Prosperity vs. Poverty

[Bubba_Switzler]

The definition of net worth is not tricky at all, it is: Net Worth = Assets - Liabilities.

Yes, you can calcluate a number. But whether net worth is the right measure of financial success is not so simple. And, further, to my other point, there is a difference between having a stack of dollar bills or gold coins in a safe and owning a productive asset.

Who owns the factory is of little consequence. That is a distributional issue. For example, Bill Gates owns a constantly decreasing share of microsoft, he is divesting from microsoft and investing in other assets. His changing his allocation of assets has no real effect on anyone. Now, Bill Gates stopped running microsoft and works more on his foundation. Is that a good thing? Warren Buffett is worth billions, but keeps working at Berkshire Hathaway even though he doesn’t need the money. Is that good or bad? I would say that it depends on what he is after. If he is using his gifts as a humble servant, then that is good. On the other hand, if his focus is to show the world how great he is, then that is not good. Not knowing him or his heart I could not pretend to know his motivation.

That theory has been tested and found wanting. It turns out that it does matter who owns productive assets, especially closely held assets. Simply redistributing ownership has serious consequences. Stock options are granted to employees for the specific purpose of giving them a sense of ownership where they work. It matters.

 

[Bubba_Switzler]

Part of the problem is a measurement bias.

A thermometer is biased toward measuring temperature. All instruments and measuring methods are biased in this trivial sense.

 

[stinkcat_14]

That theory has been tested and found wanting. It turns out that it does matter who owns productive assets, especially closely held assets. Simply redistributing ownership has serious consequences. Stock options are granted to employees for the specific purpose of giving them a sense of ownership where they work. It matters.

Source?

 

[Bubba_Switzler]

Source?

en.wikipedia.org/wiki/Communism

 

[Bubba_Switzler]

I want to draw your attention to a contradiction here:

I have no idea. I cannot see into Bill Gate’s heart.

This seems to imply that sin is a function of intent.

However - since sin by it’s very nature is hurtful to others - it is inevitable that sinners will hurt one another and whoops there goes their happiness…now their hurt and probably angry and set out to hurt someone else…that too is natural to the sinful life.

This seems to imply that sin is a function of effect.

 

[JRKH]

I want to draw your attention to a contradiction here:

I want to draw your attention to a contradiction here:

Nope no contradiction…these are talking about two different things.

Quote:
Originally Posted by JRKH View Post
I have no idea. I cannot see into Bill Gate’s heart.

This seems to imply that sin is a function of intent.

There was no implication about sin itself here. You asked me this:
"Would you say that, say, Bill Gates or any other billionaire is “hoarding money”?
My simple answer is that I do not know.

Quote:
However - since sin by it’s very nature is hurtful to others - it is inevitable that sinners will hurt one another and whoops there goes their happiness…now their hurt and probably angry and set out to hurt someone else…that too is natural to the sinful life.

This seems to imply that sin is a function of effect.

Sin is not a function of effect…sin, like charity, causes an effect. The effect of charity, of Love, is good, the effect of sin is bad.

Peace
James

 

[Bubba_Switzler]

Nope no contradiction…these are talking about two different things.

There was no implication about sin itself here. You asked me this:
"Would you say that, say, Bill Gates or any other billionaire is “hoarding money”?
My simple answer is that I do not know.

Sin is not a function of effect…sin, like charity, causes an effect. The effect of charity, of Love, is good, the effect of sin is bad.

I was trying to figure out what you meant by “hoarding”. I still don’t know.

But if sin a bad effect then why not look at Bill Gates to determine if he is hoarding from that?

 

[stinkcat_14]

en.wikipedia.org/wiki/Communism

I said nothing about communism. I was talking about voluntary transfer of ownership.

 

[stinkcat_14]

A thermometer is biased toward measuring temperature. All instruments and measuring methods are biased in this trivial sense.

