The other day I was reading the book Hackers and Painters by Paul Graham, where Graham talks about a ton of topics, some related to the high-tech industry, and others not so much.
One of the most interesting chapters was called The Daddy Model of Wealth, where he explains that money and wealth usually go hand and hand, but they are not necessarily the same thing.
“In fact, wealth is not money. Money is just a convenient way of trading one form of wealth for another. Wealth is the underlying stuff—the goods and services we buy.”
While I agree with the core of this idea, money and wealth are so intertwined in the real world that it only makes sense to think about these two concepts separately if you're running a thought experiment, or living in a fictional world.
The wealth of the world is not something static, it's in constant change, and if you want to create more wealth, you can go ahead and try to create it. At least that's what Graham tells you. But as soon as you get your ass from the chair and starting thinking about ways to create value in the real world, you'll quickly learn two important lessons.
In today's world it's very hard to create meaningful value without specialized knowledge or skills.
This means that before you can start creating wealth, you need to spend a lot of time (years?) learning and mastering a skill. So you can't just wake up one day and decide that you're going to start creating wealth, like Graham makes you believe.
And while you're learning a new skill, you probably won't be able to create value to the rest of the world, but you still need to pay for your expenses. I'm not even talking about extravagances here. I'm talking about buying food and renting a place to stay.
Of course you can say that you don't need years of training to start creating wealth. There are tons of things you can do that are valuable for others and don't require years of training. Things like babysitting, hairdressing, or gardening.
While our society needs these services, the less training a task requires, the more people will be able to do it. And although competition is good for customers since it can drive prices down, competition is not so good for the people executing the task itself.
After crating a separate definition for wealth and money, graham then puts forward bigger and bolder ideas:
“When we talk about "unequal distribution of income," we should also ask, where does that income come from? Who made the wealth it represents? Because to the extent that income varies simply according to how much wealth people create, the distribution may be unequal, but it's hardly unjust.”
On the surface, this sounds about right. People that earn more money, do so because they create more value. But knowing that in the real world you need lots of training to be able to create value, the question becomes - who will pay for the training and the time you spend without being able to create enough value to sustain yourself?
Now, if you were lucky enough and your ancestors generated enough value back in the day you don't need to worry about it. You can convert that value into highly specialized education and training, which in turn will allow you to create lots of value.
But more interestingly, what happens if you were not that lucky? In that case you'll have less chances of getting a highly specialized education, which in turn puts a cap on how much value you can generate in the future.
And yes, there is still a chance that you can create lots of value without having an highly specialized education. But the odds of that are low.