Synopsis: Generating significant wealth requires ‘farming’ significant population.
The basic concept is the economy is based on human productivity, in the same way a chicken farm is based on the productivity of the chickens in producing eggs, or an apple farm on the productivity of the apple trees producing fruit.
The farming human’s analogy about equating the workers within enterprises with the chickens or fruit trees, but the wider population of customers who contribute a share of their productivity by paying taxes or for paying for products or services and thus contributing a share of their productivity.
Most humans in some way participate in both ‘the farming’ and ‘being farmed’, and it is not suggested that farming is inherently bad.
This webpaper looks at the ‘farmer’ perspective of farming humans, as opposed to the perspective of the farmed‘.
The first step to consider an egg farm. Each chicken produces eggs, so the more chickens the farmer has, the greater the potential wealth. Of course, on a finite size farm, their being too many chickens will make life uncomfortable for each chicken, but the more chickens, the wealthier the chicken farmer.
The simplest analogy would be slaves or ‘wage slaves’ workers for business enterprises, but in some ways a better analogy would be emperors and kings who tax the population within their territory, and over the course of history have shown a taste for extending their territory which enables extending the size of their ‘farm’
But what about wealth such as oil wealth, that at first seems to be built from owning resources, and not from ‘farming’ a population of workers? The Saudi royal family does not seem to need a large population to build their wealth. Which would be true, if owning oil was sufficient to be wealthy, without the need to be able to sell the oil in order to gain more useful wealth such as luxury homes, yachts and cars and travel. It turns out, what is needed is large population of people who earn income by producing things, who then part with a portion of their earnings in order to buy fuel, with the result being similar to an emperor or king who can tax their subjects. A product valued by a sufficiently large number of customers becomes an alternate way to access a portion of a population’s income.
Ironically, while the greater the population the greater the opportunity for extreme wealth, also the greater the population, the smaller the percentage of people who can achieve any given level of wealth, so while increased population leads to nominal increases in wealth for the very wealthy, the same population growth limits the number the wealthy able to enjoy the same benefits of that wealth to ever smaller percentiles of the extreme wealthy.
Wealthy Is Relative: Wealthy means more wealth than is typical.
The concept of ‘wealth‘.
Wealth is the abundance of valuable financial assets or physical possessions which can be converted into a form that can be used for transactions.
What is being ‘wealthy’?
“Wealthy’ can be described as “an abundance of wealth”, which does not say much. However, there is also the use in some expressions to simply means ‘sufficient wealth’, but when we describe a person as ‘wealthy’ we normally mean ‘of wealth noticeably above average’.
For this page the definition of ‘wealthy’ is:
- wealthy: having significantly greater than the average wealth.
In general use, if we describe a person, a society, or even a period of time as “wealthy”, this wealth is relative to some reference. In the case of a ‘wealthy society’ either previous societies or subsequent societies, or other societies had less wealth. Usually, the reference is implied from the context and need to be explicitly stated.
For a ‘wealthy person’, the reference could vary, but for the purpose of this page, I am using ‘their nation’ as the reference. Thus a wealthy person, is someone who, relative to other in their nation, has an abundance of wealth.
With this definition, to have ‘wealthy individuals’, you have to have other people, who are less wealthy people. While this may not describe every use of ‘wealthy’, this is I believe the most common usage.
Typically, for a person to feel ‘wealthy’, it does not matter what absolute wealth they have, as long their wealth is greater than that of others the can feel are a reference. Feeling wealthy even could sometimes be a form of schadenfreude.
No King of England ever owned even single flat screen TV (there has been a queen since 1952). Very few Kings were ever able to holiday exotic locations such as the Bahamas, and in fact, most did not even have flushing toilets at home. By the standards of today, many of the wealthiest people in history had it tough. But all were considered extremely wealthy, simply because they had far more wealth than the rest of society.
