Month: September 2020

We conducted a poll to see what BNP members think is source of inequality. Whether it is wisdom that is leading to inequality or it is simply wealth. This question of inequality is a flash point for most where some see inequality as the result of oppression, evil intent of elite while others see simply it as the consequences of choices made by individuals.

Results were surprising and it was a tie –

What is the bigger issue of inequality –

— भारतीय निवेशक || Upgrade Your Life || (@BhartiyNiveshak) September 25, 2020

May be that was because the question was not really clear so we put out another poll and this time since question was more clear not surprising that largely people went with option of wisdom leading to wealth.

What do you think is more correct?

— भारतीय निवेशक || Upgrade Your Life || (@BhartiyNiveshak) September 25, 2020

Now let us see – can someone believe that wealth leads to wisdom in general or there is more evidence to say that it is generally the wisdom that leads to wealth.

Wisdom is the source of wealth not the other way around. You can lose your wealth in some accident or something that you do not control like an act of god but if you have wisdom you can regain it by working hard and upskilling yourself. For those without wisdom even if you get wealthy you will lose it. You can see that into lottery winners and even winners in shows like KBC, So if you are very benevolent and hurt by poverty and inequality in society and decide to drop money via helicopter it is going to solve nothing. People will spend it like the world is going to end tomorrow and even get some vices with new money. There is no way to be wealthy other than hard work, perseverance, upskilling and integrity.

Take the example of Mukesh Ambani and Anil Ambani. Both are the son of same father, raised in same house and if anything Anil being younger might have got better facilities because by then Dhirubhai Ambani was getting wealthier.

Anil Ambani was the face of the business while Mukesh Ambani was working behind the scenes managing the organization and even built RCom. After the feud, Mukesh Ambani got oil and gas, petrochem, refiniery – all old economy businesses. Anil Ambani got new age businesses of Financial Services, Telecom, Electricity. Anil got into entertainment industry by buying Adlabs in 2005. By 2008 Anil Ambani was 6th richest person in the world with $43B net worth.

Come 2020, Anil Ambani has net worth of zero and is saddled with enormous debt while his crown jewel businesses generating cash are sold already. On the other hand, Mukesh Ambani is 6th richest person in the world with net worth of $84.2B.

Where did things went wrong for Anil Ambani and right for Mukesh Ambani?

This could start with understanding, vision, discipline and values of the two brother. While Anil Ambani went for quick money which meant debt, Mukesh Ambani resisted this urge and focused on long term value creation. Mukesh Ambani decided to get into telecom business after non compete agreement with Anil Ambani ended. This only made the matter worse for Anil Ambani further.

Mukesh Ambani bought $52M jet for his wife Anil Ambani bought $80M yacht for his wife. They both shared same house amidst these disputes till 2012 when Mukesh Ambani shifted to $1B worth Antilla, Anil Ambani was building the house for himself of same value.

If you do not have adequate income sources and you still compete on lifestyle like this where will this end? Yes, you guessed it right. In bankruptcy court.

That is what went wrong with Anil Ambani.

Anil Ambani almost went to jail for failing to pay 550 Cr dues to Ericsson and then elder brother Mukesh Ambani came to his rescue and paid dues on his behalf. Anil Ambani thanked his elder brother for this.

The point of this story is it is not the wealth that can give you wisdom but wisdom has much higher chances to give you wealth.

Law of the nature is inequality; not equality. It punishes the fools and even obliterate their next generation altogether while reward the better evolved adaptable. That has been always the case and will remain so. With advent of technology, inequality in wealth is going to rise more. That is the law of nature, better will come up eventually.

Leverage is at the heart of inequality. In early centuries only leverage was labour and managing that was difficult because you are very close to mutiny, mob eating you alive if they get angry at you. Making other people follow you is a difficult job to handle. So there were not many who could use that leverage and get rich. Thus inequality in wealth was low in that era.

Then 17th Century onward, more and more people were able to use money as leverage because here scalability is high, you do not have to manage a lot of people. If you learn to manage capital you can do it with more and more capital. With this inequality in wealth increased. Thus you will see bankers getting ultra rich and in corrupt places politicians too. Do you wonder where does this leaves India given how rich politicians and bankers are in India? Work that involved handling of money ensured that people doing such work at the top got enormously rich. But even in this you need money to begin with. So there are some limitation to this leverage.

And now we are in the age of infinite leverage – technology as leverage. You can sit far away from big cities and people with a computer and you can code, you can write, you can record. There is no marginal cost of production for extra copy of it. So new age rich will be tech billionaires mostly right from Steve Jobs, Bill Gates to currently Elon Musk, Mark Zuckerberg, Jeff Bezos. Inequality will be maximum in this new era. Ironically this new form of leverage is most democratic and egalitarian. Nobody requires anybody’s permission to use them and succeed. For labour, others had to follow you. For capital, others had to give you the capital. In technology, nobody has stopped you from coding, writing and recording. It is only you and your skills that are on your way as obstacle. In that regard, technology as a leverage is a greatest equalizer which will also result in greatest contrast between the people and in wealth inequality.

Few centuries ago, everybody had to work on farms and there was not much difference in productivity levels between the people and result was there was not much inequality in wealth to speak of. Then we moved to money as leverage which meant some became more productive than others and result was inequality rose sharply. With technology as leverage, there is possibility of most inequality because now the productivity difference between the people is too high. There are 100x engineers but they are getting paid 10x only because society sees such high pays negatively. That results in dissatisfaction and these 100x engineers leave the employment and do something on their own and it makes them even richer. Much more than 100x that they initially were worth of. The great thing about this is nobody is stopping others from doing 100x work in the same 24Hrs that others have and succeed.

Achievement of others should be inspiring you but if you feel slighted by them and resent there is something wrong. Do not resent and envy seeing what all people have got. Work hard, persevere. upskill and see yourself becoming massively successful.

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