Image source:: https://www.dailymail.co.uk/news/article-6603399/Bill-Gates-63-photographed-waiting-line-local-Seattle-burger-shop.html
The world is 323% in debt. Who is this money owed to? Mars? :)
The global financial bubble starts with people who believe in their own personal bubbles that aren’t empirically backed. So, they make unwise financial decisions. The difference between rich people and poor people is that the first, usually don’t have a bubble around their heads. However, because of the second ones who aren't honest to themselves, they have to live in a physical bubble (isolation).
To simplify, some people earn more than what they spend and others spend more than what they earn. Because the second ones represent the majority, sovereign states need to increase their debt perennially. By owing to the private sector, the financial markets wash away the state’s power. This is how the sovereign state has diminished capacity to serve everybody and instead focuses on its creditors. So how come the quality of life increased despite the inflation and the fall of the state that we are observing?
Because of innovation, today intercontinental flights are available to the masses, as are smartphones and AI, fidget spinners, etc. It is only because of entrepreneurial innovation that we can get many products relatively inexpensively compared to just 10 years ago. The average human in the USA in 2018 lives a better life than the Rockefellers 100 years before. This is the power of innovation. However, as life gets too comfortable, many tend to work less and expect more. This is one important reason for the rise of the global credit bubble. The tradeoff, as mentioned, is again inflation that doesn’t treat people equally.
If innovation was faster than inflation the relative inequality wouldn’t be felt so much, as the quality of life would still increase. This is exactly what didn't happen in the past decades. The pace of inflation was a bit larger than the pace of innovation.
Here are some numbers:
The value of 1,000,000 USD in 2020 was only $146,528 in 1970. There were almost 400,000 patents granted in 2019 52% of which were foreign, and 67,960 patents granted in 1970 in the USA 26% of which were foreign. It means the value of the dollar was decreasing faster than the pace of innovation.
The 2019/1970 the patent/inflation ratios are as follows:
Innovation increases along with the total amount of patents approved. However, unlike inflation, innovation is not always cumulative. What’s the value to society of patenting round iPhone corners? (Yes, Apple patented round corners). I predict not only that innovation will stall even further behind inflation, but that it will become less impactful and more meaningless in the forthcoming decades.
Thus, we have two main factors that impact welfare. Innovation and inflation and both work wonders for the wealthy but only innovation works for the masses.
With regards to inflation, billionaires can hedge their risks with creative financial instruments or fixed assets. They can also move wealth internationally and use tax and inflation optimization to protect their net worth. Ordinary people cannot. While it was weird for somebody to be a billionaire in the 70s today we have Jeff Bezos worth a whooping $200 billion dollars and many others who are worth north of $100 billion dollars. They have asymmetrical benefits from both innovation and inflation.
It’s needless to say that innovation, from life extension to luxury items will become available for the wealthy first. Billionaires thus benefit from innovation not only economically for their businesses, but also personally. I predict that only billionaires who die forcefully will not get to live by 100. Good for the wealthy! We should be happy for them.
These people are very rich, but their wealth is made far larger than it is by the fact it is in a bubble with many fewer valuable things offered as an alternative. So, when value is scarce everything valuable appears bigger. And they created real value. For this reason alone, most ultra high net-worth individuals (UHNWI) don’t buy their net worth at face value. They see also the liability coming with the net worth not just the upside from it. Some feel, if not explicitly understand, the unique historical context of their inflated relative wealth.
And here’s the catch ‘ordinary people’ don’t get. Billionaires wouldn’t be what they are if they were deluding themselves that they deserve something they don’t. They are highly-intelligent people with lots of power but with an honest self-talk that is required to sustain that power. To become and remain self-made billionaires they had to be totally down-to-Earth, have zero-ego, and play the game as it was meant to be played but at no instance to forget, that it's just a game they intend to win.
Then, others, envious and bitter people who want more than they deserve, either curse them or declare them superstars to fill their own vanity. They glorify money and fame, something most billionaires deeply despise. If ordinary people pass by billionaires on the street they wouldn't believe they are real! Bill Gates thought it is because of the hat people can't recognize him. It's not most of the time. They just don't believe it's him! In their eyes he is their 'god' who is somewhere high and unreachable to them only because they are in love with money, not with playfulness. They idolize wealthy people instead of treating them fairly. Then, billionaires have to pay $15000/night hotels and events only to feel adequate & find a place where others treat them equally.
To stay down to Earth, normal, and kind, billionaires have historically had to hide. It is not really a problem of billionaires as much as of the average person blowing their own bubble of delusions and the global economy with it. The wealthy cannot even use the subway without bodyguards or being photographed, not because they don't want to use it. Cars, even expensive ones, are very inappropriate in large cities.
Don't blow a bubble. A personal, or a global one. Treat billionaires equally and yourself honestly.
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