Okay, I Am Gonna Talk About This

I have gotten a bunch of attention on a note that I made, in response to some bullshit about taking money away from CEOs, and everybody wants to make it a much bigger question - so let's talk about it

The gist of that note was that even if you took all the money away from the CEO of Walmart, when you spread $27 million out among Walmart’s 2.1 million employees, They get a little over $13 each which means they take home about $1 a month.

I got a bunch of objections that amounted to “but there are more rich people to take money away from,” and first of all there indeed are - there is about $12 billion you can take away from all of the shareholders and executives and give to those two million people for an average return of $6,000 on the fairly unsatisfactory trade of a company that now has no executive leadership and immediately begins to slide into failure.

It’s fairly distressing to see people presume that the 300+ executives of Walmart receive $80 million in compensation for doing nothing. One enterprising commenter proclaimed that the people who get these jobs only get them because of their connections, and they’re not available to normal people who don’t have those connections.

I submit that these connections are mostly developed by being good at one’s job, which is of particular note when it is a fairly atypical job that few people do at all, let alone well. This is, clearly, not available to normal people - who have a job they are not good at, largely because they are not trying to be good at it, and largely because it is not exactly a job one can be especially good at.

There are a lot of jobs like that. If you carry bricks from point A to point B, the measure of your work performance is whether the bricks get to point B on time, and if the answer is “yes” they will probably respond by putting more bricks at point A. Even if you are the fastest and best brick mover, the work will expand until you are only barely capable of it, and then management will complain that you can’t do more.

This is because people occupy specific strata in the economy. I divide them into five groups.

At the bottom, you have the broke. These are people that may or may not have jobs, but no matter how you slice it, they cannot afford all the things they need. Food, clothing, shelter, healthcare, they don’t have enough money for it. Something has to go. Their clothing is a little shabby and shitty. Their housing is substandard and unstable. They are eating cheap food and probably skipping meals.

Just above this, you have the struggling. These people probably have jobs. They can afford all the things they need, but they’ve got nothing left over for anything they want. They are incapable of moving upward, because there is nothing for them to move upward with. They are scrambling to provide for themselves, and even though they are successful, that’s all they can do.

The most important part to understand is that both of these groups do not deserve this. Nobody deserves this. They are in this place for a reason, and it is a real reason, and that reason has to be addressed. Until it is, they will continue to be in this place. Nothing will bring them out of it. In an ideal world, they just don’t have money, and if you gave them money they would be okay. In the real world, they don’t know what to do with the money. You give them a thousand dollars, they buy a new television and order pizza, then they are right back where they started.

People in the higher strata use this to justify these people being in the lower strata. They say the broke and struggling are there because it’s their own damn fault, and nothing can be done about it. While it’s technically true that it is their own fault, as that fault lies not in their stars but in themselves that they are underlings, something can be done about it. You can teach them how to use a thousand dollars more effectively.

And from a cultural standpoint, it is fairly shocking how many broke people can be supported at the struggling level by a single person (the nuclear family is a great example), and how two or three broke people can combine their resources to be struggling instead.

To a great degree, the American focus on individuality keeps people in the broke and struggling states by goading them into a “self-sufficient” lifestyle before they are ready. Providing for all of your own needs is not easy. You are likely to need help and instruction and some kind of safety net for when you inevitably fuck it up.

When you do eventually get a handle on it - which most people never do - you enter the safe stratum. This is where all your needs are met, you have no fear that they won’t be met if something happens, and you even have a little money left over for stuff that would be nice.

We like to call this the “middle class,” because it is about a third of the population, but it occupies very nearly the top third of the population. Above this level, you have about four percent of the people. Below it, you have over sixty percent of them, and they don’t make a little less. They make a lot less.

Just like above this you have the comfortable, who can afford not only everything they need, but most of the things they want. That’s not a little more money than the safe. It’s a lot more.

And then there’s the wealthy, who may as well be on another planet. They have so much more money than the people at the middle and below, it’s almost unfathomable. The tendency is for people to think of this wealth as “infinite,” but pretty much by definition you cannot produce any better result than “safe” by redistributing this wealth.

