Greed, the 1%, and… Plato?

There’s been a viral video going around the internet in the past few weeks,

Amazing infographics aside, this video is very powerful, and is just the next step in a debate that has been going on for months if not years. Unfortunately, it doesn’t look like this debate is going away.

This video is very convincing. Because the 1% has so much, we are all worse off, even the already uber-wealthy, right? That makes complete logical sense. The more the wealthy have, the less there is to go around. Well, I think we need to ask a number of questions before jumping to that conclusion.

Firstly, we must define wealth. Wealth, according to Webster’s, is “abundance of valuable possessions or resources ” firstly. But for our purposes, we are going to use the next definition which is, “All property that has money value or exchangeable value.”

So the graphics in this video are cool, but stacking up money to represent the 1%’s wealth is misleading. Wealth isn’t just cash money. Wealth is any property that has money value. The bills in my wallet, the bed in my room, and the beer in my hand all are examples of wealth. Let’s use an example to demonstrate wealth that’s close to home, Stan Kroenke.

Most of you probably know, but Kroenke grew up right here in Columbia, Missouri. He got his BA, BS, and MBA all from Mizzou, and he made a fortune developing real estate in Columbia even before marrying into the Walton Family (receiving a significant inheritance).  Now, he owns the Denver Nuggets, St. Louis Rams, Colorado Avalanche, Colorado Rapids, and is the majority shareholder for Arsenal Football Club (English Premier League). He also owns biggest ranch in Canada. Kroenke’s net worth is over $5 Billion. He is the #92 Forbes wealthiest person in America. He is the 1%.

Stan Kroenke doesn’t have $5 Billion sitting in a bank account at Boone County National Bank on Broadway. His wealth is spread all over the world. His wealth is employing people in Columbia. His wealth is bringing in tax revenue in Denver. His wealth is helping hooligans in England have a team to be passionate about. I’m jealous as hell that Stan has all that, but I’m glad he does.

I’m glad he has the money to donate to Mizzou to make the best on-campus basketball facility in college basketball. I’m glad he has the money to help develop three Walmarts in Columbia. If there were only two, they’d be overcrowded. I’m glad he has the money do develop the shopping commons where I saved 50% off ski gear at Dick’s Sporting Goods. In a small way, Stan Kroenke’s wealth has made my life better. If he wants to own a dozen houses and private jets, more power to him.

Wealth creates more wealth. It’s just how it goes, if you’re smart with it. The 1% is very smart, very lucky, and yes, very greedy. But to quote Gordon Gecko, “Greed, for lack of a better word, is good. Greed fuels us.”

Back to the video. The implication that wealth is shared and not created is flat wrong. Wealth is not a zero-sum game. Land, on the other hand, is a zero-sum game. The more land somebody own in Missouri, the less there is for the rest of us. If I buy 1,000 acres between Columbia and Kansas City, that’s simply less that there is for the rest of us. Wealth is not like that. There is not a set number of wealth available in the United States. Wealth is like…. coats. If I love coats and want to buy one every day for the rest of my life, that doesn’t mean there is any less for anyone else. Supply and demand takes its course and more coats are created. Just like wealth. Wealth is not shared, it is created. Just because Stan Kroenke has created massive amounts of wealth for himself doesn’t mean there is any less for any of us. We must create our own means to get coats, and we must create our own means to get wealth.

Unfortunately, it is disturbing the greed of the 1%. But like I said, wealth creates more wealth, and eventually you get the 1% that owns a lot of the wealth in our country. This simply happened because of the market we operate in. I don’t think it’s necessarily a bad thing, but it’s the way it is.

Where does Plato factor into all this? Well, Plato had theories that are amazingly applicable to today’s world. Plato believed that as wealth increased, so does greed. I agree with this, and I also believe that some people’s greed needs to be regulated. Look at all the white collar crime out there, (Including another Mizzou guy – Ken Lay of Enron). Plato believed this greed of the wealthy needed to be regulated by another class of citizens: The Guardians. These people will defend the general public from domestic and foreign threats. In order to do this well, defense must be their sole occupation. They must not hold two jobs. In fact, they must live a strict lifestyle so that they will never even be tempted by greed. Qualifications for the position of guardian include physical prowess, fierceness toward the enemies of the state, and gentleness toward the citizens of the state.

