The Alternative Universe of Wealth, part 3
Things that are bad for us come in threes right?
This is part 3 of our visit to the Alternative Universe of Wealth. It’s part of my series on Wealth, and should get you thinking about how concentrated wealth upends our common assumptions about good and fair lives.
It’s hard not to come across as cynical in this newsletter and series. But I equally don't want you to read it as the ravings of some blinkered, hairshirt-wearing hippy: Rich people can do good with wealth. My question is do they do more good with more wealth? Even if they believe in goodness—even if they really are motivated to do good for others—the deck is stacked against them. Giving away all their wealth won’t solve our wealth problem, because as we’ve discovered, wealth is a problem bigger than any individual, entrenched across our laws and conventions and the limits of human insight, and the fundamental physics of money.
Up to a point, some concentration of money results in more possibility and more efficiency. But unconstrained, concentrated wealth has the opposite effect. That sort of wealth, which we’ve been discussing in this series, is a thing that we therefore need to actively prevent or, basically, accept (as in, feudalism!). Unfortunately, a lot of ‘powerful’ people—good or evil—would prefer to sit out the sorts of decisions and angst that exist at those two extremes, because extreme change like that takes time.
The kinds of changes that are needed to wean us safely off concentrated wealth are intergenerationally slow, and require patient consensus-building. Implemented now, they will benefit future politicians and people: They will benefit others. Unfortunately, that leaves us with tinkering—tax and regulation cuts that lean into making immediate differences for the wrong people, alongside Hail-Marys like minimum wage and allowance bumps which essentially kick the can down the road.
To put this another way, any dream of a truly just world could never contain both a, tax-advantaged, “J. Dogoodly Richman Foundation” and a local volunteer homeless shelter.
Like many of the things about wealth that we’ve been taught or tricked into believing, or are misunderstood, these things belong in different universes. Allowing the concentration of wealth and influence that gives one person the chance to shape the world to their own ends, while simultaneously accepting there are people without enough money or support to possess something as basic as a place to call home, should be something we are haunted by.
Only, mostly, we’re not. Mostly we hold these things together in our collective heads as broadly “good”: A wealthy person using their money altruistically, and an essential social safety net. Because the “altruistic” part sounds nice, we rarely take a moment to ask whether a world without that “wealthy person” is a world that still would need safety nets.
That’s why it’s vital for us to at least get a sense of a different world. And to do that we need to see how the world operates inside the Alternative Universe of Wealth. If you’ve missed the first couple of stops, catch up below, or read on…
“The best things in life are free”
Have you ever been to one of those conventions or fan zones or events where you get a free glass of bubbles or a beer or something with your entry ticket? If you’re the type to care, you’ll likely have noticed that they generally serve pretty-near the cheapest thing they can lay their hands on. This is because, in the normal world, money trades on actualisation, not access. You agree to let them exploit you a bit in return for your experience. They’re not trying to get anything from you, bar the trade. Essentially, then, things that come ‘free’ for normal people are included in the price.
That's acknowledged in most uses of this idiom. Mostly, when someone tells you ‘the best things in life are free’, they are working from that framework. The framework states that money can be spent to enhance your life, and anything else is unreachable with money—true love, reading a book in dappled shade, the genuine joy and laughter of a child etc. You pay for everything—except things that can’t be paid for.
That leads us to assume ‘best things’ can’t be priced. Only, in the Alternative Universe of Wealth, plenty of ‘best things’ do have a price, it’s just not a price the wealthy pay.
The reason I mentioned that convention example is to contrast it with an event you might have been lucky to attend (or imagined attending) for ultra-wealthy people—a charity auction, art gallery opening, ultra-VIP box at a sports match. For people with enough wealth, there’s a surprising amount of stuff that they don’t pay for at these things, including expensive beverages, attentive waitstaff, and gift bags, because their invite is provisional on them being seen and accessible to people who extrapolate value from their wealth. They are there to be impressed, not to be on one side of a transaction. Sure, they might bid on an auction or buy a painting. Or they might not. It doesn’t especially matter because, in the Alternative Universe, their best things are paid for in the vague currency of things like “connection” and “networking”. And, funded from our pockets, by way of taxes claimed as ‘business expenses’, and the extra margins and fees we all pay.
In essence, we pay for the wealthy to enjoy the best things in life for free.
