Thursday, September 19, 2013

misconceptions...



Sometimes, I don’t know what to think.  I notice things, I guess.  It happens from reading a lot and reading varied things.  Most of the stuff I read is not from failures, but from successful people.  Either that, or from people who have come up with really good ideas that I think are worth emulating.  Or decent research. 

Anyways, Chrystia Freeland talks about the Rise of the new global super rich in a TED talk.  But Freeland ignores the research of Stanley and Danko in The Millionaire Next Door.    See, Stanley and Danko talk about the same thing, except they use statistics.   Freeland is worried about aristocracy being created a generational wealth created through parents who have the abilities to send their kids to better schools.  Stanley and Danko talk about the same thing, but in the light of research, the idea of sending kids to “better schools” to perpetuate the wealth class doesn’t pan out.   See, it’s not education that is the prime identifier of business success.   It’s a flawed analogy. 

Bill Gates talks about the same thing in Mosquitos, malaria and education, another TED talk.  Gates states that the prime factors for teacher retention and improvement are education and tenure.  Neither factor is a good identifier of whether the teacher is an excellent teacher.  So the metrics used are false metrics and the idea that more education leads to better something isn’t always a true analogy.  Gate’s talk was based on work from the Gates Foundation. 

So, what you end up with is a false analogy perfectly by Stanley and Danko.  The first generation of a family is the one that ends up becoming a millionaire.  These are generally business minded entrepreneurs who went to public schools and opened businesses, using the explosive powers described by Robert Kiyosaki in The Cashflow Quadrant.   To simplify as best as I remember, the entrepreneur creates a system that uses other peoples’ time and other peoples’ money  to make money.

Those parents then train their kids out of that system and into the a self-reliance system where wealth creation is only based on what an individual can create.  The kids of the rich parent are trained to be doctors and lawyers.  Doctors and lawyers make great amounts of money, but a doctor can only work so many hours in a year.  Whereas a person who manages a company of doctors can hire more doctors and profit from the work of every single doctor.

So, going back to Stanley and Danko the idea that a generational monopoly on wealth is being created is pretty crazy.  78% of America’s millionaires are first generation rich.  I’m almost guessing those families are back to generally “well off” in three to four generations.  This is nothing like the ideas presented by Freeland as being darned near fact.


Going to the wealth gap between the middle class and the rich.  Why do we need to support failure?   The middle class and the rich have the same amount of time in the day as each other, but the work of Tom Corley show that how the rich and the poor spend their day are as different as night and day.  Stanley and Danko said the same thing in The Millionaire Next Door.  Their general example showed that the average rich person didn’t look anything like what media portrays as rich. 

Whoops!  Looks like those super rich of the new generation are doing their best to keep up with the Jones, and the Jones’ just got more expensive.  Such behavior, as described pretty frequently and remarkably by Dave Ramsey, leads to B-R-O-K-E people.  Granted, it might take them a little while longer to blow through a billion dollars, but it will still happen.  Take a historic look at lottery winners. 

So, if people are moving upwardly mobile on a large scale, then you are dealing with an education issue.  And now we’re back to Bill Gates again, so I’m going to stop that nasty loop right there. 

I’m sure I could come up with more on this loop, but I’ll wait until later to deal with that.  Point is that just because someone is passionate about something doesn’t mean they are right.  And smart people often have blinders that prevent them from seeing what lies right in front of them. 

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