How Money Trickles Up

(Money trickles up much faster than down. If not kept in check and if allowed to run wild eventually a plutocracy is born.)

A lot of people understand how businesses and even the government can trickle down money to the masses but what very few people realize is how money trickles up.

People speak all the time about billionaires and multi-millionaires but when they truly grasp how large those amounts are, they are stunned and in awe of exactly how these people make so much money.

When you look at how money trickles up the economy though, this will become less of a surprise and more of an epiphany. After diving into exactly how money trickles up it's important to note the consequences of the cycle.

There are 2 main ways money trickles up. The first is obvious and includes the profits people make on the goods they sell. The second is more mysterious and is the profit an owner makes off his employees.

1) Profit on Goods

Most companies produce goods from toys to cars to shampoo. There is the cost it takes to make the item by the company itself and the Manufacturers Suggested Retail Price which is what the product is sold for.

The difference between the two is the profit the company makes each time it sells one of it's items.

Mass production, basically creating lots of product really fast, also helps lower the price it costs for companies to make their goods.

2) Profit on Workers

To see the origin of this idea you actually have to look back at Karl Marx's writings and read about the abuse of the average worker.

What he basically states is that all companies rely on exploitation of their workers to make money.

How is it that they exploit their workers?

Here is an example of how it might be done:

I own a factory and I employ 100 people.

Those 100 people create 1,000 pairs of shoes a day(10 pairs of shoes per person per 8 working hours).

Because of their hard work I make $20,000 dollars a day($20 profit per pair of shoes).

If I paid the workers the amount they made for me, I'd be left with nothing, therefore I must exploit them. Again if I spread $20,000 dollars to my 100 workers per day, I'd be left with nothing for myself or my savings.

So what is it I do? I pay them less then they make me. I take their surplus value which is essentially the unpaid wages that my workers earned for me but that I'm personally keeping for myself.

Stanford's more elaborate explanation:

Suppose that such commodities take four hours to produce. Thus the first four hours of the working day is spent on producing value equivalent to the value of the wages the worker will be paid. This is known as necessary labour. Any work the worker does above this is known as surplus labour, producing surplus value for the capitalist. Surplus value, according to Marx, is the source of all profit. In Marx's analysis labour power is the only commodity which can produce more value than it is worth, and for this reason it is known as variable capital. Other commodities simply pass their value on to the finished commodities, but do not create any extra value. They are known as constant capital. Profit, then, is the result of the labour performed by the worker beyond that necessary to create the value of his or her wages. This is the surplus value theory of profit.

So in the end, of the $20,000 dollars in profit I made, I only give back $15,000 dollars to the workers.

It seems very unfair that after I pay back all the costs to make the shoes and I get my $20,000 dollars of profit per day, that I only give back 75% of it.

Especially because 99% of the work was preformed by the 100 workers in the factory. I barely did anything and even saying I did 1% of the total work to make 1,000 pairs of shoes is a bit of an exaggeration.

The Worker v.s the Owner

So each worker in the above plant would make $150 dollars a day (ignoring taxes on income to make the numbers easier to handle). That comes to $750 dollars a week(5 working days) or $36,000 a year.

How much am I making though? Well I'm getting $5,000 dollars a day, which comes to $25,000 dollars a week, and which leads to $300,000 dollars a year.

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Inevitable

So as you can see from the above example, exploitation is really inevitable. If every owner paid his workers the amount they made for him, he would be left with nothing.

That is both the miracle and risk of capitalism. It can bring you great wealth but it also has to siphon it off from somewhere.

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Our Daily lives

So how does this effect money trickling up?

In our daily lives we buy lots of commodities. From food to gasoline to games, we constantly give profit to companies.

Every single transaction you make is always more than the cost it took to give you that commodity or that service. So every time you buy something you're trickling money up to the top.

So you buy some cereal and the cash trickles up to the store and then to the manufacturer and then to the owner.

Each worker at that store buys cereal, which trickles up to the store, which goes to the manufacturer, which takes a slice to the executive.

Every single time someone buys something they're immediately sending money up the ladder.

