There is a fallacy that wealth is unevenly distributed throughout societies. But wait, you say, it is! The rich have FAR more wealth than the poor. Yes, that’s true. Wealth accumulation is quite uneven. But there is virtually no such thing as wealth distribution because wealth is not something that is or can be distributed.  So to solve the unevenness of wealth distribution is to spin ones wheels in a perpetual battle against something that doesn’t exist.

First, wealth is not a fixed resource like the amount of gold in the world. Wealth can be created out of no other physical resource and can vanish with no physical perception. Wealth is often created out of nothing by people who have ingenious ideas that they act upon at the right time to create wealth from nothing more than their imagination and effort. Creation of wealth almost always involves the intellect. And, truth be told, intellectual capacity is very unevenly possessed (again not distributed) in cultures. But intellect alone is insufficient to create wealth. One must also have the drive and determination to use the intellect to create wealth. There are plenty of geniuses without a scrap of earned wealth. You cannot force intellect and drive to be evenly possessed by all people. There is always someone much brighter than me and someone who works much harder.

To be honest, wealth also does have a component of luck or fortune or blessing (however you choose to say it) built in. A person in 1850 who imagines the microprocessor and has more drive than anyone on earth still would have be unfortunate in that he/she was born at the wrong time to allow those wealth-creating attributes to be put to good use. People born in free countries, such as the USA or European nations, have a much more fertile ground for wealth creation than countries that restrict actions. So there is indeed a matter of chance involved, lest any rich folks think they are “all that”.

Looking At Wealth and Reality Deeper

The discussion of wealth inequality is understandable. Fairness is, of course, a basic human impulse. Why should some have better circumstances than others? A favorite rock group, Rush, has a song, “The Larger Bowl” that with lyrics that address how many of us feel ;

why such different fortunes and fates?
some are blessed and some are cursed
some live behind iron gates
while others see only the worst

some are blessed and some are cursed
the golden one or scarred from birth
while others only see the worst
such a lot of pain on the earth

the golden one or scarred from birth
some things can never be changed
such a lot of pain on this earth
it’s somehow so badly arranged

some things can never be changed
some reasons will never come clear
it’s somehow so badly arranged
if we’re so much the same, like I always hear

I can agree with their sentiment. However, to improve life for everyone or anyone requires clarity about the way that reality works. What are the universal laws that govern wealth?

I’ll start by repeating the conclusion. There is no such thing as “wealth distribution”. The basic idea is an emotional one, driven by the understandable desire for fairness, not a factual observation of mathematical reality. Let’s be clear – we do not help people by believing in nice sounding but false ideas. We can start with the agreement that a compassionate society should help as many to thrive as possible. But we must formulate policy around reality if we hope to help anyone.

First, wealth is not a fixed pool of resources that can be distributed. Wealth is created from nothing and destroyed by the billions daily in the 21st century. Wealth is not primarily physical resources anymore. In the 19th century and before, wealth was mineral, land, forced labor and animals. Today, a small percentage of wealth creation is from 19th century resource models. Most new millionaires and billionaires result from intellectual ideas and drive combined with luck. To be sure, luck has always been a major part of wealth creation. If you were born at the right place, the right time, with the needed mental and physical attributes, the right family and a host of other factors, you stood a higher chance of being wealthy. Today, however, the birth situation is far less important. The place is less important, at least in western nations. The personal intellect and drive are vastly more crucial. And family wealth is almost irrelevant now. Almost.

So given those two realities – wealth is daily created and destroyed and much of modern wealth is based on the intangibles of intellect, luck and drive – it is obvious that it cannot be simply redistributed.

The myth of wealth distribution is primarily based on the false assumption that there is a relatively fixed amount of wealth available and that for one person or company or group to have a bigger share of the fixed pie is unfair because it means someone else will have less .

Since we see the wealth is not fixed and that it is not based on factors that can be “distributed” intentionally, attempts at redistribution are doomed to cause damage. Indeed the entire discussion distracts from the more noble effort to help more people understand how to create wealth in the first place. If we tell people that they cannot have more and improve their lives by improving their intellectual power and stepping up their drive and that the game is rigged against them, we effectively rob them of achieving their potential. And we place their hope in a lie that cannot help them historically speaking.

The other thing we do by perpetuating the mostly false idea of unfair wealth distribution is create bigotry and resentment instead of a learning opportunity. How? If I see Bill Gates as unfairly grabbing, somehow, a bigger share of the wealth pie than he deserves, instead of using his intellect and circumstances to create billions from nothing but his mind and drive, then we will not learn the things that helped him build great wealth. We will miss out on an opportunity to apply the principles he used in our own lives. To be sure, luck is involved in his fortune to some degree. But even more so, his intellect and drive allowed him to create great wealth at an opportune time in society.

If you prefer an agricultural example, to create hundreds of dollars of wealth required farmers of old to find free Apple seeds from a wild tree, use their intellect and knowledge to plant them in a good place, use their hard work to protect and nurture them, and hope that they were not destroyed by an unlucky bout of bad weather. Their small initial resource find combined with lots of work, intellect and care, with a little good luck results in hundreds of dollars of harvest. This is amplified in industrial ages. And exponentially amplified in the information tech age.

Interestingly, the hundreds of dollars of wealth from the harvest would not exist in the world if not for all the factors. And the hundreds of dollars of created wealth do not decrease anyone else’s wealth or potential. There is no distribution  involved – only wealth creation or destruction.