1. Sivics March 19, 2008 @ 3:47 am

    I teach a couple of freshman intro American government courses in a small community college located in the buckle of the Bible belt – students ages range from 18-24, most grew up on family farms and are the first in their families to attend college. During a discussion about political ideology, popular American values,and beliefs, I asked my students if they believed or agreed, “if you work hard enough you will be rich” – not one student disagreed – one student offered Eddie Murphy as proof. Class time was over, students left quickly, all on their way to enjoying Spring Break. I am spending the break searching for ideas, suggestions, illustrations, examples, something that would be meaningful to my students, to somehow overcome or at least “test” their beliefs – your comments in this article, the points you make, reference examples, facts,ie; class, physics, etc.,all of which, in one manner or another, challenge this belief, “if you work hard enough you will get rich” – but I know it will take something more for my students to “get it” – I guess, something that challenges the belief that if Eddie Murphy did it, anybody could do it….

  2. Franklin March 20, 2008 @ 9:45 am

    Please check the article The Rags To Riches Trap, and the other article on the series.
    The only problem is that your students (we all) fall for the Lottery trap. Somebody wins eventually, so we keep the illusion of us being the next one.
    However, your chances to become rich in the US is 1 on 200,000,000 (we can discuss if it is 1:300,000,000, or even 1:100,000,000. However you cut it and slice it, though, your chances at being rich trough hard work are less than your changes at winning any State Lottery (1:40,000,000).

  3. The Politics of Debt » It’s the History, Stupid October 18, 2008 @ 3:09 pm

    […] From a historical point of view, the trickle down theory rears its head during periods of immense social wealth. During those periods it is easy to dream that “we all” can, and are, going to be rich, and the identification with the extremely wealthy plays well among those that have statistical low chances of achieving the same level of wealth. […]

  4. Anonymous November 10, 2008 @ 12:52 am

    The problem with your article is that there are all different definitions of “rich”. Is someone who works hard to become an engineer and make 80k a year included in your 40,000,000:1 odds? For that matter where do you come up with these ridiculous odds? In your other article you state the odds that someone will have a story similar to the “Persuit of Happyness” guy as 300,000,000:1. So he is the only person of his generation in the United States to ever achieve wealth from poverty? Because that is what those odds imply. No one should give up their happiness or life in the persuit of money. But there are many, like myself, who find finance, economics and politics all very interesting and persue finance as something they are passionate about. And what fun is life without shooting for the stars? The higher you aim, the harder you push yourself, and the higher you are likely to rise in life. You find out what you are really capable of. To resign yourself to being the status quo doesn’t sound like any way to live your life.

  5. Franklin November 10, 2008 @ 9:24 am

    The fact that there is a book and a movie about his story tells you that if he is not the only one, he is one of the very, very few who made it. Maybe indeed a unique case. I would be glad to see other cases. As a matter of fact, even if you show me that 10,000 people had the same story every year, the odds would not change that much. It’s the same trap as the lotto.

    My point is that setting up personal goals based on the unique will statistically set you up for failure.

    There is nothing wrong with aiming for the stars, but reaching the stars takes a lot of engineering. If you are aware of the odds against you, you may be better prepared for the difficult journey. If you are not, you will find that every obstacle (and there are plenty) becomes a new barrier impossible to surpass.

    I am not talking about resignation. Resignation is what happens when the impossible dreams get broken. I am talking about realism. Studying, working, leeching others, not having a life, may be some of the things you have to do pursing that “happiness”.

    For instance, less than 10% of the professional traders ever “make it”. And those who make it, do not do it before killing a couple of accounts. Thinking that you may trade your way to wealth makes you a great candidate for buying trading methods, but not necessarily sets you up for success.

  6. It’s the History, Stupid | Finance Money Financial News December 24, 2008 @ 6:52 pm

    […] From a historical point of view, the trickle down theory rears its head during periods of immense social wealth. During those periods it is easy to dream that “we all” can, and are, going to be rich, and the identification with the extremely wealthy plays well among those that have statistical low chances of achieving the same level of wealth. […]

  7. Anonymous February 24, 2009 @ 5:45 am

    Being rich in the traditional sense is like being a world champion in golf or a movie star – many people envy your success, many don’t care, so what?