When it comes time to send the money back to you, it never comes back in full, because the owner took a cut for himself.

If you continue the trend of 110%(the profit you paid for the commodity is the extra 10% I add) up and 90% down (the cash you lose to your boss is the 10% i removed) you see a fast flowing column of money trending in one direction.

You always overpay when you buy something and get underpaid when you work.

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Buying Power

So why is it even important to pay good wages to our workers in the first place; a greedy owner may ask.

When all this money is getting funneled up to the owners of all these companies, they have to ask themselves who is buying their products.

It's their workers and other ordinary citizens that buy their products that allow this cycle to continue.

If people stopped buying pairs of shoes, from the above example, than the owner of the shoe factory wouldn't make anything either.


To put it plainly, Cars don't buy cars, and Food doesn't buy food, it's people that buy these things and when they are not paid good wages, the whole cycle breaks and no one is then able to benefit.


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Plutocracy

In this world where owners start abusing their workers too much and where wages aren't enough to sustain ordinary people, you get a plutocracy.

There is a huge income gap between owners and workers, while ability to become a factory owner gets harder and harder.

If this system continues too long the whole system comes crashing down because people are then unable to buy the goods they need.

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Overview

So you can see how easily and readily money makes it's way up the ladder. It's now also clear about how unequally the money falls back down to the workers.

The whole system continues as long as the workers have a living wage and their buying power remains uninterrupted.

But when their buying power becomes significantly decreased and a plutocracy is born, then the whole system starts slowing to a standstill.

In the end people shouldn't complain about money trickling down to the ordinary citizen. They should be complaining about how fast the money trickles up to the owners who do such a small share of work for such a large share of profit.

Legality is useless

(One Person's will against the law of the land. Should he be silenced?)

Before I start I have to mention why there was such a long break and why the weekly postings stopped.

It seemed that being forced to write about the last topic was the problem. Although I do want to go in more detail about the morality I mentioned before, and even though I know exactly what to write about, I wasn't inspired to write it.

There was no drive to put ink to paper or in this case fingers to keyboard. :)

I'll make sure in the future I keep philosophy where it should be, the tipping point of inspiration, where the writers ink is at it's least dry.

To hold writings over for another day and force yourself to a topic, it seems, is a no-no. :D

Many times I'd be inspired and I wouldn't write here simply because i knew I had to write the previous topic first and then move onto the one I was truly inspired to write.

Eventually the inspiration became too much and this post worked it's way out of me.
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Legality to give credibility to your stance


The titles topic is important to understand in context. I'm not anarchistic and I don't believe that laws are useless.

The legality I feel that is useless though, is using legality to prove your point or to back up your claims.

• Why can't we use legality to back up our claims?
• Doesn't the law reflect the majority of people's opinions in a given area?
• If a law truly were wrong, why would so many people support it?
  

All credible questions and all worthy of an answer.

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Examples of where we went wrong

If we kept our laws the way they were we would be stuck with:

• 1) Slavery of all African Americans
• 2) Inability for Women to vote
• 3) No Social Security
• 4) Non land owning individuals unable to vote
• 5) No minimum wage
• 6) No ends to the terms of office of the President (Be re-elected as many times as possible)
• 7) Alcohol continuing to be prohibited
• 8) No Limit on immigration (Constitution and their amendments originally allowed unlimited migration to the U.S)
• 9) No Child Labor Laws
• 10) The Cuban embargo
  

There are many more examples but 10 should be enough for now.

I'm thankful I never had to have a discussion with a person arguing in favor of slavery. I wouldn't know how to contain myself if they mentioned legality to me and told me "Slavery is legal, it should remain that way and our country would fail without it."

All of the opponents for the above laws could simply say "Our founders didn't want this and thus we should not legalize it".

They might also say that "The law is the law, and we have to follow it and defend it and protect it, it's our duty as American Citizens to do so".


We've made many mistakes with our laws.
Making something illegal doesn't mean it has to stay that way forever.
Making something illegal also doesn't necessarily make it evil.

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Laziness

If we just conform to all the laws and refuse to analyze them we could be doing harm to ourselves and to the people of our community.

