# Bill gates, the rich, and "wealth creation" **URL:** \ **Category:** Great Debates\ **Created:** [March 8, 2013, 6:06am UTC](https://boards.straightdope.com/t/bill-gates-the-rich-and-wealth-creation/652354 "2013-03-08T06:06:20Z")\ **Posts on this page:** 20\ **Page:** 2
**Author:** ![magellan01](https://avatars.discourse-cdn.com/v4/letter/m/45deac/32.png) [@magellan01](https://boards.straightdope.com/u/magellan01)\ **Post date:** [March 8, 2013, 2:13pm UTC](https://boards.straightdope.com/t/bill-gates-the-rich-and-wealth-creation/652354/21 "2013-03-08T14:13:11Z")
> [@Lightnin](#): > > What, exactly, are the rich risking? > > Sure, companies go out of business every day. People also go to bed hungry every day, as well- if they’ve even got a bed. > > I know that when I was poor, I agonized over the decision to buy turkey or chicken pot pies: I preferred the turkey, but they were an entire _twenty cents more expensive_ than the chicken. An entrepreneur may risk having to file bankruptcy… but a single mother living on the street risks \*far \*more. I don’t know how you can even argue that the two situations are comparable. You’re confusing two things: being _at risk_, and making a choice to risk something. ---
**Author:** ![Martin\_Hyde](https://avatars.discourse-cdn.com/v4/letter/m/47e85d/32.png) [@Martin\_Hyde](https://boards.straightdope.com/u/Martin_Hyde)\ **Post date:** [March 8, 2013, 2:16pm UTC](https://boards.straightdope.com/t/bill-gates-the-rich-and-wealth-creation/652354/22 "2013-03-08T14:16:16Z")
I don’t believe in the “informal conspiracy” as much as most people. I think it’s a factor in why individuals on boards are less likely to be overly scrutinizing executive pay as a general concept, for sure. I think the biggest issue is the labor market for CEOs operates as an inefficient market and companies feels pressured to hire the “best” which means the “most sought after” by big recruiting firms. The most sought after is a smaller group than “people who would probably do the job very good” and thus that leads to an artificially limited market and inflated salaries that are unlikely to be providing shareholders good value for money relative to other CEOs in the past. ---
**Author:** ![John\_Mace](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/john_mace/32/185_2.png) [@John\_Mace](https://boards.straightdope.com/u/John_Mace)\ **Post date:** [March 8, 2013, 2:21pm UTC](https://boards.straightdope.com/t/bill-gates-the-rich-and-wealth-creation/652354/23 "2013-03-08T14:21:28Z")
> [@Gyrate](#): > > While I don’t have evidence to hand, the ‘informal conspiracy’ has some traction around my office (although we don’t think it’s _quite_ as pervasive as some have portrayed it to be). And the point isn’t that “the boards” are pushing up salaries, it’s that a sufficient number of individuals on those boards each have an incentive to push up salaries (no corporate collusion necessary). The salaries can be justified by comparing the going rate; the companies may lose out but unless they’ve been excessive it won’t hurt the individuals responsible for voting for the higher compensation packages and so there’s little disincentive not to do it. > > The checks against this ought to be the shareholders, but that’s a whole different problem. Yes, it should be the shareholders, but we rarely, if ever, see shareholders doing anything about it. Getting back to the OP, I don’t think anyone is saying that if someone is rich, they must have created some wealth somehow. Lots of people are born wealthy. But it’s easy to see how wealth can be created. If it takes you 5 days to make a set of clothes for yourself, and I come along with a machine that lets you do the same thing in 2 days, then I’ve “created” 3 days for you that you can do something else instead of making clothes. You can build a table and now you have clothes and a table instead of just clothes. Now, the next person who comes along and keeps my clothes-making-machine company going didn’t invent the machine, but he’s still making it available to other people and “creating” 3 more days for those other people to do something else. Because, you know, the clothes-making-machine company can’t run itself. We can argue about how that other person should be compensated, but to say he doesn’t create any wealth is to not understand what it takes to run a business. ---
