Is Stealing from the Rich the Answer?
On X I’m seeing a lot of posts saying that the wealth of the wealthy should just be seized. They look at the wealth that people like Elon Musk have amassed and think that we could all live a lot better if we just confiscated it and doled it out to everyone. I’ll admit that this might seem like an attractive idea. It goes against the commandment of “Thou Shall Not Steal,” but if you’re not religious, why should you care?
In this article, I’ll go into why stealing from the wealthy is not a valid path to improving the lives of the common man. In fact, it will make life worse and eliminate the path that currently exists for common men to make a better life for themselves. I’ll also discuss what actually will make your life better.
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How wealthy are people like Musk?
A quick Google search will tell you that Elon Musk’s net worth is around $400 B – or about half of a trillion dollars. Likewise, Jeff Bezos has about $115 B and Microsoft Founder Bill Gates has $156 B. Certainly this is far more money than they could ever spend and far more than even their whole extended family could ever spend. But the truth is that they actually are far less wealthy than this.
To understand why, realize that their net worth is calculated in a lazy way, especially for their shares they have in the companies that they founded. For example, Musk’s stake in Tesla is valued at $145 B since he owns about 13% of the shares. This value is determined by multiplying the share price of Tesla (what price a few shares traded for when the markets were last open) by the number of shares he has. Given the value and that Tesla is trading at around $420 per share, Musk must have around 145 million shares of Tesla.
But what would happen if Musk were to sell all of his shares in a relatively short period of time? This would be like going to a large city like San Francisco or Dallas and selling all of the homes in the city within the same month. Obviously, to sell a home, you need to find someone who both wants to own the home and sell it to them at a price they are willing to pay. You would also have to find people who had enough money to buy the home. Do you really think you could find many people who would want to live in San Francisco who are not living there already in a short period of time if you charged anything close to the price of the homes there right now? You’d need to drop the average price down to maybe $50,000 per home.
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How many people who don’t already want to own Tesla would buy Tesla shares if Musk were dumping them on the market? What average price would he get for the shares? $200? $100? $40? His actual worth, meaning if he sold everything right now and turned it into cash, might be about 10% to 20% of what is quoted. This means that if you were to tax him at 50% of his net worth in a year, you’d be likely to get a quarter of his stated net worth. Plus, he would need to sell everything, and after that the game would be up. You would have killed the golden goose and there would be no more golden eggs for you.
So, if you went out and took all of the wealth that the very high net worth people have, you’d get maybe 10-25% of what you think you would. Also, once you took it and spent it, there would be no more wealth. It would all be gone. In addition, a lot of people would be out of work since a lot of companies would go bankrupt and a lot of companies that would have gotten started wouldn’t because investment in businesses would all dry up. No one would want to risk their money and invest if it could all be taken away.
And what would each person get? In Musk’s case, each person would get about a thousand dollars. Not exactly a windfall that would take you into retirement. The reason is that even though he has a high net worth, there are a lot of people you’d need to divide it up with.
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Your necessities come from your work.
Another socialist idea is that we could just take money from wealthy people and dole it out to cover the basic needs of everyone. “Why should people need to work for their food, shelter, clothing, broadband internet, NetFlix, and so on?” Why not just give out enough money for everyone to get these things and then if people worked, they could buy additional stuff? This idea, called a Basic Minimum Income or BMI, is a popular idea among socialists.
The issue here is that you miss what money really is. Money is an IOU to facilitate trading. It is not, in itself, anything of value. You can’t eat money.
Let’s say that we gave everyone $2000 per month to cover their rent, food, and lights. Let’s then say that they all decided they didn’t feel like working this month since it’s cold out, so they all took the month off. What do you think they’d find if they went to the grocery stores?
The stores first off would be closed since there would be no one at the stores since everyone was taking the month off. This wouldn’t really matter, however, because even if they were open, there would be nothing on the shelves since there would be no one to place it there, or transport it from the central facilities, or prepare the food and box it up, or harvest the food from the fields. There would be no gasoline or diesel fuel to put in the tanks of all the people who do these things either since there would be no one within the entire supply chain for fuel. And there would be no one at the gas stations to sell the gas and diesel.
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The food that you eat and the things that you use are only there because other people made them, transported them, and put them on the shelves. You can only acquire them because there are people working who can then sell them to you. Having money is not the same thing as having necessities. All of the people who work everyday create those necessities. They then trade them to others who are creating other necessities. Without people spending their time creating these things, they will not exist. If people spend less time working, there will be fewer things. BMI is a path to poverty, not prosperity.
