LESSONS LEARNED #41: “The want of unearned money is the root of most evil.” -Old Pithy

Posted by PITHOCRATES - November 26th, 2010

Money is a Temporary Storage of Wealth that Makes Trade Efficient

People don’t want money.  They want what money can buy.  A dump truck full of money is useless when there is nothing to buy with it.  For money is nothing more than a temporary storage of wealth.

We make or do creative things.  Things or services that people want.  There is a world full of people making goods or providing services other people want.  Some people make cellular phones.  Some people make microwave ovens.  Others provide landscaping services.  And these are the things we want.  Not money.

Money is a tool.  We use it to make trading with each other easier.  People who make cellular phones don’t need to find someone who makes microwave ovens to trade with.  Instead, they receive money for the cellular phones they make.  And the microwave oven makers receive money for the microwaves they make.  Then the cellular phone makers and microwave oven makers can take that money and trade it for what they want.

Our Human Capital Determines the Size of our Paycheck

We call the skills we accrue over time that lets us make or do things that other people want ‘human capital’.  People that have human capital have jobs.  Employers hire them because they have valuable human capital. 

Some people have so much human capital that they start a business.  They’re very good at bringing together an idea, people and resources to make valuable things or services that other people want to buy.

People with human capital are traders.  Just like in ancient Mesopotamia.  Nothing has changed.  Except that we trade more efficiently these days because of money.

It’s Easier to Steal Money than Televisions and Mansions

Not everyone traded.  Some people stole.  Some fought.  When peoples came into contact with each other, they often fought each other.  And the winner took the spoils.

Not much has changed today.  There are people who still steal.  And they are peoples who still conquer.  The only difference really is the efficiency of some theft.  Again, this is due to money.  It is more difficult to steal a 42″ plasma television than it is to steal $750 (which they can use to buy a 42″ plasma television). 

Likewise, it is more difficult for a politician to steal a million dollar mansion than it is to steal money.  Either as bribes from some special interest.  Or from taxpayers.

Unearned – Evil; Earned – Good

Those who steal typically have little human capital.  But because they still want those nice things they steal money.  The problem with theft, though, is that stolen money is transitory.  If you have human capital, you get a recurring paycheck.  Once you spend stolen money, it’s gone.  And you have to steal again.

This want of unearned money is the root of most evil.

People who earn their money with their human capital improve the lives of others.  The more they buy, the more others sell.  And the more jobs these others create.  And these jobs allow other people to use their human capital to buy other things.  Or even make charitable donations.

This want of earned money is the root of most good.

Rockefeller and Carnegie Made and Gave Away Fortunes

John D. Rockefeller made a fortune with Standard Oil.  He was ruthlessly efficient.  No one could refine, transport and sell petroleum products cheaper than he could.  People benefitted from affordable petroleum products.  And after he retired, he gave away vast portions of his wealth to charitable causes.

Andrew Carnegie made a fortune from steel.  Like Rockefeller, he was efficient.  No one could produce quality steel at a lower price than he could.  His steel built the skyscrapers and railroads of America.  He made a fortune.  And gave most of it away to charitable causes.

Most of the politicians that make it to Washington leave Washington as millionaires.  They sell themselves to special interests.  Raise our taxes so they can buy political favor.  And their policies are notorious for the unintended consequences that destroy (e.g., Aid to Families with Dependent Children (AFDC) destroyed black families). 

High Taxes and Lottery Tickets Punish the Poor

The federal government has created such an entitlement mentality that some people can’t survive without government assistance.  To fund their destructive policies, they’ve raised taxes on the wealthy.  And impoverished the poor.

With taxes so high, charitable contributions have declined.  Sin taxes (on cigarettes and liquor) have hit the poor especially hard (as they have less disposable income).  Which makes the poor more dependent on government.

But the ultimate insult to the poor has got to be the lottery.  The government entices the poor with illusions of getting rich quick.  And this want of unearned money causes the poor to spend large chunks of their small paychecks or government benefits (that they can’t afford) on lotto tickets.  Hoping to win the big one.  With some of the worse odds in the history of gambling.  (People have a better chance of getting struck by lightning than winning the lotto.  And few people believe that they will ever be hit by lightning.  But they’ll keep buying those lotto tickets.)

But whether a thief, a politician or the poor, the end result is the same.  The want of unearned money makes people make bad choices.  And people suffer because of those choices.

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FUNDAMENTAL TRUTH #41: “The want of unearned money is the root of most evil.” -Old Pithy

Posted by PITHOCRATES - November 24th, 2010

Survival of the Fittest is not a Pleasant Way to Live

Whoever said that ‘money is the root of all evil’ got it wrong.  Money gives us peace.  It gives us safe societies to live in.  It’s money that has civilized us.  Differentiated us from the animals. 