**Author:** ![puddleglum](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/puddleglum/32/137_2.png) [@puddleglum](https://boards.straightdope.com/u/puddleglum)\ **Post date:** [March 8, 2013, 2:23pm UTC](https://boards.straightdope.com/t/bill-gates-the-rich-and-wealth-creation/652354/24 "2013-03-08T14:23:21Z")
Banks and governments create money but what people create is wealth . Money is just a way to measure that wealth. If I buy a piece of clay for $1 dollar, create a sculpture, and sell it for $10, then I have created $9 worth of wealth. However, if I take a dollar bill and make 10 copies I may have created money but no wealth. What Gates created was Microsoft, it may be a little harder to imagine than something tangible like a statue, but the principle is that same. Before Gates Microsoft did not exist and so was worth nothing, now Microsoft has a market cap of $235.71 billion. That is what he created. Obviously other people have helped in creating that wealth but a company can have many programmers who are replaceable, but without a founder a company can not exist. So the marginal value of the founders are higher than any other employee. Note that the stock price is not the only value Gates has created. Every employees salary since he started the company has a small part which is value from Microsoft, and every person who has used his company’s products have consumer surplus which is not quantifiable but is real and dwarfs the market capitalization. ---
**Author:** ![msmith537](https://avatars.discourse-cdn.com/v4/letter/m/d9b06d/32.png) [@msmith537](https://boards.straightdope.com/u/msmith537)\ **Post date:** [March 8, 2013, 2:31pm UTC](https://boards.straightdope.com/t/bill-gates-the-rich-and-wealth-creation/652354/25 "2013-03-08T14:31:37Z")
> [@LinusK](#): > > What I’m curious about is the concept of how wealth is created, and specifically that it’s created by people who’re rich. > > Bill Gates has a lot of money. He’s very wealthy. But he didn’t create that money. It was created by banks, or by the government. It was transferred from someone else, or somewhere else, to him. But he didn’t create it. > … > Being rich means you’re able to consume a lot. It doesn’t mean you’ve created anything. This is all Econ 101 stuff really. Wealth is created by turning raw materials into finished goods and services. Money is simply a convenient placeholder for that wealth for the purpose of exchange. What Bill Gates created was a company in the form of Microsoft. Think of Microsoft as a giant complex machine that converts raw materials - namely ideas and computer code - into finished products - i.e. every version of Windows and other software. Does it matter that Bill Gates doesn’t write every single line of code for every piece of software? No. He created and built the machine that makes it. And lets not forget that a lot of other people got rich or at least made good livings being part of that software machine. And most of Bill Gate’s wealth is tied up in making sure that it runs smoothly. We use Bill Gates or Mark Zuckerberg as an example of wealth creators because they came from modest means and built billion dollar corporations. Modest that even though they were Ivy League educated, they came from upper middle class households. > [@Stratocaster](#): > > I agree, these threads often have posters who consider the two interchangeable. Return on investment, earned income? Eh, what’s the difference. They’re all just “rich guys,” and any one will do for a comparison. Some posters consider anyone who makes over $100,000 to be “rich guys”. ---
**Author:** ![XT](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/xt/32/456_2.png) [@XT](https://boards.straightdope.com/u/XT)\ **Post date:** [March 8, 2013, 2:35pm UTC](https://boards.straightdope.com/t/bill-gates-the-rich-and-wealth-creation/652354/26 "2013-03-08T14:35:34Z")
> [@](#): > > Bill Gates has a lot of money. He’s very wealthy. But he didn’t create that money. It was created by banks, or by the government. It was transferred from someone else, or somewhere else, to him. But he didn’t create it. If he hadn’t founded Microsoft then all the money it’s made (not just for him but for all the investors, all the employees, and for all of the spin off companies that created products that used Microsoft products to gain market penetration or create new markets in their own right) wouldn’t have existed…and the banks and government would have not needed to expand the money supply. No, Gates didn’t print up the money or expand the money supply all on his own, but he DID create the need to expand the overall money system by a non-zero amount, so saying he created wealth is entirely accurate. > [@](#): > > He lives in a nice house. A mansion. But he didn’t build the house. He didn’t wire it. He didn’t install the windows or (probably) even pick out the furniture. Other people did all that stuff for him. No, he didn’t build the house in the sense that he was out there with a hammer building it. But the wealth his company generated for him enabled that house to be built…for all the folks who built it, and built all of the things that went into it to have jobs and for the company that built it to make a profit. > [@](#): > > He’s rich because he owns Microsoft stock. But he didn’t bid up the price of his stock. He didn’t create the market, or come up with the mechanism of selling big corporations to millions of people in itty-bitty pieces. He’s rich because he CREATED Microsoft, and at some point he and others decided to ALLOW Microsoft to publicly sell stock in the company…of which, being the owner, he received a large chunk of the initial offering. > [@](#): > > He didn’t come up with concept of copyright, or the law that makes it illegal to make copies. 