The Purpose Of Wealth

All too often I've heard someone say "What do you need money for, you can't take it with you when you die." To which, I offer the rebuttal; that is the point. You leave your wealth here when you die.

"There are really only two good reasons for having a significant amount of money: To maintain a high standard of living and to ensure your personal freedom." Writes Doug Casey who goes on to state that other reasons such as to leave a legacy or perpetuate your genes are psychological foibles in The Point of Being Wealthy. While some degree of personal freedom is the prerequisite for all other advancement, I'd argue that it is only the middle tier in the individual economic hierarchy and that Casey and others are missing the larger picture.

In 1798 Thomas Malthus theorized that life in its natural environment will reproduce exponentially until it over consumes its resources (food) causing starvation to reduce populations below a sustainable consumption level. This pattern can be observed in the growth of everything from bacteria to deer populations; however it has yet to be witnessed on a grand scale in human population. While the Malthusian concept has reemerged into theories of peak oil, peak resources, and even the environmentalist movement, others have argued that the reason why the human population has continued to increase exponentially over the last 5000 years is its species' unique practice of economic and technological advancement. In other words, rather than simply consuming, reproducing, and dying as other creatures in nature do; humans develop, save, and pass on knowledge and tools to support their subsequent generations.

Or at least they used to save, develop and pass on better tools.

It's worth noting that both forces of Malthusian starvation and economic advancement are real and powerful forces. In order for the population to grow, wealth must not be just maintained it must be increased. When growth slows, people starve and die. When growth increases, people prosper. Thus the true purpose of wealth is to create capital which produces more than it consumes and eventually improves the lives of not only yourself but of all those that follow you.

Many people of Western culture including many wealthy people and outspoken billionaires believe that each generation should create their own wealth from scratch. However, it is only the act of inheritance that separates human prosperity from Malthusian catastrophe. Without inheritance of both capital and knowledge, a much smaller human population would be still living in caves. The taxation, confiscation and elimination of inheritance threatens to undermine the progress of human kind.

It is natural to desire a high standard of living and enjoy the comforts that wealth can buy. However, you can only consume so much Champaign and caviar. You can own many cars and many homes but only sleep in one bed and drive one car at a time. The overconsumption of resources beyond productive means threatens to squander wealth and opportunity. It is unfortunate for all of human kind that many of the world's wealthiest people including Buffett and Gates have chosen to squander their accumulated productive wealth not just on themselves but on futile social programs which arguably do more harm than good. If you teach people to fish they can use the knowledge to sustain many generations of life. If on the other hand, you give free fish to people so that they become hopelessly dependent, as soon as you run out of wealth to squander, they will starve and die. For this reason, most charities are immoral. But the choice to voluntarily give charity is still better than having one's wealth coercively stolen for someone else's agenda. Interestingly, the shareholders of Berkshire Hathaway and Microsoft have also seen no gains since Buffett and Gates abandoned their productive posts to squander what they took lifetimes to accumulate.

For successful capitalists with more creativity than Buffett and Gates, I'd like to offer the achievements of Thomas Edison as inspiration. Not only did Edison create wealth for himself, as a founder of General Electric one of the largest companies in existence today, he also can be credited for literally enlightening the world. The wealth that he created through the development of the light bulb not only increased the standard of living for his children, it raised the yardstick of economic advancement for virtually everyone on earth.

Make no mistake in confusing wealth with money. Wealth is capital with the means to produce, whereas money is a means to exchange capital with other people. As such, in the long run the majority one's savings should be allocated to capital reproduction and growth rather than a nonproductive or depreciating means of exchange such as fiat currency. In an economic environment such as the current one, it may be necessary to hold precious metals as a store of value in order to preserve wealth, however income producing capital investments are necessary for growth over the long run.

Whatever your field is, you can add value. Acquire a rental property and provide someone with a home. Start a small business and provide one other person with a job. Create self replicating machines. Decode proteins and cure cancer. Create sustainable controlled cold fusion. Not only will you create thousands of jobs, if you are successful you'll bring wealth and a higher standard of living to every human being.

If only today's leading capitalists had the same virtues, the economy and world would be much better off. Today's knowledge and technological advancements are of such complexity that significant amounts of labor, capital must be levered in research and development. Capitalists with the means to create life changing wealth, not only have the potential to make the world better; I argue that they have the moral responsibility to do so. Elon Musk, the founder of Paypal who parlayed his wealth to become the founder of Spacex may be one such potential capitalist. Over the coming decades, Spacex has the potential to make space travel affordable for the common person and facilitate access to the abundance of resources in space.

While the implementation of new technologies such as space mining may seem laughable to some, the development of technology and capital is a matter of life and death. In order to sustain an ever increasing population of people with increasing standards of living, more efficient capital and technology is required.


Naturally, a person born without an inheritance starts their economic advancement from zero. Initially they are unproductive until they learn a skill used to earn income usually as a laborer for another capitalist but sometimes as an entrepreneur. Over time they accumulate wealth by producing more than they consume. At this phase they merely may want a better standard of living or more personal freedom. Once they've saved enough wealth to sustain their consumption they are economically free. Most people at this stage retire, and live off of what they've saved for the remainder of their lives. However, those seeking economic enlightenment become great capitalists. Think of people such as Andrew Carnegie and Steve Jobs. They create more value than they ever could consume by creating jobs, and increasing knowledge and the implementation of technology. These capitalists measure their success not by how much they've taken and consumed over their lifetimes but by how much they've given to the world. That is the purpose of wealth.

As Andy Dufrense of Shawshank Redemption said, "Either Get Busy Living or Get Busy Dying."