    Rich life experience (consisting of positive impressions) is what is most valuable, IMO. And quite often $$$ helps with that.

    Isn’t it fascinating to be able to see the Earth from space or even land on the Moon? Or to sponsor building a school in a poor remote village?

    You can become an astronaut. Or you can by a space trip for several million dollars in some 10-20 years. Earning and saving several millions seems more realistic to me, plus it provides some side benefits.

    Billions on a bank account should not be an end goal.
    But you can achieve a lot by envisioning greater goals and by working hard to earn money that helps you to achieve those goals. And your work should be not only hard, but also smart. (The _smart_ part is often forgotten). And by working towards your great goals and by seeing progress, you get the satisfaction from your everyday work, which makes you both more successful and happier.

    Just make sure you don’t sacrifice too much when trying to achieve any of your goals. Balance is the king!

  8. Ilse Hehlfurt October 10, 2009 @ 6:08 am

    The free opinion is of great value – thanks!

  9. Anonymous September 22, 2010 @ 9:43 am

    In the future, I think you should avoid using analogies, or use them in a different way. In this article, your analogies only made things more confusing. Everything but the analogies made perfect sense.

    If you want to use an analogy, you should use it to make your concepts easier to understand, and you should try to use analogies which provide intuitive relationships to make it easier to reason about things.

    In your mountain analogy, for example, you talked about downward pressure. Obviously, there is no downward pressure on mountains. There’s only gravity and slopes. This analogy fails to express the relationship appropriately, and also fails to provide any intuitive understanding of difficult concepts.

    Firstly, getting rich has nothing to do with climbing a mountain. People climb to the tops of mountains all the time. If it were that easy to get rich, almost everyone would be rich.

    Secondly, getting rich tends to be accomplished most easily by making everyone else poorer. You buy land, homes, and stock, or you buy natural resources, like underground oil reserves and water supplies. You buy essential property that other people need, and then, once you are legally able to prevent anyone else from using it, you force people to give you money in exchange. In doing so, you contribute nothing to society, yet you receive money. People must pay you, because, if they don’t, police will drag them from the property you bought and put them in jail. Mountains don’t exactly make this relationship clear.

    Sure, there are other ways to get rich. You could work very hard. Take two jobs. Maybe two very well-paid jobs, like being a surgeon (the best paid job, on average), and working as an orthodontist (the third best-paid job) when you don’t have any emergencies to deal with. You might earn around $95 per hour if you’re paid the average wage for those jobs. If you can work 12 hours per day, you’ll get $1,140 every day. If you work on weekends and holidays too, you’ll earn $416,100 per year. This is the most money you can ever hope to earn without exploiting other people. If you want to make more than this, you need a gigantic helping of luck – and even just getting this much money would require substantial luck in being born in a family that could afford to send you to medical school.

    Even so, there are upper limits. First, we’ve got taxes to deal with, so subtract $120,000. Let’s assume you live like a monk, and you’re single, so you only need $20,000 per year to live on. You’re now left with $276,100 to put in the bank every year. The highest interest rate I’ve seen at a bank is with a long-term certificate of deposit, which would get you a 1.9% interest rate. The total inflation rate from Jan, 2000, to Jan 2010 was 28.3%. With compound 1.9% annual interest, you would get an extra 20.7% back on the money you put in the bank. So, if the inflation rate is fairly consistent, and if the banks maintain their current interest rates, you will, in effect, lose money by putting it in the bank, in proportion to how much money you have.

    Every 10 years, on average, your savings will multiply by 20.7%, and will be devalued by 28.3%. Thus, over ten years, every dollar put in these long-term savings accounts would become 94 cents. You lose 6 cents for every dollar. Once you get up to 46 million dollars, you would never be able to become richer, at least not without directly purchasing stocks, or apartments, or other property with which you could exploit others. At $46 million, you would lose money just as fast as you earn it, since you’d lose $2.7 million every ten years, and you’d be able to save about $270,000 every year.

