Beirut, the capital city of Lebanon, and its metropolitan area by NASA Johnson is licensed under CC-BY-NC-ND 2.0
" data-orig-size="1024,683" data-image-title="Beirut, the capital city of Lebanon, and its metropolitan area" data-orig-file="https://smallivy.files.wordpress.com/2023/05/49195322968_614dff29d3_b.jpg" data-image-description="" data-image-meta="{"aperture":"0","credit":"","camera":"","caption":"","created_timestamp":"0","copyright":"","focal_length":"0","iso":"0","shutter_speed":"0","title":"","orientation":"0"}" data-medium-file="https://smallivy.files.wordpress.com/2023/05/49195322968_614dff29d3_b.jpg?w=300" data-permalink="https://smallivy.com/2023/06/04/socialism-will-not-make-life-better-investing-will/49195322968_614dff29d3_b/" alt="" class="wp-image-23355" data-large-file="https://smallivy.files.wordpress.com/2023/05/49195322968_614dff29d3_b.jpg?w=723" />Beirut, the capital city of Lebanon, and its metropolitan area by NASA Johnson is licensed under CC-BY-NC-ND 2.0More and more I’m seeing articles and tweets calling for Basic Minimum Income, reduced hour work weeks, lavish vacation benefits, and other socialist ideas. Many of the authors of these articles and tweets are people unhappy about needing to work so much and wanting to cut their worktime down while maintaining their lifestyles. Others are thinking that as a wealthy society we can just provide for the basic needs of everyone without them needing to work at all. These ideas are socialist in nature, meaning they take resources from those who produce them and have the government dole them out to others based on perceived need. To put it succinctly:
Production is taxed. Need is rewarded.
Contrary to the insistance of those calling for these policies, they are neither fair nor workable. If enacted, they would result in life being worse for almost everyone. In this article we’ll explain the basic economics behind work and ways to reduce the amount of work you need to do through investing. Socialism will make investing impossible and actually make your life harder, not better. We show you how to use capitalism to actually make life better.
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Why must we work so much?
It is true that the long work week leaves little time to hang out with friends or “have adventures.” Most people are working at least 40 hours per week, plus spending an hour or two per day getting ready for work and commuting there. That’s about half of your waking hours.
Socialists blame this on capitalism. The “evil overlords” are forcing people to spend so much of their time working just to survive. Their solution? “We need to provide a Basic Minimum Income to everyone so that people don’t need to work so hard for their basic needs.” They also say we should also go to a 32-hour workweek so people have more time and there are more jobs. “Shouldn’t we be able to work less and have everything we need?” I agree, this sounds nice.
But are we working more than we need to survive because of capitalism? Actually, things are easier and we can get what we need while working less because of it. To understand why, let’s say you tried to get everything you needed without capitalism. There are no jobs, no bosses, and no factories to go to. Would things be better without these vestiges of capitalism?
Let’s say that you lived all alone in the woods. You made your own shelter, grew your own food, hunted for meat, preserved your food, made your clothing, made and maintained your tools, and so on. How much of your time would be spent working and how much would be spent relaxing?
If you’ve ever tended a sizeable garden, you know that it takes a few hours per day weeding, fertilizing, and watering. Even picking what is ready to eat is a chore that takes a good deal of time. You really need to be out there all of the time doing something to have a producive yield. And if you have invasions by pests, droughts, or cold periods, the garden will need imediate attention and can’t wait just because you have something else to do.
Hunting, sewing, maintaining a home, taking care of livestock, and other activities also takes significant time. Getting food prepared for storage will consume many hours. And if you’re working by yourself, you probably won’t have a lot of tools to make work more efficient. In this isolationist society there would be no Wal-Mart or Amazon from which to order things. There would be no delivery people because they everyone else would be busy taking care of their homes and farms as well. I’m guessing you’d get maybe a few hours per year where you weren’t doing something to maintain your life.
The fact is that it simply takes a lot of time to just survive. It isn’t that business owners make you work to survive. It is just that gathering or fabricating everything you need for just a simple life will require most of your waking hours. If you live in favorable circumstances where resources are readibly avaialble things get easier, but it is still necessary to spend a lot of your time gathering. Sorry, it’s just the way things are. Jeff Bezos or Sam Walton didn’t create this.
