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Musings Report 2021-47 11-20-21 What Is Wealth?
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For those who are new to the Musings reports: they're a glimpse into my notebook, the unfiltered swamp where I organize future themes, sort through the dozens of stories and links submitted by readers, refine my own research and start connecting dots which appear later in the blog or in my books. As always, I hope the Musings spark new appraisals and insights. Thank you for supporting the site and for inviting me into your circle of correspondents.
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What Is Wealth?
The diverse nature of wealth is an enduring topic here because it ties together the world of finance, the tangible world of life's material essentials, the intangible world of inner values, goals, hopes and fears and the equally intangible world of skills, social capital, experience and agency--control of one's life and room to maneuver / chart a new course.
In other words, there are many answers to the question what is wealth? The answers that are most relevant depend on the circumstances.
One definition that will become increasingly relevant in my view is: freedom from helplessness.
Being poor increases helplessness by limiting options, agency and room to maneuver / chart a new course. If you don't have bus fare, you have to walk. If you don't have enough cash to pay the border guards' bribe, you can't get out of a country sliding into chaos. If you only have enough cash for a wretched dive, that's your only choice of accommodations.
We presume money can buy whatever we want, and the past decades of stability have reinforced this faith in the near-infinite power of money.
But as this excerpt from my new book explains, money can't always extinguish helplessness:
"Systems analyst Eric Bonabeau described how traffic gridlock forms without an accident, blockage or leadership:
"Traffic jams are actually very complicated and mysterious. On an individual level, each driver is trying to get somewhere and is following (or breaking) certain rules, some legal (the speed limit) and others societal or personal (slow down to let another driver change into your lane).
But a traffic jam is a separate and distinct entity that emerges from those individual behaviors. Gridlock on a highway, for example, can travel backward for no apparent reason, even as the cars are moving forward."
Once traffic freezes in gridlock, a magnetic leader (shall we say Napoleon?) stuck in a vehicle has no more power to relieve the congestion than any other participant. (A “whiff of grapeshot” won’t dissipate gridlock.) The wealthiest few in the costliest vehicles are equally powerless to escape or reverse the congestion." (end excerpt)
One can argue that the gridlocked rich person can charter a helicopter to swoop in and pick them up, but this presumes a helicopter is available, there is a safe landing zone nearby, the helicopter receives official clearance to attempt the landing and other contingencies. Absent the helicopter extraction, the rich person is just as stuck and helpless as the poorest person in the rusty pickup truck.
As I often point out, money only has value if what it can buy is readily available.
The global supply chain disruptions have been an education in vulnerability, dependency chains, chokepoints, systemic fragility and the hidden costs of optimization. Thanks to knowledgeable readers and correspondents, I've learned about the extreme fragilities of healthcare and gasoline/diesel fuel supply chains, but the chokepoints in system we assume are rock-solid--ports, truck drivers, containers, meat processing plants and dozens of other supply chains--has been a real eye-opener.
Even the wealthy rely on these same supply chains. Only the super-wealthy own their own ranches and abattoirs and have direct connections to sources of energy (Recall that filling a giant private tank with gasoline is not a long-term solution as gasoline degrades with time.)
Consider how much it costs to buy freedom from global supply chains, meaning that your household owns or has private access to sources of food, fuel, water, goods and services, security, etc. that are only loosely connected to global supply chains.
The top 10% of households are by definition wealthier than 90% of the households. Who Are the One Percent in the United States by Income and Net Worth?, individuals who earn more than $129,000 and households with incomes above $201,000 are in the top 10%. (Other sources say individuals need $158,000 in income and households need over $300,000 to qualify, so these are estimates based on various sources.)
To be in the top 10% by wealth, households need a net worth of $1.22 million.
To be in the top 1% of income, households need $505,000 or more (other estimates say $700,000) and $11 million to be in the top 1% by wealth.
Is $11 million enough to buy freedom from the helplessness of near-total dependency on global supply chains?
Much of this wealth will typically be tied up in one or more residences, retirement accounts, family enterprises, etc., so only a portion would be available to buy a farm, a ranch and an oil well. With asset prices as high as they are, a few million dollars won't buy much--and there is no guarantee that after paying for wages, taxes, fees, fertilizers, etc., that the ranch, farm and oil well will be profitable; they might generate significant losses.
