Wealth and Poverty

My last trip to London reminded me of how much better off we are today than in times past. I was stopped at the security station and patted down so thoroughly I thought I should leave a tip.

"A little further down and to the left…" I mused.

"Ah, thank you."

Not only are we massaged before boarding the train to Paris, we also have campaign finance reform and a whole New Era in which we can look at dirty pictures in the privacy of our own homes.

Even Ramses II, among the richest and most powerful of the Pharaohs, had none of these things. He lived without the conveniences we take for granted today. When it was hot, he had young, half-naked maidens to fan him with palm fronds. But they were no match for a good Carrier window unit.

Philip of Macedon’s face was reconstructed by scientists – based on reports from the time. It can be seen in a recent issue of "National Geographic." He looks terrible. One eye is sealed in a ghastly way – after he was struck in the eye by an enemy arrow early in his career. What he would have given that day, I imagine, to have been picked up from the field of battle in a medevac helicopter and whisked to the Shock Trauma unit at Johns Hopkins. The surgeons there take out bullets every night. An arrow would have been a piece of cake.

It is often said that even the poorest of the poor in America today live better than these ancient monarchs did. But the benefit of being rich – apart from the absolute benefits of calories, painless dentistry, surgery, antibiotics and air conditioning – is to be able to feel superior to others. Most of the pleasure comes by way of comparison. And most people do not seem to get a huge ego boost from the knowledge that Ramses II did not have air conditioning, while they do. Instead, they yearn to surpass their neighbors.

Which is getting hard to do. Because all the neighbors have air conditioning now. Even the billionaires are finding it hard to stand out. I do not know Michael Saylor, but I bet he eats pretty much the same food you and I do. He probably wears similar clothes. His car is not too different from yours or mine. Even on vacation, he must find it hard to distance himself from the shoe clerks and other millionaires next door.

What is going on? Well, wealth itself is perhaps reaching a kind of point of diminishing returns.

We have been exploring the nature of wealth. I will tell you now where I am going with this inquiry so you can decide to get off here… or go along for the ride.

I hope to draw out a, uh, richer, more complex view of wealth – based on what I have been able to get out of this research into France’s wealthy families. There’s more to being wealthy, as I hope to show, than just having a lot of money. In fact, having a lot of money … without more… may actually be negative in some ways.

We have seen over the past few weeks that the Law of Diminishing Returns reduces the marginal utility of every additional dollar you earn. So does it reduce the value of every incremental unit of information. Or each additional ton of horse manure that piles up in my yard. Or each excess calorie you consume.

At some point, the extra calories or additional horse manure becomes worthless. You have all you need. Beyond that point – more is less. You would actually be better off if the additional eclairs and horse apples didn’t exist.

Surplus information – interviews with Al Gore or reruns of Oprah Winfrey – does not make us smarter. It wastes our most limited resource – time – and diminishes our quality of life.

Humans have been on earth for only about 100,000 years. During 99% of that time, wealth for most people meant calories. The more calories you had available to you… the richer you were. The richer you were, the more likely you were to survive and reproduce. Gold jewelry was merely a way of storing calories – because it could be traded for food when the need arose.

The legend of King Midas seems to make the point that even gold becomes toxic if you get too much of it. The poor king with the Midas Touch turned everything into gold – even his own daughter.

Is this a general principle? Have we discovered a new, unnoticed Law that governs the affairs of men? Beyond the point of Diminishing Returns is the Point of Increasing Toxicity. First, things become worthless. Then they become a burden. Even a threat. Could this be true for wealth itself?

Or is it merely a matter of learning how to control your appetite?

More tomorrow…

Your correspondent,

Bill Bonner
April 01, 2002 — en route to Le Dorat

This morning, Bill’s off to Le Dorat for the "Ostentation" festival. No fooling.

Le Dorat is a small town near Ouzilly, where Bill’s country house it located. Every seven years since the middle ages, in a celebration they call "L’Ostentation" (The Showing), the residents of Le Dorat have unlocked the vault in the town church, removed the relics, and paraded them around for the world to see. The locals dress up in festive attire and make a merry time of it.

"It’s a big deal," Bill says. "If I don’t see it this year, I’ll be over sixty the next time it comes around."

He’s promised a full report tomorrow.

In the meantime, enjoy "Wealth and Poverty," originally broadcast on March 16, 2000.

The Daily Reckoning