Couldn’t we just be provided with necessities?
Since we spend so much time working to just get the necessities, why can’t we just be provided with them? Well, where would they come from? Everything you use has the materials sourced and prepared, is fabricated, then is packaged and shipped somewhere so that you can get it by people working. If people like us aren’t out there doing these jobs that produce these products, they wouldn’t exist. You could take every dollar of every millionaire or billionaire and pass them out (and these would not go as far as you think), but when you went to the stores to spend them, there would be nothing there without people working.
And most of the time people spend working are spent making necessities and most money is spent for necessities. If necessities were just handed out without work, it would mean that most of the items produced would be handed out without anything being provided in return. Because these items were “free,” people could choose to not work at all and have evrything they need, or choose to only work to get extra things instead of necessities. There would be no compensation for the people making necessities since putting in effort yourself to get them would not be needed. There would be a huge imbalance where a lot more people wanted things than the amount of things produced.
For example, for simplicity let’s say that four people are in the population. Three of them are growing corn, the other one is making boats. Let’s say the three produce enough food for all four and that food is just given out. The person making boats can only make one boat per year. Who gets the boat? The guy who made the boat, in which case the three making food get nothing for their effort, or one of the three growing food, in which case the other three get nothing for their effort? In such a system, those who got nothing would quickly decide not to work at all or all go make boats for themselves since food was provided, but because then the three weren’t working growing corn, there would be no food available.
Capitalism makes things more efficient
Before capitalism, people spent most of their time working for a very meager lifestyle. It was not unusual at all to have a family of four or five, with the kids chipping in from an early age, living in a home that was 1000 sq feet or less with just one or two rooms. (The bathroom was probably a pit toilet outside.) Water was drawn from a well. Getting an orange for Christmas was considered a huge treat. Kids looked forward to spending a few hours at school so that they could get away from doing work around the house or farm.
‘Yeah, I’m proud to be a coal miner’s daughter
-Lorette Lynn, Coal Miner’s Daughter
I remember well, the well where I drew water
The work we done was hard
At night we’d sleep ’cause we were tired
Never thought of ever leaving Butcher Holler.”
Capitalism actually increases the amount of freetime you have while also increasing your lifestyle. By specializing in something and trading for things you need rather than having everyone produce everything for themselves, each person can specialize in one product or service. This means he can get very proficient at it and buy and maintain special tools and areas to work more efficiently. It is also often much faster to make extras of something than it is to make the first because you have everything setup and have the mental focus, so work is more productive.
For example, if you were working by yourself and you needed a well, you’d grab a shovel and get to work. It would probably take a few months, digging everyday, to complete a meager well. With capitalism, some people specialize in digging wells. Because they dig hundreds of them each year, they can invest in expensive digging/drilling equipment. People need to pay them quite a bit for them to dig a well, but it can be done in a single day or two because of the equipment and the experience that comes from digging wells all of the time. Comparing the time required to earn the money to have the well dug versus the time to dig it himself with a shovel, the homeowner spends far less time for the well, so he hires it out. This provides more free time.
So it isn’t capitalism that is causing you to spend so much time working. The hard fact is that it just takes a lot of time to make the things you need to live, plus all of the luxuries you enjoy. You may not make that car you drive, but you need to create enough other things to trade for it. Other people in turn spend large amounts of time making cars so that you can buy one by exchanging products that you make with others. But you spend far less time to get that car than you would if you were making it all on your own. (In fact, having a car anything like modern cars would be impossible.) Thank you, capitalism.
How do some people make so much more for what looks like a lot less effort?
One powerful thing about capitalism is that it rewards people based on:
- The number of people whose needs you meet and
- The criticality of the needs being met.
If you cook dinner for one person, you can trade the labor in cooking that meal to someone for something equivalent that you want. If you cook dinner for people all day, you can trade for a whole day’s worth of meals. You’re helping more people, so you get more in exchange. If you direct others in cooking meals, plus gather together all of the ingredients and space for the cooking, you can provide more meals to more people. This means that you can make more since you’re helping to meet the needs of mroe people. By coordinating the work of other people, you can help a lot more people than you could do on your own.