    This is not a mountain. A mountain can be climbed, given enough time, and provided you put forth enough effort to climb it. Even if you were immortal, and worked tirelessly in the best-paying jobs in the United States, you still would not be able to climb this “mountain”. The only ways you can climb up this mountain are by establishing a company and exploiting your workers, or by purchasing homes and apartments and renting them out, or by investing in stock which offers high dividends or capital gains. In this way, your return on investment can exceed the inflation rate, and you can climb up as high as you like, if you have the time. If not, you can pass your assets to your children and let them continue your journey.

    I think a better analogy might be a waterfall swarming with salmon. You are always dragged down by the water, and if you ever stop swimming, you will be crushed against the rocks (living expenses). To get to the top, you need to push other salmon down. As you get higher, there are more salmon below you, pushing you up, and it becomes easier to reach the top. If you don’t push against salmon below you, you’ll never make it to the top, because the salmon at the top are true masters of pushing you down. To get above them, you must exploit those below you.

  10. Franklin September 22, 2010 @ 12:34 pm

    Thanks a lot for the long message. Really appreciate your comments, which I think are mostly correct.
    The article was written during the Bush era and before the recession. The overall feeling then was that everybody was going to get rich by investing in the housing and stock markets, if you look at the first comment made to the thread you will have a feel for what the overall ideology was then.
    I certainly could have done a better work in writing this, but I also had some urgency to send the message across.
    Let me know if you want to publish on the site.

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You Are Not Going to Be Rich

Finance, Thoughts Comments (15)

I am kind of fed up with the “we want you to be rich” stuff that’s going around (yes, I am talking about the barrage of programs and books from The Secret to the latest Trump publishing endeavor). I think that that is the kind of propaganda that keeps illusions alive, and while we live in a world of illusion we are unable to change the reality of the world we live.

So let’s face it. The reality of the world is that 10% of the population holds 85% of the wealth. We are taught that such is the nature of world and that it can be changed. And let’s face it; the attempts to turn around the tables of wealth distribution seem to corroborate so far that hypothesis. However, in order to avoid what seemed historically to be the norm (the attempt to redistribute by means of violence the wealth produced by the whole of the society), we are educated into passivity and complacency towards the status quo.

All these books and ideas about becoming rich I think misdirect our energies towards unattainable and utterly useless goals. Let’s leave aside the unattainable part of it for now and let’s see why I think the goal of being rich is useless. Becoming rich essentially means moving from the lower 85% (55% if you happen to be middle class) to the upper 10% of society. It is not impossible, and now and then we will hear a story that keeps the myth alive. However, if we think in terms of the energy needed to attain that goal, you will see that it is a useless goal.

Let’s imagine that the whole population of the US forms a mountain, with 1% of the population at the top, 10% in the second tier, 55% in the third tier, and the rest forming the base. The people at the top are lawfully entitled to their wealth, and they are not going to give it to you, which create downward pressure. The second tier, not only have the same entitlement, but most probably also worked very hard to get there and will protect their place in society, creating even more downward pressure. Finally, if you are middle class, there is that small group of 165 million people who essentially share your same social background, education, and skill sets, and who are direct competition to you in your quest for reaching the top. Every day, you know it perfectly, you need to get out there and compete against people who can take part of your income, who want the same position as you, or who are direct commercial competition. We already spend a lot of money and energy just to stay in the middle class.

However, your task is not to remain middle class (which is already hard enough in the current economy), but to climb this mountain in order to reach, at least, the top 10% of the mountain (we are not even talking about the pinnacle). I don’t know if you ever climbed a real mountain, but even if you did some casual trekking in a mountain you will agree with me that climbing, even using known paths is tiresome and hard work. The obvious reason for it is that, when climbing, you are going against the force of gravity, and in order to defy gravity you need a large amount of energy.

Although in American society allows for upward mobility and rewards with social recognition those who make it to the top and remain there, it naturally posses a strong gravity force. We recognize this force as competition from our piers, lack of liquidity to finance a business, or just market pressures imposed by the desire of everybody else to retain and increase their wealth.