And even owning an oil well doesn't mean there's a private supply of gasoline, as the crude oil must be transported by pipelines to one of the handful of refineries that turn oil into fuels.
Alternatively, a wealthy household might buy a solar array large enough to charge a few electric vehicles, but intermittent energy sources have their own limitations. To use the analogy of gridlock, having an EV that you charge yourself doesn't mean you escape gridlock.
The point is that wealth doesn't materially reduce our dependency (and thus our helplessness) on vulnerable supply chains. The super-wealthy household with a private island and a huge yacht still depends on fuels, goods, services, pharmaceuticals and food transported or accessed from elsewhere.
As I noted in a recent Musings Report, the key to reducing helplessness is to reduce the number of intermediaries between you and what you need to survive, and/or reduce your consumption of things that are dependent on long chains of intermediaries, chains that even the wealthy can't control.
The more you can do for yourself, the more essentials you control, the more essentials your immediate locale supplies, the wealthier you are in terms of reducing your dependency and helplessness.
Standing in an empty grocery store or closed gas station with a wallet full of money is like standing at the bus station or border crossing without enough cash to get somewhere better. Having money changes the situation if the bus is operating, but if supply chains snap and the bus is out of service, money isn't the decisive factor.
Real wealth is not being dependent and helpless. We're all dependent on long global supply chains riddled with chokepoints, but the less we consume and the more we can provide ourselves, the greater our agency, our options and our room to maneuver / set a new course.
How can we increase our agency and reduce our dependence / being stuck in gridlock? I'll address that question in the next Musings Report.
Highlights of the Blog
The Fed's Moral Hazard Monster Is About to Lay Waste to "Wealth" 11/19/21
Top 1% Gains More Wealth Than the Combined GDPs of Japan, Germany, UK, France, India and Italy, Bottom 50%--You Get Nothing 11/17/21
Paging Isaac Newton: Time to Buy the Top of This Bubble 11/15/21
Best Thing That Happened To Me This Week
It's rewarding when "the best food in town" is in your own kitchen and it costs a fraction of a (frankly inferior) restaurant meal. ($15 for a burrito or a burger or a sandwich? I know costs are soaring, but when a few takeout meals add up to $100, count me out, sorry.)
Here is a classic sambar prepared from Maya Kaimal MacMillan's cookbook Curried Favors, page 68, and a novel variation on pizza--shaved asparagus pizza--from Deb Perlman's The Smitten Kitchen, page 109. The pizza dough is as simple as it gets, and the topping is just two cheeses and the marinated asparagus. Amazingly delicious for such simplicity.
From Left Field
'This is the age of waste': the show about our throwaway addiction and how to cure it -- stop buying needless, low-quality stuff--but then the economy crashes because it's dependent on "waste is growth"....
Case series: Reinfection of recovered SARS CoV-2 patients for the third time-- sobering, as the symptoms and consequences get worse with each subsequent infection...
Everything we 'know' about the rise of Man is wrong -- commentary on Graeber's final book....
Plant in traditional Samoa medicine could be as effective as ibuprofen, study shows-- Big Pharma is hiring crews to eradicate this as a mortal threat... (OK I'm joking)
The principles of patience (via GFB)
A Review and Autopsy of Two COVID Immunity Studies
Aleksandar Todorovic, artist; I call his remarkable work "technocratic iconography" (via GFB)
"A Secular Shift": What The Black Death Tells Us About The Labor Market -- interesting: we're trading more income for more leisure...
The Betrayal by Technology - A Portrait of Jacques Ellul (54 minutes)
Mao reconsidered-- not the conventional POV....
"It was a sport and pastime to humble those exalted heads." The relatively commonplace destruction of monuments during the Roman Empire.
He Saw America’s Crackup Coming in 2011--He Says It’s Worse Now--many have foreseen national fragmentation as the end-game....
"Solitude is for me a fount of healing which makes my life worth living. Talking is often torment for me, and I need many days of silence to recover from the futility of words." Carl Jung
Thanks for reading--
charles |
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