The way to think about this is to break an incredible experience down into components. When you’re rich, the best components are the “priceless” access and pandering. You might remember in the movie Pretty Woman, Julia Roberts’ character goes to an opera and is lent a $250,000 necklace. That is, of course, the most obtuse example of a ‘free’ thing that wealth might give you access to, but what’s more common is getting some degree of free. For example, seats in first class on a plane cost a lot of money, but would be far more expensive if it wasn’t for the multitude of seats further back on the plane. Your wealth lets you buy a seat that includes ‘free’ highly-attentive flight attendants, more range and tolerance to turbulence than a typical private jet, and a comfortable sleep—subsidised by the sardines in the back.
The thing is, it’s often really hard to quantify how much these things are worth. How much extra is your family-wealth worth on your application for a prestigious university? How much is it worth that a Prime Minister will take your phone call? How much is it worth to deeply experience things made valuable by society—a Picasso or Matise painting in your living room, or Beyoncé at your birthday party?
The wealthy might not pay for all the best things in their life, but that doesn’t mean they cost us nothing.
“You can’t get blood out of a stone”
We’ve likely all written off some money owed to us at some point. You purchased a movie ticket for a mate and they never paid you back or something. We might say it’s too hard—like getting ‘blood from a stone’—but it’s generally just a passive concession because it’s not worth your time.
In the Alternative Universe, however, they take this idiom seriously. Wealth is protected and hidden actively, locked behind trusts and LLCs, ‘offshored’ or hidden in cryptocurrencies, or in Russian Doll-style legal-entities-inside-legal-entities. There are some good societal reasons for this at lower wealth levels—we put up with it for the same sorts of reasons we put up with insurance companies, shark cages, and trapeze nets: We want to ensure a small business failure doesn’t literally make a family homeless. But we actually can do that without also allowing a family responsible for millions of drug-related pain and death to walk away with 90% of the fortune they explicitly built from that pain and death.
Quite often you’ll hear people defend wealth by claiming it was built by “taking risks”. The business owner deserves their billions because, at some point in the past, they maxed out their $500 credit card and borrowed some money from a friend to start up their business. And, probably, they worked hard. And, certainly, they got lucky.
The thing is, if their business fails once they’re operating inside the Alternative Universe, they’ve had the opportunity to use wealth to protect their wealth. Their employees likely work hard as well. But if the business fails for them, they lose their job without the protection that having wealth might have provided them.
There’s not really much more to say about this one—it’s just a brief stop on our tour. It’s simply a thing that winds me up, because, as we’ve discussed here before, it feels like double-dipping for wealthy people: They get to parade around at factory openings and ground-breakings, wearing the halo of a “risk-taker-job-creator”, while simultaneously being able to afford to protect themselves from real risks that normal “risk-averse-job-havers” face. No modern billionaire loses ‘everything’ in the way that the rest of us can lose everything; anyone with wealth always has a stone.
“Can’t make an omelette without breaking a few eggs”
I wrote a whole piece early in this series about capitalism, so I’m not going to play that drum again. I expect we all understand conceptually that wealth under capitalism is built on exploitation. That’s not derision, it’s just fact: If every transaction was perfectly fair, there would be no wealth. You can argue about “willing buyers and suppliers”, but what makes capitalism work is the possibility, and incentive, to tilt the board. For certain kinds of people, conditioned by certain kinds of ideology, it is what gets them out of bed in the morning, and keeps them in the lab through the weekend.
We will never know for sure whether we could have achieved the totality of what we have in the past 200 years without capitalism. Even Karl Marx, the writer of the literal Communist Manifesto, believed capitalism was a required footfall on the way to an enlightened socialist society. But it doesn’t change the fact that it is an economic vehicle that requires a minority of people to stand on the bonnet yelling “CHARRRGE” while a whole lot more people are doing the pushing from behind, in the dust and mud.
So what is different in the Alternative Universe is the subject of this idiom. Mostly, when ordinary types think about this idiom we focus on the sad outcome of the egg. But the wealthy focus on the omelette.
However, that is less about evil than about scale.
You’ll likely have come across some YouTube video or opinion piece or tweet or webcomic that attempts to put a billion dollars in perspective: You know, stuff like “1 million seconds is 12 days, but 1 billion seconds is 31 years”. But, no matter how relatable these examples might appear, the scale is still nonsense—I can barely conceive of things that happen in the space of around a fortnight, let alone over three decades! …Even 1 million is a big number!
