In late October, 2018, someone in South Carolina won the mega millions lottery prize of $1.356 billion. Almost everyone else who bought tickets won nothing. In fact, they lost what they had spent on the tickets. As the amount of the prize grew, more and more people bought tickets, thus increasing the odds of their winning. I haven’t heard any complaints about income inequality. It must be a great system. The more people who participate by buying tickets, the higher the prize climbs while simultaneously the chance of any individual winning the prize diminishes proportionally. Could there be a greater example of income inequality than one person winning $1.356 billion and millions of others winning zero while paying for the privilege?
Jeff Bezos, the founder and chairman of Amazon, is currently, at least momentarily, the world’s wealthiest person, as measured by the market value of Amazon stock he owns. I hedge my position by using the words “currently” and “momentarily”, because equity wealth, as in stocks or real estate, is based on a somewhat arbitrary concept of “market value”, which is formally defined as “what a willing and informed buyer is willing to pay a willing seller.” While use of “willing” three times in a single sentence no doubt violates editorial standards, it is apt, because it denotes the following: it is temporary, it can change, it is subjective, and it is voluntary. Mr. Bezos’ stock value is based on the decisions of millions of shareholders, each of whom believe that the purchase of Amazon stock will increase their own wealth. So far, they are right. I bought amazon stock in 1998, when the share price was $4.79. On September, 2018, share price is $2,003. I should be rich! But I’m not. Thinking that the world was going to collapse on January 1, 2000 due to Y2K, I sold my Amazon stock for about $64 a share in 1999. Then I invested the proceeds in a small startup company that proposed to create a non-addictive analgesic from the venom of a poisonous snail. Eventually that company went under and I never recovered my investment. I bet on the wrong horse. The looming question now is, “whom should I blame?” Perhaps even a better question, for those who trust in God, is “am I a steward worthy of having my wealth management responsibilities increased?
Jeff is a billionaire, I not, despite all my 50+ years of hard work and my graduate level education. Shall I blame “structural discrimination”, you know, racism, sexism, ageism, genderism and assorted other “isms”? Nope! I’m white, old and not rich, born Jewish to boot, so there’s no excuse for me. The real structural problem is between my ears, and yours. I was riding a bus one day, and picked up a copy of Inc Magazine that someone had left behind. I read an article about a computer company that some university of Texas student named Michael Dell started out of his dorm room. The article predicted his model would really take off, and the company would soon be going public. As it turned out, the initial public offering price, which the general public usually can’t buy, was $8.50 a share in 1988. The stock quadrupled in value the next 4 years. I thought, when I read the article, “what a dumb idea”. Who’s dumb now?
But material wealth is a measure of what? If you believe in God who owns everything and who created you, material wealth is not something you own, rather something you manage as a steward for the real owner, God. The story of Robert LeTourneau is instructive. God gave him the ability to design powerful earth moving equipment, and he in turn resolved to give back to God’s work 90% of his income. But behold, as his income, and thus his management ability grew, no matter how much he gave away, the 10% he retained just kept growing. The miserly experience the opposite phenomenon. Are you generous? You will be able to grow in generosity. Are you miserly? You will grow in that too!
If you want to reduce your own income inequality, here’s the simple steps that will make all the difference. Save either 5% or 10% of your earnings before spending anything; create a budget which tracks your income, all spending, and allots a certain percentage of income for saving and giving (here’s where you will find out how much you can save without pinching your lifestyle); as your savings increase, decide how much needs to remain in savings as a cash reserve for emergencies–three to six months worth of expenses is recommended–and invest the rest. When I use the terms “save and “invest”, here’s what I mean: savings are very low or no risk of loss of value, very easily accessible without penalties, and consequently very low prospect of growth, like bank accounts; investments are the opposite of those characteristics, with prominent examples being stock mutual funds. If you want details consult with a financial planner, but following these steps WILL build wealth and cure your own structural inequality! That is, as long as you show yourself to God as a worthy steward.