If you want to be rich you have to own something.
That’s it.
Why? Okay well two reasons:
In any salaried job you work you will produce more value than you are paid (otherwise why would they hire you?). Who gets to keep all this extra value you created? Owners. (This is called the exploitation of surplus value).1
If you don’t own something, your monetary value will be strictly tied to the amount of hours you work each week. For most people working full time the maximum you can scale that is by a factor of 2. However, investments such as property (houses), individual companies or the stock market, can grow each year without your time investment.
Hence, given our capitalist society you can be on two sides of the equation. You can either work for a salary and have someone else keep the majority of the profits you make, or you can own those profits.2
Implicitly, I think this is why wealthier people tend not to be lawyers, doctors or engineers. They work to become owners of the companies highly skilled people will work in. Hence, as a non-scientific observation, a greater proporiton of friends I have from wealthy backgrounds go into consulting and finance. On the other side, if you are poorer, a high salary job like being a doctor seems attractive. Especially if you don’t come from wealth you will not have the pre-existing capital to put into new investments, so you would need the guaranteed income of the salary. However, it is much more difficult to get truly wealthy from a salary.
Hence, there are three ways of creating true wealth:
- Through family. Either being born into it or marrying into it.3
- Through salary and savings. If you save a portion of a good salary each month into good investments you can probably retire well.4
- Through innovation. Through creating your own thing. This might me a patent, a trade secret a company or more. However, once you own that you can grow its value beyond what you could scale your salary.
Any rich person (who earnt their wealth) fundamentally understands this truth.5 If you want to be rich, understand that you have to own things for true wealth.
If you still don’t quite get it, try reading this poem:
Letting the Cat out of the Bag
Anonymous. Published in The United Automobile Worker, October 1937.
“What did you tell that man just now?”
“I told him to hurry”
“What right do you have to tell him to hurry?”
“I pay him to hurry”
“How much do you pay him”
“Four dollars a day.”
“Where do you get the money?”
“I sell products”
“Who makes the products?”
“He does.”
“How many products does he make in a day?”
“Ten dollars' worth.”
“Then, instead of you paying him, he pays you $6 a day to stand around and tell him to hurry.”
“Well, but I own the machines.”
“How did you get the machines”
“Sold products and bought them.”
“Who made the products?”
“Shut up. He might hear you.”
Note: This is not financial advice. Consult a licensed professional before making investment decisions. Investing involves risk.
Marx’s three core critiques as I’ve read from other sources were 1. The Exploitation of surplus value. 2. Alienation. 3. Class Struggle. ↩︎
If you are lucky, some jobs will let keep some of the extra value you create. For example, being an early employee at a startup where you get equity, or being a sales person, where you keep a percentage of the sale. ↩︎
Of course when you have existing capital it becomes much easier to maintain wealth through investing it again. If you do it intelligently - unlike most lottery winners. ↩︎
This actually can be quite achievable with smart planning. Look up FIRE and Mr Money Mustache. ↩︎
In fact, the absurdly rich don’t even need work or even be a CEO. They can just live off of their investments, by paying an investment firm to manage their stocks and wealth for them. ↩︎