Rags to Riches

Whilst sitting in my hot tub watching the stars early this morning my thoughts turned to multi-billionaires. During the period of covid lockdown my neighbor and I have been trading books about rich, powerful Americans that appear to be doing rather horrible things to our society and often to the economy as well. Examples of folks that have come into our consideration are Richard Sackler of Purdue Pharma that got rich from selling oxycontin and Charles Koch who leveraged a failing oil refinery into a fortune. Other current “rags to riches” stories include Donald Trump, Bill Gates and others. You are free to add your own list of rags to riches examples. People that fit into this mold are a few of the huge farmers in California’s Central Valley and others that how outsized influence due to accumulating vast fortunes from virtual monopolies. There are some interesting things that characterize these folks. All of them started from modest beginnings (some a lot more modest than others), all of them leveraged a good idea (or lucky situation) into something akin to a monopoly, and all of them eventually seem to become convinced that they have “something special” giving them permission to think and act as kings or emperors.

I wonder how this happened. How did these few people acquire such vast fortunes, and the power the power that comes with it? How does that happen? Is it good or bad for the Country, the world or any part of society? If it is a bad thing, can we, or should we, do something to prevent it from occurring? These are the types of questions that come to my mind while “daydreaming” at 4:30am in the rural “wilds” of the Sacramento Valley.

I don’t think that the people who find themselves in the position of being exceedingly rich and powerful have any special “magical” attributes that somehow preordain their rise to wealth and power. I think they are generally just “normal” folks (perhaps very smart normal folks – but more like the top 5% of smart (IQ above 125). The certainly aren’t 170+ IQ super geniuses. There are a LOT of people in their intelligence category – but only a vanishingly small number of us end up being billionaires. In general, it appears that they are pretty “normal” folks that had a good break and then continued to add fuel to the fire, leveraging that good break to finally create situations that are close to being monopolies creating things that people either desperately need, or think they need. Basically, they all create what might be described as an addiction to something that they have a near monopoly on. Oil to fuel motors is one, computers to fuel whatever all of the computers do, social media to fuel our need to be seen and heard, actual narcotics to fuel our addition to narcotics, and “Cuties” to fuel our love for cute little citrus fruits. None of these things were needed before someone “created” a need for them. Someone had an idea that would “stick”, blew fire into the smoldering kindling, and then kept feeding the fire until it turned into a conflagration. They did this in a way that was fast enough, and protected enough by patents, to for them to end up being showered in wealth. These kinds of “beginnings” start all of the time (I would guess many millions of times a year), but only now and then do things come together in ways that allow the fire to explode – I think it is much more a random event than anything else. The very rich people that followed the path from rags to riches found themselves to be riding a perfect wave, they didn’t make the wave but once it was there they got on and held tight.

A little story from my early years might illustrate a bit of this. I was a struggling building contractor, just barely getting along on the meager income I could get from doing one-at-a-time custom jobs for “normal” homeowners, not the rich that can afford to pay for excellent work. In order to make this work I became a part of a small group of like minded friends that shared work and opportunities. This group was made up of a bunch of independent entrepreneurial tradespeople (plumbers, carpenters, painters, drywall folks, dirt movers, roofers, etc). We all belonged to an informal group that shared work because none of us could do everything.

One winter when work was slow because of the weather a bunch of us decided to take an adventure trip to the Mohave Desert in Southern California. I had being going to a very special, very remote, place with my family for many years and I wanted to share the beauty of the desert with my friends from Northwest California that grew up in a world of rain, fog and cold rather than dry, sunny and hot. This turned into far more of an adventure than I had anticipated, but I will leave most of that to another time (perhaps). I want to talk about our first night’s campfire.

I guided our little group to a camping spot that I had used many times in the past. It was located on the edge of some rolling hills to the north, and a vast almost flat alluvial plane stretching off for many miles to the south. This is in the heart of the extremely dry, sparsely vegetated Mohave Desert populated by rattlesnakes, scorpions, desert tortoises, bob cats, coyotes and big horned sheep. (Actually, while it appears almost barren this is a place that is alive with many animals and plants that become very obvious because they stand out in the land of dirt and rocks. When there is an animal there you tend to see it.

