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Blessed Are the Poor – Really?

January 6, 2016
 

 “People are ruined by challenged economic lives.

But they are ruined by wealth as well because

they lose their ambition and they lose their pride

and they lose their sense of self-worth…”

      Malcolm Gladwell (David and Goliath)

 

An average human being would eat just three meals a day, put on just one dress at a time, use only one computer or smart phone, drive only one car, occupy only one chair in his office, watch only one TV, live only in one home sleeping only in one bedroom occupying just one half of the bed space… He takes none of these along when he dies. Assuming an average life span of 65 years, a person lives on this earth from cradle to grave for less than a mere 24,000 days. Most billionaires have no more than 10-20 years of future life to live. In other words, these people have just some 3500 to 7000 days of life left in them.  How much money could they possibly spent within such a short period of life on this earth? Yet there greed for wealth never ends…

People keep working themselves to death, skipping meals and sparing no time for their loved ones while keeping their sole focus on minting more money, amassing more riches… They would break the law, use unethical means, indulge in corrupt practices and would estrange or even eliminate their own blood relations for the sake of grabbing more wealth. Many seldom pause to consider whether they or their future generations would ever really spend all the wealth they scramble to accumulate.

I am not suggesting that money is bad. I am also not suggesting people should retire from all activities once they earn enough wealth to see themselves and their children comfortably through life. The point I wish to make is the irrationality of the human attitude towards accumulating wealth, more wealth and still more wealth by hook or crook. The point is the foolishness of the craze for wealth.

For instance, take the case of the richest man of India. Forbes estimated his net worth in 2015 to be around $21 billion. In fact, this is less than half his net worth a few years ago. The global economic meltdown and the consequent tumbling down of the stock markets had swept away big chunks of his wealth. Yet, at current exchange rates, his net worth of $21 billion in 2015 works out to some Rs.1.4 lakh core. Assume that he simply invests this sum to earn an annual interest at the rate of 8%. He would rake in nearly Rs. 11,000 crore a year. After paying income tax @30%, his net annual return would be something like Rs. 7500 crore. This translates in to more or less two thousand lakh (20 Crore) rupees for him to spend every day without touching the principal he invests. How would anyone really spend twenty crore rupees each day on all the 365 days in a year? 

It is not that he has not been trying his hand at spending. For instance, he built a twenty-seven storied 400,000-square-foot skyscraper home Antilia for accommodating his family of five. The reported cost of its construction was anything between 1-2 billion US dollars (One billion US dollars is now equal to around INR 6500 crore). It has been reported that the house, if we can call the architectural monstrosity so, has six stories of underground parking, three helipads and requires a staff of no less than 600 to run it. Antilia tops the Forbes list of the most expensive homes in the world. The family has another fourteen storied apartment tower at another part of the city where, according to reports, the family continues to live in spite of Antilia which apparently has some Vastu issues…

Yet his craving for amassing more wealth has not waned a bit. He keeps working at a fever pitch to make more money by every possible means – fair or unfair. None would easily forget the ugly dispute that erupted between the brothers over the division of family wealth in the aftermath of the death of their father on July 6, 2002. We often assume that the poor are the people hungering after wealth. The opposite is the stark reality. The rich are unabashedly greedy.  What baffles me is why people never say ‘enough’ when it comes to money?

Economists try to explain man’s never-ending appetite for money by means of the theories of ‘utility’. In Economics, the term utility is synonymous with pleasure, satisfaction, sense of fulfilment etc. A person consumes a commodity because he or she derives utility from its consumption. It satisfies some want or desire of the consumer. For instance, I drink my bed coffee because I have a deep desire to have it first thing in the morning. I find pleasure, satisfaction and a sense of fulfilment when I drink it. In other words, bed coffee has ‘utility’ for me. Thus, utility is the ‘want satisfying power’ of a commodity. Economists propose ‘util’ as a measure to represent the value of utility. It is analogous to a ‘gram’ for weight or a litre for liquid’.

Another term connected with the concept of utility is ‘Marginal Utility’. The first cup of my bed coffee gives me a certain amount of pleasure (Utility). Let me say its measure is one ‘util’. If I am fond of coffee, a second cup in the morning might give me some additional pleasure (utility). This additional pleasure may or may not have the same level of intensity as the pleasure I derive from the first cup. ‘Marginal utility’ is the extra pleasure the consumer derives from the extra unit of any commodity he consumes. 

