Business: The Economics of Wealth

When Adam Smith wrote “The Wealth of Nations”, wealth was created from the land. Men and women worked the fields, forests, mines, and labored over hand-built products. Then the Industrial Revolution happened. Some men and women continued to work using the old production techniques, but many started working in the factories. It wasn’t that the materials they were using had changed. It was that the production processes evolved. Today economists have written that we are in a new economic era called a Knowledge Revolution. Wealth is now created out of our heads through technological innovation.

When I read news articles about the economy I am troubled because most of the writing I’ve seen for general consumption assumes that one system entirely replaces another. But there are still people who make a living off the land, there are still people working in factories, there are the knowledge workers, and there are the risk takers. It’s not that one system replaced the other one. All these systems co-exist. Isn’t that what we are talking about when we still need migrant workers to harvest our crops? And we need the illegal aliens to clean our offices and work in food processing plants? How about the unionization of workers? Each American and all our illegal aliens fit into one or more of the economic theories, one theory doesn’t define our entire economy. The Knowledge Economy sits on the Industrial Economy which sits on the Land-based Economy. We need all these systems for the US to function.

Now about the Knowledge Revolution. There was a short span of time when knowledge workers could look forward to being able to generate wealth with their minds. But with India and China joining the Knowledge Revolution, the knowledge worker has been devalued. We can still make a living, but not like before. So I think we have worked through the Knowledge Revolution or perhaps it’s just flattened out. So what comes next? We are seeing a creativity boom on the Internet. It’s fast, easy, and cheap to create and get feedback. Is that what’s next? A Personal Creativity Revolution? I don’t know.

Now the question I always ask myself is how can I make more money? How can I get some of that wealth? Let’s look at Oprah Winfrey. Is she a knowledge worker? I don’t think so. She is not a technologist and I just don’t see her building spreadsheets. What I do see is a very creative woman, who uses knowledge workers to enable her creativity. What about Bill Gates? Steve Jobs? Andy Grove? Michael Jordan? Etc... What do they have that the average person does not? The courage to take risks. Just like a hundred years ago when the farm boy had to have the courage to go to the city for a factory job. The key to wealth creation lies in having courage and taking the right risks. I think living a passionate life helps tremendously. I think that people who have built their own empires from the bottom up love their products or something about their products. They also hire other people from the other economic realities to build those empires. They don’t do all the work themselves. And looking back through recorded history, this really isn’t anything new.

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