While reading posts from my favorite bloggers, I came across Pauline’s post from ReachFinancialIndependance.com which was a reply to a post written by Financial Samuraï about the riches and why they want to keep us down. I also recently came across another great post about modern day slavery and I thought it was a very interesting subject as it is the premise of my blog. I started commenting on Pauline’s blog until I realized that I had actually written a complete post as a reply. I guess that’s a subject on which I have a lot to say. So I thought that this should be worth more than a comment!
While the purpose of my blog is not to talk about politic and it is more about seeking early retirement, I often asked myself why I would want to be rich anyway, why is it so important to me and to most people, how to do it , what would be the impact on others around me and others in the society and how I would stay rich after reaching my goal. These questions bring just more and more questions and moral ones too. I think those questions are important for a dividend growth investor like me because if I decide to invest in several corporations and become a shareholder, if I decide to become rich and reach early retirement, I become a capitalist and an owner and even though this status does not give me any real power (because I only own a couple of voting shares out of billions) I make profit of whatever these corporations do like enslaving workers into the minimum wage cycle, polluting, putting kids to work in other countries and so on…
Do this makes me or you an accomplice? I’d say yes… But not investing would make myself a “modern peasant” for the rest of my life and I would be part of the system anyway because publics plans, insurance companies, mutual funds, banks where I put my money – they all invest in Corporate America anyway.
So there must be a tradeoff. I am not one of those people who will put his head in the sand not to face reality. I don’t know what all those corporations do to make a profit but I know that they are part of a system which produce goods things and bad ones.
It’s unfortunate but if you want to reach financial freedom, someone will have to produce income for you, thus you’ll have to “enslave” and put people under your dominion.
To reach early retirement you’ll have to put people under your dominion
This statement is an important one. You’ll have to put a lot of people under your dominion to avoid being part of the workforce yourself. If you own real estate and lease apartments to people, what you’re asking them is to pay your mortgage. You are using leverage (their income) to improve your wealth. They sign a contract with you and are then under your dominion. One might argue that you are offering your services to people in need of a shelter and that you are carrying all the risk so you should keep all the benefits, but in the end, that’s what it is.
Instead of owning a land and a building, these people will pay you to live in your house on your land. It might be by choice, but it also might be because they can’t afford to buy a land and a house themselves. And when your mortgage will be paid in full, what’s going to be your risk? Should you reduce the rent to help people? I know you won’t. But, people have decided long ago that we could buy and own lands. Some families own land that are passed from generation to generation. It is free and clear and have been so for a very long time. What’s their risk?
As a dividend growth investor that’s what I do too. By owning shares of companies who are owning the workforce of many individuals to make a profit that can be distributed to me as dividend, I have put people under my dominion and I have given managers of these corporations the duty to make profit! While I’m not the one who do the dirty job of paying people minimum wage and force them to work 40 hours per week with only two weeks of vacation per year I receive the benefits of it. I use my money as a lever to hire the workforce of other people and I’m paid for that. In reality, I do nothing at all. They do all the work, I get the benefits. Is it fair?
This puts me in a role conflict situation because, morally, I think that working at minimum wage is exploitation and I wouldn’t do it myself unless forced to. But, as an owner of a company, I don’t want management of the companies I own shares in to raise their wage as it would probably mean they would have to cut my dividend unless their competitors do the same. Why would their competitors do that? I think it’s the government duty to increase the minimum wage, not the corporation duty because it would be a non-sense (sabotage) for a corporation to do it. Minimum wage is mostly something we see in the retail sector where profit margins are razor thins and costs must be tightly controlled. So, if my competitors don’t increase their costs while I do, I’ll have less money to fight against them and risk losing the business war in the end.
Maybe we should review the system and decide from now on that every “employee” should be an associate/shareholder of the company. In such companies, there would be no salaried employees. Every member of the company would put his capital at risk and would want to work toward his own success. But I can already imagine a lot of human problems coming in the way in such a system.
On the society scale, more money in the hands of the poor will probably just result into more inflation because the same amount of goods produced by the same amount of workers (same offer) but with more money to spend (more demands) equals price increase. That’s a basic rule. And as someone who would like to reach early retirement, inflation is one of my worst enemy as it can reduce the value of my capital and the value of my dividend income.
This society is stucked in a well-planned catch 22 because we are all shareholders of these companies even though many think they are not so we all want greater returns on capital but we also want to be paid more. And inflation helps no-one in the end. So what’s the solution?