This lazy mentality means we ignore the problems of our city or country and we keep the status-quo.

We may spend 100 years saying "Such and such is illegal, just don't do it" and find out what we were doing was enabling the deaths of millions of people.

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The People's Will (Essence of Law)

The law in it's purest essence is just the people's will. It's an order established of the people, by the people, and for the people.

To say that my opinion or any other person's opinion doesn't matter, or is wrong, because it's illegal means you don't understand the essence of law.

If all of America feels something to be legal, and yet it is truly illegal, there will be nothing to stop it.

A good example is copying pages from a copyrighted book. It's substantially illegal, but no on enforces it, and if a police officer saw you doing the above crime he would hardly give it a second thought.

It takes political and public will to make a law, a law.

A piece of paper means nothing.

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A step in the right direction

In the end you have to understand the essence of law and how it's related to the will of the people.

It's completely ignorant to say something is illegal and therefor evil.
It creates a lazy mentality and will never force us to re-evaluate our positions.

If we want to head in the right direction we only need to follow a few simple rules:

• 1) Analyze all laws and base proper opinions about them using concrete details and facts
• 2) Remember that our opponent is not automatically wrong if he argues in favor of something illegal, because it may soon become legal.
• 3) Understand that the essence of Law is the will of the people not the ink of a judge on paper.

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Popular issues where you will hear this legality argument

1) Immigration (This was the source of my inspiration, someone mentioning that we must enforce the laws of this country. He didn't understand that our will is the law of this country.)



2) Gun Control
3) Abortion
4) Stem Cell Research

In all the above cases, people stand where the law currently resides, if it agrees with their point of view, and they simply say we should be patriotic and respect the laws of this country.

Again there is a loss of this essence of the law which says our will should dictate how society is run not necessarily what the law currently is right now.

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How the law should be treated

It should be respected as it stands currently but the opinions of those working against it should always be heard.

At the end of the day we can't be anarchists and all follow our own rules. We submit to each other and submit to the majority opinion.

We should keep our minds open though to the other side, soon enough it will be their turn to be the majority and you will regret then you gave no time no listen.

Keeping an open mind is essential but even more so is keeping an open heart.

The feelings of a few can topple the dictates of a hundred tyrants.

Mystery post

(The picture for the next post. Can you guess what it might be about?)

Morality is the only hint I'll give. But what does morality or ethics have to do with water, or islands, or possibly the world?

Stay tuned to find out :)

~~Phoenix

The Value of an Item

(A shirt can be made for 10 dollars and sold for a million dollars, as long as people are willing to pay that much for it)

It took an online game to teach me what the value of an item was.

It's one of the most valuable lessons I have ever learned and that is both because of it's significance and because of the fact that I learned it on my own, it wasn't refined from a book or word of mouth.


People always say, "Something is worth what someone is willing to pay for it".

In essence, that is what I figured out. Even after having left that virtual world ages ago, these small treasures remain with me.

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Background

The game I was in was simple. You go out and kill animals and gain loot. You sell the loot for money and you buy items and upgrade your stats to kill more efficiently.

There was one problem though, everyone needed weapons but there were no dealers around.

Not only did that make things worse, the only people who could help us with a price were NPC's (Non playable Characters, essentially robots) who would offer to buy our weapons from us.

Everyone in the game agreed on one thing though, the price the robots paid for our weapons was significantly undervalued.

Weapons that were very hard to obtain would sell for next to nothing.
These highly sought after weapons also dealt much damage and anyone would be crazy to sell them to a robot.

So what were we to do?

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Following new paths untraveled, The Rangers way

So like a lot of people in the game, I had a lot of weapons to sell and wanted to get rid of them to train my character faster.

What would I sell them at though, and where would I start?

Here is what I did:

1) I guessed: I literally one day went up to a person, gave the strength of a certain weapon, and asked him if he wanted to buy it, for 4,000 of the currency we had available.

I had very little information at the time and there were literally no other weapons dealers to consult with, so pricing the object was as simple as a guess.
The particular customer above was overjoyed with the offer and quickly purchased his new weapon.