So, the perception of ‘wealthy’ becomes relative to the ‘wealth’ of others, and a person is considered ‘wealthy’ when their wealth exceeds more typical ‘wealth’. The result is that is that it could be easier to be ‘wealthy’ in a poor country, and far harder to be wealthy where everyone else has substantial wealth.
Wealthy is limited to the few on a finite planet.
A key reason ‘wealthy’ requires greater wealth than the average person, is that some .wealth
Some of the trappings of wealth could become available to everyone. If there was enough total wealth, everyone who owns a car, could own a Ferrari instead of that car, because a car tis totally manmade wealth.
But not all aspects of wealth. Being ‘wealthy’ also provides access to a share of natural wealth, and there is a limited about of nature to share, and the more who share, the less ‘wealth’ from owing a share.
Consider beach houses. In any given area, there are a limited number of luxury beach houses. You can replace the houses with apartments, but only those in ground floor apartments can just walk out onto the beach, and the beach becomes far more crowded, as can be seen from a comparison of Zuma beach in Malibu with a beach in Florida.
If you have a city with 100,000 people, and space for 100 luxury beachside homes with their own access to the beach, then only the richest 1% have the wealth to ensure they could own one of those homes. Not everyone wants a beach house, and if only1 in 10 want a beach house, then those in the wealthiest 10% who choose to have one can own one. But if the population increases to 1,000,000 then the barrier to owning a beach house rises, and that ownership becomes 10x more exclusive.
As population rises, the percentile of wealth required to own or access any limited supply asset increases.
Wealthy Needs Inequality.
If “wealthy” is greater than average wealth, thing in order to have “wealthy” people who have above average wealth, it is also necessary to have people of below average wealth.
Effectively, we cannot have “the rich”, without also having “the poor”, or at lest “the masses”.
Simplistically, in a population of 10 people with a wealth of 1 million dollars, if just one of those people increased in wealth to 2 million dollars, the “average” wealth would then become 1.1 million, so the other 9 of the 10 people would then all then have below average wealth.
In practice, being “wealthy”, normally means having the ability to pay others to do things for you. This is “for you”, as opposed to employees who do things for a company but report to you. In some societies these are servants, in others “staff”.
The greater the inequality in societies, the more common it becomes for wealthy individuals to have “staff”. An example would be western expats who are not accustom to having staff in their home country, finding themselves allocated a driver and a maid in another country with greater inequality.
In the end being “very wealthy”, requires that relatively, there are a number of people who are significantly less wealthy.
Very Wealthy Requires Many Who Are Less Wealthy.
We normally think of wealthy as “independently” wealthy, which is when a person has sufficient wealthy that they do not need to work, although the wealthiest people tend to keep continue working on acquiring even more wealth.
The wealthy person is not going to physically going to grow their own food, or always prepare their own food, or normally, physically build their own house.
It is not just direct staff that are needed to support the lifestyle of the wealthy, an entire society of less wealthy people is normally required.
The Key to ‘Wealthy’: The “Trickle Up” of Farming or Harvesting.
The Source Of Wealth: Contributions By Many.
The following insightful quote from Jeff Bezos also appears in the paper: Wealth & Happiness vs population.
Jeff Bezos gave a heartfelt thanks to Amazon employees and customers following his record-setting trip to space Tuesday — noting that they “paid for all of this.”
“I … want to thank every Amazon employee, and every Amazon customer because you guys paid for all this,” the 57-year-old Amazon founder told reporters after returning from his trip to the edge of space.
“So seriously, for every Amazon customer out there, and every Amazon employee, thank you from the bottom of my heart, very much. It’s very appreciated.”
Jeff Bezos thanks Amazon workers, customers for bankrolling trip to space
In theory, a person can gain wealth by finding a huge gold nugget or a massive diamond, or, like the Beverly Hillbillies or the Saudi royal family, though oil rights, or by being a lottery winner and acquiring wealth through some other form of luck.
However, as made clear by Bezos, it is not the owning of gold nuggets, diamonds or oil, but the being able to sell them for a share of the earnings or productivity of customers that is the essential step in gaining great wealth.
