moneyFYI
Financial Freedom Is Merely Organized Common Sense
Looking At Bernie Sanders As An Honest Man
I have been watching Bernie Sanders for about a decade. I am convinced he is an honest man. Honest however, does not preclude naive or self-interested. The presidency is an executive function first. Are those the skills required of an executive? Hardly!
I had a psychologist friend who insisted when someone shows you who they are, believe them.
What has Bernie shown us?
Honest
He believes now and has always believed the system of economics and possibly politics is unfair. It concentrates wealth and power in the hands of the few. He believes wealth would be better distributed more equally. Honourable perhaps.
I am pretty sure, the power will have to remain concentrated. Just in the hands of politicians and bureaucrats rather than those with money. I would be interested in seeing how he plans to smooth the power distribution. No doubt he will argue the government is the people. Sad, really. Which leads us to naive.
Naive
There is no evidence in history that finds socialism working. Why? Because there is no wealth to distribute fairly until someone creates it. Socialism can only appear to work while there is wealth to distribute. To believe the wealth will continue after the incentive to create it disappears is naive. People respond to interests and incentives. Socialism offers neither.
Socialism is inefficient and Bernie must overlook that to be honest. No government is good at creating wealth. People create wealth and they do it for their own reasons. To be wealthy certain skills are necessary. Most people don’t have the risk tolerence, the energy, or the persistence to be extremely wealthy. By definition, only a few people can be super wealthy. They are not all “nice” people. That allows us to denigrate them.
Bernie! I would appreciate the answer to a single question. “Can society be wealthy without wealthy people?” Show your work.
The trickle down effect
The concept is interesting and not because it works the way people think it does. People miss the point. Probably intentionally. It would work more often if people actually appreciated what happens. Let’s take Bill Gates and Microsoft as an example. Bezos, Zuckerberg, and the Google founders would work as examples, too.
- Microsoft started in a dorm room ar Harvard on 4 April 1975.
- IBM selects MS-Dos as the operating system for their personal computers in November 1980. 5.5 years in the making.
- Microsoft becomes a public company 13 March 1986 with stock offered at $21 per share. By the end of the day it is worth $31.25 and Bill Gates is worth $350 million. 11 years from its founding.
The Microsoft trickle down
- In February 2020, it is worth $184 per share. If you bought 100 shares at the issue in 1986, you would now have 28,800 shares worth $5.3 million. Plus the dividends you would have received in the interim. Currently about $50,000 per year. Did you buy the stock at issue and if not why not? You were using the product and you had to know it would be worth more someday. Who was competing with them? Bill Gates skills and effort trickles down to anyone who had $2,100 in 1986
- Microsoft has 148,645 employes at the end of 2019. They likely get paid. Some handsomely. Let’s suppose Bill Gates in 1975 continued at Harvard and become a senior buureaucrat. Would those Microsoft jobs exist? Maybe, but not certainly. If other businesses hired them, why would their founders have created those businesses. Bill Gates skill and effort tricked down to almost 150,000 current employes and thousands more who have come and gone in the 45 years from founding.
- There are 1.5 billion Windows users. The current price of the software is negligible. People buy it because it worth more to them than the money it costs. Value trickles down to the users.
- There are 1.4 billion users of Microsoft office. Why? Because they get more value than their money is worth. Value trickle down .
- Anyone heard of Fortnite, Grand Theft Auto, Minecraft, or Call of Duty? Four of the hundreds of Microsoft games. Anyone own an X-Box? People buy games and devices because they give them pleasure. Value trickles down.
- Does anyone use Hotmail, LinkedIn, Skype, or own a “Surface” computer? Probably a few of us. Do we use it because they provide value? Of course.
If Bill Gates had $1 per year, per product used, he would be far wealthier than he is. If I offered you $1 per year to give up Office or Windows, would you? {Insert laugh track here}
Of course you would not.
Bill Gates would have at least four times as much money if he still held the 45% of Microsoft he had at issue. He diversified his wealth and likely added other values in the process. The Gates Foundation adds value. He does not have money because he has your money. He has money because you willingly give it to his business. He created far more value than he kept.
Where money comes from
Economic value arises when people provide something others want. If you want more, provide more. Better skills, more risk, more persistence, more patience. No government has ever, as in not ever, created wealth where none existed prior.
Anyone who thinks they can is more naive than Bernie.
Once you know how wealth works, it is dishonest be a socialist. Once you are dishonest, people don’t trust you.
Back to the question. Can society be wealthy without there being wealthy individuals? Think about it in terms of value exchange and why people do it.
I help people understand and manage risk and other financial issues. To help them achieve and exceed their goals, I use tax efficiencies and design advantages. The result: more security, more efficient income, larger and more liquid estates.
Please be in touch if I can help you. don@moneyfyi.com 705-927-4770
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