😛 > [@](#): > > He didn’t write MS-DOS, or come up with the personal computer. Nope, he did neither…but he created a company to take advantage of products and add value and leverage to those products. And the products his company came up with created a huge market for personal computers that didn’t really exist before, and added a huge amount of wealth and value to using the things, both from a professional and a personal perspective. > [@](#): > > So what has he created? The company that made all of that possible, that pretty much built the early (and later) market for personal computer use, operating systems and office automation software. Along with Apple, Microsoft was THE early company that enabled every day folks to get a computer and actually be able to do something with it. And Gates built that. He ‘created’ it. > [@](#): > > He’s certainly rich. But to say he’s rich, therefore he’s “created wealth” is circular reasoning. Being rich means you’re able to consume a lot. It doesn’t mean you’ve created anything. No, you simply don’t seem to understand the concept of what wealth creation is, to be honest. Nothing circular at all. If you rip Microsoft out of history, and you don’t magically wave your hand and say ‘well, someone would have done all of that clearly’, then you’d have a hole in the economy. There would be less wealth overall, since not only would you have all those people who worked for Microsoft not making the money they made, and the investors in Microsoft not making the money they made, but also companies like Dell and HP probably not making PCs the way they did, and you’d have a non-zero lessening in business productivity across the board, which would further lower the total amount of wealth in our system. It would be a cascade effect. How much? Well, hundreds of billions just in Microsoft directly (operating costs, assets, and annual profits)…trillions if you count all of it’s impact. Maybe more if you want to get extreme about the cascade effect of having no Microsoft and you look at the worst case scenario for how things would have played out in an alternative universe. ---
**Author:** ![msmith537](https://avatars.discourse-cdn.com/v4/letter/m/d9b06d/32.png) [@msmith537](https://boards.straightdope.com/u/msmith537)\ **Post date:** [March 8, 2013, 2:42pm UTC](https://boards.straightdope.com/t/bill-gates-the-rich-and-wealth-creation/652354/27 "2013-03-08T14:42:24Z")
> [@Evil\_Captor](#): > > Um, you do not seem aware that Windows is, and always was, a blatant ripoff of the Apple OS, which Apple got from the work of the Xerox research labs? Yeah, no one cares about that. Facebook was a blatent ripoff of MySpace was a blatent ripoff of Friendster. Sometimes the difference between success and not so much success is a matter of small tweaks and timing. Windows may have “ripped off” Apple OS. But the PC market was an order of magnitude larger than the market for the Mac and there was a need for a graphical interface. ---
**Author:** ![XT](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/xt/32/456_2.png) [@XT](https://boards.straightdope.com/u/XT)\ **Post date:** [March 8, 2013, 2:44pm UTC](https://boards.straightdope.com/t/bill-gates-the-rich-and-wealth-creation/652354/28 "2013-03-08T14:44:40Z")
> [@msmith537](#): > > Yeah, no one cares about that. Facebook was a blatent ripoff of MySpace was a blatent ripoff of Friendster. Sometimes the difference between success and not so much success is a matter of small tweaks and timing. > > Windows may have “ripped off” Apple OS. But the PC market was an order of magnitude larger than the market for the Mac and there was a need for a graphical interface. Exactly…it’s like saying that no other car company counts, since they all ripped off Henry Ford’s process of automation…and Ford doesn’t count since he didn’t, in fact, invent the internal combustion engine! It’s a silly argument, but consider the source there… ---
**Author:** ![Martin\_Hyde](https://avatars.discourse-cdn.com/v4/letter/m/47e85d/32.png) [@Martin\_Hyde](https://boards.straightdope.com/u/Martin_Hyde)\ **Post date:** [March 8, 2013, 2:48pm UTC](https://boards.straightdope.com/t/bill-gates-the-rich-and-wealth-creation/652354/29 "2013-03-08T14:48:45Z")
Right, getting there first rarely matters. New product development isn’t like gold prospecting or something where the first guy to get a big land claim probably gets really rich. It’s about the first guy who gets something to market that people want. And FWIW, both Apple and Microsoft actually coexisted along with other OS products for most of the 80s before Microsoft ran away with the market. It’s not like there wasn’t vigorous competition. Hardly anyone knows who invented the first car, and even the first airplane is debatable, as is the light bulb. What we do know is the people who made the most money off of those things weren’t their original inventors. Both Edison and Bell did very well for themselves (Edison in particular was a good businessman), as did the Wright Brothers, but they weren’t the ones who became the wealthiest off their particular innovations. ---