Because where this comes from is the Pareto principle. 20% of the population control 80% of the wealth. We will ignore why for a moment, and just take for granted that this is how it works in any given population. So we take our initial population and say well, the other 80% of them are controlling 20% of the wealth. So that’s your upper class and lower class.

But because these two populations are, well… populations, the Pareto principle applies here too. So each of these divides into two more groups, by the same process.

Now, because of how the maths work out here, you’ll see that the top of the lower class and the bottom of the upper class are indistinguishable. They each constitute 16% of the population controlling 16% of the wealth. And since you can’t tell them apart, this makes them look like a single block of the population where 32% of the people control 32% of the wealth, which is very close to a third. And that third falls right in the middle.

This is already fairly shocking when you look at the people and wealth split for the upper and lower classes, but of course when you split them again you will find something to get really mad about.

That tiny little sliver of people on the right edge is controlling more than half of the money. Meanwhile, more than half of the people - on the left edge - only get that tiny little sliver of money. The interstitial classes barely even register, sure there is some unfairness there but they’re not that big a deal.

Of course, we’ve turned eight categories into five by combining one and not splitting it. If we left it uncombined, we’d have six categories, which would still have a bump in the middle.

And to fairly represent all the groups, we have to apply the principle to those two middle categories again, but we now have two sets of three indistinguishable groups: three of 12.8% of the population controlling 3.2% of the wealth, and three of 3.2% of the population controlling 12.8% of the wealth.

Basically, the top of the top of the bottom looks exactly like the top of the bottom of the top, which looks exactly like the bottom of the top of the top. And the bottom of the top of the bottom looks exactly like the bottom of the bottom of the top, which looks exactly like the top of the bottom of the bottom. So we can sort these, first of all.

And then we can combine them into either five classes, like I’ve been doing:

Or into four classes, which is a sensible alternative that I didn’t take because it lacks a clear centre.

If you’re working from collected economic data, this is the likely result because you can’t distinguish three results from one another on either side. You’re not going to combine them the way I do, starting from a purely theoretical basis of applying a principle to a hypothetical economy containing imaginary pools of people and wealth.

But if you want to be really dishonest, you’re gonna combine those and do this.

That just looks awful. It looks like those tiny few people at the top have this massive amount of money, and it sure does look like they took it from all those people on the bottom. But we already have a number for what we would get if we just redistributed all the money to everyone equally: per capita GDP. And in the US, that is about $65k.

Now, personally, I don’t want everything redistributed equally. My proposal would be a 50% tax rate, as in we collect 50% of the GDP in tax on a progressive system. People at the bottom pay less than 50%, while people at the top pay more than 50%.

And when the government gets that 50%, they return 50% of it - 25% of GDP - to the people (leaving them with about the same amount of tax revenue they already collect; a bit more, but not a lot more), reallocating it so the people at the bottom get a fair shot at getting off the bottom. Essentially I am in favor of a $16k annual UBI, in the form of weekly cheques.

That would produce a distribution that looked more like this. (That bump in the middle is an illusion caused by the combination of classes. The curve would actually be somewhat smoother.)

And the important thing here is that the rich are still rich. You are never going to get broad political support for any plan where the rich don’t get to be rich anymore, and besides, we need rich people to do big shit normal people can’t afford when the government can’t be arsed to do it.

That’s the same reason we need corporations: so normal people (for sufficiently limited values of “normal”) can put their money together and create a fake rich person to do big shit.

But herein lies the other important thing: when you start sending them cheques every week, most people are going to be stupid and make bad decisions. That’s why it’s every week, and not every month - to ensure your stupidity can only lead you to make bad decisions of a certain size. You don’t get to be stupid with a thousand bucks, you get to be stupid with three hundred.

If you are actually learning from your mistakes, getting the next cheque fairly quickly allows you to iterate on that learning faster. If you are not, getting the next cheque quickly gives you more opportunity to suffer the pain of making bad decisions and hopefully figure out that you should be learning something here.

But don’t lose sight of what the people on the bottom are doing with that money, whether they are being stupid or not. They are giving it to the people on the top.

