The billionaire's burden
What do Donald Trump, Mark Zuckerberg, Jeff Bezos, Bill Gates, Elon Musk, and Warren Buffett all have in common? Obviously, they are all very powerful men. The last five are among the world's richest people and Donald Trump is most probably a low-level billionaire. But no, this isn't what is most surprising about them. What they all have in common is that they were always rich, millionaires at their birth. While they may have multiplied their families' fortune by about a factor of one-thousand, they didn't have to.
This is a fact I didn't know and was surprised to learn. Warren Buffett's father was a Congressmen and owner of an equity brokerage. Bill Gates' father was a partner in a major law firm. Elon Musk's father owned a large engineering firm. Bezos' grandfather was a wealthy scientist and landowner. Steve Jobs is perhaps the most famous of the billionaires that came from relatively "nothing" but even his adopted family was at least upper-middle class. The fact is economic mobility is more an ideal that an actuality in most parts of the world.
Is it a coincidence that the top 10 on the "world's richest list" were already rich at birth? As income inequality becomes a major issue in many of the political races going on this year in Europe, this fact becomes often cited. Sunday's French presidential race may end up hinging on income inequality if Le Pen can successfully convince her supporters that immigrants deprive the French of their jobs. When the economy is bad, the xenophobia card is often played.
One of the hottest ongoing debates that will only heat up is the "coming of the machines." In the next decade, some scientists predict that technology will have advanced enough to make many professions obsolete. These scientists theorize that robots will take over many of the labor intensive jobs of today. If income inequality is a major problem now, it will only be exacerbated as those who control the means of production will no longer need human labor and grow increasingly wealthier.
Is it the responsibility of governments to level the playing field? To prohibit income inequality from playing a factor in the next generation's chances at economic mobility? Is it even possible? "The estate tax" does this to some extent but shouldn't parents be able to pass on an inheritance or a house to their children? Finland has a novel approach in trying to level the playing field by taking measures to nearly completely ban private education. This means that nearly all children attend public school, which in turn means that the rich have a vested interest in public schools being great. Perhaps this is why Finnish schools are the best in the world. In this way the barriers to the greatest predictor of economic success, an education, are lifted.
Perhaps the greatest equalizer would be a world in which interest rates are so low that capital is not nearly as valuable as it once was. The Federal Reserve will have announced their rate decision by the time you read this and while I have no idea what it is at this writing, I can predict almost unequivocally that there will be no rate hike. While June is said to be on the table and a rate hike may occur before financial markets take a summer breather, I believe the Fed will not raise the Federal Funds Rate target in June either. A softening of the housing market and a decrease in the inflation rate will almost certainly force the Fed to delay any hikes.
So if global interest rates will not be rising anytime soon, the best way to help to decrease income inequality, to allow the next billionaire to truly be "self-made" is for governments to lend a helping hand to entrepreneurs. While the Small Business Administration of the United States and similar entities in other countries does a good job of this, debt financing is sometimes a greater burden then many new business owners are able to shoulder. Equity financing of entrepreneurial endeavors coupled with mentoring would be the best way for governments to help level the playing field so that any person who wanted to, could truly build a global business without help from their family.
This is a fact I didn't know and was surprised to learn. Warren Buffett's father was a Congressmen and owner of an equity brokerage. Bill Gates' father was a partner in a major law firm. Elon Musk's father owned a large engineering firm. Bezos' grandfather was a wealthy scientist and landowner. Steve Jobs is perhaps the most famous of the billionaires that came from relatively "nothing" but even his adopted family was at least upper-middle class. The fact is economic mobility is more an ideal that an actuality in most parts of the world.
Is it a coincidence that the top 10 on the "world's richest list" were already rich at birth? As income inequality becomes a major issue in many of the political races going on this year in Europe, this fact becomes often cited. Sunday's French presidential race may end up hinging on income inequality if Le Pen can successfully convince her supporters that immigrants deprive the French of their jobs. When the economy is bad, the xenophobia card is often played.
One of the hottest ongoing debates that will only heat up is the "coming of the machines." In the next decade, some scientists predict that technology will have advanced enough to make many professions obsolete. These scientists theorize that robots will take over many of the labor intensive jobs of today. If income inequality is a major problem now, it will only be exacerbated as those who control the means of production will no longer need human labor and grow increasingly wealthier.
Is it the responsibility of governments to level the playing field? To prohibit income inequality from playing a factor in the next generation's chances at economic mobility? Is it even possible? "The estate tax" does this to some extent but shouldn't parents be able to pass on an inheritance or a house to their children? Finland has a novel approach in trying to level the playing field by taking measures to nearly completely ban private education. This means that nearly all children attend public school, which in turn means that the rich have a vested interest in public schools being great. Perhaps this is why Finnish schools are the best in the world. In this way the barriers to the greatest predictor of economic success, an education, are lifted.
Perhaps the greatest equalizer would be a world in which interest rates are so low that capital is not nearly as valuable as it once was. The Federal Reserve will have announced their rate decision by the time you read this and while I have no idea what it is at this writing, I can predict almost unequivocally that there will be no rate hike. While June is said to be on the table and a rate hike may occur before financial markets take a summer breather, I believe the Fed will not raise the Federal Funds Rate target in June either. A softening of the housing market and a decrease in the inflation rate will almost certainly force the Fed to delay any hikes.
So if global interest rates will not be rising anytime soon, the best way to help to decrease income inequality, to allow the next billionaire to truly be "self-made" is for governments to lend a helping hand to entrepreneurs. While the Small Business Administration of the United States and similar entities in other countries does a good job of this, debt financing is sometimes a greater burden then many new business owners are able to shoulder. Equity financing of entrepreneurial endeavors coupled with mentoring would be the best way for governments to help level the playing field so that any person who wanted to, could truly build a global business without help from their family.
Last Update: May 04, 2017 02:02