A while back I posted a story called the Lemonade Stand. Here I want to explain more explicitly some of the ideas behind that post. Most people will probably find these ideas non-intuitive.
- The economy is really about natural resources and things people do with them. This includes farming, which is the activity that matters most.
- Money is mainly a form of symbolic communication. This is especially true these days, when money is mostly numbers in a computer, but it has always been that way even when we were exchanging little bits of gold (which frankly is only good for decoration).
- The amount of money next to your name (such as Bezos, $188 billion) is a social construct that expresses how much influence you have over other people’s actions. Owning stuff just means everyone agrees to handle that stuff the way you dictate. Owning corporations means you can direct the activities of its members. Paying wages means you can direct individual people to do specific things, like flip that burger for you or fix your plumbing. Money only works as long as people agree to it.
If money were distributed strictly on merit, then I think there are mainly three criteria: how hard you work, how smart you are, and your moral character. On any of these three criteria, I do not believe that Bezos is a million times better than most average working people in America, yet he has a million times bigger share of the economy. What’s up with that?
Bezos had some good ideas and he worked hard to build a company. He deserves credit for that. However, he did not do all the work. He does not pack the boxes or put them at my doorstep. He does not write the software. He has a vast number of talented and hard-working people making that happen. However, he harvests the benefits of their strength and creativity merely because he started the thing, and perhaps because he continues to provide effective leadership.
This is how our society is structured. We like the pyramid scheme, where those who start something can ride the wave to unbelievable heights, while those who come in under them serve only to hold them up.
One argument for keeping society this way is that it encourages innovation that creates amazing solutions like Amazon. However, I believe Amazon could still happen without a 6-order-of-magnitude difference between the bottom and the top. What if we decided to somehow (not sure how) limit it to only 2 orders of magnitude? Bezos could be 100 times richer than his poorest employee, and that would still be a lot.