And wealthy people are not immune to this problem. No one has a literal vault of gold coins to swim in like Scrooge McDuck. Large wealth is always an abstract idea. And, because of that, the consequences of large wealth are abstract as well.
When you spend a few dollars on a crochet doily at the local craft market you can conceive of the maker sitting in their armchair, with their hook and thread, a cup of tea and a gingernut, a bar heater on the rug, TV on quietly in the background, books on shelves, dinner in the oven… You can visualise all this as integral to your trade. Your transaction is human-sized: You are conscious of the egg.
When you’re mining millions of barrels of oil, or buying tonnes of cobalt, or devising a private equity buyout… When you’re campaigning for more private vehicle lanes and helicopter pads but less public transport, or less fibre internet infrastructure and more cube-satellites… When you’re adjusting your industrial recipes to replace essential fats with palm oil and corn syrup… When you’re colonising a country, or encouraging unmoderated free speech… In transactions that size, our brains only have the capacity for the omelette. There are not humans in those transactions, just abstract numbers. And the bigger the wealth, and the more these things need to be justified as progress—energy, efficiency, communication or value—the further they drift from our human affinity.
If you find yourself not seeing the egg for the omelette, you know you’re operating in the Alternative Universe of Wealth.
“No risk no reward”
The final stop on today’s tour is the bowling alley!
What? You don’t like bowling!
Oh well. I guess I’ll just use your ball??
In college, my friends and I were avid fans of The Simpsons and ‘tested’ each other constantly with all sorts of inside jokes. At one stage, I even purchased a second-hand bowling ball for a friend’s birthday in reference to the 1990 episode “Life in the Fast Lane”. The basic gist of the episode was Homer, having forgotten his wife’s birthday, purchased a bowling ball, with the goal of getting her a gift he planned to benefit from himself.
Normally, we understand this idiom to encourage ‘big swings’ in life: Take a big risk and, provided you don’t flame out, you’ll be rewarded biggly. And because we’re talking about wealth, ‘risk’ is essentially a synonym here for “money spent”. And, sure, there are examples of truth in that among our wealthiest global citizens. But remember, they took those sorts of risks outside the Alternative Universe of Wealth. Those sorts of risks—if they pay off—earn you entrance into the Alternative Universe, where these idioms start meaning something different.
In the Alternative Universe, Bowling Ball Gifts get purchased all the time. For example, the ultra-wealthy appear to risk their impressive bank balances by giving money to their charitable foundations, but this can be a wonderfully-rewarding tax dodge. While rules do vary from place to place, it’s not uncommon to require 5% or less of a charity’s assets to be ‘spent’ each year in order to retain tax-exempt status. And, note my use of the term “assets” there: Put $10m plus a $150k artwork into your charity; get the artwork revalued to $500k by a compliant auction house; gift the artwork to a private museum; get a nice plaque for your generosity; then carry on building (tax-exempt) wealth with the full $10m—to cover any future costs of your swanky (‘charity-adjacent’) entertainment and travel.
A true classic ‘no perceived risk, no reward’ trick in the Alternative Universe is the carried interest loophole that tax departments have been failing to close for decades. Dating back to cargo carried on merchant ships in the 16th Century, this was originally payment to a ship’s captain in the form of a ‘percentage of the profit from goods sold’. It acknowledged the captain took a risk carrying those high-value goods through stormy, pirate-infested, waters, so incentivised them to protect the goods in transit. Because it was a share of the sales, it was a reward that was considered ‘capital gain’ rather than ‘income’, and hence taxed at a lower rate (Don’t get me started again about that!) But, remember, in the Alternative Universe, something only needs to have the appearance of risk for there to be a reward. So, now, carried interest “profit sharing” gets used by hedge funds to reward traders, in lieu of much more highly-taxed performance bonuses, on the pretence that somehow the trader is taking a personal risk, trading their client’s money.
In simple terms, ‘risk’ is used in the Alternative Universe in the same way that ‘crab’ is used in your local fish’n’chip shop’s crabstick. In the Alternative Universe, a thing only needs to look like a risk to claim a reward.
Ok, just one more stop in the Alternative Universe of Wealth to go. I won’t claim I’ve saved the best for last, because this stuff is all pretty bleak, but if you’re a fan of education or ornithology, you’ll want to stick around.