The rich get richer. This was the topic of a very interesting analysis sent to me by one of my readers. We have all read the headlines about people like Bill Gates and Elon Musk and the massive amounts of money they have accumulated. We have also read how they have used the power of that money in support of their various personal views and projects; some appear to be excellent, others not so good, depending on your point of view.
The article I read analyses why this process of the rich getting richer hasn’t ended up with one person, or one country for that matter, in control of the world. The article tries to figure out what stopped that happening: From Alexander the Great through the Roman and British empires to the Rothschilds, the Rockefellers, the United States, Russia and Bill Gates. The same process will also probably apply to Xi Jinping, China and Elon Musk, eventually.
The article states that in the past three decades, the share of U.S. wealth held by the top 1% has gone from 24% to 32%. Like most cliches, “the rich get richer” became a cliché because it’s true… of money, and power. The powerful tend to aggregate more power: Incumbents, for example, get re-elected 90% of the time.
It makes sense. Money buys you power and influence, which begets more money, which buys more power and influence. This is the basis of capital accumulation and wealth creation – an upward cycle. It’s also the reason we “should” have progressive taxes and regulation: to prevent the natural order of economics from doing its thing, making rich people richer and poor people poorer.
However, what makes no sense, in this scenario of “the rich get richer”, is why does one entity not end up having all the power? Why don’t a few families control all the wealth and one or two governments control the globe? Why isn’t there a president of Earth?
A sobering, and perhaps reassuring, fact: As much as it seems that power and wealth are centralized, the world’s richest man owns just 0.04% of the world’s net worth.
Throughout history, nobody has come close to amassing total control. The mightiest empires were still minority owners of planet Earth. Before her death in 1901, Queen Victoria oversaw a kingdom that spanned roughly a quarter of the globe’s land surface and ruled just 23% of the world’s population. At its peak in 1300, the Mongol Empire controlled about 18% of the Earth. The Roman Empire was even smaller (4%).
As they gained territory and resources, each empire continued to expand. Britain, in 1910, had witnessed six decades of growth. With each land grab came greater stores of resources, more coffee and molasses to import to their island. This created new markets and business opportunities to fund more land grabs. And the wheel turned.
However, from the British Empire to the Qing Dynasty, to the Ottomans, they all have one thing in common: They all fall.
A celestial pillar of the universe seems to be that it abhors absolute control. No individual or institution has ever achieved it. Apex predators cannot eliminate their prey without starving themselves. If there are too many wolves eating too many deer, the wolf population declines, as they run out of deer! Balance is fundamental to ecological systems, and the same is true (over the long term) in our human-made world. But why?
A powerful entity, or person, collapsing under the weight of their own success is not a novel concept. The Ancient Greeks had a word for it: Hubris, an excessive confidence in defiance of the gods. For us, it means excessive confidence preceding downfall. Which more or less equates to the same thing, because for the Greeks, defying the gods almost always led to death.
The Peter Principle holds that because people get promoted on the basis of prior performance, they will inevitably rise to the level of their incompetence. I think that also applies to institutions of all sorts including countries. Our brains make it easy for our ambition to exceed our ability: The Dunning-Kruger effect describes a demonstrated cognitive weakness, that the less we know about something, the more we overestimate our knowledge. That’s why stupid people, and people who make great cars and then buy media companies, are so dangerous!
The inevitable collapse of the powerful is a good thing, and I’m glad we live in a universe that seems to embrace this as a governing principle. Absolute power and wealth concentration are incompatible with the innovation that characterizes humanity’s upward movement. The crashing to Earth can cause collateral damage, but it’s a creative destruction. The rich get richer but only for a while.
So, what is the lesson, what can be learned? Every day, no matter how successful we become, we need to earn our success. We need to be kind and appreciative; we need to surround ourselves with people who will push back on us, and question our beliefs and actions. We need to demonstrate humility. You are never more susceptible to making a huge mistake than right after a big win, when you begin to believe the falsehood that your success is all about you. Yes, you’re brilliant and hardworking, but greatness is in the agency of others, and timing (and other features of luck) is everything.
The flip side is less discussed, but more important. When you’ve fucked up, when things are going poorly, a relationship ends, you have professional disappointment, or you’re in financial stress, forgive yourself. Mourn, then move on. And moving on means finding the people and activities that give you the strength and confidence to believe you have value, that you are the solution to your firm’s needs, and that you could make someone else’s life wonderful. I have known many really successful people. But there’s a distinction between success and happiness. It boils down to registering one truth and surviving the accompanying emotions: Much of your failure, and your success, is not your fault.
I thought this was an interesting analysis, worth repeating in a blog and, if you are in the United States during this week of Thanksgiving, something to celebrate being thankful for.