A general characteristic of marginal utility is that it does not remain constant at all levels of consumption. Returning to our analogy of bed coffee, for someone who has the habit of beginning the day with a steaming cup of coffee, the first cup he consumes would be highly pleasurable and fulfilling. But the enjoyment one derives from a second cup would not be as intense as the first cup. If one has to consume a third or fourth cup, consumption might turn out to be a punishment. In other words, marginal utility might turn negative to bring down the overall utility. In short, with every unit of additional consumption of a commodity (Marginal quantity), the quantum of extra joy one derives from consumption (Marginal Utility) wanes in its intensity. Beyond a point, it might even fall below zero. 

This phenomenon of falling utility values as consumption increases is captured by economists in the ‘Law of Diminishing Marginal Utility’. It states that as a person increases consumption of a product while keeping consumption of other products constant, there is a decline in the marginal utility that the person derives from consuming each additional unit of that product. Although the term might sound bewildering to readers unfamiliar with the jargon of Economics, it must now be obvious that ‘Diminishing Marginal Utility’ is simply a matter of common sense and everyday experience.

Now, is the law of diminishing marginal utility applicable also to money? Imagine that, instead of cups of coffee, you are offered wads of currencies. You would certainly be delighted to receive the first bundle of currencies. But, would you be any less delighted with the second, third or hundredth bundle? I believe that it can safely be assumed that when it comes to money the level of our delight would only intensify with more except in extremely rare cases. Thus, the situation is that people would eventually reach a stage of ‘enough’ with every commodity they consume. But with money, hardly anyone would ever say ‘enough’. 

So, economists tell us that the law of diminishing returns does not operate when it comes to money since it is always assumed that for any consumer, money income is limited.  Since money income is limited, a consumer derives some pleasure (utility) from holding on to his money. But he would exchange his money for a commodity as long as the utility he hopes to obtain from the commodity is higher or at least equal to the utility of holding on to the money. For instance, for a hungry man, a loaf of bread has more utility than the money he has to exchange to obtain it.  So a hungry man would exchange his money to pay for the bread that satisfies his hunger. Once his stomach is full, bread will lose its utility and the man would not give up any more of his money for buying bread. He might exchange it for a cup of coffee.

Thus, conventional theories of Economics would have us believe that money would never lose even a bit of its shine. This would mean that the first rupee, the first rupee beyond a lakh, the first rupee beyond crore and the first rupee beyond a billion that I come to possess will all have the same utility value for me. Thus, the pleasure I would drive from every unit of additional quantity (Marginal Quantity) of money is the same even if I am a multi-billionaire. 

However, there are arguments that money too could suffer from the effects of the law of diminishing marginal utility. Nevertheless, everyone agrees on one point. It is that the marginal utility of money (extra pleasure from extra rupee) would never fall to a level of zero. This would mean that humans would never stop loving more money since very rupee he gets increases the intensity of his total enjoyment by some measure. So, when it comes to money, more is always merrier. 

In the light of the economics we discussed above, we may conclude that a person possessing a wealth of ten million is happier than a person whose wealth is one million.  And a person with a wealth of 100 million is happier in comparison to everyone else with lesser wealth. This perhaps explains why the likes of Bill Gates with a net worth of $79.2 billion or Warren Buffet with 72.7 billion or Larry Ellison with $54.3 billion or Mukesh Ambani with $20.8 billion in 2015 have not been sitting back, relaxing and enjoying the mind-boggling levels of wealth they already possess. Instead, they have all been continuing to work themselves to exhaustion making more money, the philanthropic inclinations of some of them notwithstanding…   

One explanation for this frenzy of the rich to become richer could be that people seek to ensure that their coming generations live in comfort. A related question is, how much money the parents of the people who are billionaires now had accumulated for them? The plain truth is that parents of many of today’s billionaires had lived lives of poverty and want. Their children had seen it and realized how poverty makes parenting difficult. There is no denying the fact that more money makes parenting easier. The only issue is how much more. Several questions come up in this regard. For instance, is it possible that parenting would become difficult because of too much wealth?  Is it possible that the utility of wealth would turn negative beyond a point? Is it possible that people would regret their wealth beyond a level?…

I would like to share with the readers a discussion on this that I came across in the book ‘David and Goliath’ written by Malcolm Gladwell, the renowned author of international bestselling titles like ‘Blink’ and ‘Outliers’. He presents a brief narrative of the life of someone he calls, ‘one of the most powerful people in Hollywood’ as an example of how too much money becomes an impediment when it comes to ease of parenting.

