Entrepreneurs create wealth, something supported by data globally (particularly in emerging markets). Having an idea, either an innovation to an existing product or the creation of something new, creates value within the market.
When students enter my courses, many believe that most wealth is inherited or generated through investments. There’s an assumption that rich kids sit around, amassing wealth without effort, and somehow these kids grow up to be on the Forbes 400 list. When I teach about the rhetoric of economics and business, I explore how many students believe these myths and we this discuss how those myths took hold within our culture.
When I begin a class with quizzes on wealth, one of the questions is “Who are the wealthy?” The choices are bankers, investors, heirs to fortunes, and entrepreneurs. Students typically choose the answers in this order: heirs, investors, bankers, and (lastly) entrepreneurs. The actual order is entrepreneurs, investors, engineers, and finance executives. Notice I omit “engineers” from the options, in part because nobody was choosing “engineer” from the list and because many of the wealthy engineers were entrepreneurs, too.
Forbes and other financial publications have reported that entrepreneurship remains the best path to wealth in the United States and Europe, particularly within Germany.
Most rich people build their wealth as entrepreneurs, not with stocks
Forbes, 22 June 2020
In 1984, less than half of the names on the Forbes 400 ranking of the richest Americans were self-made billionaires. In 2018, 67% were self-made! This determination is made on the basis of a scoring system in which each billionaire on the Forbes 400 list is ranked on a scale of 1 to 10, with a 1 indicating that the person has inherited their entire fortune and is doing nothing to grow their wealth and a 10 indicating that a person has risen from very simple circumstances to build their wealth against great odds by their own efforts. Anyone who scores between 6 and 10 is classed as self-made rich.
We also know that the wealthy work more hours per week, and are likely to have had at least one business failure. Studies of “self-made” wealthy individuals (meaning they came from families with incomes below the top quintile) reveal these are people obsessed with working and learning. They work a lot, sleep less than most people, and seek out new ideas.
So, why do my students not know this? Why do most people assume the rich are lounging about and contributing little to the world?
Media depictions of wealth and political discussions of “the rich” reinforce beliefs about wealth that contradict the data.
Often the villains in our stories are wealthy. This predates the Dust Bowl, but certainly the Great Depression era helped fix the image of an evil banker taking over a farmer’s deed. Snidely Whiplash and Henry F. Potter were the continuation of Shakespeare’s Shylock. We just love to hate bankers, whom we assume to be greedy, unethical, outsiders.
If the villain isn’t a banker, he or she is surely a corporate executive more interested in money than creating or innovating. The executive cares little for the harm done by faulty products, destroying people and the environment for short-term gain.
Why do we are about the “Rich and Famous” who only married into wealth or were born into it? We take the statistical outliers and make them icons of what wealth means in our culture. This disturbs me because it distorts views of wealth, leading to bad public policies that penalize entrepreneurs. (I’m all for discussing inheritance taxes, but there aren’t that many families paying large inheritance taxes.)
Curiously, Americans also mythologize inventors as unfortunate souls, often manipulated by the bankers and executives. Someone takes the idea and makes the money, leaving the real inventor empty-handed.
Bill Gates, Jeff Bezos, Larry Page, Sergey Brin, and others on the Forbes list led innovative technology firms. The entrepreneurs behind the Industrial Revolution in the United States were largely poor, not even what we might call middle-class: Andrew Carnegie, John D. Rockefeller, and Henry Ford.
We can look back and criticize the competitive nature of these entrepreneurs, which sometimes led to immoral choices. But, these are merely the big names.
Most Americans work for small, family-owned businesses. Most of our economy is power by small business and entrepreneurship.
I want my students (and my daughters) to recognize that hard work offers a return on investment. Be creative, take risks, and learn from failures. Never stop seeking out new knowledge and experiences. Don’t sit around waiting for good things to happen.
Yes, luck matters. I didn’t choose to be born in the United States in the 1960s. But, I was.
Hard work and a lot of long days were required to earn my university degrees. Nothing was easy along the path to where my wife and I are today.
Discover more from Almost Classical
Subscribe to get the latest posts sent to your email.