Think about your job. What do you do for other people? If you were not there doing that job, and there was no one to take your place, that job wouldn’t get done. That means that whoever receives the benefits from your actions (your customers) would not receive those benefits. It also means that they would probably not do whatever it is that they do that you, perhaps, benefit from.
You get to keep most of what you make.
Here’s another secret those promoting socialism won’t tell you: You keep most of the value of the goods and services you produce. If you create $20 in value per hour by doing your job, you probably get to keep at least $15 of that. Sure, your company may take in $50 per hour, but after paying for rent, lights, the cost of the goods, and all of the people in the company that make it possible for you to sell the item, the net profit is probably about $20 per hour and you get $15 to $17 of that. It isn’t like they are keeping most of the money and giving you a very small amount for your labor.
So, how do other people become so wealthy if you’re keeping most of the value of your labor? The answer is scale. If the owner of a company employees 10,000 workers and gets just $1 per hour from each of them, he’s making $10,000 per hour or about $21 M per year. His employees, on the other hand, make $312 M collectively if they average just $15 per hour in pay.
Why do we pay these guys anything?
OK, so the owner only gets $1 per hour from our work. Why should he get anything?
The reason is that the owner makes an environment where we can make more money per hour than we could make without him. There is nothing to stop you from creating all of the necessities you need for yourself. You could grow your own food, make your own clothes, build your own shelter, and gather wood for heat and light at night. Pioneers have done this for centuries and homesteaders still do it today (although with some trading to get better tools and materials).
But an employer provides the ability for us to trade our labor for all of these things rather than need to make each of the items ourselves. We can specialize on doing one useful thing and thereby get really good at it. We can then get paid and trade the money from our labor for the things that we need. Because everything can then be made at scale by people dedicated to it, tools that make the work a lot more efficient can be created and the cost to make those goods (as measured in manhours per item) becomes a lot less. It might take you 300 hours to make cloth and then sew a dress all by yourself. You can get a far better garment than took a group of people maybe 30 minutes to make from harvesting the raw materials until the dress is made and on the rack.
Access to expensive tools and other resources is another great reason for working for an employer. Employers provide the tools, the idea, the marketing, the location, and coordination of the workforce to allow you to make more money than you could on your own. (If this isn’t the case, why would you be working a job?) So, maybe the company takes $2/hour from the $30/hour that you earn, but without the company you could only make $5/hour. Certainly trading $2/hour for an additional $25/hour is a good trade.
So what if the company employees 1000 people and therefore the owner makes $2000/hour while you’re only getting $28/hour? You aren’t doing anything for the other 999 people the owner is helping. He is, so he gets a small cut from the additional money they make.
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How can you make more?
OK, so taking money from Elon Musk won’t allow you to cover your basic expenses without working. In fact, it would destroy the businesses that allow you to easily make enough to cover your basic expenses and then some. What can you do that will actually allow you to make more money and live a better life?
Well, obviously you could do what Elon Musk does and start businesses. You would need an idea, then you would need to do the hard work of getting it into place. You would probably need to work a lot of hours for “free” as you built the business. You would need to hire a bunch of people and deal with their issues. You would have some employees that would think you were ripping them off and that they should make far more than they get paid. You would need to deal with employees who were stealing from you. And you would have the welfare of all of those employees in your hands. A big responsibility.
An easier way is to hire people like Elon Musk to create a business for you. You can buy shares of stock in $TSLA and get access to Musk’s ideas. You could buy shares of Microsoft and get dividends from Bill Gates’ flagship company. You could just buy an ETF like VOO (Vanguard S&P500 fund) or VB (Vanguard Small-Cap Fund) and get money from thousands of companies and all sorts of people with good ideas.
Just like the business owners do, you would be helping others earn more from their labor. In this case, you would be providing money to the companies executives so that they could buy better tools, buildings, and do other things needed to run their business. In exchange for making more money, they give you a portion. The more of your money you let them use for this purpose and the bigger their businesses get (actually, your business, since you are an owner), the more you could receive.
Start now and keep adding to your portfolio each year and in a couple of decades you could be in the position where you no longer need to work to cover your needs. You have this available to you right now. If you raise taxes, trying to take money from billionaires, this opportunity will go away. Be careful of what you wish for.
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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.
