No single man on earth has the strength or intelligence to create an economic contribution that justifies this sort of wealth. The super rich achieve their wealth off the backs others.
Here's a different point of view: Carlos Slim has so far been relatively unable to compete in the US. Some people argue that he does well in countries like Mexico because in those places, he can run a monopoly (like his telecom company) or oligopoly with price fixing power, generating large margin at the expense of his customers (who don't have much of a choice in the matter). Thus, his business has plenty of reserves for things like 3 day workweeks - at the expense of the population, in exactly the zero sum game you describe.
But when you look at modern American billionaires like Steve Jobs or Bill Gates, they made their fortune by working intensely hard and smart in very competitive markets, and inventing or making available to the mass-market products that created billions of dollars in value. It can definitely be argued that a single individual can create billions of dollars of new wealth, and not on the "back" of others - there's a lot of very wealthy early Microsoft and Apple employees out there, and billions of dollars of value created for its customers over the last couple decades.
A clearer example is Google: it has an effective monopoly on search, but it's not because it has lobbied Washington to stop people from using other search results, it's because it was the best search engine, spread like wildfire, and kept the market ever since. People use Google not because there's no other (legal) search provider available, but because it's still the best way to find things on the internet.
Because of this instinctive understanding of the value created, it's much rarer to see Brin and Page criticized for their wealth.
>But when you look at modern American billionaires like Steve Jobs or Bill Gates, they made their fortune by working intensely hard and smart in very competitive markets, and inventing or making available to the mass-market products that created billions of dollars in value. It can definitely be argued that a single individual can create billions of dollars of new wealth, and not on the "back" of others - there's a lot of very wealthy early Microsoft and Apple employees out there, and billions of dollars of value created for its customers over the last couple decades.
I disagree. Those innovative mass market products may be created under the leadership of one hard working man, but it is fundamentally impossible for a complex product like the iphone to be entirely the work of one man. The iphone, the boeing 747, and many other complex projects can only be built with the expertise and labor of multitudes of people. Steve Jobs and Bill Gates cannot build such wealth without exploiting the labor of their corporate empires.
Face it, they're freeloading at this point.
The wealthy who invest their money are, in fact, assuming some degree of risk that they can afford to absorb, while their investees have time and talent, but would be completely ruined by a failed financial bet of similar size.
By comparison, the investor who invests capital has no guarantee of compensation for his input; he eats the risk inherent in the venture, in exchange for a return on his investment if it succeeds. If it fails, he is out of his input and has not received any compensation for it. That is a level of risk that many people can't take.
Lenders, likewise, assume risk of default. It is not the act of having money which is rewarded - simply sitting on a large pile of cash doesn't magically spawn more money. When money is lent to other people, the lender assumes the risk for the loss of that money - the beneficiary of the loan may not pay that money back. Interest charged is payment for assumption of that risk.
We've not yet even touched on the fundamental aspect of the capital economy - mutually-beneficial exchange. Those employees that work for the startup that ends up making the investor a ton of money? They've gotten jobs and compensation that they wouldn't have otherwise. Nobody willingly and rationally enters into a transaction that doesn't provide benefit to them over the available alternatives; if it was not better than the alternative to take investment or a loan, then nobody would do it.
It grows compounding at 7% year-over-year because it's invested in companies and people that are growing their own businesses because of it. Money doesn't just grow on its own; capital accounts don't accumulate by virtue of their own gravitational pull. The degree of risk doesn't really change the fact that that capital is risked as investment hopefully helping other people succeed, rather than just sitting in a Scrooge McDuck swimming vault somewhere. You can still lose it, and it has to be somewhere that someone else is using it to produce wealth in order for your own accounts to grow.
This is my entire argument. Lets not consider risk for a moment... If someone else is producing wealth in order for your accounts to grow and you as the owner of the accounts are the beneficiary of this growth then that means you are exploiting someone else's work. This is NOT fair.
Now lets take a look at the equation with your statement involving risk.
>"Low risk" is not "no risk". I mean, heck, look at 2008. People invested in index funds - frequently considered one of the lowest-risk, most stable stock vehicles - lost 50%+ of their invested value in a hurry.
Low risk is not no risk but does low risk justify extravagant returns? No.
If I have 20 million dollars in a stable fund that grows 10% a year, that means I get 2 million a year sitting on my ass. The majority of people in the US will not never even touch 2 million in their lifetime. You want to justify that kind of compensation by saying that index funds still involve certain risk?
Let's be real, bubbles pop and industries heal, the economy goes up in aggregate, and many rich people stay rich or get richer in extreme and extravagant ways that are grossly un-proportional to the amount of work they output.