In practice, most wealth arises from managing to get many people to all contribute some of their wealth. Historically there have been only two paths to great wealth:
- Be a ruler, earning money by a tax on subjects.
- Own a business that supplies a large number of customers who pay a ‘tax’ to own or use your products.
Both of these roles can be considered ‘the farmer’ in the ‘farming humans’ analogy.
In both cases, a large number of people all contribute to the creation of significant wealth, and then pay, or ‘contribute’ part of their wealth to the wealthy4 person.
So Bill Gates became wealthy because a large number of people exchanged the proceeds of some of their working hours to buying products which included software by his company.
A Historical Look At Significant Wealth: Bigger Empire, wealthier emperor.
Outstanding wealth: the more workers, the greater the wealth.
Consider a society of only 10 people. With only 10 people, most will be busy just getting food. To allocate the spare time of 10 people into building one single house for the leader is not exactly going to amount to a palace for a king. When trying to determine the wealth of leaders from antiquity, the number of people in the society is used as one of indicators of their wealth, as the greater the population under rule, the greater their potential wealth.
Now consider historical figures of great wealth: the Pharaohs Egypt, Alexander the Great, Augustus, emperor of Rome.
Mathematics dictates that average citizen will have wealth which represents an average share of wealth produced by that society. This means the wealth of the average person will be approximately equivalent to the value of what they themselves produce to trade for their own wealth.
But for those of extreme wealth, the labour of hundreds if not thousands is required to produce their homes, monuments, food, clothing and precious metals and gems.
A small society would be incapable of producing such wealth. Significant wealth was not even possible until significant populations could contribute a portion of their efforts to producing the wealth for the most wealthy.
The Oldest Societies: The Bigger The Empire, The Wealthier the Ruler.
For Classical Antiquity, even more than for the High Middle Ages, the definition of personal wealth becomes difficult to compare with the modern period; especially in the case of divine kings such as the pharaohs and Roman Emperors, where an entire empire might be considered the personal property of a deified emperor.
List of wealthiest historical figures
Although the ‘entire empire’ could be considered property of the ruler, much of the household wealth early emperors such as the of the Pharaohs or Egypt, Alexander the Great and the emperors of Rome was obtained through taxation. Alexander the Great was one of the greatest at extending the population generating his wealth through conquests of additional peoples. Through conquest, Alexander also gained access to wealth previously collected by other rulers from their subjects, and as a result, controlled most of the wealth of what from his perspective was the known world.
As these ancient emperors owned all land and resources, subjects either paid taxes for the use of the land and resources in order to be able to survive, or would need to leave. Taxation needed to be set at levels where not too many subjects neither died, nor left. In fact, all these emperors needed to command great loyalty from their subjects.
Dieter Wildung, a former director of Berlin’s Egyptian Museum, said it is “common knowledge in serious Egyptology” that the pyramid builders were not slaves. “The myth of the slaves building pyramids is only the stuff of tabloids and Hollywood,” Wildung said. “The world simply could not believe the pyramids were build without oppression and forced labour, but out of loyalty to the pharaohs.”
Great Pyramid tombs unearth ‘proof’ workers were not slaves
One such individual was Alexander the Great; one of history’s most famous warriors and a legend of almost divine status in his own lifetime. He falls into the elite category of individuals who changed the history of civilisation and shaped the present world as we know it.
From a leadership perspective, it’s not very difficult to say that Alexander was without peer. He could be magnanimous toward defeated enemies and extremely loyal toward his friends. As a general, he led by example, leading from the front.
Leadership Lessons from Alexander the Great
In fact great wealth always comes from some form of ‘tax’ or revenue obtained from supplying something to the masses, or earning a share of revenue as something is supplied to the masses.
Always the peasants/customers get something in return for their contribution to the wealth. It may have been the use of the land to grown their crops or protection from invading armies, and today it may be their own piece of flat pack furniture or copy of some software, but still there is something in exchange.