2) The economy's response (Money Supply): At the time a lot of people had money but the exchanging of weapons was pretty rare. When I offered to sell that item, an above average loot, people could afford to lose a bit of money and invest it in a better weapon.

I noticed after time, as people had less money, the amount I could charge for a product fell.
After a while I changed the price a bit to correct for demand and total population wealth.
Those corrections kept my customers coming back, knowing I'd be a good deal.

3) What you expect to get: I didn't do what you might expect in a normal business scenario. 4000 of that particular currency was a very good amount for that weapon. I could also get the weapon back with an average amount of work. So I didn't raise my price much. As long as I was getting a pretty good pay off and unloading my supplies, I was happy.

Possibly a better entrepreneur might have grabbed that chance and increased prices, but like i mentioned above, I was more than satisfied with what I had received.

4) The Market: Other dealers soon started popping up and everyone had the same question I had. I was asked what they should price their items at and regularly gave them my store prices.

As new dealers entered the market and competition started looming pricing became more and more variable.

5) Demand and Math: I noticed something odd in the economy and basically it was that certain weapons would not be bought, regardless of price.

Certain weapons that were of average efficiency were not selling and I never even bothered pricing them because of this lack of demand.

You could probably graph the efficiency of my better weapons and their price then graph these weaker weapons and the math would give you a good average of what these weaker weapon's price should be around, but the problem is, if i offered this price, no one would buy it.

There were a few reasons for this:

Why pay 500-1000 for a weapon that is average and won't help you fight much, when you can easily afford 4000 for a nice and strong weapon that will eventually pay back it's cost?

So the money supply was high and the supply of good weapons was good, in essence destroying any need whatsoever for these average weapons.

Don't be fooled though these average weapons would still be good and useful, but everyone always said, "Why pay 500 or 1000 for them, when 4000 will do for a very good one".

Also our weapons didn't degrade, to buy a good weapon was to have it for life. (They degrade now though, and it would take a long time to explain this new factor in our economy)

I just found it odd that a whole range of decent weapons were essentially wiped out and any mathematical price you could put to them would not meet the test of the market. It was eye opening for me, a lesson I hold to this day. It proves that everything is worth what someone is willing to pay for it, not the mathematical figures of an Economics Professor. I think the best example of something being worth more than an Economist says it is, would be the concept of Book Value.

I can understand that concept a lot easier now thanks to my experiences in this virtual economy.

6) Maturity, the Middleman: After a bit of time I found that competition in the market was very fierce. It was harder to sell weapons with people under selling you and customers always questioning your price.

After a while most customers felt they knew the price better than you, even if they had never sold weapons in their whole life.

As time went on I found a new business, something I was sort of forced into and something that flourished within me because of my networks. By now I knew a lot of dealers and a lot of customers and one day my friend comes to me telling me he needs a very very high quality item sold.

This is an item that i had personally never looted. This item existed in very low quantities in the game and therefore was extremely hard to sell.

Price wise it was about 250,000 of the above currency I mentioned. Just to give you some perspective, most people carried about 10,000-20,000 and I personally stayed at about 40-50k. So 250k was A LOT of cash in that game.

With a bit of work, I found a buyer and I charged the seller a fee for my service. This was a totally new industry for me, one where I could make large amounts of cash for a minimal amount of work.

I started charging static percentages for items that I helped sell and I ONLY dealt in high price items. It was a great market because I found out that a good number of people could afford these very nice weapons but could not find anyone willing to sell them.

I also found a good number of sellers who just wanted cash quick. Together I helped initiate a number of transactions and I had started making more doing this than initially selling weapons to begin with.

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The Real World

I learned to look at the real world differently. Everything seemed to look different, every object seemed t have it's own story, and brand new markets starting appearing before me.

This virtual game had in essence forced me to move with the market and understand it's workings.

That was something that would have been impossible in the real world.
I wasn't selling any products in the real world, and I had very small networking capabilities.
But in this virtual game I connected with scores of people and inquired into their needs.

Strong lessons

I found the Value of an Item truly is just whatever people will pay for it.

