By Derek Bullen
If you don’t know us, you won’t understand us. Few people have a frame of reference for the tremendous amount of work entrepreneurs and wealth creators do. The long hours, dedication and need to succeed must be similar in many ways to an athlete working hard to turn their talent into a career. There are multiple misconceptions about the rich. The first thing most people don’t know is that you cannot become rich without paying most of the money you make to everyone else first.
Take Amazon as an example. In 2020, the value of Amazon increased by $570 billion on paper. Jeff Bezos owns about 10 percent, so his net worth, from the company he created and founded, increased by $57 billion. At the same time the remainder, $513 billion (just over half a trillion dollars!) was created for everyone who is a shareholder in Amazon. There are individual shareholders but 60.7 percent of Amazon is owned by institutions like banks, pension funds, labor unions, and governments. Companies and other institutional investors own Amazon. When you get a loan for a car, a pension as a teacher, or home insurance after a fire, there’s a little bit of Amazon wealth making each transaction possible.
Another myth is that the rich don’t pay their fair share of taxes. The rich actually pay most of the taxes in society. In the USA, about $1.6 trillion is brought in each year through the taxation of the population. The top 1% of earners pay 40% of the $1.6 trillion, more taxes than the first 90 percent! That’s right, 90% of the population of the USA is getting a free ride on their taxes courtesy of the 1%! In fact, in a typical year 44% of the population pay no federal income tax, however in 2021 57% of American earners did not pay federal income tax. If the 1% were incentivized to leave, the USA would lose funding for 40% of the roads, schools, military, infrastructure, and other government services we all enjoy.
Hard to believe for some, but CEOs are fairly paid for the work they do. In 2020, CEOs in the top 350 firms in the U.S. were paid on average $24.2 million, including all options. In the same year they created billions in wealth for society. Although $24.2M sounds like a hefty payday, it is paltry compared to the $230 million on average earned by top musicians, and $280 million on average earned by top athletes.
Being a CEO is like being the chef and host of a large dinner party. You invest the money in groceries, hire workers to cook and prepare a wonderful meal for everyone. Then, once everyone is fed and paid, consuming most of what you made, you get a plate for yourself. Mainstream media then comes and criticizes you for making and eating a meal while ignoring the thousands you fed first.
French economist Thomas Picketty wrote an epic essay citing the wealth inequality gap as the main cause of poverty. Mainstream media was instantly fascinated by the idea. The accusation sells papers! In the last decade, articles on poverty in the USA have only increased by 26%, despite it being a major issue. In the same timeframe, articles about wealth inequality increased 533%. These articles are misinformed.
The rich don’t take money from the poor. Wealthy people generate wealth and opportunities for others. Poverty is a key societal issue in its own right. There will always be those among us who are poor, some can’t work, and others won’t work. Jesus tells us in the Bible that there will always be the poor among us. However, when the rich get richer, fewer of our neighbors are poor. The business of creating wealth lifts over 50 million people a year out of extreme poverty. The world only had 15 billionaires in 1980 and the percentage of the global population living below the poverty line was a sadly at 45 percent. Today with nearly 3,000 billionaires globally, global poverty has been reduced to 22 percent and the trend continues downward. More prosperity leads to a longer life too. In the same timeframe poverty dropped in half, average lifespan went up from 61 to 73 years. Child mortality was cut in half too.
Whether you are poor or rich or somewhere in between, If you can work, you should work. It provides a sense of purpose and develops financial independence. A job matters. It is what we talk about first when we meet someone new. We apply our potential to the work in front of us, and in exchange we get paid. For many of us, our work is a meaningful exchange of energy. We spend the majority of our day working.
It’s important to work because wealth is an equal opportunity game. In 1984, fewer than half the people on the Forbes 400 list of richest people were self-made. Most of them had inherited their wealth. Today, two-thirds of the billionaires made their money from scratch in their lifetime. With technology, information and global connectivity, wealth is a possibility open to anyone who has the talent and wants to work insanely hard for a prolonged period of time.
Derek Bullen is Founder and CEO of S.i. Systems, one of the largest professional services companies in Canada, with thousands of information technology consultants working on projects for blue-chip corporations and government agencies across Canada. His new book is In Defence of Wealth: A Modest Rebuttal to the Charge the Rich Are Bad for Society (Barlow Books, 2022), and previously published High Velocity, a book to help new IT professionals develop their soft business skills. Learn more at bullenbooks.com.