This Hollywood man was born to poor parents living in a ‘mixed neighbourhood’. As a ten-year-old boy, during the winter season he would visit people in nearby homes offering to clear the snow from their driveways and sidewalks for a price. In the fall, he would be visiting them with offers of raking fallen leaves. He would fix up a deal with the homeowners and would then contract the job out to other children. He would ensure that the job is done on time and to the satisfaction of his clients. He would pay his ‘workers’ the moment the work is finished and would collect the money later from his clients. This made his crew work hard to finish their assignments in time. By the time he was eleven, he had a tidy sum of over six hundred dollars in his bank account. He had earned it by his own hard work. In the nineteen fifties, $600 was a huge sum.

His father was a man who had suffered the deprivations of the great economic depression (1929-1939) that America went through. He understood the value of money and had no qualms about speaking out about the need for saving every penny. Thus, our hero learnt the value of money the hard way and understood that, “Any fool can spend money.  But to earn it and save it and to defer gratification – then you learn to value it differently.”

At the age of sixteen, he went to work at his father’s scrap metal business. Describing his experience working as an employee of his father, he says, “It was awful. It was dirty. It was hard. It was boring. I was putting scrap metal in barrels… I could not get the dirt off me. I think looking back, my father wanted me to work there because he knew that if I worked there, I would want to escape. I would be motivated to do something more.”

He went to college where he ran a laundry service for his wealthy classmates. He made money through innovative initiatives and intense hard work.  He went to Business School and Law School in New York. After graduation, he landed a job in Hollywood. He now has house in Beverly Hills the size of an airplane hangar. He has a private jet, a Ferrari in his garage and a seemingly unending driveway to the massive gates reminiscent of some medieval European castle. And he understood the value of money because of his boyhood of poverty on the streets of Minneapolis…

But what is the situation of his children? Children of Hollywood billionaires do not go clearing snow from the driveways of their Beverley Hills neighbours. Their parents do not wave the electricity bills on their faces for not switching off lights. It is impossible to teach his children to “work hard, be independent, learn the meaning of money” as his father had taught him. His children lived in a New World of riches. They looked around and realized that they never have to work hard, be independent or learn the meaning of money.  

Money certainly would make life happier and parenting easier. But it does not necessarily follow that the more money one has, the merrier one would be. It is not necessary that parenting would become easier as one keeps accumulating more and more wealth. Poverty is the root cause of the miseries of millions across the globe. At the same time too much of money is the source of serious unhappiness, frustrations and tensions in the lives of people. The Hollywood billionaire of ‘David and Goliath’ says, “My own instinct is that it’s much harder than anybody believes to bring up kids in a wealthy environment… It is difficult at both ends of the spectrum.  There is some place in the middle which probably works best of all.”

In his autobiographical essay ‘Old China’, Charles Lamb writes his cousin Bridget, with whom he lived, saying, “I wish the good old times would come again when we were not quite so rich. I do not mean, that I want to be poor; but there was a middle state in which I am sure we were a great deal happier. A purchase is but a purchase, now that you have money enough and to spare. Formerly it used to be a triumph… A thing was worth buying then, when we felt the money that we paid for it.”

I do not expect any billionaire to read this post. But, one cannot lose sight of the reality that those who made their billions were spurred by the financial pains of their parents and the poverty of their childhood days. What kind of motivation would be driving the children born into the lap of luxury? What kind fulfillment would people experience when they live splurging on the wealth accumulated by their ancestors?  Would the children ever feel the thrill of earning their own small sums to support their families? Would the children born to the immensely rich and their parents be happy about just accumulating more and more wealth so that a hundred generations to come would never experience the joy of earning their bread by the sweat of their own brows? 

The Bible says that Jesus lifted up his eyes on his disciples, and said, “Blessed are you who are poor, for yours is the kingdom of God” (Luke 6:20).I wonder whether it was sheer nonsense aimed at incentivising poverty to help the rich retain their wealth, as many people have come to interpret it.  I believe that there is lot misery to be born poor. I also believe that there is a lot to be happy about not being born with a silver spoon in the mouth… 

Let me now conclude quoting what Khaled Hosseini writes in his bestselling work ‘The Kite Runner’ (Page 27). “That same night, I wrote my first short story. It took me thirty minutes. It was a dark little tale about a man who found a magic cup and learned that if he wept into the cup, his tears turned into pearls. But even though he had always been poor, he was a happy man and rarely shed a tear. So he found ways to make himself sad so that his tears could make him rich. As the pearls piled up, so did his greed grow. The story ended with the man sitting on a mountain of pearls, knife in hand, weeping helplessly into the cup with his beloved wife’s slain body in his arms…”

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  1. Hi where is that image from?, what country?, who is that child?, how can I help that child not have to be so thin and eat off the floor, Im so sad for this child, it breaks my heart….please reply to me via private message [email protected]

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