Friday, January 9, 2009

Secrets of Getting Wealthy

Secrets of Getting Wealthy

wealth, wealthy, rich, secrets, economy, financeAt the base of almost every ethical system in the world is the idea that the pursuit and worship of money is unfulfilling, and there is much truth to this. But while idolizing material wealth is likely to be a path to spiritual and moral poverty, it is important to remember some of the reasons why people get rich in a market economy -- as well as some of the implications of their efforts.

1. You get wealthy by producing value.

Generally, there are two roads to wealth. You can make something and trade it to people who want it, or you can use force to take things that don’t belong to you. For most of history, the easiest way to get rich was simply to take things from other people; indeed, in ancient China and at the height of the Roman Empire, “commerce” was looked down upon.

But over the last five hundred years or so, the legal institutions that encourage trade and commerce have developed. The histories of the European economies in which modern market economies developed is by no means spotless, but one thing that the process of global integration and the spread of the market economy did was spread the means to prosperity all over the world. The planet can today support far more people than it could formerly, and the potential exists for everyone to be rich.

2. Other people get rich if you get rich by producing, and they can get rich if you save.

Your restraint produces capital and new technology for others, who can use the funds you don’t consume to produce new goods and new technologies. Moreover, if you are a successful entrepreneur your ideas and innovations generate benefits for everyone. Ironically, the bulk of the benefit is likely to accrue to people other than you.

3. “Giving Something Back” might be misleading.

Bill Gates became the richest man in the world by producing an operating system and software package that made everyone much more productive. The great irony, as some have pointed out, is that Gates’ attempts to save the world through his charitable endeavors may prove to be a drop in the bucket when compared to the contributions to human well-being that he has made through Microsoft. If you really want to help those around you, you would all do well to take a good, hard look at what you do well.

Perhaps unexpectedly, it is unnecessary to mean to do well for others in order to actually do well for others. One of the lessons of economics is that the unintended consequences of well-intentioned actions and endeavors might actually produce more harm than good. Production makes everyone better off, and even allegedly “selfish” endeavors might do more for the world than charitable activities.

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