But for our purposes here, the bias is not trivial. After all, we shouldn’t measure financial success solely in terms of how much money one has. For example, a person who makes $30k per year and is content and manages it well is more successful than someone who makes $500k per year and is greedy and envious. So you might have one person who spends all their time working and makes $500k, another who works less, makes $30k and spends the extra time visiting lonely people in nursing homes. Is the person who makes $30k less financially successful? We really cannot say without more information.

 

[Bubba_Switzler]

But for our purposes here, the bias is not trivial. After all, we shouldn’t measure financial success solely in terms of how much money one has. For example, a person who makes $30k per year and is content and manages it well is more successful than someone who makes $500k per year and is greedy and envious. So you might have one person who spends all their time working and makes $500k, another who works less, makes $30k and spends the extra time visiting lonely people in nursing homes. Is the person who makes $30k less financially successful? We really cannot say without more information.

Neither is the bias of a thermometer trivial. Instruments measure what they measure, no more, more less.

But no amount of information is going to answer this until we decide what prosperity and financial success really means.

At the most basic level, we have to choose between net wealth and change in net wealth. The relationship between a function and its delta is mathematical. But it is readily apparent that, for example, good choices will have a more direct impact on the delta.

So far JRKH is the only one I recall showing an interest in delta as a defintion of financial success or prosperity. But I, too, am sympathetic to that view not least because it relates better to some of the more general good life elements.

 

[stinkcat_14]

Neither is the bias of a thermometer trivial. Instruments measure what they measure, no more, more less.

And of course, if you are measuring the wrong thing your measurements are useless. So there is a legitimate questions as to whether in this context net worth is what we should be measuring when we talk about “prosperity”.

But no amount of information is going to answer this until we decide what prosperity and financial success really means.

At the most basic level, we have to choose between net wealth and change in net wealth. The relationship between a function and its delta is mathematical. But it is readily apparent that, for example, good choices will have a more direct impact on the delta.

But, the question remains, is either of these a good measure of “prosperity”. I don’t think anyone has established that they are.

So far JRKH is the only one I recall showing an interest in delta as a defintion of financial success or prosperity. But I, too, am sympathetic to that view not least because it relates better to some of the more general good life elements.

I am not sure that delta is necessarily the appropriate measure, after all, if I have $10 million, I will be as prosperous and I need to be and changing that by $1 million (for example) won’t change my well-being. In fact, I might be even more prosperous if I started with the $10 million and gave half of it away. It depends on how you measure “prosperity”.

 

[Bubba_Switzler]

And of course, if you are measuring the wrong thing your measurements are useless. So there is a legitimate questions as to whether in this context net worth is what we should be measuring when we talk about “prosperity”.

But, the question remains, is either of these a good measure of “prosperity”. I don’t think anyone has established that they are.

Well, these are essentially the questions of the moment.

I am not sure that delta is necessarily the appropriate measure, after all, if I have $10 million, I will be as prosperous and I need to be and changing that by $1 million (for example) won’t change my well-being. In fact, I might be even more prosperous if I started with the $10 million and gave half of it away. It depends on how you measure “prosperity”.

So let’s look more closely at this scenario.

Let us suppose, further, that you came to the $10M by inheritance. Now the simplest question is are you prosperous?

I don’t intend to rely entirely upon the dictionary but let’s see what wikipedia says: “Prosperity is the state of flourishing, thriving, good fortune and / or successful social status. Prosperity often encompasses wealth but also includes others factors which can be independent of wealth to varying degrees, such as happiness and health.” en.wikipedia.org/wiki/Prosperity

Most of this implies that the answer is “no”. (Some might regard inheritance as good fortune but that’s not the best understanding of the phrase and some societies hold aristocracy in high social status but others value accomplishment.)

This defintion is more consistent with JRKH’s position on several points: per his first post, it includes the more general concept. It talks of flourishing and thriving and success.

More importantly, there is a very strong correlation between wordly success and happiness and health.