The people on the top fall into two broad categories: people who produce things, and people who collect things. If you want to eat steak and eggs with asparagus for dinner, you probably do not have a cow or any chickens or a field of asparagus. You will have to go get those things from someone who has them.

One way to do that is to go to each person in turn: someone with cows who can sell you a steak, someone with chickens who will sell you some eggs, and someone who grows asparagus they can sell you. Those are the producers.

But that is a pain in the arse, and you would much rather go to just one place where someone has got all three of those things. Enter the collectors. They have already gone to the producers and collected the things. Now they have put all those things in one place. You go to that one place, you get the things you want, and you pay for them all at once.

You pay more than you would pay the producers, but you also don’t have to go visit three different people. The convenience of doing this is worth a little extra, to most people. Which means a couple of things.

First, the collectors are going to be paid more than the producers, but they also have to pay the producers first. So they have to start with more money than a producer does; even a small producer can sell what they produce, but a collector cannot make any real money as a collector without having a substantial collection of goods.

Second, the people who do not produce or collect anything will invariably transfer their money to the people who do. And chances are very good they will transfer all of it, every time. This is why so many people are living paycheque to paycheque - they spend the whole thing.

That’s why this approach doesn’t end poverty. It makes poverty less horrible, but stupid people who make bad decisions will still drive themselves straight into poverty like it’s a race. The bottom of the scale is always zero. We can pour $300 a week into the economy as long as we like, it’s not going to build up wealth at the bottom, because there’s a hole in it. And that hole is not just stupid people making bad decisions, it’s people who need things to live that have to be acquired from someone else.

This is why trickle down economics “doesn’t work.” We defined “work” as helping the people at the bottom build wealth, but the people at the bottom don’t know how to build wealth. Even if they did, after they bought everything they need… there would have to be something left over to build it with. The money did trickle down, people just had to throw it straight back up so they could have food and clothing and shelter.

And the other problem with trickling down is that everyone on the way down gets to take a sip. If you give the rich two trillion dollars, the poor are not going to get much of it, because everybody between the rich and the poor gets to take some as it goes by. The working poor get some. But that’s all most people care about.

The root of all this is production. The problem is production. On an individual level, you need to produce something or you will be stuck transferring all of your money to someone else without ever having any transferred to you.

On an economic level, when you give money to people who need things, they will go try to buy the things. You need to produce more of the things. If you raise demand without increasing supply, prices go up. And they go up precisely enough that the number of people who get the things will stay the same.

This leaves you with precisely the same number of people who don’t have the things, and you have fixed nothing. UBI isn’t going to repair the economy. It’s going to give people tools, but if they don’t use those tools to increase production to meet the newly-higher demands of the people, the economy will just adjust to the new conditions and nothing will change.

That’s why the rich have to stay rich. They’re the ones who can bankroll production and collect the products into a convenient location. If you take the money away from all the smart people and give it to stupid people instead, you’re going to get a bunch of bad decisions and everything is going to collapse.

That’s not to say all the rich people are smart, but that enough of them are for it to be Very Very Bad if you took their money away. It’s hard to tell the very smart from the very stupid. Look at Elon Musk; most of us are pretty well aware that he’s a fucking moron, but he still has this massive fanbase who think he’s brilliant.

Moronic and brilliant just don’t look that different to the average person. They are both sources of “things I would never come up with,” and if you have a lot of money chances are very good that those things were smart.

Anyway this is a fairly long article and the point is basically this: we need the rich people, because they do things other people can’t do. We don’t need the poor people, but they’re inevitable; no matter how much money you give people, some will spend it on gambling, some will spend it on drugs, and some will spend it going bowling - or for some other generally inoffensive shit that is clearly not the best place to spend it.

What everyone seems to have forgotten is that economic growth on paper doesn’t feed or house or clothe anyone. It is an accounting fiction. What we need is for people to produce. Production must increase. We must grow more food and build more houses and make more clothes. You cannot shuffle the numbers around and make the problem go away. Shuffling the numbers can help, and we absolutely should, but the problem is a lack of production.