Sound to me like the government is our guardians. It’s unreasonable to make our officials do not hold just one job (at least not throughout their life). They do not live a strict lifestyle, and they certainly are tempted by greed. Fierce towards enemies, gentle towards citizens. I like to think Plato is not necessarily a fan of big government and big regulation, but smart government and smart regulation. I agree with this view of Plato’s guardian theory.

I think one smart regulation we can do is controlling CEO’s compensation. This goes along with the last part of the video. I don’t think that the CEO is working “380x harder than the average worker.” This is just what happens in a free market. To understand CEO compensation, one must understand how businesses work. The CEO doesn’t sit around with all the executives saying, “Hmm, I think I deserve another million, mark it down.” CEO compensation is decided by the Board of Directors, a group people that may or may not be paid, and may or may not have any historical connection to the company. The Board is voted on by the shareholders. If you go buy 2 shares of Facebook stock, you get a vote on the Board. It’s how the game works. It’s not “how hard their working”, it’s what their worth. Albert Pujols doesn’t work 500x harder than I do. But his work is worth 500x more than mine is. Or at least the Angels think so. It’s a fact in our market that people don’t get paid how “hard they work,” but rather what their worth.  Even still, I do think executive compensation could use some regulation. But this doesn’t mean the average worker is going to get paid more, or that more jobs will be created. The day the US government tells business who to hire and what to pay all of them is the day I lose faith in the entire American economy. It will crumble.

So, after three very long tangents, I hope you have a little understanding of what wealth is, where wealth comes from, and why we shouldn’t blame the 1% for creating it for all of us.

1,000 words later, that is what I think I think.

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2 thoughts on “Greed, the 1%, and… Plato?

  1. David, you and the video make very interesting points. The fact is that common wisdom says that we only grow as a Nation if we can all hope to achieve the American Dream. I’d never heard of Stan Kroenke before your post, but he seem like a great wealthy guy. Unfortunately, many, if not most, wealthy guys are not as charitable. As far as sports arenas go, one need only look to the Ralph Engelstad Hockey Arena, for the University of North Dakota in Grand Forks. It is generally acknowledged to be the finest hockey arena in the world. But as it was being built, the furor over UND’s nickname “the Fighting Sioux” began to erupt. He loved the nickname, so in an effort to make the prospect of removal a prohibitively costly measure, the Fighting Sioux logo was strategically placed in thousands of instances in the arena, including a large granite logo in the main concourse. Now for UND to get any television coverage, or to do any post season games, it has to put up ugly tarps all over the arena. Steve Jobs was notorious for giving hardly anything the charity, while the vilified Bill Gates is giving away a lot. Now I hope that no one will argue against all of them being super rich.

    But what about John Menard, owner of Menards: Menards, with more than 200 stores in 11 states, has $6.6 billion in annual sales. John Menard, who launched the business in Eau Claire in 1962, has an estimated net worth of $5.2 billion, making him the richest person in Wisconsin. Yet he apparently gives little to foundations or charitable organizations. A letter writer to Milwaukee Magazine told of how the store refused to even donate lumber to an employee Eagle Scout’s project, to build bird houses for a local nature preserve.

    You note, and I agree with you, that something must be done with executive compensation. I personally believe that it is fruitless to try to limit executive compensation. They have the money an the lawyers to get around the law. Note how NO ONE has yet been prosecuted over the Wall Street mess that caused tens of thousands of families to lose equity in their homes, if not their homes themselves, while giving themselves million dollar bonuses. I believe we must work on bringing back the middle class. My suggestions:

    1. Better education for all children. Everywhere. We are a village. Include the arts and physical education in all classes. Paid for by higher taxes on your 1 or 2%. When folks can work hard and earn a living using the knowledge they learn, we are all better off

    2. Universal health care. Yes paid for by taxes When people are healthy, they can learn. And that included mental health care and substance abuse. Yes, I know. I have many friends who have gone to expensive treatment five times under Minnesota’s “rule 25” paid for by taxpayers. Four times it was for “three hots and a cot,” but (1) many of these become taxpaying citizens and (2) by not being on the street they are not,engaged in criminal activity and are also not using our tax dollars by taking up space in the courts or our money in our jails and prisons. There is no way to perfectly balance this, but if mental health were readily available, we might have fewer mass shootings. I know it’s often a three month wait for a first visit with a psychiatrist in Minneapolis. It doesn’t take that long to buy a gun.