You are the partial beneficiary; the person who has used your money has also benefited from it. They have accomplished business goals and produced goods and services that they could not have without capital, and the price of that capital (a percentage return on the funding raised) is worth access to that capital without access to its associated risk. This is a fundamental tenet of capitalism - exchanges and transactions are only entered into when they are mutually beneficial. Somehow, the whole is greater than the sum of its parts!
> If I have 20 million dollars in a stable fund that grows 10% a year, that means I get 2 million a year sitting on my ass. The majority of people in the US will not never even touch 2 million in their lifetime. You want to justify that kind of compensation by saying that index funds still involve certain risk?
If you have 20 million in a stable fund, that's 20 million dollars of capital that is being used to promote other businesses and to produce goods and capital that otherwise may not be produced, and it's 20 million dollars when you can lose overnight. Again, the value contributed is not the labor, but capital and assumption of risk has a very real impact and is an absolutely necessary part of the equation. The capital holder is enriching both himself and the person in whom he is invested. The capital holder is happy because his risk yields dividends, and the capital consumer is happy because his labor yields dividends, and you're right, the capitalist didn't put in the labor, but the laborer didn't have to put in the capital. Neither could do it nearly as effectively without the other. The relationship is symbiotic, not parasitic.
> bubbles pop and industries heal, the economy goes up in aggregate, and many rich people stay rich or get richer in extreme and extravagant ways that are grossly un-proportional to the amount of work they output.
Bubbles pop (with investors in risky ventures/funds eating the brunt of that), industries heal (certainly not overnight, and during those recoveries, it is again the capital-holders who bear the financial burden), the economy does go up in aggregate (because it's not zero-sum, which is why laborers benefit even if the rich get richer), but are you suggesting that earnings should be directly proportional to the labor invested? I'm not aware of any economists who place any stock in the labor theory of value. The empirical evidence directly contradicts it.
I'm not talking about venture capitalists risking and betting money on speculative private businesses. I'm talking about what a typical rich person does to preserve and grow wealth. They put it in stable index funds and live off the interest for the rest of their lives while contributing almost nothing to economy.
There is no beneficiary in the stock market. The money goes to another trader while the stock price reflects either speculation or corporate output. But that's besides the point, in a low risk index fund, a 20 million investment yields 2 million with no work while your average worker gets 50k annually for working 5 days a week. There is no fairness in this no matter how you justify it.
>If you have 20 million in a stable fund, that's 20 million dollars of capital that is being used to promote other businesses and to produce goods and capital that otherwise may not be produced, and it's 20 million dollars when you can lose overnight. Again, the value contributed is not the labor, but capital and assumption of risk has a very real impact and is an absolutely necessary part of the equation. The capital holder is enriching both himself and the person in whom he is invested. The capital holder is happy because his risk yields dividends, and the capital consumer is happy because his labor yields dividends, and you're right, the capitalist didn't put in the labor, but the laborer didn't have to put in the capital. Neither could do it nearly as effectively without the other. The relationship is symbiotic, not parasitic.
Your view of risk is very incorrect. No stable index fund goes to zero overnight. Worst case scenario you lose 90% of 20 mill overnight and you're still 2 million dollars rich. Even then in every case, your investment fund will eventually go back to and past 20 million over time. This has always been the case, historically, for the American Economy.
Ever hear of a 401k? Even though those are essentially stock funds, people put money in them for safety, not risk, these are the same funds rich people throw their money into.
Also your symbiotic view of laborer and capitalist is flawed. The laborer creates a 2 million dollar product and only sees a 100k annual salary, while the capitalist put in an investment of 100k annually and reaps the benefit of the 2 million dollars. If the laborer's labor is worth 100k then we're talking about different returns by a magnitude of well over 100% for equal investments. That's not symbiotic, it's parasitic because the returns are not not distributed fairly. Rich people justify this with "risk" but the risk is minimal; remember I'm not talking about the startup game, I'm talking about rich people and their low risk strategy to grow their money.
>"are you suggesting that earnings should be directly proportional to the labor invested? I'm not aware of any economists who place any stock in the labor theory of value. The empirical evidence directly contradicts it."
You're telling me it's ludicrous to get paid fairly for labor contributed and that empirical evidence supports this? How about this? The laborer creates a 2 million dollar product, the laborer gets 1 million, and the capitalist gets the other million? That's way more fair than what we see in the real world. If there's an economist who thinks this is unfair I have to disagree with him/her.
Have you heard of the term wealth inequality? Did you know it's especially bad in the united states, and that it's growing? These are real problems and there is genuine discontent among the masses. People aren't stupid, if things were truly fair no one would be talking about it.
