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The 1% do not get wealthy from “hoarding the profitability gains.” This is a common misconception on HN and society in general. Profits of businesses are typi

The 1% do not get wealthy from “hoarding the profitability gains.” This is a common misconception on HN and society in general. Profits of businesses are typically in 10% range for small businesses and even lower on average for large businesses [1]. Wealth is not income. It’s the value of owned assets: money, property, etc. So where does the wealth come from? There are a couple of different answers-and I’m not going to discuss stealing, slavery, exploitation or other illegal and immoral practices-but generally the answer for lots of wealthy, legitimate people is it is CREATED from “deals.” Wherever one person (or group) can sell something to someone else at a multiple of its current value, wealth is created. The expectation that something of value will either generate income or grow in value in future years creates a higher price for that thing right now. That entices the buyer, and creates wealth for the seller. How much wealth? If you have a rock today that you can tell a story about being potentially worth 100x in 10 years, then you can probably sell that rock for 10x of its actual value today. That is wealth creation. This is related to the concept of “time value of money.” Real estate is one example. Selling a business is another. Art is yet another example. Have a great day. Edit: [1] https://www.aei.org/carpe-diem/the-public-thinks-the-average-company-makes-a-36-profit-margin-which-is-about-5x-too-high-part-ii/ https://www.aei.org/carpe-diem/the-public-thinks-the-average...

mschuster91 3y ago
> Wealth is not income. It’s the value of owned assets: money, property, etc. Both wealth and income disparity have risen over the last decades - while the lower income group's shares have stayed constant, the middle class has eroded in favor of those already in wealth - and only the top 5% managed to gain wealth after the 2009-ff depression [1], with their gains by necessity coming from the suffering of the 95%. The reason is simple: if you are already wealthy, you can afford snatching up assets of all kinds for fire-sale prices - particularly those who had to panic-sell their assets or walk away from properties they could no longer afford or were completely underwater after the loss in value despite paying down their mortgage for many years in the early COVID crisis months or in the 2009-ff depression to survive got hit really hard. And on top of that, simply being wealthy puts you in a very favorable economic position... stuff like using higher-risk but also higher-profit financial instruments is only allowed after hitting a certain wealth threshold, you could generate virtually free money and evade taxes by taking loans on your continuously appreciating stocks, or use highly complicated multi-national tax evasion constructs. [1] https://www.pewresearch.org/social-trends/2020/01/09/trends-in-income-and-wealth-inequality/ https://www.pewresearch.org/social-trends/2020/01/09/trends-...
pixl97 3y ago
>Wherever one person (or group) can sell something to someone else at a multiple of its current value, wealth is created. And where does the vast majority create their wealth from... Labor. What does AI stand to devalue... Labor. Just remember that most people don't have the capital you're talking about!
- jschveibinz 3y ago
  Well, no you missed my point. I understand it is subtle, so I will expand on it. I said that wealth was created in the transaction. Labor may be required to create the thing being sold, such as a business, but that labor is becoming less and less important over time. Take the sale of the company “WhatsApp” to Facebook. They sold for $16 billion, but they only had 55 employees with some equity. That’s a lot of wealth for those people. With AI, this type of productivity (like WhatsApp) with less labor required will only increase. More productivity, less labor. The capital for creating WhatsApp came from investors. The founders likely had no capital of their own. But they are super wealthy today. Those who expect to be employed (labor) by strictly being told what to do for a salary will be on the sidelines of wealth creation. Those who figure out how to use AI to build valuable things and then sell them to others will create their own wealth. AI is the “fix” for less capital and less labor. Everybody needs to think about jumping into the pool and start swimming. Anyway, that’s what HN is supposed to be about: entrepreneurship.
  - pixl97 3y ago
    "There are two types of magical thinking around AGI. 1, that AGI will be able to do absolutely anything. And 2, that AGI won't replace your job" >Those who figure out how to use AI to build valuable things and then sell them to others will create their own wealth. See, this is why we cannot have discussions about generalized AI, that is the entrepreneurs don't think they'll be replaced by AI, and if they pull themselves hard enough by the bootstraps hard enough they'll overcome the all seeing data harvesting Molochs we've created by sheer willpower and brilliance. And maybe in a few cases will... but will it matter when the angry masses displaced by technology club them to death in the streets? Entrepreneurship without responsibility equals calamity. Drastically changing the social contract and saying 'good luck everyone else' will be our modern "let them eat cake" moment.

mschuster91 3y ago

> Wealth is not income. It’s the value of owned assets: money, property, etc. Both wealth and income disparity have risen over the last decades - while the lower income group's shares have stayed constant, the middle class has eroded in favor of those already in wealth - and only the top 5% managed to gain wealth after the 2009-ff depression [1], with their gains by necessity coming from the suffering of the 95%. The reason is simple: if you are already wealthy, you can afford snatching up assets of all kinds for fire-sale prices - particularly those who had to panic-sell their assets or walk away from properties they could no longer afford or were completely underwater after the loss in value despite paying down their mortgage for many years in the early COVID crisis months or in the 2009-ff depression to survive got hit really hard. And on top of that, simply being wealthy puts you in a very favorable economic position... stuff like using higher-risk but also higher-profit financial instruments is only allowed after hitting a certain wealth threshold, you could generate virtually free money and evade taxes by taking loans on your continuously appreciating stocks, or use highly complicated multi-national tax evasion constructs. [1] https://www.pewresearch.org/social-trends/2020/01/09/trends-in-income-and-wealth-inequality/ https://www.pewresearch.org/social-trends/2020/01/09/trends-...

pixl97 3y ago

>Wherever one person (or group) can sell something to someone else at a multiple of its current value, wealth is created. And where does the vast majority create their wealth from... Labor. What does AI stand to devalue... Labor. Just remember that most people don't have the capital you're talking about!

jschveibinz 3y ago
Well, no you missed my point. I understand it is subtle, so I will expand on it. I said that wealth was created in the transaction. Labor may be required to create the thing being sold, such as a business, but that labor is becoming less and less important over time. Take the sale of the company “WhatsApp” to Facebook. They sold for $16 billion, but they only had 55 employees with some equity. That’s a lot of wealth for those people. With AI, this type of productivity (like WhatsApp) with less labor required will only increase. More productivity, less labor. The capital for creating WhatsApp came from investors. The founders likely had no capital of their own. But they are super wealthy today. Those who expect to be employed (labor) by strictly being told what to do for a salary will be on the sidelines of wealth creation. Those who figure out how to use AI to build valuable things and then sell them to others will create their own wealth. AI is the “fix” for less capital and less labor. Everybody needs to think about jumping into the pool and start swimming. Anyway, that’s what HN is supposed to be about: entrepreneurship.
- pixl97 3y ago
  "There are two types of magical thinking around AGI. 1, that AGI will be able to do absolutely anything. And 2, that AGI won't replace your job" >Those who figure out how to use AI to build valuable things and then sell them to others will create their own wealth. See, this is why we cannot have discussions about generalized AI, that is the entrepreneurs don't think they'll be replaced by AI, and if they pull themselves hard enough by the bootstraps hard enough they'll overcome the all seeing data harvesting Molochs we've created by sheer willpower and brilliance. And maybe in a few cases will... but will it matter when the angry masses displaced by technology club them to death in the streets? Entrepreneurship without responsibility equals calamity. Drastically changing the social contract and saying 'good luck everyone else' will be our modern "let them eat cake" moment.