Which kingdom is crueler to live in?  The animal kingdom?  Or the human kingdom?  Most will say the human kingdom.  They will point to the Nazis and World War II.  The death camps.  The horrors of the Eastern Front as the Soviets and the Germans waged perhaps the cruelest war of attrition known to history.  And then say check and mate.  Man is worse than animals when it comes to acts of cruelty.  As World War II so clearly demonstrates.

Well, yes, World War II is probably the greatest tragedy man has ever perpetrated against his fellow man.  But a lot of those who suffered and perished were doing so to end the tyranny of fanatical state socialism (Italy’s Fascists, Germany’s National Socialists and Japan’s militarists).  It was a struggle of good versus evil.  Where the evil were behaving like animals.  Using military power, ideology and cruelty in a pure Darwinian survival of the fittest.

Welcome to the Animal Kingdom where the Lame and Young are Eaten

Yeah, you didn’t see that coming, did you?  Only man sacrifices for the good of others.  Animals don’t do that.  That’s why they have so many babies.  Because animals prey on the most defenseless.  They don’t help them.  Babies are easy food.  So they have a lot of babies because so few make it to adulthood.  Because others eat them. 

When a soldier falls in combat, others will risk their own life to drag him to safety.  So many do this.  And the few we see we recognize for this extraordinary act of bravery that is above and beyond the call of duty.

Our nation recently awarded Staff Sgt. Salvatore Giunta the Medal of Honor.  Our highest decoration.  While serving in Afghanistan.  He is the first living recipient of the Medal of Honor since the Vietnam War.  This is what men do.  Perform selfless acts of bravery to help others.  And people like Staff Sgt. Salvatore Giunta make the world a better place.

You know what a hurt animal is?  Easier food.  While the other animals run away, predators eat the slower and lame.  Another reason why animals have so many babies.  They’re still food as they grow up.  And they never stop being food.  This is the animal kingdom.

We Used our Brains more than our Brawn

Say what you want about the cruelty of man, but we don’t eat our babies.  Or our lame.  Most of us live out of the elements.  Many in a warm and cozy house.  The necessities of life come rather easy for most.  Whereas lots of animals perish from the lack of food and water, in America even the poor are obese.

So how did this happen?  How did life get so easy for man compared to the animals?  Yes, our opposable thumbs helped.  And our big brains.  But even with these we were still hunters and gatherers.  And when you hunt and gather, you need a lot of land to hunt and gather on.  Because food just isn’t that plentiful in convenient small areas.  So they traveled.  And came into contact with other hunter and gatherers.  Who they then fought for the limited food supply to survive.

This all changed when we used our brains more than our brawn.  Instead of gathering food, we farmed.  Instead of hunting, we raised cows, pigs, chickens, etc.  As our food supply became steadier, we could do other things besides tending to our food supply.  We thought.  We innovated.  We improved.  We created.

The Barter System was Good but Inefficient

Of course, we were able to do these other things why?  Because not everyone had to be farmers.  But these people still needed food.  So what did they do to get food?  Steal it at every opportunity like in the animal kingdom? 

No.  In the beginning, they traded for food.  A tool maker traded his tools to a farmer for some of his food.  We call this kind of trading the barter system.  It’s an improvement over stealing what you want but it has its problems.  What if the tool maker only makes one kind of tool?  And the farmer already has three?

This is the big downfall of the barter system.  Searching for someone that has something you want AND wants what you have.  The longer it took to find these people to trade with the more time you spent searching than making something.  These ‘search costs’ became costly and made barter inefficient. 

If only we could find something that would make this trading process more efficient.  Something that would allow me to spend less time searching and more time making things.  Something that could temporarily hold value that I can trade for.  That I then could trade with other people for what I wanted.

Money Made Trade Efficient.  And Allowed us to Live Together in Peace and Harmony

We call that ‘something’ money.  And it has exploded the efficiency of trade.  It made it very easy to buy the things you wanted by using the money you made selling the things you made.  Markets where all this buying and selling took place became cities.  Living standards increased.  We were able to live in peace and harmony with each other like never before.

It is our creativity and the things we make or do that allowed this to happen.  Money just made this ‘human capital’ more efficient.  And the more money we accumulated from our human capital, the better everyone lived.  Because we produced more things that people wanted.

But there are those without this human capital.  The lazy.  The shiftless.  Criminals.  Lawyers.  And politicians.  They don’t create anything.  They just want to profit from the human capital of others.  To steal, if you will.  And it is this want of unearned money that is the root of most evil.

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