Shopsmith Forums

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Ed in Tampa wrote:I found this mind blowing chart of American Wealth. It is 6 minute long video, you owe it to yourself to watch it.

It answers Dusty's question of who are the middle class.

http://www.dailytelegraph.com.au/business/mind-blowing-chart-on-the-richest-americans/story-fn7ki9fd-1226589884653

There are some interesting comparisons and "shocking" statements in that clip. The problem is that I don't know how and they don't tell me how to validate that data. Nor do they tell me clearly who prepared that data.

Good data, properly collected and presented can be mind changing but, at the same time be absolutely scarey if presented with a biased objective.

To get a good example of this, look at some reruns of campaign speeches from the past. Please note - no party affiliation with this statement. All campaign speeches are prepared with a biased objective.

Something akin to class warfare.

I found myself asking what is this persons agenda? What is the purpose of this presentation?

My greatest and most valuable reward was entirely unearned. It was a gift. While I have yet to FULLY enjoy it, I know some day I will, and in the mean-time I'll give thanks for it and continue to go to work each day, grateful that I have a job!

Actually you cannot begin to tell who is wealthy by where they live or how they live or what they drive... When my son was a teen he often commented about someone with new cars and an extra nice house etc. as them having money. My response was always that it was much more likely that what they had was a lot of debt...
They were probably making payments on both cars (or more) and a house payment that would scare me to death.
There is a guy I know that had a lot of costly toys and a lot of people thought that he was doing well. I knew that he had 2 mortgages on his house, a separate payment for his pool, another on a boat and 2 more on their cars. He also had an $80,000 credit card debt + interest. Then he got to fooling around and the usual accompanying divorce... It didn't go well...
He had not had a good example, his father lost a high value 20 acre field off of the corner of his farm (on a state highway) in a poker game...
On the other hand I have a friend that I used to think was worth maybe 6 or 8 million dollars. Further information leads me to believe that he is worth more like 15 to 20 million or possibly a bit more . He lives in a nice remodeled brick farm house on an ordinary looking farm (he is not a farmer) a mile from me. He is a peach of a guy and we share an interest in old Gravely garden tractors among other things. He lives simply and usually is one of the few guys around that drives an old half rusty clunker of a pickup that looks worse than some of the old farm pickups that I have driven.
I have frequently observed that ones success is often more related to luck and coincidence than to good planning, hard work and mental abilities.
There is an old expression that "farmers live poor and die rich". That can sometimes apply to some other self employment situations that require a big investment in equipment or facilities. My financial statement is really quite good (but nothing like my friend ) but I still run out of disposable cash to buy some things I would like to have. It's not like I have too many wants... Well, yes it is.

Whoever wrote the original article very clearly had a ax to grind. Or more likely, advertisements to sell.

First, it should not matter to society how much one owns, but rather, how much does one consume? Warren Buffet is filthy rich, yet lives modestly, and has convinced many other billionaires to give away their fortunes when they die. He also lobbies for a more fair tax code that makes the rich pay at least as much as their employees. Does this make him a bad guy? I think not, but I bet that his personal wealth was quite sufficient to skew the reported numbers.

Now for Bill Gates. Did he get filthy rich by stealing from the poor? Nope, he did it by successfully commercializing the class of machinery that you and I are right now using to facilitate this debate. I would argue that he did not take that wealth, but rather that he CREATED that wealth. And he is now spending his time, talents, and fortune to try and sustainably improve the conditions of the much less fortunate worldwide.

Of course, these are the obvious good guys. But without free enterprise, where would we get them from?

Now for the bad guys. With the likely exception of Bernie Madoff, almost no one thinks of themself as a bad guy. But a lot of people work hard to get paid more than the are really worth. And many of them succeed.

So what is a good day's work really worth? As a budding entrepreneur, I used to ask myself this question often, especially when compensation review time came around. It really drove me nuts, because in a small company, virtually EVERYONE is indispensable. Yet you obviously can't pay every employee 100% of your revenues.

After several years, reality became apparent to me, and I subsequently slept much better at night. The determining factor of a fair wage in a free economy is, and MUST be, what it costs to replace the employee, based on current market wages. If you offer too little, you cannot find a replacement. If you offer too much, your costs will be higher that your competitors', and you will slowly and surely lose margin and/or market share until your company dies. At which point all of your employees are either jobless, or more likely are working for the competition at market wages.

This explains a fair amount, such as "why do social workers make so much less money than doctors?". Simple supply and demand, and the AMA keeps the supply of doctors pretty tight. AKA the Mercantilist system.

