Book of Wise Investors

Most people believe that more money can solve the poverty problems faced by humanity. But do you really think so?

Does distributing wealth equally among all people on planet Earth once and for all eliminate poverty from humanity?

We all know that printing more money will eventually leads to inflation. It is like everyone having Midas touch that turns everything he touch into gold will only make gold worth even less than steel.

Adam Smith brilliantly outlines in his Wealth of Nations that the wealth of humanity comes from annual supplies of human labor, both mental and physical labor. Without people working in farms to grow rice because they can turn everything he touch into gold and no need to work or that wealth is distributed equally such that everyone has one millions dollars now, there will be no food to eat, and so what if you have one million dollars.

Rich millionaires and billionaires like Warren Buffet and Bill Gates donate a lot, but not to people who are “poor” but to research institutions, subsidize education, etc. They know deep in mind that giving to people who are poor can only increase but not decrease poverty simply because if people do not work to produce something and create value, the economic pie will just get smaller. If all toilet cleaners receive one million dollars today, places that need toilet cleaners will just have to increase salary in order to attract those working in other low end jobs to come work as a toilet cleaner.

At the end of the day, if most of toilet cleaners are gamblers, lack in financial intelligence or simply want to spend on luxury items, (for example only, I don’t mean that they are) the wealth at the end of the day will just simply be passed on to operators of casinos, Ponzi schemes or businesses selling those goods. An increase in demand for certain goods only means that companies can raise the prices and earn more profits as they suddenly have one million dollars.

The person behind having wealth is the key, not money alone only.

This does not mean that we should not help people in lower end of social-economic strata, but that the key to eliminate poverty is not by distributing wealth equally but by increasing the economic pie.

A very simple example can be seen in the case of charity giving, there is no doubt that we need to help patients with no money and kidney failure to pay for kidney dialysis. But that if a kidney patient on average needs $100 000 over his lifetime for kidney dialysis, 10 millions dollars can only helps 100 patients and there will be countless generations to come that requires kidney dialysis treatments.

If $10 millions can be allocated to promising stem cell research, which eventually can create a new kidney from thin air, then annual donations in this area can be channeled to other areas and wealth of humanity increases as a result.

Consider the fact that if a talented person working as researchers to discover a way to clone kidney suddenly receive one millions dollars as part of a plan to reduce poverty from equal distributions of wealth, together with doctors and nurses who quit their jobs also after having one millions dollars each, do you think poverty is accelerated?

The poor kidney patient having one millions dollars also no use.

Everyone has a specific preference on their consumptions, with one millions dollars each on hand, they will just bid up prices of certain goods and services, and in turn pass the wealth back to businesses procuring these goods and services.

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