Wealth Creation

If I asked you to describe wealth, what would your answer be? Dictionary definitions for ‘Wealth’ are:

1. A great quantity or store of money, valuable possessions, property or other riches
2. An abundance or profusion of anything; plentiful amount
3. All things that have monetary or exchange value
4. Anything that has utility and is capable of appropriated or exchanged
5. Rich or valuable contents or produce

These dictionary definitions fit what we think of as wealth very nicely, don’t you think?

Now, what if I asked you to describe how wealth is CREATED. What would your answer be?

The fact is, MOST people never give this the slightest thought. If pressed, most people will come up with some idea about how it’s created, but typically their answers will be confused and contradictory.

So, let’s think about it for a moment. Things (boats, aeroplanes, wristwatches, jewelry, cars etc.) are made in factories around the world (okay mostly CHINA right now) but are these factories creating wealth? Or are they just creating ‘things’ which are of equal value to the money paid? If it’s of EQUAL value, then nothing has been created!

To create value, you need to do something (make something or provide something) for other people that they need or want, and when they exchange something of theirs for it, they are getting MORE (not equal) than the value of their bargaining item (for now let’s say they’re using money).

Okay, we all value things differently (which we’ll talk about in the near future) but for now, accept that you can get MORE back than the cost to you. Let’s see how this works.

Question: could you build a car? I don’t mean a ‘kit-car’ where it’s half done for you and you add the engine and wheels. I mean, could you locate the iron-ore, dig it up, smelt it, design the engine, build it (AND build the tools to build the car), make the seats…………….well, you get the picture. No, of course you couldn’t. Nobody can. No ONE body can. Even if you could, imagine how much it would cost you to actually do it. Millions of dollars! Multiple millions for ONE car!

But we can buy all of this fantastic technology for a $10-20k, or for a couple of thousand if you’re buying a previously used one.

So, what’s my point? Well, let’s take a far simpler scenario. Imagine you are like the survivors on a popular TV show about being LOST on a tropical island. How could you possibly become wealthy?

How about doing this:

While each of your 10 colleagues are laboring for 10 hours each day, walking up the foothills to the lake to get fresh water and hauling it back to camp in makeshift buckets, fishing for themselves or hunting (because some like meat and others like fish), YOU do this AND you work an extra 2 hours each day.

What do you do with this time? Firstly, you make an agreement with them. You say, “If I could save you the two hour walk up that dangerous hill to the freshwater lake each day, would each of you spend just ONE HOUR doing things for me?” (This is called ‘market research; you are determining if there is a demand for your product/service). Let’s say they agree. Who wouldn’t? If you could perform this ‘miracle’ you would be saving them a NET time of three hours each per day (2 hours up the hill and 2 hours back + 4 hours), during which they could do other things (laze around, party or create something useful perhaps?).

So they sensibly agree and you then proceed to continue to do your own work for 10 hours (hunting, fetching water etc. looking after yourself) but you ALSO work an extra 2 hours building a really neat bamboo pipeline from the lake all the way down to the camp. (No, I don’t want to get into engineering details, it’s the principle that matters here!).

Once you’ve CREATED this, after weeks of extra effort, inventiveness and toil, overcoming obstacles and fighting off savage beasts (okay, I’m getting a little carried away now), you can relax EVERY DAY (should you so wish, though being the enterprising person you are, you probably wouldn’t) because the 10 hours of work you needed to do just to survive is now being done by your 10 colleagues, each working 1 hour for you, because you have saved them EACH three hours per day!

THAT is how wealth is created!

Even the poorest people in the U.S. are currently enjoying a lifestyle that is FAR BETTER than a King lived 500 years ago, simply because over the centuries, other people have created wealth, which we are all benefiting from to this day.

Anybody CAN create wealth. By improving other people’s lives, you can create wealth for them AND yourself.

LH