I am rewarded (as you put it) for having say $100,000 in my bank. I saved it, maybe did some projects, etc. That money is mine, are you honestly going to say that I don't deserve the benefit that money brings me? Sure, it's only $5000/year in interest, but the argument doesn't break down if the amount has more zeroes in it.
Edit: Not only does a lot of the discussion revolving around rich people claim illegality, it is implicitly assumed. Tried and convicted in public opinion simply by virtue of having a lot of money.
The argument does begin to break down once the amount has more zeros in it. If you had 1,000,000,000,000 in the bank I would say there's no way you got that on your own. You had to work with thousands of other people in order to get that kind of money. Therefore it becomes debatable whether or not you deserve that capital.
Probably, yeah. In my example, the number might not be a thousand, but more like 1-2. How is it different?
Point is, you'll have to explicitly state the difference between the two. At some point there is a disconnect. And that leap needs to be addressed otherwise people will simply go on implicitly claiming that rich people don't deserve what they have, or didn't acquire it legally, etc.
Did he? Or did he simply "lead" the people who did the actual work?
"are you honestly going to say that I don't deserve the benefit that money brings me"
Are you honestly going to say that you deserve the benefits you get for simply having that money more than someone who's actually doing work?
Leading is a skill, and thus valuable, and so someone probably paid him to do the work of leading. Or are you going to just argue that "only making something of use is work". If that's the case, you obviously have a twisted world-view, and debating it is pointless with you.
>"Are you honestly going to say that you deserve the benefits you get for simply having that money more than someone who's actually doing work?"
Money represents the value I created to someone in exchange for it. So yeah.
I agree. Leading is a skill. But leading is not a skill that justifies an astronomical portion of the pie. I would say between coding and leading, coding is a far more specialized skill that is harder to learn and find. In short, it is far easier to tell people what to do then it is to do it. This statement grossly simplifies what leadership and coding is, but the basic premise still stands.
Also you should note that the skills needed to gain a leadership position versus actual leadership skills are not congruent. There are many people in leadership positions who are bad leaders yet get unfairly high compensation simply due to their perceived rank.
This illustrates another problem in our society. We have a hard time identifying leaders. Leadership is perceived to be a commodity skill but I would argue that many people can do it. How do you know the janitor or garbage man if given the right opportunity can't be a great leader for a fraction of the price of current average CEO salaries? We don't know. But if it were true, then that means leadership is not a commodity skill and therefore not justified to be associated the extravagant compensation that is often paid out to people who possess such said "skills."
No you don't. You may have earned the principal. But the growth was not earned by you. The growth is the direct result of employees within the company, if that's not you, then you don't deserve it.
This is true, but leadership skills are worthless if the people you're leading don't have the skills to do the work in the first place.
And again, you're going to claim that just having money means you deserver more of the reward than someone who actually put the work in to create something?
You're being obtuse intentionally. You have no intention of discussion, you just want to find a way to blame people getting benefit from money without some sort of labor (notably, your personal definition of labor). That is a twisted world-view, and one I have no intention of remedying in your head. Good day.
That's a mistake on my part. My comment was directed more towards people like the author of the OP who are rich and do no work. That being said rich people cannot contribute anything more to the economy other than what they can produce with their own physical and mental labor. This is a fundamental limit, that is set by the laws of the physical world. Yet, paradoxically, the wealth of the super rich skyrockets past this limit.
This is because the capital they deploy into the world isn't generated by them. It's generated by the labor of the corporations they own. A corporation is composed of employees and this is the true origin of capital. The money rich people deploy and churn into the economy is capital "owned" by rich people the same way landlords "own", "redeploy" and charge rent on land; If you disagree, note that in the english language land and corporations are both referred to as capital.
Societies closer to communism tend to generate a large amount of kafkaesque government workers, whose goal is to complicate any process they control in order to ensure maximum benefits at minimal contribution to society.
Societies closer to socialism with healthy social nets and welfare systems tend to attract a large influx of constituents, whose plan is to game the system for maximum payout from the government, and countries with liberal immigration policies like Germany or France already have massive public issues with it to the point of political pendulum swinging to ultra-right parties.
It seems like any society has to make a rational choice about which freeloaders it's okay with, and at least try to align the incentives right. In the US we're okay with rich not working, but we gouge them via property tax, sales tax, taxes on investment income and estate taxes. It's not like having Paris Hilton working a full-time job would energize the US economy.
Doesn't matter how much a rich person works. Their "work" is in no way equivalent in value to their extravagant wealth. That being said, I see no better alternative to capitalism. Wealth inequality is an unfortunate side effect that is just a fact of life: it's unfair. What I don't like is when people try to justify their wealth as if they deserved it.