**Author:** ![newcomer](https://avatars.discourse-cdn.com/v4/letter/n/e5b9ba/32.png) [@newcomer](https://boards.straightdope.com/u/newcomer)\ **Post date:** [March 8, 2013, 2:51pm UTC](https://boards.straightdope.com/t/bill-gates-the-rich-and-wealth-creation/652354/30 "2013-03-08T14:51:58Z")
> [@msmith537](#): > > This is all Econ 101 stuff really. Wealth is created by turning raw materials into finished goods and services. Money is simply a convenient placeholder for that wealth for the purpose of exchange. I don’t mean to be mean but perhaps it’s time to update your understanding how is wealth created today, especially in the era of fractional reserve banking where debt is the main driver of economy and as such it requires constant expansion of credit to keep it going. The enormous wealth accumulated in certain quarters is in fact someone else’s debt. Modern financial instruments and - even more modern - accounting ensure that relationship between someone’s wealth and debt is hidden. ---
**Author:** ![newcomer](https://avatars.discourse-cdn.com/v4/letter/n/e5b9ba/32.png) [@newcomer](https://boards.straightdope.com/u/newcomer)\ **Post date:** [March 8, 2013, 2:53pm UTC](https://boards.straightdope.com/t/bill-gates-the-rich-and-wealth-creation/652354/31 "2013-03-08T14:53:33Z")
> [@XT](#): > > No, you simply don’t seem to understand the concept of what wealth creation is, to be honest. Nothing circular at all. Let’s learn something today. Please … ---
**Author:** ![John\_Mace](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/john_mace/32/185_2.png) [@John\_Mace](https://boards.straightdope.com/u/John_Mace)\ **Post date:** [March 8, 2013, 2:54pm UTC](https://boards.straightdope.com/t/bill-gates-the-rich-and-wealth-creation/652354/32 "2013-03-08T14:54:21Z")
And in order for you to “create wealth”, you need to get the product to people who want it. Jobs blatantly ripped off what the folks at PARC were doing, but then, it’s not like XEROX didn’t have the wherewithal to market products. They just didn’t see the market. Even Gordon Moore, a tech visionary if ever there was one, didn’t see the market for the PC when it first came out. This happens over and over again. Like I said in another thread: Henry Ford was a genius in his time. Then his time passed, and he was just a cranky old man. ---
**Author:** ![XT](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/xt/32/456_2.png) [@XT](https://boards.straightdope.com/u/XT)\ **Post date:** [March 8, 2013, 2:54pm UTC](https://boards.straightdope.com/t/bill-gates-the-rich-and-wealth-creation/652354/33 "2013-03-08T14:54:31Z")
> [@newcomer](#): > > I don’t mean to be mean but perhaps it’s time to update your understanding how is wealth created today, especially in the era of fractional reserve banking where debt is the main driver of economy and as such it requires constant expansion of credit to keep it going. The enormous wealth accumulated in certain quarters is in fact someone else’s debt. > > Modern financial instruments and - even more modern - accounting ensure that relationship between someone’s wealth and debt is hidden. The new liberal conservation of wealth law…wealth can neither be created nor destroyed, but merely shift on an accounting sheet. It’s all a zero sum game after all… ---
**Author:** ![XT](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/xt/32/456_2.png) [@XT](https://boards.straightdope.com/u/XT)\ **Post date:** [March 8, 2013, 2:55pm UTC](https://boards.straightdope.com/t/bill-gates-the-rich-and-wealth-creation/652354/34 "2013-03-08T14:55:33Z")
> [@newcomer](#): > > Let’s learn something today. Please … That’s an excellent idea. You first… ---
**Author:** ![John\_Mace](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/john_mace/32/185_2.png) [@John\_Mace](https://boards.straightdope.com/u/John_Mace)\ **Post date:** [March 8, 2013, 2:57pm UTC](https://boards.straightdope.com/t/bill-gates-the-rich-and-wealth-creation/652354/35 "2013-03-08T14:57:27Z")
> [@XT](#): > > The new liberal conservation of wealth law…wealth can neither be created nor destroyed, but merely shift on an accounting sheet. It’s all a zero sum game after all… To be fair, there is a certain amount of wealth that is “created” the way **newcomer** says. Whether that is the primary way that wealth is now created is up to him to demonstrate, though. As yet he hasn’t done that. ---