Now, I live in Florida, and I grew up during the Apollo era, so I have a love for everything related to space travel and I enjoy watching the powerful blasts of the rockets when they launch the shuttle. It amazes me and bothers at the same time the amount of energy we are freeing in order to send scientists and occasional tourists to circle the globe. As you know, launching space vehicles is risky business, and a small piece of debris can destroy a mission.

If you followed the analogy so far, that’s what the get rich schemes are: Rockets that try to negate the forces of social gravity to put you very high very fast. My question is, if NASA and the private industry, with wealth of scientists at their disposition to analyze every possible variable consider rocket launching a risky enterprise, why would anybody accept with blind fate that any plan for getting to outer space without effort may have any chance of success?

There are other ways to reach high altitudes that are not vertical launches, the alternative is parabolic flight. A parabolic flight is the normal flight of every commercial airplane. To clarify this, let me tell you that if a commercial airplane launched vertically from New York, it will reach Europe in a matter of minutes, not hours, and although it sounds tempting (above all if you are a frequent flyer), it will require an enormous amount of energy and probably special training of every single passenger. What’s more important, families with infants would not be able to travel (and, I know, if you are a frequent flyer you don’t think that’s a bad idea either). But you are starting to get one of my points, if you want to go very high with your family, you may need to chose a parabolic flight, longer and boring, but safer.

So, what kind of vehicle do you have to make it to the top?

You may have some inheritance, and that will help you. You may be particularly talented in a marketable skill. You may have an extraordinary inner strength an unflappable goal setting skills, and all of these things will help you. However, most of us are in a situation where our job can be performed by a machine, or by another worker in another country willing to work for a fraction of what we would, most of us do not have natural extraordinary skills (by definition), and most of us get distracted from our goal of getting rich by stupid things like love, friendship, parenthood or family ties.

After you know the vehicle you have, and you figure out how to improve it, you need to figure out the amount of energy you will need for the climb. Are you going for the mad rash? Are you going to take the scenic route? Are you going to try to climb a burning rocket jumping into every single new “get rich now” scheme to get burned with technology stocks of technologies you know nothing about, real estate deals that you hardly understand, or commodities that you never before heard of?

Let’s face it. You may not count with the right vehicle to reach the top, and you may not have the energy necessary to do it. And you know what? That’s fine.

Getting by sucks, and getting rich is overrated

The goal of making money should be to have enough to enjoy the social freedoms we attained. If you only make enough to get by, you lose on your freedoms. In a way, you are forced to give up on the possibility of exercising them because you are using most of your energy in trying to get by. If you are only getting by, you are at the steepest side of the mountain and you will have to make an extraordinary effort to acquire new skills that would allow you to enjoy more of your life. Forget for now getting rich and focus on how to get out the rut. After you achieved that, you may set yourself new goals, but trying to go from 0 to 100 uphill on a bicycle will only hurt you.

On the other hand, what’s the point of being rich? Do you really think it is going to bring you more happiness? Let me tell you, happiness and money are not related there is no connection between the two and there never was a connection.

Haven’t you had moments of happiness even you are not rich? Haven’t you perhaps been happy for a long time? For all I know, you may be a very happy person, and yet, for some reason, you want to risk that to be rich.

Maybe you have the illusion that getting rich will bring you social recognition. It is true. Society recognizes and idolizes people who become rich or just famous (which brings the immediate assumption of wealth), but also recognizes and idolizes people who do extraordinary things for others.

The whole idea of getting rich is overrated, overblown and is just an illusion that blinds us from changing those things we can actually change. Make our neighborhood better, contribute to social causes, raise a healthy functional family, or take care of the elderly. I do not know! You name it. There are so many things that require only a fraction of the effort that climbing the social ladder requires and that bring us so much more happiness that it is useless (for impossible) to enumerate them.

This article is part of the series "Redefining Riches"

  1. How Your 401k And IRA Rob You
  2. The Rags To Riches Trap
  3. You Are Not Going to Be Rich
  4. It’s the History, Stupid
  5. Ghosts and Demons

Franklin @ March 7, 2008

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