Americans and Poverty

The bad news is that poverty sucks. The good news is, at least if you are an American, you have never likely seen it, much less experienced it personally.

According to a map I received in our last issue of the National Geographic Society, the top 25% of people in the world make just over $12,000 a year. That means the poorest Americans on average are still some of the wealthiest people on this planet. Would you rather be one of the poorest people in America, or would you rather be "wealthy" in Bangladesh?

Poverty is relative. Americans have been socialized into believing they have a right to whatever they want, regardless of their economic condition. Thus in this country, what we call poverty is more likely conditions associated with over-extended debt than anything resembling dirt-floor subsistence living. I am guessing that if we spent a day with the average Cambodian, we would spend more time being grateful for what little we may have (glass half full) and much less time being obsessed with the wealth of others (glass half empty).

While many will have us focus on the gap between rich and poor, shouldn’t the real focus be on the poor and the conditions they live under? Are they improving? Or are things really getting worse for America’s poor?

Jealousy may get us to focus on what others have obtained -- thus making us feel they (the “rich”) have been “stealing” from us or are under some moral obligation to share their wealth with us, (whether that is willingly or by the coercive force of misguided legislation). As Americans, we tend to be oblivious to the fact that 95% of the rest of the world would gladly change places with the poorest among us. To them, WE are the rich people. Do those from foreign lands have the same moral standing to make claim on the wealth of average Americans? How much is too much? Who gets to decide that?

One of the most common mis-perceptions in economics is the idea that wealth is static: if someone has something, it must then cause me to have less. But this is contrary to reality. Wealth is created via the productivity of people, not just through the distribution of existing resources. (For example: personal computers didn’t even exist several decades ago. Now there are millions and millions of them. Not only has this progression made computer producers wealthy, it has also made their users more productive, making them wealthier as well.) The creation of wealth makes everyone better off.

And while the paychecks of athletes and movies stars may seem outrageous to the majority of us -- especially in comparison to teachers and firemen, the success of the former did not create the poverty of those on the other end of the scale. In fact, in many ways, the exact opposite can be argued. The more ultra-wealthy people there are in a country, the higher the standard of living for the poorest of that same country. In other words, we shouldn’t be considering redistributing the wealth of the richest among us, we should be trying to create conditions that promote the successful creation of MORE wealth.

As Economics Professor Steven Horwitz recently pointed out in an article titled The Poor Are Not Getting Poorer: “One look around at even the bottom fifth of American households today - where children are watching cable TV, surfing the Web, or chatting on cell phones while Dad takes free generic medicine and Mom heats something up in a microwave - shows the poor are hardly getting poorer.”

Yes, this “Great Recession” has been extremely painful, but we, as Americans, still have much to be thankful for. More importantly, we need refocus on creating more wealth and not worrying about who has too much.

More Thoughts on Bill Gates (via Milton Friedman)

Recently, in an internal company blog, I responded to a question regarding what role a company’s profit plays in its pursuit of corporate social responsibility. The question centered around information gleaned from an article in The Economist.

Consistent with other things I have blogged about in the past, here was my response:

Let me start with a thought experiment.

After decades of successfully building businesses, Bill Gates is a billionaire many times over. Now he wants to use large portions of his wealth to the betterment of Africa. How does he best serve this goal?

One, he can give away his money through various charities, or two, he can do what he does best, build more wealth by creating more businesses.

Think of how many thousands and thousands (and thousands) of people who have successful careers directly tied into the technology businesses Bill Gates has created. He is directly -- and indirectly -- responsible for putting food on the tables of virtually every IT person on this planet, (not to mention multi-millions of others who happen to use a PC in their daily work life). Therefore, is he being “responsible” by giving his wealth away? Or would Africa (and the rest of the world) be better off if he just continued to do what he is great at, creating more technology and building more businesses? I would argue the latter.

Considering the question of what defines socially responsibility is the proverbial equivalent of the “give a man a fish” versus “teach a man to fish” question. Both are good, but one is better.

Wealth is not static. Wealth grows exponentially. Wealth is the building block that creates more wealth. And while “giving” may instinctively seem more altruistic, I would argue, “building” is the much more effective (and responsible) method for Bill Gates to successfully meet his goals. Bill Gates should do what Bill Gates does best. No matter how much money Bill Gates “gives” away, his work in the business world will forever remain his greatest contribution to humanity. And while being socially responsible may include both “giving” and “building”, the “act” should not be confused with the “results”. The latter (building) will almost always give better results. It perpetuates more building.

Making a profit is at the core of being socially responsible. Anything hindering that goal is counter productive to helping others. And taking it to the individual level, all responsibility begins with personal responsibility. When the flight attendant explains the safety procedures before your next flight, she will tell you that: “in case of emergency, put your air mask on first before helping others.” So it is in life. Take care of yourself first. This is what makes you able to help others.

(This goes beyond “financial” profit, by-the-way. For instance, this explains why something like work/life balance is so important. It is not only in the employee’s best interest, it is in the longterm best interest of the employer as well. After all, someone who takes care of himself is in a much better position to help others than someone who burns out.)

Perpetuating and maintaining profitability is the single most important factor allowing a business and/or a person to take on social responsibility in the first place. In fact, that is why [our company’s] value number eight: Earn a Reasonable Profit, is the most important value.

Without it, the other seven would not exist.

Skydog -- The Movie

Duane Allman died on October 29th, 1971 at the ripe old age of 24. Despite Skydog’s short time on this earth, Rolling Stone Magazine would later list him as one of the greatest rock and roll guitar players of all time, second only to Jimi Hendrix.

Even though I grew up within walking distance of the Canadian border, it was difficult to go very long without hearing the South’s greatest band, the Allman Brothers blasting out of every older kids’ eight tracks inside their muscle cars. Unfortunately, I did not purchase my own copy of the classic Eat A Peach album until I reached adulthood. And, not unlike Miles Davis’ Bitches Brew, it would take me another dozen years or so of listening to it before I fully appreciated it.

Today, I can not listen to this without wondering how different today’s American music would be if we had had a few more decades of Duane’s influence.

There is an interesting twist to the final chapter of Duane Allman’s story. Duane Allman died in a motorcycle accident, crashing into the back end of a truck. Legend has it that the name of the album containing his final contributions, Eat A Peach, was derived from the crash. Supposedly the back end of the truck that ended Duane’s life was carrying peaches. Cool story...if it were true. Actually, according to snopes.com, the name came from a quote Duane made when asked by a magazine interviewer, what he was doing to help the revolution. His answer, “...every time I am in Georgia, I eat a peach for peace.”

Considering his father was murdered when he was a child, the adventures he must of had growing up with little brother Gregg, the incredible people he did session work with, his meteoric rise to fame, and the final, tragic crash that ended it all -- this legend’s short life would be great material for a movie.