**Author:** ![newcomer](https://avatars.discourse-cdn.com/v4/letter/n/e5b9ba/32.png) [@newcomer](https://boards.straightdope.com/u/newcomer)\ **Post date:** [March 8, 2013, 2:57pm UTC](https://boards.straightdope.com/t/bill-gates-the-rich-and-wealth-creation/652354/36 "2013-03-08T14:57:55Z")
> [@XT](#): > > That’s an excellent idea. You first… I already did and you did a marvelous job refuting it. Which means… it’s your turn… ---
**Author:** ![Martin\_Hyde](https://avatars.discourse-cdn.com/v4/letter/m/47e85d/32.png) [@Martin\_Hyde](https://boards.straightdope.com/u/Martin_Hyde)\ **Post date:** [March 8, 2013, 2:58pm UTC](https://boards.straightdope.com/t/bill-gates-the-rich-and-wealth-creation/652354/37 "2013-03-08T14:58:23Z")
What **newcomer** is talking about is a way to create capital but he’s confusing that with wealth creation. Fractional reserve banking **can** create wealth, but it isn’t intrinsically how wealth is created, it depends on how the money is used. Fractional reserve banking increases the **money** supply, not the wealth supply. That increase money can be sent to more investments at which point it might create wealth or it may disappear in failed investments. ---
**Author:** ![XT](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/xt/32/456_2.png) [@XT](https://boards.straightdope.com/u/XT)\ **Post date:** [March 8, 2013, 3:01pm UTC](https://boards.straightdope.com/t/bill-gates-the-rich-and-wealth-creation/652354/38 "2013-03-08T15:01:57Z")
> [@Martin\_Hyde](#): > > What **newcomer** is talking about is a way to create capital but he’s confusing that with wealth creation. Fractional reserve banking **can** create wealth, but it isn’t intrinsically how wealth is created, it depends on how the money is used. Fractional reserve banking increases the **money** supply, not the wealth supply. That increase money can be sent to more investments at which point it might create wealth or it may disappear in failed investments. Yep. You can create wealth in as much as you can at least marginally expand the money supply this way, but it’s not how wealth is overall created. Perhaps John is right and my dig was a bit harsh, but the theme in these kinds of threads always seems to be that people like Gates don’t create wealth…instead, it’s either created magically (by fiat from the government), or it’s not really created at all, but instead shuffled about from some mystical fixed pot of wealth that would be here regardless. ---
**Author:** ![newcomer](https://avatars.discourse-cdn.com/v4/letter/n/e5b9ba/32.png) [@newcomer](https://boards.straightdope.com/u/newcomer)\ **Post date:** [March 8, 2013, 3:05pm UTC](https://boards.straightdope.com/t/bill-gates-the-rich-and-wealth-creation/652354/39 "2013-03-08T15:05:53Z")
> [@John\_Mace](#): > > To be fair, there is a certain amount of wealth that is “created” the way **newcomer** says. Whether that is the primary way that wealth is now created is up to him to demonstrate, though. As yet he hasn’t done that. I could spend pages and pages explaining but I honestly don’t have that much time nor I’m going to figure out where to start from. For example, if someone does not understand why $80B a month pumped by Feds into the economy has, as the most obvious and direct consequence a record Dow Jones numbers and - on top of that - the record annual dividend paid in 2012 of $300B… well, I’d rather admit he’s right than try to explain that. When Warren Buffet says great thing about Bernanke he is saying it from a perspective of a man who invests in so called “value stock” and his praise of Bernanke is for his skill to keep reins of a bunch of wild horses. Buffet’s only concern is if he’s going to live long enough not to see wild horses break out. So, yeah, you can call me blowhard if that helps refute my claim. ---
**Author:** ![JohnT](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/johnt/32/15048_2.png) [@JohnT](https://boards.straightdope.com/u/JohnT)\ **Post date:** [March 8, 2013, 3:06pm UTC](https://boards.straightdope.com/t/bill-gates-the-rich-and-wealth-creation/652354/40 "2013-03-08T15:06:48Z")
> [@XT](#): > > Yep. You can create wealth in as much as you can at least marginally expand the money supply this way, but it’s not how wealth is overall created. Perhaps John is right and my dig was a bit harsh, but the theme in these kinds of threads always seems to be that people like Gates don’t create wealth…instead, it’s either created magically (by fiat from the government), or it’s not really created at all, but instead shuffled about from some mystical fixed pot of wealth that would be here regardless. You forgot “stolen from the workers”, XT. [Previous page](https://boards.straightdope.com/t/bill-gates-the-rich-and-wealth-creation/652354.md?page=1) [Next page](https://boards.straightdope.com/t/bill-gates-the-rich-and-wealth-creation/652354.md?page=3)