The Creation of Wealth

This one is primarily aimed at the prime demographic, those of you who are between the ages of 18 and 32. The reason that you are called the prime demographic is everyone wants you. In the earlier years this age group establishes brand loyalties that will last the rest of their lives. In the later years you will probably become part of a highly desirable “household formation unit” and you will buy a lot of stuff, like baby carriages, minivans, and three bedroom houses in places like Poolesville. The reason I want you to think about the formation of wealth is I want someone to mail me my social security checks when I turn 62 and continue to mail them to me for the rest of my life.

There are lots of good people in this country doing lots of good things. In fact, I believe almost everyone would consider themselves good people doing good things with their life, except for perhaps drug dealers, investment bankers, and other such criminals. (Just a joke) In the movie American Gangster, the protagonist portrayed by Denzel Washington, considered himself an ethical businessman providing high quality heroin at a reasonable price to a customer base who would buy it from someone anyway.

I am an engineer working for the U.S. Navy. When I watch a U.S. destroyer take out a group of Somalia pirates, I like to think I am a good person trying to make the world a safer place. But I don’t create any wealth. When my wife worked as a medical social worker at a hospital, she was helping people who were sick and sometimes had medical bills that were a real problem. She is a good person doing good things, but she doesn’t create any wealth. Preachers, doctors, teachers, missionaries, policemen, and even investment bankers can all be good people doing good things but none of them create any wealth. Service industries service wealth. The government can do all sorts of socially beneficial things because they can tax people and institutions that create wealth. Think about it. Where are the great teaching hospitals, like Johns Hopkins located, Bangladesh? No, great universities, research centers, and hospitals are found in counties that are very good at creating a great surplus of wealth. What are the implications of this for the future of our country, or for the future of China?

There are only a finite number of ways wealth can be created. A few seeds can be placed in the ground and then many seeds can be harvested, agriculture. Something that is worthless sitting in the ground can be brought to the surface and sold for a great profit, mining. Finally something of little value, say aluminum, can be turned into something of great value, such as a Boeing 767, manufacturing. Don’t think of these categories as limited. They are only as limited as your imagination, but at the end of the day, in order to create wealth, someone must bring something of greater value than the sum of its constituent parts into the physical world. As a nation, we have recently learned that the manipulation of money is not the same thing as the creation of wealth. Thinking that manipulating and insuring debt can make us all millionaires is a variation on the Amway fallacy. Back in the 70s and 80s some folks I know became enamored with Amway. They built giant pyramids of wealth based on the work of others in their mind’s eye, but at the end of the day they discovered that for the whole thing to work, someone had to go door to door and sell boxes of soap. They all went out and found real jobs.

So, I hope some young person reading this blog entry goes out into the material world and manufactures a new cancer drug, or a new type of power generator, or miniature machines that clean my toilet while I sleep, or find a plant in the Amazon rain forest that can be cultivated for food, or something I can not even imagine. Then I hope they share this wealth with the world and build great teaching hospitals, universities, fund missions all over the world, and even send me my social security check.

Proverbs 10

[15] The rich man's wealth is his strong city: the destruction of the poor is their poverty.

Proverbs 13

[11] Wealth gotten by vanity shall be diminished: but he that gathereth by labour shall increase.

[22] A good man leaveth an inheritance to his children's children: and the wealth of the sinner is laid up for the just.

Ecclesiastes 5

[19] Every man also to whom God hath given riches and wealth, and hath given him power to eat thereof, and to take his portion, and to rejoice in his labour; this is the gift of God.