Wealth Transfer x Inequality
Personally, I think human beings live “relative to peers”. Peers often being their own selves.
A) People (I usually admire) want to become freer/better/nicer/richer/wiser than they were yesterday.
B) People (I might not admire so much) usually want to be freer/better/nicer/richer/wiser than their neighbor (To prove my point look for the success of social media platforms like Instagram and Facebook).
Type “A” people, in my view, would much rather live in a more balanced society, in socio economical and moral terms. Especially in terms of equal opportunity for each individual to follow his/her desired path in life. A world where people hang out and enjoy their time together.
Type “B” people are harder to please. Someone smarter than me said Envy drives the world. Not Greed.
Due to the nature of Capitalism, which is great at allocating capital, but without a good solution to distribute its benefits, the world, today, is going through a period of very high “opportunity inequality” (wealth concentration as the source).
Here’s Ray Dalio’s screenshot of the issue: Our Biggest Economic, Social and Political Issue
With that, here’s Warren Buffett:
“It’s 24 hours before your birth, and a genie appears to you. He tells you that you can set the rules for the world you’re about to enter — economic, social, political — the whole enchilada. Sounds great, right? What’s the catch?
“Before you enter the world, you will pick one ball from a barrel of 6.8 billion (the number of people on the planet). That ball will determine your gender, race, nationality, natural abilities, and health — whether you are born rich or poor, sick or able-bodied, brilliant or below average, American or Zimbabwean.
“This is what I call the ovarian lottery. You’re going to get one ball out of there, and that is the most important thing that’s ever going to happen to you in your life. That’s a good perspective to have when setting the rules for our world.
“We should be designing a society that doesn’t leave behind someone who accidentally got the wrong ball and is not well-wired for this particular system.”
So, I’ll express my view on inequality x opportunity in terms of Buffett’s questioning:
If I could set one rule for the entire world, which I strongly believe will have balancing consequences long-term, it would be something along these lines:
– Inheritance taxes would be 100% of what exceeds the cost of decent shelter + good healthcare + good education, BUT all proceeds from this taxation would have to be exclusively invested in educating and keeping healthy kids up to 15 years of age, maintaining a leveled playing field at the base of the demographic pyramid.
I know my suggestion is utopia, but I’d like to put my thoughts in words, publicly.
Today few wealthy really trust Governments to use their money wisely. I am no different and wouldn’t want to give any of my financial remains to the politicians currently in place. And for that problem I have no suggestion of solution.
Politicians are human beings prone to turning into crooks if incentives allow, prone to favoring groups of interest and prone to manipulating the majority which typically give too little thought about “how the game works”.
It’s just a thought I’d like to put out: Capitalism that defends reasonable ways to keep a leveled playing field for those who will build the future makes a lot of sense. Always pay attention to incentives.
Why such strong opinion?
– You can’t eat excess money;
– I’ve realized that the $ in my bank account, as it grew over time, hasn’t made me happier than I was when a bit younger, broke. “With [financial] power, comes responsibility.” Money clearly is subject to the law of diminishing returns;
– Living in Rio, I’d much rather have peace while walking down the streets, than being afraid of being mugged. I’d rather have less relative to the guy who now robs me if that meant the odds of me being robbed were much radically closer to zero.
– Inequality breeds [financial] heterogeneity (social class warfare) and, despite the politically-corrects desire for “personal freedom”, more [financial] homogeneous societies are more balanced, peaceful (Sweden x Middle East).
– Absent ego (keeping score), accumulating wealth is, for me, some sort of fear of not being able to earn a living in the future, for whatever reasons. If society is more balanced, this should ease, because, if you don’t have to be better than everyone else…everyone’s lives are simpler, thus cheaper too. I measure my wealth in terms of my living expenses. If one is happy with little, you need little wealth to feel rich.
– Coffins have no drawers to stuff things when I die. This notion that we remain responsible for the living (our children, wife) after we die, for me, is crazy, but it’s no excuse to want to steal from future generations of human beings we love, in aggregate (everyone, not our dear ones only). We should leave our dear ones with a good toolkit that helps them go after their own sense of purpose. That is, for me, the most important challenge I will face when raising a kid. It’s hard to admit this, especially without having children yet, but it is how I think now. We can’t buy insurance against every problem possible, but let’s do no harm to our society.
Comments and push-back welcomed. I know there’ll be many.