As for the statistics in the thread starter, the one about CEO's making a gizillion times more than their employees rings true, but is also misleading. Methinks those would be FORTUNE 500 CEO's most likely. And why do they make so much? I have two theories: 1) they are incredibly brilliant, and thus virtually irreplaceable, or 2) they have a pretty good history of success, and are alse VERY good at gaming the system. Personally, my money is on Theory #2.

Now don't even get me started on the fairness of the current tax code. Capitalism should be encouraged. It is a brutally efficient system for creating wealth. But representative government does have a legitimate role in mitigating the brutality. At present, the wealth seems to be overly effective at buying votes, and thus tax codes that result in wide disparities of wealth (or more importantly, consumption).

Personally, I'd love to vote for Warren Buffet for President of the U.S. of A., even if he is old enough to be a Platinum member of this forum!

BuckeyeDennis wrote:Whoever wrote the original article very clearly had a ax to grind. Or more likely, advertisements to sell.

First, it should not matter to society how much one owns, but rather, how much does one consume? Warren Buffet is filthy rich, yet lives modestly, and has convinced many other billionaires to give away their fortunes when they die. He also lobbies for a more fair tax code that makes the rich pay at least as much as their employees. Does this make him a bad guy? I think not, but I bet that his personal wealth was quite sufficient to skew the reported numbers.

Now for Bill Gates. Did he get filthy rich by stealing from the poor? Nope, he did it by successfully commercializing the class of machinery that you and I are right now using to facilitate this debate. I would argue that he did not take that wealth, but rather that he CREATED that wealth. And he is now spending his time, talents, and fortune to try and sustainably improve the conditions of the much less fortunate worldwide.

Of course, these are the obvious good guys. But without free enterprise, where would we get them from?

Now for the bad guys. With the likely exception of Bernie Madoff, almost no one thinks of themself as a bad guy. But a lot of people work hard to get paid more than the are really worth. And many of them succeed.

So what is a good day's work really worth? As a budding entrepreneur, I used to ask myself this question often, especially when compensation review time came around. It really drove me nuts, because in a small company, virtually EVERYONE is indispensable. Yet you obviously can't pay every employee 100% of your revenues.

After several years, reality became apparent to me, and I subsequently slept much better at night. The determining factor of a fair wage in a free economy is, and MUST be, what it costs to replace the employee, based on current market wages. If you offer too little, you cannot find a replacement. If you offer too much, your costs will be higher that your competitors', and you will slowly and surely lose margin and/or market share until your company dies. At which point all of your employees are either jobless, or more likely are working for the competition at market wages.

This explains a fair amount, such as "why do social workers make so much less money than doctors?". Simple supply and demand, and the AMA keeps the supply of doctors pretty tight. AKA the Mercantilist system.

As for the statistics in the thread starter, the one about CEO's making a gizillion times more than their employees rings true, but is also misleading. Methinks those would be FORTUNE 500 CEO's most likely. And why do they make so much? I have two theories: 1) they are incredibly brilliant, and thus virtually irreplaceable, or 2) they have a pretty good history of success, and are alse VERY good at gaming the system. Personally, my money is on Theory #2.

Now don't even get me started on the fairness of the current tax code. Capitalism should be encouraged. It is a brutally efficient system for creating wealth. But representative government does have a legitimate role in mitigating the brutality. At present, the wealth seems to be overly effective at buying votes, and thus tax codes that result in wide disparities of wealth (or more importantly, consumption).

Personally, I'd love to vote for Warren Buffet for President of the U.S. of A., even if he is old enough to be a Platinum member of this forum!

Dennis
You make some really good points and you are right in most of them. I think in you assessment of CEO's you missed one crucial thing, many are born into the position and use their money and power not their brillance or gaming ability to sustain them. In fact many are hideously unprepared to lead anything and yet being part of the "club" often get named as board memebers in other companies.

I do totally agree with you on the tax situation. The whole concept of lobbying and all that goes with should be outlawed and each political race should have a non exceedable cap on spending.

One thing with employees and their value to a company. Many companies view employees as commodities, forgetting to included intangibles like character, loyality and experience. Give me a person with integrity, work ethics and loyality and I will give you ten that don't possess those qualities and I would still be ahead of you in the deal. Give me a person of experience and common sense and I will give you 5 that don't possess those qualities and I will be ahead of you again. And these are traits that don't show up in job applications or new hire evaluations. These traits are learned of the person by working with them.

I'm a strong advocate of the apprenticeship concept of employment. Everyone starts at the bottom even the future CEO, college graduate or not and works their way up. Some companies are now doing this using the concept of temp employees that get hired on after some length of time.