The United States has a wealth inequality problem. It’s not a secret. Wealth inequality exists because of the way capitalism is designed to be. In economic theory, employers will never hire if the employee costs more than he or she benefits the company. If the person generates 5 units of value (arbitrary number) then the employer will only pay at most 4 units of wages. When there’s a huge disconnect between those values, an employee either has leverage to negotiate a higher pay or will get fired. The bottom line is that the employer HAS to benefit.
So why doesn’t the employee work for himself? There could be a number of reasons. The most obvious one could be experience. The lack of experience and knowledge means that he doesn’t know how to generate value for himself, so he settles for a paycheck in return for his time. As a result of the lack of experience, it’s significantly risky to start a company from scratch.
I don’t know enough about how the world works to be able to say “I want to work for myself and quit.” It’s too risky. I’m a newly college graduate and don’t know anything to create value for customers that they would want.
The Wealth Inequality Problem
The chart above specifies that the top 0.1% of Americans hold the same amount of household wealth as the bottom 90%. Talk about wealth inequality! The top 0.1%’s income level is about $1.6M+ a year. I’ve met a few top 0.1% income earners and they have qualities that show that they deserved to earn that income. Blaming the rich for the inequality isn’t morally nor logically sound.
The wealth inequality problem makes me angry. It makes me want to jump out of my seat and attack the people responsible. It solves my short-term needs to relieve stress but it doesn’t solve the inherent problem at hand. There has to be another way.
The 0.1% Doesn’t Complain
The 0.1% didn’t get there by complaining and blaming others for their problems. They understood the game, figured out how to play it legally and ethically, and figured out how to be better than anyone who stood in their way. One personal experience I had was working with an executive of a company.
He figured out how to generate value for the company and the company rewarded him for that. He’s up to date with every accounting rule changes that could affect the company and look for ways where his company comes out on top. That’s the difference between the bottom 90% and the top 0.1%. The bottom 90% focus more on reacting to the situation. The top 0.1% focus on acting to the situation.
He didn’t complain that there’s a new rule that he now has to deal with. He didn’t even comment on how many extra hours he now has to spend to understand the rule but rather figured out how it can benefit the company.
It doesn’t matter whether the glass is half empty or half full, as long as you’re the one pouring the water
Playbook to Get to the Top
Be Better than Someone Else
There’s one thing I’ve found about competition. If you weren’t something-“er” than the next person, you’re not going to win. I played competitive tennis on and off throughout college. The ones who got to hold the trophy and have the title of champion next to that trophy was to be something-“er” than his or her opponent. He was either fast-“er” on the court, had a strong-“er” serve, smart-“er” about placing shots, or anything else. But that “er” at the end was always there.
How do you add this coveted two letters next to a description? Preparation. Putting in the hours. There’s no way that Roger Federer, arguably the greatest tennis play in the world, didn’t put in time to practice a down the line shot millions of times before stepping up to the court to show it once in a grand slam tournament.
Once an employer finds out that your skill is something no one else can do better, they will keep you around. The downside to this is that a manager might pigeonhole you for having such a skill. This is what I call a “good” problem to have. Healthy communication on your career objectives and wants should clear up the misunderstanding if it comes down to this.
I’ve preached countless times that it’s not about the income, it’s about the savings rate that gets you to the top, financially.
The bottom 90% DOES NOT SAVE. Not only do they not save, they overspend. A negative savings rate means that they are spending 100% of their after-tax income AND THEN SOME. That gap has to be funded through some channel, the most common of which is debt. Money can propel someone forward in life, but like everything, it can also put someone back. Debt is bad money that will put you back if gone about the wrong way.
The thing about money is that money has the power to reproduce. Deploying money to the right channel could mean that money either makes more money or brings home friends. Debt is rarely the answer (few exceptions).
Making money by being better than another person may not work, but saving money sure will. Saving leads to investing. Investing leads to more money. More money leads to that cycle starting over and over again.
Learn how to Communicate
It’s one of the most underrated skills. I focused heavily on getting my hard skills up to snuff (Microsoft Excel, coding, etc.) that I didn’t focus on getting my soft skills up to snuff. I’m convinced that it’s the reason why I had so many job rejections in college.
Junior year, I racked up an impressive 40+ rejections after going through interviews and senior year, that number was comparable. Looking back, I realized how much of a robot I must have sounded like. I memorized popular interview questions and I was prepared with a ready-story to tell.
No matter how much I practiced sounding authentic (adding um’s, slowing down my speeches, etc.) I wasn’t authentic. Therefore, I couldn’t have possibly sounded authentic, which is why I probably didn’t get the job.
Even beyond interviews, though, I sometimes find it hard to describe a work problem in an efficient and accurate manner. I find myself not being coherent during an explanation, and the blank stares I get don’t help either. I’m hoping to better this part.
Wealth inequality makes me angry. Bill Gates famously said
If you were born poor, it’s not your mistake. But if you die poor, it’s your mistake.
As I’m barely entering the work force, I’m going to try to do everything in my power to earn more. I’m probably not going to reach the top 0.1% of earners. But I know that getting to the top 10% of earners is within my reach, which is earning $77,500 or more. If inequality makes you mad too, it’s all the more important to channel that anger to do something about it instead of channeling the anger to express anger.
Readers, what do you think about wealth inequality? Are you trying to get to the top? Let me know in the comments below!
My goal is to enable your success in personal finance so that you can realize the American dream. The first step is starting today!
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