The perfect society does not exist
Can I chose to invest only in eco-friendly, animal-friendly and people-friendly businesses? I guess I could and I sure would… if they would exist and be profitable! But I don’t believe they do? Doing business is a war and all our society is based on exploitation – exploitation of the workforce, exploitation of the resources, exploitation of animals, exploitation of the masses. If some cheats and take shortcuts while others don’t… we all know who’s going to win. While I don’t endorse such behaviors, I know that they occur everyday and that they are even legal and socially accepted behaviors like paying people minimum wage while the CEO makes millions per year.
Just think about the milk you drink and the steak you eat, about the food industry that we all support. Do you really think that the milk comes from a lovely family jersey cow who lives a happy life surrounded by kids and flowers, feeding herself in total freedom on large lands like the picture they put on the milk box? I’m sorry but if it’s the case, it’s time for you to get out of your living room and see the real life. Cows are considered as goods and treated and stacked as such. To have a milk cow, you first need your cow to make a baby. Then you take her baby off (and slaughter it – veal meat) and plug her to a machine that will siphon her milk. She won’t see her baby again and will stay there for the rest of her life stacked next to other cows like her. For sure, siphoning milk from a cow everyday creates some damages and infections that make the poor cow suffer. As such, they are shooting her with antibiotics to make sure they can continue to siphon her milk day after day…
We are in a society of mass production and the food industry is based on exploitation and suffering of animals. Everyday, we slaughter hundreds of millions of animals for our own consumption and profit… I highly suggest you listen to this documentary if you eat meat: The Earthlings. I think it’s important to see who we are, what we do and in what society we live. This documentary is free for everyone to see.
While some people try to change things and better treat animals, being able to make a profit in such a business is not an easy thing because you would find yourself competing with huge conglomerates who don’t care a lot about animal’s well-being and who are able to cut costs at their detriment.
The perfect society doesn’t exist because humans are far from being perfect. In whatever society model you will create or instate two things will happen. Some humans will want more than the others and will fight for that cause and when they’ll succeed, they will do all that is necessary to make sure they keep what they have even if it makes other suffers or create a mass of poor people. And, most society eventually become the enemy of the people who compose it… it’s part of the cycle and everyone who would oppose himself to the society becomes an enemy of the state and would be treated as such.
Preventing others from stealing what you have is a normal behavior?
Eventually in a mature society, the rich and the greedy control the government and make laws to favor them instead of favoring the masses and to make sure that masses don’t complain they keep them occupied and ignorant of the situation. They also give scarce information to the masses and often they give the masses an affirmation and its opposite so that people feel lost because if they feel lost, they don’t know what to do. The sky is blue the sky is grey. What color is the sky? This gives them control over what people think and do and help them keep the masses on the idle. I think everyone should know about the 10 commandments of propaganda. It’s a mind opener to those who didn’t realize how corporations, governments, medias are manipulating the masses. It could definitely be the subject of another post.
Capitalism carry the same problem of duality. Remember the following premise. If everybody owns the same amount of money, then you are not rich and you’ll have to work because 1 million won’t buy you a pint of milk if everybody has billions in their bank accounts. So, if you want to be rich and afford not to work, you have to own a lot more than others. Since inflation can eat your capital, unless you have inherited or won at the lottery an incredible amount of money, you’ll have to shelter your capital from inflation by investing in income-generating assets thus putting people under your dominion.
So if you are rich, there must someone else working under your dominion if you want to stay rich. And if you are rich, then you don’t want others to be as rich as you are because you’ll have to go back to work, because your money won’t be enough to call yourself rich anymore. It’s self-preservation to make sure that the poor won’t become as rich as you are. But in capitalism, everybody wants to be rich and we are telling people that anybody if not everybody could become rich if they really want and try while it’s just a non-sense. If everybody is rich, it’s not capitalism anymore and no-one is rich, it’s pure communism at its best. But, we all know that communism don’t work because humans are greedy… so in this system, most people in the society remain poor and few are very rich and in control.
Riches make things complicated to start a business or achieve higher levels in the society to make sure that they preserve their place in it. They create what we call barriers to entry or what Warren Buffett calls “wide moat”. The higher the barrier, the less probable everybody could overcome them, the more secure the riches feel.