• What they will pay for it is affected by how much cash they have.
• What they will pay for it is affected by how badly they need it.
• What they will pay for it is affected by how rare it is to find.
• The most important lesson though was knowing that NO one could accurately price anything.
• Everything is mispriced. Why?
• Because everyone has a different price they are willing to pay for something.
• Even with a small degree of difference, that means a huge shift in profits and returns, especially as you increase your volume of buys or sells.

Maybe that is why the stock market is so powerful in creating wealth.
Knowing how the price of an object will shift can create a millionaire overnight.
You have to remember though, even if you perceive a company as being strong, if the world continues to disagree with you, and even if you are right, their stock price will never go up.

That doesn't necessarily mean though that you should usually go with the market because the market has shifted in favor of companies that you knew were strong from the beginning.
The market is also infamously random.

But what it does mean is that you should stay open minded, so as not to build your pride to a hurtling and devastating collapse.

Things aren't worth what you think they are, they're worth what people are willing to buy them for. Something I didn't just read, but lived, and therefore appreciate more.

~~Phoenix

Donating 1.5 billion per year

That's the estimated value of the amount of stock Warren Buffet will be giving to the Bill and Melinda Gates foundation.

Also here is an interview with a little more information about the largest donation in the history of Mankind, especially by a living donor.

Would most people give 1.5 billion dollars, in stocks of their own company, away to a foundation?
Sure he is giving it away at a late stage in his life, after his wife's death.
Death is interesting, in that it gives you the proper perspective on life.

As Andrew Carnegie once said, "The man who dies rich thus dies disgraced."

Or as Islam says(paraphrase), It would be more beneficial that a man give an apple of his orchard while he lives, than give 1,000 trees away after he dies, when they are no longer useful to him.

Warren Buffet, the second richest man in the world, thus will be giving away nearly 40 billion dollars, almost all his fortune. Yet, if you had read my last post, you would have read that he would not have fully actualized himself.

The fully actualized person, would never have had that high of a net worth, and would definitely not have sacrificed nearly as much of his life for wealth.

So in essence, he will die a second class citizen, because of his wealth, and the sacrifices he has made for it, and the desire to satiate his unending greed.

That said, he will still die with more dignity, than most of humanity will.

~~Phoenix

Infatuation with Wealth

(Happily ever after seems to come with a mansion nowadays)

BACKGROUND

A record of our time

I think when people look back at this time in history, they will look on with amazement. Not because of the technology or the people, but because of the decisions we made and the infatuations we had.

I've hinted before that this blog particularly serves as a window into the mindset of my time and my people, for future generations to poke at and analyze.

It also is used as a tool to analyze the philosophy behind a number of commonly held beliefs.

Today's topic stirred the inspiration in me like I haven't felt in months.

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What brought on this surge?

(If you haven't seen the movie, stop reading now, Spoilers ahead)

I had read the summary for this movie a million times and it completely turned me off.
The summaries on Imdb and all the other popular sites are horribly off. By that I mean they barely touch on what the movie is really about.

Regardless I finally decided to see it today, especially after seeing so many positive ratings on a number of sites. The final blow before making this decision was my favorite movie rating site, which gave the movie a 96% approval rating.

So I watched it, and I enjoyed it a lot. The themes it hits on were amazing and not even hinted at in the summaries of the movie.

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Philosophy finally starts here


So where did that magical inspiration come from? Why was so much background given?
What exactly brought on this particular surge?


A simple theme; Our infatuation with excessive amounts of money.


A lot of stories nowadays it seems, are riddled with this theme. The 21st century theme that The hero or protagonist becomes immensely rich and they live happily ever after thanks to this new found fortune.


It's so prevalent that we're seeing this trend start in societies and cultures that expressly FORBID this form of greed.

A religious movie, that I was invited to see ended with this exact theme.
Somehow the main character couldn't continue living unless he inherited a huge amount of money by luck or chance or destiny.

What is it with our society? Why can't we have a happy ending without someone becoming rich?
In the Days of Walt Disney, finding your true love or finding true happiness was the goal in the story. With Disney, when you had reached that peak, money was of no use to you.


