Does how much money a person has reflect their value to society?

[JAK]

I would say, as an argument to justify extreme wealth, I think it potentially has merit. Though, I think it is more that people get compensated based on the value attributed to their contribution to society, by society, rather than based on the value of their contribution to society i.e. capitalist society values bankers more than teachers, though an alternative society, where, teachers are extremely well paid is conceivable, though unlikely.  

 

For instance, yes, some people argue that it is ludicrous that Cristiano Ronaldo is close to being a billionaire, for kicking a ball around a field, while nurses may struggle to buy a house. However, millions of people pay to watch Ronaldo, he provides countless hours of joy, and millions buy his shirts. Therefore, arguably, his earnings are justified as he provides more value than the nurse. 

 

Similarly, it could also be used to explain why lazy bums are broke. 

However, I think it is a little dangerous to veer too far from the extremes, as there is an underlying implication that people get what they deserve, which although sometimes the case, is not always the case. 

For instance, some extremes are pretty clear cut:

• Bezos, Rockefeller, Ford, Gates etc. either changed industries, or provided products everyone used. Although, they may not have originated the ideas, or acted completely ethically, they provided the products, so a few shekels commission from everyone is arguably justifiable. Whether rewards should be capped is another story.
• Multi-generational, sit-on-their asses, broke social welfare scrounges. Possibly not fair in terms of chicken-egg, cause-effect, personal circumstances etc., but fair in terms of value-add.

However, it's a little more complicated to argue that Buffett (even though I love the guy) or Bernard Arnault have contributed the same value. Although it has merits (pensions etc.), great capital allocation is a little obvious in terms of value-add to society, than a product on every shelf or desktop. Buffett himself admits that he would have zero value-add on a desert island. 

 

And then you have the middle, where it gets very murky e.g. value of a teacher vs. a senior civil servant. In particular, if that latter has been promoted to their level of incompetence (Peter Principle), and may be doing more harm than good. Even nurse vs. doctor, when sometimes the nurse does all the donkey work, with a doctor needing to just sign off. Hard to say the differences in rewards here are based on relative value add. In particular, when you get into specifics. 

Also, there is a difference between value add, and potential to add value. By this I mean, sometimes its a winner takes all world. 

 

Many things in life are due to being in the right place at the right time. Replay the scenario again, and the outcome may remain the same, but the players may change. For instance, I think Mauboussin quotes a study, where participants are asked to listen to songs from a selection of songs. When participants do not know what other participants listen to, there most popular tracks were randomly distributed. However, when participants can see what other participants listen to, the most popular tracks became clustered. So from one perspective , Beyoncé is richer than an unknown singer, because she provides more value to millions of people than the unknown singer. However, from another perspective, millions of people listen to Beyoncé because millions of others do, because of some random chaos/path dependence, not because she possess more inherent value-add. 

 

Similarly, you have the percolation model. Take a chequerboard, with varying amounts of black and white cells randomly distributed across the board. If you want to cross using black cells only, the probability of success is only 20%, until you hit a tipping point of 59% of black squares, then it jumps to 80%. Same thing kind of applies with discoveries etc., where a critical mass of pre-existing technology is necessary for something to happen. Uber.... simple idea, but wouldn't work until you had smartphones, 3/4G, etc.  But as soon as you had those technologies, amazing value add was unlocked. Are the outsized rewards for the person who adds the last piece in the jigsaw completely deserved? Arguably yes, arguably no. 

Same when you get to great idea, shit implementation e.g. Ray Croc vs. McDonald brothers. Arguably, no McD without Croc. However, would Croc have achieved anything without the McDonalds.  Facebook vs. MySpace. John Logie Baird invented one of the first TVs.... but not sure he made any great fortune from it. Contrast that with people with better business acument like Gates. 

 

Then you have externalities.

 

As someone else said, the guy who discovered antibiotics wasn't rewarded according to the value provided. Worse, some Indian pharmaceutical company is probably cleaning up peddling generic antibiotics to people in developing countries where they are used as blanket panaceas without prescriptions (probably same problem in US agriculture). Thus, reducing the effectiveness of antibiotics for all. Therefore, someone is arguably becoming wealthy while providing negative value to society. Same with any Tragedy of the Commons type situation. Opioid pandemic?

 

So kind of a long winded way to say, it depends !  

Edited June 27, 2022 by JAK

[randomep]

So Prince Charles, Melinda Gates, the Walton heirs, Steve cohen contributions to society is in proportion to their wealth?

[Parsad]

On 6/26/2022 at 12:44 PM, Longnose said:

 

Fair enough going back to the original thought. Does someone's net worth translate to their societal value? 

 

Short answer No. 

 

But does wealth amplify an individuals impact on society? Yes.

 

Yeah, but so does any position of power.  I know a lot of broke ass politicians who have too much influence on society one way or the other...including some dumbass Supreme Court Judges.

 

The only part I agree with is money or power amplifies impact...good or bad...Buffett or Jeffrey Epstein!  Cheers!

[flesh]

I didnt read the replies but i'd say yes it's obvious. 

 

Just take the paredo (pareto?) principle or 80/20 rule combined with the fact that we reward productivity with money.

 

On average, the wealthier you are the more you contributed and therefore should be of more value to society. I doubt there's any other one metric that would be better to derive value for society in our society. There's probably some interesting aspects to the curve though. If you think of it in income deciles it's pretty obvious. If you slice it further it might get funky. From a societal benefit perspective, if you had to eliminate one decile of the population measuring income/wealth, which would you eliminate first/last?

 

ofc there's exceptions blah blah. 

 

At a personal level, it's silly to think of yourself this way, luck, ovarian lottery, ego, pride. I've been in Spain for a month now and I guarantee there's all sorts of smarter/more productive people all around me who never come close to my financial standing.

 

How many of us would have discovered stocks in a country where the ibex was top of mind? How many of us are aware of any investment that's returned what the ibex has returned in our life time?

[SharperDingaan]

This is very quaint 

 

A great many people would argue that in the real world, the more of a bastard/thief you are, the wealthier you are.

Sure, WEB did well .... but compared to a Putin, MBS, etc. ? ...... WEBs pile is chicken shit !!

 

Always go with the scum of the earth.

They stay rich, because they are very good at what they do !

 

SD