Saturday, September 22, 2012

You Sort Of Built That

Once upon a time I considered myself a conservative republican. Political views are like religious views in that you are more or less born into them.  Geography and environment determine both.  Ideas are imprinted onto our minds before we’ve had a chance to develop strong critical thinking skills. We hear things over and over again and believe them.  We want to belong to our tribe, etc.  It’s only natural. I was raised in East Texas and my political views up until my mid-twenties reflected that. 

My political change of heart happened for a combination of reasons but I think the biggest factor was just spending enough time out in the real world making a living and paying bills.  To be perfectly honest I just didn’t pay a lot of attention to this stuff until my late twenties. Around that time I started getting a better understanding of how the world actually works and started looking deeper into politics and power and I shifted from right to left on the political spectrum.  There were beliefs I held that just didn’t square with the reality I saw day to day and eventually I had to admit it to myself and adjust accordingly.

There were a number of issues that I realized were just plain wrong and maybe addressing each one individually is an idea for future blog entries but the main one could be summarized like this:

 “If you are rich, poor, or somewhere in between, it’s your own fault.”

That’s really the big myth.  The rich deserve to be rich and the poor deserve to be poor because “the market” and their own personal talent and hard work (or lack of) is what got them there.

Lest this post be misconstrued as a product of disappointment or jealousy resulting from personal failure, allow me to dispel that now.  I have exceeded my own expectations of success – and my expectations were high.  It was not a lack of personal achievement that caused my change of heart. It’s been the opposite.  My personal journey through the stages of achieving reasonable economic success has been a large part of why I started questioning the truth of the statement above.

To be sure, there is some truth to the claim that one’s fortunes or lack of are their own doing.  I’d estimate that the claim is about 50% valid.  When looking at the sum total of factors involved with determining an individual’s socio-economic status, I would argue that personal talent and determination account for maybe half of the total.  The other half can be summarized in a single word:  luck.

If you are uncomfortable with the word luck we can also call refer to it as circumstances that are out of one’s control.

If you happen to be born into a stable, loving, financially secure family, your odds of success are immediately much higher than someone who was not.  If your parents happen to be bright people and intelligence is in your genetic makeup even better.  If your parents happen to be not just financially secure but wealthy, even better. If your parents happen to be not just wealthy but also well connected and powerful in the community, even better.  And so on.  Warren Buffett refers to this as the “Ovarian Lottery” and the role it plays cannot be overstated.  As the second wealthiest person on Earth he acknowledges that being born in the right place at the right time with the right kind of mind was a tremendous factor in his success.  He realizes that not being born to a crack head mother or alcoholic, gambling-addicted father was not the result of good decision making skills on his part.  Being raised in a comfortable suburban neighborhood in Omaha, Nebraska as opposed to a housing project in Compton, CA was not based on any tenacity or talent that he possessed. It was chance, pure and simple.  The idea that we all get an equal start is ludicrous but it’s a comfortable delusion for people born with every possible advantage.

And luck goes far beyond the accident of birth.  There are countless examples of people who have followed all of the rules, worked hard, done everything you are supposed to do and still struggle to get by.  The fact is that there are innumerable factors outside of one’s personal control that shape their economic outcome.  The big recent example would be the millions of people in the United States and all over the world who have had their financial lives shattered because a handful of greedy con-men from Wall Street wrecked the whole system. 

Thinking about my own case, yes there are certain things I’ve done right but there are also situations that just happened to work out for me that could have easily gone the other way and made a big difference.  I’ve been fortunate in ways that went beyond anything accomplished by own individual efforts.  Nobody is truly self-made.  Even with rags to riches type stories someone, somewhere gave someone else a chance.  Other people helped that person succeed.

Then there are the various features of society that make success possible: public education and universities, transportation infrastructure, law enforcement, fire departments, the judicial and legal system, patent protection, safe drinking water and food standards (and the means of enforcement), a national defense, and the list could go on.  Providing all of this to three hundred million people is not free.  As wealthy venture capitalist Nick Hanauer put it, if zero government, taxes, and regulation were truly the ideal environment for thriving businesses, places like Somalia or the Congo would be the home to the world’s most successful companies.

I do think there is a realistic and reasonable path to a comfortable life for almost anyone who has the capacity to learn, work hard, and overcome the peer pressure to waste money on unneeded junk.  Our decisions do go a long way towards shaping our future but it’s too simplistic to think that personal effort and ability are the only determinants of economic outcomes. A lot of people at the very top would like us all to swallow that (especially those like David and Charles Koch, the Walton heirs, and others who inherited dynastic wealth from daddy) but I think that’s just so they can absolve themselves of any responsibility to contribute and give back to the society that made their opulent lifestyles possible.

(Note: Economic mobility can be measured by how closely a son’s earnings are correlated to his father’s earnings.  By this measure France, Germany, Sweden, Canada, Finland, Norway, and Denmark are all more upwardly mobile than the United States.)