What has happened to our goals? Why must our happiest endings today come with a rich bounty?


(I've touched on this topic before btw, in more detail about the greed part. Click here to read it)
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Greed (Avarice)

Time and time again we've been warned by millions upon millions of people that greed is bad.
We've lost touch with that.

Here is a small window into the mindset of Wall street and mandatory bonuses given at the expense of the American tax payer:

WSJ Article "Greed is good"

TYT Discussion about it:




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An eye opener:

I was told for the first time in my life that the never ending struggle for resources is not the way to ultimate actualization(Being the best you can be).

It's sad that my religion teaches this but our followers are so blinded by the need for resources, that they don't feel the need to rehash this point. They will rehash a million other things, but they seem to neglect their duties when it comes to greed.

I was reading the commentary(Tafsir) on the Quran when I came upon a passage said to have been narrated by the Prophet. It had to do with a particular verse asking Muslims to not desire this world too much. The Prophet reiterated this point in his narrative.

To summarize; it stated:

There were three people in this world (Ranked from best to worst)

1) There are those who only made enough to sustain their lifestyle without going into debt or making a lot of profit. These are the best of people, they find satisfaction with their life.

2) There are also those that are on this run for resources, will gain as much wealth as they can, but will also scrutinize every penny making sure it goes to good causes.
You'll routinely see these people donating to noble causes or financing other projects. They will be rewarded for the good that they buy and punished for the bad that they buy on Judgment day. They actively strive to do good in this world.

3) There are those that are also on the run for as many resources as possible. Yet this group will spend it how they like. These are not philanthropists and if they are, they are so in money only and will never give their time to good causes. They will spend how they like on what they like in exorbitant amounts.


My eyes had opened to a new reality:

• Surely it had to be those that paid millions of dollars to charities and worked hard for them, that were the greatest people on earth.

• Surely because I was in America, I was expected, more so than anyone else, to succeed where millions of others did not even have the chance to fail.

• Surely I was to try and make as much money as possible.

Yet here i am, being told, that the greatest of people make modest amounts, are not accruing debt, and yet are also not rich.

If you are not American, you might not be able to grasp the severity of this problem because from the moment we start walking, we are told to make as much money as possible.

It is a constant run for resources, so much so, that some people forgo honest work in order to take less righteous paths to fulfill this goal.

Yet here we are being told, if you want to be the best you can be, do not run so hard.

What I took from the passage was:

1) Pay off what debt you owe and try not to go into debt.

2) Buy what you need to buy, that isn't exorbitant(excessive).

• Home worth less than $400,000
• Car worth less than $15,000
• Computer worth less than $1,300
• Make sure your normal bills are not extreme(example: buying $500 worth of clothes a month is too much.)
  

3) Be satisfied, don't want or act like you need to obtain large and insane amounts of money, especially to be happy.


I had never hungered for being rich before, so this idea wasn't a hard transition for me.

But I was now being told to specifically NOT go for large amounts of money.

Before it was, Do it if you can, but don't be so greedy, money in the end is worthless.
Make sure you use your wealth wisely and not at the expense of others.

Now it is, Do not strive for it, do not want to be excessively wealthy, and never worry about it.


Yet what is funny and truly ironic is that a religious movie I saw, matches the ending with Slumdog Millionaire.

An ending that does not walk toe to toe with the religion the movie was made for.

~~Phoenix

Computer Status update

This really shouldn't be a place to rant about my computer, so i basically held off.
A small summary though, should sum up some explanations.

It is impossible to describe how hard it was being inspired and not being able to take it down as i normally do.

Windows restore eventually failed, and 2 incompetent technicians later, I'm left with 2 ghost users on my computer and my original user profile.

Why the ghost users? A few HP restores, that went terribly wrong, that is shielding 80 gigs of files, unable to be deleted, with a number of unusable programs.

Solutions? Full format and reinstall, hopefully finished by the end of this week.

If you don't know about hp restore, be thankful. It promises to restore your computer, but gives you a ghost user account, with all your previous programs corrupted, most of the time being unable to uninstall.

Anyways, that's the update, and the next post is the real reason why i logged on here.