Returning to our scenario, let’s imagine two competing futures: in one, the person who inherits this $10M invests it in bonds and subsists off the income. He’s a gentleman of leisure.

In the other future, he uses this $10M to start a new business which makes him a billionaire.

Now the question is, which of the above is futures best represents prosperity? In which is he flourishing, thriving, experiencing good fortune and / or successful social status? Which will bring him good health and happiness?

I would argue for the second even though he could easily live comfortably in the first.

 

[sallybutler]

So what is meant by this?

I could imagine that it means having money is the result of having money (a tautology).

Or it could imply that money buys happiness and fulfillment.

This does seem to be one of the examples that takes net worth to be a measure of financial success.

Prosperity is the state of being prosperous. Prosperous means successful in material terms.

Prosperity is not a spiritual state. It is a physical state.

 

[Bubba_Switzler]

Prosperity is the state of being prosperous. Prosperous means successful in material terms.

Prosperity is not a spiritual state. It is a physical state.

Prosperity is much more than physical and can certainliy be thought of as including the spiritual. It is not only prosperous in material terms.

For example, the defintion I gave above from wikipedia includes: “flourishing, thriving, good fortune and / or successful social status” and “often” “happiness and health”.

It’s a much more general concept than material possessions.

 

[stinkcat_14]

Well, these are essentially the questions of the moment.

So let’s look more closely at this scenario.

Let us suppose, further, that you came to the $10M by inheritance. Now the simplest question is are you prosperous?

Once again, it depends on what you mean by prosperity. Financially, most likely the answer would be yes. After all, if you invest the $10 million in stocks that pay a 2% dividend you would have a higher income than 95% of the households in the most prosperous economy on the planet.

I don’t intend to rely entirely upon the dictionary but let’s see what wikipedia says: “Prosperity is the state of flourishing, thriving, good fortune and / or successful social status. Prosperity often encompasses wealth but also includes others factors which can be independent of wealth to varying degrees, such as happiness and health.” en.wikipedia.org/wiki/Prosperity

Most of this implies that the answer is “no”. (Some might regard inheritance as good fortune but that’s not the best understanding of the phrase and some societies hold aristocracy in high social status but others value accomplishment.)

I am not sure how inheriting $10 million is inconsistent with that definition of prosperity, after all, it can generate a high income that is better than 95% of the people in the US make. How is that not prosperous under a secular definition of prosperity?

This defintion is more consistent with JRKH’s position on several points: per his first post, it includes the more general concept. It talks of flourishing and thriving and success.

More importantly, there is a very strong correlation between wordly success and happiness and health.

Returning to our scenario, let’s imagine two competing futures: in one, the person who inherits this $10M invests it in bonds and subsists off the income. He’s a gentleman of leisure.

In the other future, he uses this $10M to start a new business which makes him a billionaire.

Now the question is, which of the above is futures best represents prosperity? In which is he flourishing, thriving, experiencing good fortune and / or successful social status? Which will bring him good health and happiness?

I would argue for the second even though he could easily live comfortably in the first.

If you have more than you need with $10 million, why would it be better to become a billionaire? I remember a billionaire lamenting that in his quest for billions, he neglected his family. I thought he was a fool, because he neglected his family to make a bunch of money that he never spent. That is the textbook definition of foolishness.

 

[Bubba_Switzler]

Once again, it depends on what you mean by prosperity. Financially, most likely the answer would be yes. After all, if you invest the $10 million in stocks that pay a 2% dividend you would have a higher income than 95% of the households in the most prosperous economy on the planet.

I am not sure how inheriting $10 million is inconsistent with that definition of prosperity, after all, it can generate a high income that is better than 95% of the people in the US make. How is that not prosperous under a secular definition of prosperity?

There is no flourishing, thriving, good fortune or success involved in earning a passive income. At best, it might support other activites which satisfy that. This I believe, is what JRKH was pointing to.