As usual, I started to make a little campfire to heat water for coffee and just to create a cheery place for us to gather around and chat about our day and our plans for the next day. However, a friend of mine asked to be the “fire keeper.” He started making a small little fire in the middle of the 2 foot diameter ring of stones my family assembled years ago to contain a small fire and hold a grate to put pots and pans on for cooking. He then went into the desert to gather more firewood for the evening’s fire. As you can probably imagine, that is a bit of a task because there just isn’t much out there in the way of firewood. He brought back some nice, small dead limbs that he found in a nearby dry creek. I settled down to relax, and he went back to get more. He brought another armload and put it on the fire – making the fire too big for the stone ring but still nice and cheery – too big to make s’mores but fine for talking. Then he went to get more firewood, and threw it on the pile. Now the fire was getting pretty big so we all had to move our chairs back to avoid the heat, putting us too far apart to be able to talk easily. Once more my friend vanished and returned with roots of some pretty big plants that he had uprooted to throw onto the fire. By now it had grown from a camp fire to a bonfire. He was unstoppable! Every time the fire got bigger he had an urge to make it even bigger – until he had gathered up all of the loose firewood from a very large area (perhaps a mile in diameter) and had uprooted the bushes and small trees that he could work loose from the ground. By mid-night we were all standing very far back from the roaring fire, and thank God my friend finally wore down (having partaken with a little of the whisky prior to each of his sojourns). By morning the fire had burned down to a pile of smoldering ash, and we no longer had a source of easily obtainable firewood. My guess is that there was no firewood in that area for many years after that – things grow pretty slowly in the desert. We then had to drive to find additional firewood.

He couldn’t seem to help himself. The fire was there, firewood was there, and if you put more on the fire got bigger. It didn’t take very long before he stopped worrying about where the wood was coming from, or what that was doing to the local area then and into the future. Actually, I don’t think he ever bothered with thinking about any of that in the first place. He didn’t even think about what he was setting out to do, which was to make a nice fire to heat coffee and draw in some friendly conversations with his friends. Instead, he went solo into the desert and just kept getting more and more and more until there wasn’t any more to get, and he had run out his ability to continue.

Is this what those ultra-rich “rags to riches” folks do? Is this the same kind of obsession that they get trapped in? And then they get power, get fame, get control. How very “sexy” and thrilling it must be. Unfortunately they also come to believe all of the lies about how wonderful they are, how smart they are, how sexy and viral they are, and they believe that they must have special powers to have succeeded in such a spectacular way. We just have to look at the Sacklers, Kochs, Trumps, and others to see how this infects their minds.

This brings me to the question of: “should we allow this sort of thing to happen?” Perhaps we should find a way for lucky, smart, energetic entrepreneurs to succeed and get very rich – but not “too” rich. Of course I have no idea where the boundary might be between “rich enough” and “too rich”. The idea of tractor pulls comes to mind. For those that are not familiar with this “sport” the game is to pull a heavy sled with some kind of machine (originally a tractor). The sled is rigged up so that it slides easily at first, but the resistance to being pulled by the tractor increases the further it goes, eventually getting so hard to pull that the tractor stops in its tracks. The winner is the one that pulls the sled the furthest. I am thinking of this kind of an idea to allow folks to compete, but not to just run off with the game. Of course, as with most sports of this kind, there is an ever increasing desire to make the tractors even bigger and stronger, requiring bigger and stronger sleds – on into the night. But even with the biggest and the strongest, the sleds are all designed to eventually stop the tractor.

Maybe we need something similar in our economy. Taxes are one way to make the “sled” get harder and harder to pull. Right now we are in a situation where the rich have gotten so much power that they have modified the rules so that the weight of the sled behind their tractors gets smaller as they go along – once you pass a certain threshold taxes decrease rapidly the more their income is. Eventually not only do taxes decrease to zero (or nearly so), but huge “incentives” start going their way so that the government gives them lots of money to make more money. As demonstrated by the Sacklers, it gets to the point that donating money and things to charity, foundations, and museums becomes a very lucrative profit center. All of those great sounding donations aren’t being generous, they are the best way that they have for making high profits (and honor) with that part of their wealth. The fact that those profits come by way of money from the rest of the us taxpayers is not important.