Now, the people who cook the meals receive money for their time, as do the people who grew/produced the food, provide the space for the meals, and provide all of the utilities, furniture, and so on. Because the people coordinating normally receive the money from the customers and then distribute it, it appears like they are paying for things. But, in fact, all money comes from the customers just as it would if the people were cooking for the customers and being paid directly. But the act of arranging everything and making it convenient has value and you can get paid for adding that value. By providing that service to more people, you can make more than you could by cooking the meals yourself.
How to make money without working
It is also possible to earn money without putting in any effort yourself, at least after putting in some level of initial effort. People are willing to pay for the service of using money that you have. Here you’re providing services or goods to others through your efforts, for which they give you a voucher (cash) to get things that you want. Rather than using that voucher immediately and trading it for things, however, you let someone else use that voucher so that they can get something now rather than going through the effort themselves and taking the time needed to earn the money. That has value to them, so they are willing to pay you something for use of your money.
This use of your money can come in the form of a loan or an investment in their business. In the former, you’re letting someone use your money with the agreement that they’ll pay you back plus a fee. With an investment, they agree to give you a percentage of the money they make through the use of your money. Because you’re taking more risk when investing than when you give a loan, you can normally earn a high return this way.
Because these options are available, after you’ve put in the initial effort to raise the starting capital you can then make money without putting in additional work yourself. By reinvesting some of the money you earn this way, you can even increase the amount of money you earn, evetually getting to the point where you don’t need to work at all and afford all that you need. It all comes down to the willingness to:
- Put in the initial effort to earn money to invest,
- delay use of the money for your needs, and
- continue to delay use of some of the money so that you can reinvest it and increase what you earn.
This will work as long as there are people who want to use your money and who can make productive use of it.
This is not some special priviledge that only rich people can use. It is available to everyone. Investing today is easier than ever thanks to the invention of mutual funds and exchange traded funds. You can get started investing for $3000 or less. Because earnings compound with time, the sooner you get started, the more you can make.
Getting started
If you want to start investing and making money without working, you’ll need to first get some money to invest. This normally comes from budgeting where you put some of the money you earn aside and let it build up until you have enough to make initial investments. This is probably the hardest part, but most people can at least put some money aside if they work diligently at it. Another possibility is to look for ways to increase your income through side jobs or working your way up at work.
The next step is to send your money into a mutual fund company like Vanguard or Schwab and set up an account. This can be done online in about 15 minutes. Money can be sent electronically or through the mail with a check. Setting up regular, automatic deposits from your checking account is a great way to make sure you’re investing regularly.
The next step is to invest the money. ETFs and index funds that invest in large areas of the markets are great ways to do this because the cost is really low and as long as you buy and hold for long periods of time, you’re basically assured of making a good return. A large cap or total stock market fund are great first choices. Some of these can be purchased for as little as $3000 to start, then additional investments for basically any amount can be made.
The final step is to reinvest most of the money. By doing this, your income will grow over time. By letting the money you earn through investing make money, you reduce the amount of work you need to put in. Because your investments won’t be making a lot to start, you’ll need to be sending in a decent amount from work to grow more quickly, but after several years of doing this, the money you receive from investments will equal, then dwarf how much you send in from work. Eventually it won’t really matter if you send in money or not.
Once the account starts generating enough income, you can start spending some of it, adding to your lifestyle or even replacng your work income. the trick is to not spend so much that you cause the account to shrink. You can only spend what can be replaced while also letting the account grow to compensate for inflation. The more you reinvest, the faster your account and the income it generates will grow.
Before you can start investing, you need money to invest. Please check out FIREd by Fifty: How to Create the Cash Flow You Need to Retire Early
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Have a burning investing question you’d like answered? Please send tovtsioriginal@yahoo.com or leave in a comment.
Disclaimer: This blog is not meant to give financial planning or tax advice. It gives general information on investment strategy, picking stocks, and generally managing money to build wealth. It is not a solicitation to buy or sell stocks or any security. Financial planning advice should be sought from a certified financial planner, which the author is not. Tax advice should be sought from a CPA. All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.