Survival of the fittest or life in the jungle
Communism, capitalism, democracy, monarchy, anarchy… we can’t change human nature. If you let a good territory unoccupied, someone will take it over and fight to keep it. If there is a limited resource, humans will fight to control it. Because if you don’t fight you might find yourself under the dominion of someone else faster than you think. Our planet is a finite environment. There is a limited number of resources and because of that, we live in an eternal war system. The more humans there will be on this planet, the more war there will be (or the masses will be under more severe control and restricted liberty).
It’s the survival of the fittest. We try to convince ourselves that we are civilized but we are territorial animals in reality. Try to take off the bone of your dog while he has it between his paws… now try to do the same to a human in a more evolved way (restructuring an layoffs)… you’ll notice that behaviors are really similar. The dog will bark and try to prevent you from taking his bone, the human will yell and start to find ways to make sure that he won’t be the one who’s layed off – this might include stooling colleagues to make sure they lose their job while he keeps his or do like me and try to diversify his sources of income to make sure that he’s not so dependant of his employer.
Some have more ability to fight and survive than others but we all want to fight for what we have. Some “need” (I should say desire) more than others and will be willing to fight more. Some are better at fighting. Being civilized really just means fighting with our brains (strategy) instead of fighting with our fists.
Money is power as it gives people who controls it leverage over those who don’t. The more you have, the longer the lever. Why would someone want to lose the control of that lever? It would put him under the constraint of the leverage effect of someone else.
That kind of leverage is seen at every scale of the society. If you become the quarterback of your football team then this means that others won’t be. Some will try to steal that place from you. If you own a company selling burgers and others see that you can make a lot of money selling burgers, some will try to steal your idea and your market shares. If you don’t do anything, they will succeed. Governments fight for resources, companies fight for resources and market shares, employees fight for jobs.
The problem with humans ability to think is that we live in a finite environment with finite resources but our brain gives us the ability to wish for infinite needs, desires and resources. And infinite wants and needs vs finite resources equals war; civilized or not civilized war, but war anyway.
Should the riches share their wealth?
I would personally like to see the riches share their wealth more but it ain’t gonna happen unless we force them not only as a society but as the humankind as a whole (all the countries, every human being on the planet) by enforcing international estate tax laws, changing the international legal frame in which a corporation and its board can operate, make the board criminally and civilly accountable of the decisions and actions they make, by limiting the amount of capital an individual can amass and control by himself and through subsidiaries and so on… but even though we would do that, some would still find loopholes…
We already have many good laws in place. But, the problem here resides in the fact that many riches are greedy. If they can take more without the risk or with the limited risk of being harmed or deprived from their freedom, they will. And the more money they have, the less are the chances that someone, even a government, could deprive them from that ability because they can end up almost controlling the governments. It’s almost like a mental disorder. Why would someone need 50 billions of dollars anyway. It doesn’t make the economy roll to keep so much capital in the hands of only one person and it also put governments and society at risk because it gives way too much power to only a few.
When we put our money in mutual funds for example, we give huge leverage to a few people and it’s important that we are aware of that. This power is not under our control, but under THEIR control. We only told them “please give me good return”. There is a saying that we are usually better served by ourselves. It is clear here that you’d probably be better served by yourself if you would manage you own money. Many studies have proven and showed that most mutual funds manager aren’t able to beat or even approach the market return anyway. Most of them are just trying to beat the market with that same technique: invest huge amounts in a company to take control, cut costs (restructuring and layoffs), boost earnings per share on the short term and sell with a huge profit. So, by giving your money to these “professional” managers, are you really helping yourself if they cut your job?
Governments have passed laws to forbid one single mutual fund manager to own more then a certain amount of the companies’ shares to avoid that… But these guys all go to the same country club… Do you really think they don’t do such things under the cover?
Also take a look at the wage that CEOs pay themselves nowadays… it used to be forty times the salary of their average employee not so long ago and people were upset. Now it’s more than 400 times and up to more than a thousand times that salary in huge American corporations… Worst, they now have stock options so if they are able to lift the short term companies’ earnings, they can exercise such options and multiply their wealth. But short-term profit usually do no good to a long-term investor like me. Worst, to get short-term profit, they often use techniques that can put the long-term fundamentals at risk like using undue leverage or cutting too much in necessary capital expenditures.
We gave them that power because we gave them control of OUR capital. We have indeed abdicated control of our capital to these so-called professionals. And that’s partly the reason why I decided I should invest my capital by myself. I don’t control what they do, but I control with more depth to whom I give control of my capital to a certain extent.