If you have more than you need with $10 million, why would it be better to become a billionaire? I remember a billionaire lamenting that in his quest for billions, he neglected his family. I thought he was a fool, because he neglected his family to make a bunch of money that he never spent. That is the textbook definition of foolishness.

I remember a genlteman of leisure who neglected his family. There is no reason to suppose that the man who made something of his inheritance is going to be less family oriented than the gentleman of leisure and much to suggest otherwise. Does the name Paris Hilton ring a bell? Have you see the movie Arthur?

Now that said, clearly many people understand prosperity as simply having money. And not, I suspect, because they can earn a passive income but more simply because they can live off it. Such people are more likely to entertain hypotheses such as H5, that prosperity is primarly the good fortune of birth.

 

[stinkcat_14]

There is no flourishing, thriving, good fortune or success involved in earning a passive income. At best, it might support other activites which satisfy that. This I believe, is what JRKH was pointing to.

So, you are saying that the money I make from my investments does not count towards my success? Does this mean I should not put money in a 401k because it has nothing to do with prosperity?

I remember a genlteman of leisure who neglected his family. There is no reason to suppose that the man who made something of his inheritance is going to be less family oriented than the gentleman of leisure and much to suggest otherwise. Does the name Paris Hilton ring a bell? Have you see the movie Arthur?

In other words, it is better to put your money in bonds and take care of your family, than neglect your family and make a billion.

Now that said, clearly many people understand prosperity as simply having money. And not, I suspect, because they can earn a passive income but more simply because they can live off it. Such people are more likely to entertain hypotheses such as H5, that prosperity is primarly the good fortune of birth.

I, of course, have never defined prosperity as simply having money. Like I said, a person who starts with $10 million and gives half of it away may be more prosperous than someone who takes $10 million and turns it into $20 million.

 

[Bubba_Switzler]

So, you are saying that the money I make from my investments does not count towards my success?

I’m leaning toward that understand of prosperity, yes.

Does this mean I should not put money in a 401k because it has nothing to do with prosperity?

No, it does not mean that at all. Whether or not earning passive income is prosperity, it is still a good idea for a number of obvious reasons.

In other words, it is better to put your money in bonds and take care of your family, than neglect your family and make a billion.

In the same sense that it is better to wear a shoe on your head and take care of your family than to neglect your family and wear a hat.

I, of course, have never defined prosperity as simply having money. Like I said, a person who starts with $10 million and gives half of it away may be more prosperous than someone who takes $10 million and turns it into $20 million.

I think others here have implied that. We have discussed the more extended concept of prosperity that would include giving money away as well as spending it (e.g. on a family) as you earn it.

 

[stinkcat_14]

I’m leaning toward that understand of prosperity, yes.

In other words, people who work on wall street are not prosperous.

I think others here have implied that. We have discussed the more extended concept of prosperity that would include giving money away as well as spending it (e.g. on a family) as you earn it.

So, the question is, how do we compare the relative prosperity of two households, for example, suppose in one household both spouses work and in another, one spouse does not work and the household gets by on 40% less income. Are they both equally prosperous?

 

[Bubba_Switzler]

In other words, people who work on wall street are not prosperous.

People who work on wall street are not earning a passive income. If you are working you are not passive.

Similarly, Warren Buffet is not a passive investor. He is a very active investor.

A third future path for our scenario would be to take that inherited $10M and actively invest it and earn above market returns. I would call that prosperity.

So, the question is, how do we compare the relative prosperity of two households, for example, suppose in one household both spouses work and in another, one spouse does not work and the household gets by on 40% less income. Are they both equally prosperous?

Assuming that your question is directed at making choices and not simply ranking people we can rephrase this as a choice between a dual income and a single income.

Also, remember that the general concept of prosperity is not simply measuring income. (I floated the idea of using finance as a proxy for the general concept for the purpose of considering the hypotheses but we can return to that later.) So in this choice we would need to weigh the whole situation including care of the family. It might make sense for one parent to work or both depending on the circumstances.