    3. Breakfast for poor kids. Let’s face it, there are an awful lot of kids out there who were brought about by accidents when their parents partied too much one night.

    4. End the student loan mess. People owe more in student loans than they do in credit cards. Many may never be able to own homes because of the huge student loans they owe. Profit making schools care about getting the kids in, and not about placing them. Other schools are being overbuilt and turning out graduates with useless degrees. While we may be a unique example, we now have four law schools in the Twin Cities, and lots of graduates are trying to pay for their student loans working as coffee shop barristas and restaurant servers because there aren’t any jobs. I graduated from a private college and law school with no student loans, and my parents were definitely middle class. That can’t happen anymore. The easy availability of money (i.e. student loans) is, I believe, largely to blame for the student loan crisis, along with the redistribution of wealth shown in the video. Middle class families can’t both buy a home and fund a child’s education, particularly if they need to put their kids in private schools because of the poor quality of the public schools, largely caused by fewer tax dollars going into the schools.

    5. Raise the minimum wage. I know, it is described as a job killer. But raising the minimum wage gives people an opportunity to learn. And ALL the restaurants will have their wages increased. An interesting note is the difference between the restaurants on the Wisconsin/Minnesota boarder. They all want to work in MN because even though the minimum wage is lower, there is no tip credit against the minimum wage. So the WI folks have had trouble filling their server positions, and have had to increase their wages.

    6. Require servers to get sick days. Servers rarely get sick days. So they come to work sick, and still work around your food and mine. Not really about your economic issue, but enough said.

    7. The budget deficit was lower during Bill Clinton’s higher tax years than it is now. The economy was in great swing. He had his faults (everyone gets a home). But the Bush tax cuts have lead us into a huge recession (that’s my opinion).

    8. Simplify the tax code. I have lots of ideas here, but not enough space to chat. Why do I get to write off my mileage, while the pizza delivery guy doesn’t? (Well, he does, but he can spend hours totaling it all up,and it won’t give him any tax benefit). Simplicity an fairness tend not to go hand in hand, however. But, for example, why does a convenience store have to take 3.15 years to write off the cost of the building, while if they through in some necessary but polluting gas pumps, they can write it off in 15 years? Why does the timber industry get the investment credit which expired for everyone else in 1985?

    10. Labor unions were formed because the “contract” between the owners and the sweatshop workers was deemed by society to be unfair. Society is coming close to this now. The most efficient way to ensure decent education and health care is to raise the taxes on the richest. Even Bill Gates and Warren Buffet agree with me. There is a theory that if taxes are higher, folks spend more on tax deductible items (workers) because it will save them more money. I don’t know that this is true, but it is an interesting theory. The same is true with credit cards and cars with 27% an 33% financing. I’d rewrite the bankruptcy laws so that there were two classes of unsecured creditors: Those with interest rates of say 8% or less get paid twice as much as those lending at more than 8%, or something to encourage lower risk loans. And bring back usury laws. In the Marquette Bank decision, the Supreme Court said that banks were regulated by the state in which they were located, not where the consumer lived. But it also said that Congress could change it back to the way it was. Minnesota had an 16% interest rate cap. That should be enough. In the 50s, 60s and early 70s, banks paid 5% on all savings accounts, and got about 6 to 8% on their loans, and made a profit. Now they pay 1/10th of a percent on savings accounts and charge 18% or more on credit cards. Something is haywire here.

    Good discussion. I’m proud of you for your thoughts, but I’m up too late. And I’ll stop making sense if I write much later.

    Take care.

    Uncle Ken

    • Great insight Ken. I agree with a lot of what you had to say, especially the Student Loan Crisis that is ahead.

      I intentionally avoided any talk about taxes in my original post. I’ve learned a lot in school, but still have to learn a lot more about all the economic effects that raising and lowering taxes has.

      Good to hear from you and good to have level headed discussions like this without getting too politicly agressive.

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