Every billionaire is not a policy failure — far from it
Income inequality dominates our political and policy debates. Perhaps the latest example of this phenomenon is the extent to which proposals regarding how much the rich should be taxed have become ubiquitous in our discourse.
The problem now surfacing in our public and political discussions is how they are creating a culture that frowns on success. This is particularly the case when we start denouncing that billionaires are policy failures or that they somehow take money from the rest of us, instead of thinking about their value-creation for society as a whole.
Three things are often overlooked and/or underappreciated when thinking about billionaires, millionaires or really any successful entrepreneur for that matter and the system that fosters their achievements.
First, one of the most consequential shortcomings of our ever more affluent society, is the extent to which the power and role of entrepreneurship for increasing opportunity and raising living standards is taken for granted.
It is a strange kind of cognitive dissonance that Americans generally have favorable views about entrepreneurship but not billionaires.
In a recent Gallup poll, 86 percent of Americans have a positive view of entrepreneurs, 92 percent have a positive view of small businesses, 79 percent have a positive view of free enterprise and 50 percent of Americans even have a positive view of “big business.”
It is almost always the case that billionaires were small-business owners at some point and climbed their way up.
The success of Jeff Bezos should not be seen exclusively as a matter of his wealth but by the more of 300 million Amazon accounts worldwide who willingly benefit from the services provided by Amazon, and the more than 500,000 people the company employs.
In 1950, Walmart founder Sam Walton started operating his own store and 12 years later, he opened the first Walmart.
Through a lot of innovation and perseverance, he turned Walmart into the biggest private employer in the world, with almost 2.5 million employees worldwide. It is both telling and inspiring that the company’s current CEO, Doug McMillon, started as an associate.
More recent billionaires, such as Mark Zuckerberg, Jack Dorsey or even Sergey Brin and Larry Page have built social media and internet platforms, that despite their shortcomings, have brought immense value to people in both monetary and non-monetary terms.
One would think political figures who have benefitted and built their careers on the social-media empires created by said billionaires, would be more grateful.
Second, most billionaires and successful entrepreneurs don’t even think about profit and wealth as an end or even intermediate goal, not that pursuing profit is anything to be ashamed about in an economy built upon voluntary, mutually beneficial exchange.
Rather, most are motivated by the opportunity to solve a significant problem or improve society. For example, Jeff Bezos started Amazon because he saw an opportunity through the internet revolution to empower customers, enhance their customer experience and offer greater customer service.
Similarly, as Gary Hoover, president of the American Business History Center, recently told me about the drive and purpose of entrepreneurs:
“Whole Foods founder John Mackey in his 20s came to the conclusion that people did not eat the right things, causing them to have worse, shorter, less healthy and less happy lives. He and his colleagues built a company worth $13 billion on that thought and their drive.”
Herb Kelleher thought the longstanding carriers like American Airlines and Braniff Airways were inefficient and charged too much. So he built Southwest Airlines, always reminding his associates/employees that without Southwest’s lower fares, thousands of people would miss a wedding, a funeral or a graduation.
Last but not least, a third aspect that is often overlooked in discussions about billionaires is that while people like to highlight individuals and their riches once they’re at the top, how they got there is seldom appreciated or discussed.
A paper from 2016 by Wealth X, shows how, in the United States, only about 12 percent of high-net-worth individuals inherit their wealth, while 75 percent are self-made. Contrast that to more “egalitarian” countries like Sweden and Denmark where 43 percent and 23 percent inherit their wealth respectively. Only about 31 percent of high-net-worth individuals in Sweden and 44 percent in Denmark are exclusively self-made.
Focusing on self-made stories is also more illustrative of reality than many might think, as the United States is rife with many examples that show the power of grit and individual agency.
Hamdi Ulukaya, the founder of Chobani, ignited a Greek yogurt revolution in the United States when he started the company. He came to the United States with very few resources and spoke very little English.
He overcame those barriers and became a billionaire who is currently employing more than 2,000 people, many of whom are refugees escaping brutal regimes abroad.
The economic system that enables so much opportunity for so many people should always be celebrated while still acknowledging that there is always room for improvement and to lift barriers to social mobility.
To paraphrase the work of late economist William Baumol, there is certainly a distinction between productive entrepreneurs who earn their success through creating value for others and unproductive entrepreneurs who benefit from rent-seeking behavior and catering to the political class.
If we’re worried about cronyism, the first step should be to make the system less susceptible to regulatory capture and rent-seeking behavior, rather than misleadingly attempting to vilify wealth creators.
If we look down on billionaires and frown upon success we’re scorning the pillars of what the country was built on and the American Dream itself. And that is definitely not a good selling point for any political candidate who wants to truly unite the country or win elections.
Gonzalo Schwarz is president and CEO of the Archbridge Institute, a public-policy think tank that advocates on behalf of free markets and limited government intervention.
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