The ever-expanding wealth gap is primarily a function of what Warren Buffett has called the most powerful force in the universe: compounding. The "problem" is t

The ever-expanding wealth gap is primarily a function of what Warren Buffett has called the most powerful force in the universe: compounding. The "problem" is that some people are simply better at growing their wealth. This minority of people, either through intelligence or luck or some combination of the two, are able to earn very high returns on their wealth, typically via creating businesses. Then once they have some wealth they become creditors, and can earn additional returns. I encourage anyone to throw together a spreadsheet to see how this happens in the real world. Start with 100 people whose wealth is identical, set to $1. Then make a corresponding column that's a normal distribution to represent growth rate (I start at 25%). Then fast forward 50 years, compounding everyone's wealth at their respective growth rate. Voila, through the magic of compounding, despite the growth rates being normally distributed, the wealth distribution is now basically logarithmic, and the wealth gap has effectively exploded. Despite everyone beginning with the exact same wealth, the top 15 people now have almost 80% of the wealth. The longer the time horizon, the greater the imbalance becomes. Welcome to compounding...Buffett gets it. Today's wealth gap is not a capitalistic conspiracy nor is it racism or anything else. It's just algebra. Even if you use a normal distribution with a very small variance, over time the wealth imbalance will grow significantly. It is inescapable.