The principle still follows, the actual wealth enjoyed by the wealthy, is created by the larger number of ‘not so wealthy’ who build the residences of the wealthy, build the ships of the wealthy, grow the food for the wealthy or otherwise ‘work for the wealthy’. The usual trend is a flow of hard wealth from the masses who in exchange receive something supplied in significant quantities through a distribution channel controlled by the wealthy.
Does Trickle Down Economics ever work?
Possibility One: are the wealthy ‘wealth generators’ for society?
Although there are exceptions, most people responsible for the advances in society do not gain significant wealth. For example, much of modern wealth is a result of the invention of the semi-conductor, and this was certainly no sure path to fortune for those who played a role. There are clear examples, of people who played a role in advances that could be said to generate overall wealth, such as Thomas Edison, Bill Gates and even Alfred Nobel, who themselves became wealthy. But then, most who gain wealth from steps forward for society overall, including Bill Gates and Thomas Edison, are less clearly responsible for the advances, and some argue it is more a case that these individuals managed seize on and profit from, advances that were happening anyway.
But the premise of ‘trickle down economics’, is that by lowering taxes and providing more opportunities for the rich, they will generate more wealth for the overall society. Neither Thomas Edison, Bill Gates nor Alfred Nobel, are thought of as creating the greatest contributions once already wealthy. Logically it could be argued that if people like this need support to produce results, that support is needed before they become wealthy.
The best example I can imagine is Elon Musk. It is still a ‘long bow’. Tesla, his venture that has had the biggest impact, was started before he invested the assumptions required to argue that focusing on building the wealth of people at the level Elon must had reached prior to his funding and joining Tesla assumes:
- the original Tesla founders would not not have been successful if Elon Musk not joined and then taken over the company.
- by boosting the wealth of other people with similar wealth to Elon Musk at the time he invested in Tesla, there would be many other success stories like Tesla.
Data suggests the wealthy most often continue to increase their wealth anyway without government assistance, and there is little evidence that the further their wealth increases, the more new ventures they launch, or even that their personal wealth get diverted into expanding their current ventures. Most examples of people who created businesses, that resulted in many jobs for others, such as Gates, Bezos, Edison or even Rockefeller, did not start with wealth that then “trickled down”. In each case, although they generated wealth that also raised the level of wealth of many others, their own wealth arose from wealth “tricking up” from an even bigger base.
So far, the biggest benefit to society from having wealth people is that some of them become philanthropic, and there are already tax breaks to encourage that.
Possibility two: as the wealthy spend their money, it is distributed across society.
Does the Sultan of Brunei being extremely wealthy, result in greater riches across society in Brunei?
As a nation, there are many different possible options for how the oil wealth is initially distributed. As a kingdom, much of the nations wealth is first directed to the Sultan, however, unfortunately, very little seems to “trickle down”. The same also applies in Saud Arabia, another location with an ideal environment to prove any “trickle down effect”. Problematically, neither country seems to provide evidence that the presence of extreme wealth ‘trickles down’ through all levels of society.
Other Possible scenarios?
I was considering the scenarios where the wealthy have wealth that trickles up from consumers outside a country, and then trickles down within the country. This is effectively what is happening with Brunei and Saudi Arabia, as the consumers who are the ultimate purchasers of oil are scattered around the world, but these are clear examples how when wealth does not trickle down. Tax havens on the other hand, show that in principle this can work if the population of a nation is small enough, and the country can attract wealthy people from outside. The Cayman Islands, Bermuda and tax havens do arguable manage to finally make ‘trickle down’ economic work when the number of wealthy people is inflated and the number of people to trickle down to is small.
Conclusion: ‘Farming humans’ as the path to wealth.
The main mechanism for the wealthy to become wealthy, is to gain wealth a portion of wealth from a large number of people. The larger the population, the less each individual needs to contribute in order to create substantial wealth.
Updates.
- 2023 April 9 th: Synopsis updated and new image
- 2017 July 15: Typos fixed.