part0007

Certainly, the possibility of living in a civilized world develops the opportunity for inequality.

The opportunists seize every opportunity to make a profit.

They deserve every single penny they make out of it while the others stay in ignorance of these opportunities.

There are two factors at play here:

Though the opportunity was available to all of them, only the opportunist were able to see the opportunity at hand.

This is only made possible with the help of Leverage.

Let’s say that there is an opportunity to make money by cleaning a house. You could do it in a number of ways.

What does this mean financially?

Depending on your region and country, all these figures will vary but the point remains that you are saving time/money depending on what you are willing to choose.

Leverages here are Vacuum Cleaner, Robotic Cleaners, and Man Power.

Let’s take a financial example this time.

I have a $100 in my bank account and you have a $100 million in your bank account.

We both choose to invest it in a low-risk index fund which yields a moderate 8% annual return on investment.

After a year, My initial $100 would have become $108 while your $100 million would have become $108 million.

Even though we both had equal opportunity, you were able to make the most of the index fund investment.

What is the Leverage here?

To add insult to injury, I’ve earned all of my $100 while you have inherited your $100 million.

Now, I may feel life is unequal!

In reality, it is not.

Your parents may have worked hard and deserved every penny of what they have earned and then passed it on to you.

If you are unaware of an unpleasant situation, you cannot be troubled by it.

In the above-mentioned example of index fund investment. I would have been happy If I did not know that you made $8 million in the same transaction, doing exactly what I did.

Initially, the wealth gap between you and me was $99,999,900.

After a year, the wealth gap between you and me has widened to $107,999,892.

While this fact is true, inflation is also catching up to eat up what I’ve earned in interest, along with tax payment to the government and costs involved with the fund.

The real return on investment could be anywhere between $2 – $6 while you could be looking forward to earning anywhere between $2 million to $6 million.

Your parents might have worked hard; learnt along the way to become the best in their fields to accumulate and provide you a $100 million. While mine did nothing and provided me with a total inheritance of $0.

It is in every parent’s interest to ensure that their children have every bit of advantage in this world.

The more developed the nation, the deeper the family legacy and inheritance. If you ensure that you increase the total family inheritance by say 20% in total over your lifetime and leave your children with a net inheritance of $120 million, you are essentially making sure that your family has an advantage in the capitalistic society we live in today.

Meanwhile, if I ensure that I spend every little penny that I have left and leave my children with a net inheritance of $0 I ensure misery to my children.

If you are determined enough and are motivated sufficiently. You will eventually earn your first million in the 30 + years of your career.

It is the only recipe which promises the attainment of your financial goals.

But don’t people who invest end up losing money?

These are the people who do not do their homework before investing.

Just like other industries, the Investment sectors are full of gold diggers. You must be aware of it and make sound investment decisions with the least risk.

In order to be aware of what makes an investment sound, you need to keep learning about the art of making money.

Be inquisitive; strive to learn; every little experience is a lesson on what works and what does not.

It would generally take me 2 – 3 generations if I am lucky to get from where I am today to catch up with say $100 million net worth if everything goes right.

But if enough people like me think that inequality is the root of all evil and decide to revolt against it, maybe we can throw away the current government and manage to press the reset button on the inequality.

When the civilizations start building a society again, it is inevitable that the inequality will breed again.

According to Walter Scheidel, a professor of Roman History at Stanford University and the author of “The Great Leveler”, there are only four factors which have the ability to reset the problem of inequality – war, disease, State collapse and revolution. But as soon as the devastation is over, income inequality builds again.

In the process of destroying inequality, we will risk destroying the whole civilization as we know it. Simple to start from the scratch again.

Do you really want to reset all the achievements that your country has gone through simply because you do not have the patience to wait until the money compounds to $100 million after 2 – 3 generations?