“So,” my friend A says to my friend B, “if you don’t think there should be any billionaires, what about millionaires? Should there be any millionaires?”
“Not sure,” says B.
“What about thousandaires?”
“Of course.”
“So, if there are already many thousandaires, and many multi-thousandaires, would it be okay if there was just one or a few that achieved a million?”
“Sure, I would grant that,” says B.
“So, if there are already many millionaires, would it be okay if there was just one or maybe a few billionaires? Where do you draw the line?”
This conversation happened among my buddies. Yesterday, in fact.
B has been griping about how unfair it is that some people are so rich and others so poor. “There should be no billionaires,” he’d said. “We should tax away their money and distribute it widely. Use it to give everyone a Universal Basic Income (another theme he’s been pushing).”
Hold on, says my astute buddy C. Are you suggesting this is a zero-sum game? If someone is richer, someone else has to be poorer?
(A zero sum game is a mathematical concept in which the total amount is fixed; an increase in one share therefore requires a decrease in the other because they need to always balance each other out. The pluses and minuses must always add up to Zero.)
“You know my answer to that,” I chimed in, “Let’s see what others say.”
“No,” he said, “let’s hear yours.”
So I expounded on what every economist knows but virtually no one else seems to understand; that money is not a zero-sum game. Billionaires mainly become billionaires not by taking a larger swath of the pie than they deserve (zero-sum game), but by growing the pie bigger.”
The idea that money is a zero-sum game is a fallacy that is perpetuated by those who don’t understand it, those who are perpetual complainers about money, and those who aren’t interested in taking the initiative to help grow the pie themselves.
If money were a zero-sum game, we would still be hunters and gatherers, living in caves. Innovativeness has taken us beyond that, one step at a time, but with ever increasing velocity. The pie is hundreds of times bigger now than it was when we were in caves. The pie grew by 27 times between 1900 and 2000 alone, and, since the 18th century, by 200 times. (A nine-inch diameter pie in 1700 would now be more than ten feet in diameter, according to Steven Pinker.)
How does the pie grow? By people being innovative and resourceful: with the earth’s bounty, with scientific discoveries and inventions, with their own creative impulses, and by learning how to make money work on their behalf.
It’s in everyone’s interest to grow the pie (albeit with some limits on our abuse of the earth’s environment). That is why governments give tax breaks to those who use their innovative resources to grow the economy. They want (perhaps need) to incentivize people to grow the economy, especially when they provide food, housing, shelter, energy, etc., to make people’s lives better.
As long as they are growing the pie, they deserve those breaks.
When they stop growing the pie, and instead start slicing away at their neighbour’s wedge, they don’t. And I’m sure there’s some of that happening, too. I’m certainly not defending that practice.
But even those with the smallest wedges still have a lot more pie than they would have, had others not grown the pie on their behalf.
Why don’t more people take advantage of the opportunity to be pie growers (and save on taxes, to boot)?
Because they choose not to. They choose to avoid learning about money and how it works, and how to use it to grow the pie.
Which leaves them little reason to complain—unless, of course, they are incapable of learning (of which there may be a few).
“Money is a game; know the rules and win,” is the first line of the book I wrote on this topic.
I was highly offended when I first heard that line used. I was still ignorant at the time. But it was a step in my own journey to understand how to grow the pie.
And I finally had to admit that it’s true. That’s why I used it as the first line of my book. (See Money Habits for Success, on the tab on the right).
You can win or lose at the game. But if you don’t understand the rules, you’ll almost certainly lose.
A better option: Learn the rules, and join them.
At least, that’s how I see it . . .
“Whoever makes two ears of corn, or two blades of grass to grow where only one grew before, deserves better of humanity, and does more essential service to his country than the whole race of politicians put together.” Jonathan Swift, Gulliver’s Travels (1726), quoted by Steven Pinker, Enlightenment Now, p.75.
