time denying the effect of his wealth creation on the ECONOMY AT LARGE.

So I’m sick of hearing people say “tax the rich,” “the rich are getting richer and poor are getting poorer,” “the rich have too much while we have nothing!!!” But the truth is, you tax the rich too much and there will be a disincentive to work (See Laffer Curve) and we need the rich to work and continue to grow businesses because not only do they create wealth for themselves, but also for others! And stop saying “the rich are getting rich and the poor are getting poorer, because the truth is, the larger pictures shows that the rich are getting richer and the poor are getting richer, too! I DO, however, hate that we have so many opportunities for the rich to “write-off” basically all of their taxes – even Warren Buffet has said this unfair (LINK). AND I AGREE, this needs to change. But the fact is that we all have to pull our own and realize that the world doesn’t revolve around us. We may be a bit jealous of the millionaires and billionaires flying on their private jets and living in their mansions on the beach. But the truth is, they fly in those private jets to business meetings and the amount of time they actually enjoy spending in those “mansions” would be for little more than sleeping. You don’t make millions working 40 hours a week, I can promise you that. And being able to retire with millions at the end of their career is something for them to look forward to and even more incentive for them to work hard in the present.

I think I’ve made my point…..again…I’m just rambling this off because I don’t know where else to put it. haha.

So next time you say something negative about the rich, think about why you’re saying it? Is it because you truly think it is unfair, or are you just mad that you’re not one of them? Because the truth is, we all have the potential and opportunity to – not only create personal wealth, but MUCH more importantly the ability to help other people and create jobs for them as well.

- Ross

(SIDE NOTE – I was talking the other day with some people about celebrities and someone mentioned that they might not deserve all the money that they get. I disagree with that, because being a celebrity is essentially the end of your life as you know it. You now become an idol and something that is constantly watched and must be guarded by large men just FOR YOUR SAFETY. I think making millions for a celebrity is the trade-off, a deserved one, for the fact that they will no longer have a life. They will no longer be visiting regular restaurants or going shopping at the store without cameras following them. Plus, acting isn’t near as easy as you might think, otherwise there would be a lot more successful actors, no?

But most of my experience, belief, and education on wealth creation comes from the business side of things, which requires a LOT of work and a LOT of time and often a LOT of risk.)