In the end, I believe that a society is better and healthier if people can have a shelter, food in their plates, health and education and enough real possibilities to have realistic dreams. A society, to my own belief would be better if we could also let humans the time to think and evolve. A society of slaves does not make an healthy society. Such bad behaviors should be stopped and people should not be allowed to control so much capital because it gives them way too much leverage to oppress the masses.
When you give power to people, there is always a chance they won’t use it solely for your own good if they can use it for THEIR own good first.
What am I doing to change things?
Someday, we, has a society, will have to review the limits of corporations and the limits of capital one individual or a small group of individuals can control. Our current system puts too much power in the hand of too few greedy people who don’t do things for the benefits of all but only for their own benefits. Being paid a thousand times the salary of one of your (tens of thousands) employees is not just being paid way too much, it’s illogical, immoral and insane. The risk these corporations face is slim anyway. They have destroyed almost all possible competition. The risk they face do not deserve the return they get. It’s mathematical non-sense. Anyway, no one should “deserve” such a paycheck at the detriment of others. But that is definitely what is happening.
Giving control of huge amount of money to only a few is a threat to society and masses because money is used as a lever to put people under their dominion. Some are so rich that they have a personal fortune higher than the budget of many countries. This shouldn’t be in my own opinion. But personal fortunes isn’t all. Some corporations like banks, investments bankers, mutual funds accumulate the savings of the mass. They promise a good return (which rarely happens by the way) to their customers and with all that money, they have a huger lever in hand. What they do with it… well it’s hard to know… but the 2008 financial crisis is not so far away.
I’m a realistic guy. Our ancestors have created that society. We are pursuing what they did. We are “enslaved” in modern ways but we still are slaves. But, I try to be optimistic and I think that things are getting better. Actually, we have more freedom than most human beings have ever had. Many movements are popping everywhere in the world : anti-consumerism, early retirement, animal protection, access to free education for all and so on…
I won’t change that society all by myself. But, I think we must evolve and that I can do my part. First off, I want to free myself from the chains of poverty and the poverty cycle. I don’t come from a rich family. In fact, my grand-father was an alcoholic who was threatening his kids and denied them the right to access a good education. My father did what he could in life but lived poorly. My brother and I are trying to elevate our family and free ourselves from the rat race so that we can have more free time to do good things for us, for our future kids and for our communities.
I don’t want to live in denial. We live in a society runned by the riches and based on exploitation. While I think it’s a bad thing and that we could improve that, I don’t think any other society would be very different. Humans societies have always been built on the exploitation of masses. Life is a jungle in the end and that won’t change unless we change the human nature and the laws of nature itself. Life is a mysterious thing that we don’t understand very well so far. But one thing is real. Everything that is alive fights for it’s own survival.
While I would like to live in a perfect society where we would all be equals, where we would all be free from the chains of work, where we could put machines to work at our place to produce everything we need in abundance without harming anyone or anything and where we would all have access to a good shelter, plenty of food, great education and total freedom to go where we want, when we want, I don’t think that such a society will ever exist and if it does, then it will be because we will have changed and evolved (all of us including the greedy).
This could and should be our vision, but it is not our current reality.
As a consumer, I try not to encourage over-consumerism. As a citizen, I pay all my taxes on time and I recycle and do compost. When I eat, I try not to spill and limit my meat consumption because I don’t like how they treat animals. I’m not a 100% vegan yet because eating meat is so anchored in my brain that I find it hard to stop, but I don’t want to encourage too much the meat production industry because I don’t like what they do.
I’m writing on this blog to help people learn how to reach financial independence, to learn why living with a lot of debts enslaves them in the rat race.
But, I know that I’m also part of the “problem” or should I say the “system” because I work for Corporate America, because I own shares of great companies who not only do good things, but also do bad things.
I live in a built society and I have decided to use the tools that are there to reach early retirement and to do the best I can to avoid leaving a huge and bad footprint around me. I do it even though I’m not always happy with what corporations do because not doing it would be even worse and I would be part of the system anyway.
No one can win on every aspects but getting the most of everything, trying not to harm others and do good around us makes this life worth living.
I’m sure I could do more and will eventually. But Rome was built one brick at a time and reprogramming what school, medias and society has programmed into my brain takes time… I am just a human in the end.
What do you think of the riches? Do you think that we live in a lie? Do you think that our society exploits the poor? Do you think it is really possible to become rich? Do you feel bad to own shares in big companies and as such support that system?
Image courtesy of Stuart Miles/ FreeDigitalPhotos.net