Is there only a fixed amount of wealth in this world, or can people create an infinite amount of value? On today’s episode, Brittany and Emma discuss.

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Links:

• Bernie Sanders and the Fixed Pie Fallacy
• Monopoly Might Be a Zero-Sum Game, but Wealth Isn’t.

Here’s a transcript of our conversation:

Emma: Hi Brittany.

Brittany: Hi, Emma.

Emma: So, today we wanna talk about the fixed pie theory, or as some people call it the fixed pie fallacy. And a lot of people have heard of this, and this is referenced in a couple of different industries and groups of people that will reference this idea. But generally what this is it’s this false notion that there is only so much wealth and only so much resources that people can have access to. And a lot of times you hear this come through in things like the richer, getting richer and the poor are getting poorer. And you know, we need to eat the rich and we need to, we need to tax everyone so that we can all be equal and share the wealth. And of course, as we know, like industries are always evolving. There’s always new, new things that are happening, and new ways to make money are coming out of the woodwork, out of nowhere. And increasingly as the years go by it’s industries that you don’t even need physical products to get wealthy with. You look at things like Uber or like Airbnb and the sharing economy, and people are finding new ways to earn income without even needing supplies. So it kind of takes away with this idea that you know, there’s only so much gold, there’s only so much land and it allows people to actually share things and use things in a new way. But what it really does is it sort of undermines this idea that there’s only so much wealth to go around and we need to cut the pie up into smaller pieces so that everyone can have some. Brittany, do you have, do you have any misconceptions you’ve heard that are kind of in that vein?

Brittany: Yeah. a lot of people, and Connor and I have talked about this on a past episode, population control. The people who think the world is getting overpopulated, they’ll use this argument a lot to say, you know, we can’t, you know, we have to cut down how many kids we have. Or some people are even like, oh, I’m not gonna have kids at all because there’s not enough resources. And by resources, we mean water or land or food. And that is so silly because the pie doesn’t get smaller. The more people we have, the pie gets bigger, right? Because like you said, new jobs are created and think about maybe the people that wouldn’t have been born, that were born like Elon Musk who created something great, right? Or Satoshi and Nakamoto who we talked about last time, who created Bitcoin and blockchain and all these things that have made the pie bigger. So it’s funny to me that we hear these people like Bernie Sanders and, A O C who we’ve mentioned last time, I can’t even try to pronounce her name, Alexandria, what is it? Something Cortez.

Emma: Ocasio-Cortez.

Brittany: Ocasio-Cortez. so they’re big into that where they think that you know, the more people have wealth, the more billionaires there are, the more everybody suffers. And that’s so silly to me. One thing me has talked about, we’ve talked about Mises before, he’s an economist or was an economist, is that you know, thanks to the rich, that’s the reason a lot of us have affordable technology. Yes. You know, things like iPods, things like even something like silverware that started because rich people could afford to try it out while it was still very expensive. and then it trickled down to us, right? So it’s funny that we get mad at the rich and the wealthy where like, people like you and I are like, yeah, let’s get more of ’em. You know, like Totally Thank you for your contributions.

Emma: Yes. That’s why I have a laptop that Yes. You know, can fit in the, you know, just the top of my table here and not an entire room like in the sixties. Yeah. It’s as people try new things and get into new expensive technology, it gets better and it gets faster and it gets cheaper because more and more people can have access to that. And you know, business people, they look at that and they say, Hey, I can make three of these for really wealthy people, or I can make a million of them and sell them to everyone and make way more money. So it’s actually, the free market really empowers consumers as well to get more of that amazing technology. And it ultimately improved their quality of life because these things are being made available not just to the super-rich, but to everybody. Yes. Look at the prices of things like eating out at restaurants or again computers or color TVs. And these things are getting better and better, but they’re also getting cheaper and cheaper compared to, you know, other new products that are coming onto the market. So there’s no set amount of wealth and of wealth to be enjoyed by us. And, you know, expensive experiences and stuff like that. You can really ultimately look at all of this and say, Hey, if a super rich person in 2021 is driving a Tesla, there’s a pretty good chance that 30 years down the road, that’s gonna become a pretty common thing for a lot of people because the technology will get easier for people to recreate, it will get easier to produce. And ultimately we will be able to take part in that more.

Brittany: Absolutely. And you know, it reminds me of cars actually. We did another episode on Henry Ford And he was able to, there’s a little different, he was able to come up with a production line, which is how we were able to get more cars. But there was a time where the idea of regular people driving cars was outrageous. You know, that thought was something that only the very wealthiest could do. And now the fact that you look outside, right? And everybody has a car for the most part. There are affordable cars everywhere. So I think it’s such a silly belief and it’s not only silly, it’s a dangerous belief because then you have a lot of younger people, Occupy Wall Street, I guess that was not, that was, oh my goodness, almost a decade ago now, where has the time gone? But that was a big movement where it was like you had people who were almost right. They could have been right. If they had talked about, you know, the Federal Reserve, the creature from Jeal Island thing. Oh yeah. Talked about how us inflating money and creating and printing money out of thin air is the reason that we’re becoming poor. But instead, they chose to focus on this eat the rich saying, which was, you know, yep. We’ve got too many billionaires. We’ve got too many or millionaires, we’ve got too many wealthy people. No, to their credit, something also talked about was the housing crisis where we had people on Wall Street kind of pulling the strings and manipulating things. And that’s not good either, but that doesn’t represent everyone who’s wealthy. And a lot of people who were able to accumulate wealth are also able to create value. Look at Jeff Bezos. I mean, I know a lot of people don’t like him, but I don’t know what I would do if I did not have two-day delivery. Cuz I’m actually, somebody doesn’t drive. I’m like talking about everybody having a car I don’t drive cuz they live in a city where I don’t have to. Yeah. But I mean, I get all my cat’s food on there. I get my food, my food gets delivered to me from Amazon once a week. So like everything to is because of Amazon and it’s because Jeff Bezos had the wealth to be able to come up with this amazing idea.

Emma: Exactly. If there wasn’t the, you know, the Jeff Bezos and the Elon Musks of the world that are accumulating that massive amount of wealth, yes, they’re being rewarded for their hard work, but also they are making things available to us that were not available before. You don’t just decide to be a rich person and wake up and become a billionaire without actually creating some value for the world. And a lot of people look at, you know, folks like Elon Musk just this last weekend, he was on Saturday Night Live. Right. And all of these people were saying on social media, how could you have him on here? You know, he’s hoarding the wealth. There are so many people in the world that are hungry. But that’s such a false equivalence to make. it’s basically comparing apples and oranges and saying, Hey, this billionaire, the fact that he even exists is wrong. Yep. Because there are people who are poor. That is just the complete wrong way to look at that. And you can say, Hey, how can we get smart, innovative people like Elon Musk, like Jeff Bezos working to solve problems like hunger and like poverty and coming up with ways that maybe we can empower people to work and to find jobs and opportunities. Maybe that’s a better way to look at it. But just saying, Hey, you billionaire, you don’t deserve to exist because there are poor people. That’s just a very simple, it’s a cognitive bias. We talk a lot about cognitive bias at, the Tuttle twins. So it sort of falls into that category. But at the end of the day, these folks are, ultimately changing the way that the world works. And it’s not like there can only be five of them. It’s not like there can only be a few, you know, super billionaires that are successful. There’s a lot of upward and downward mobility when it comes to wealth. There are people who get really wealthy really quickly. There are people who lose their money. It is all this wild, wild west. And it’s actually a very beautiful thing. If you’ve ever watched Parks and Rec, Ron Swanson has a quote where he talks about the free market being a jungle and it’s beautiful and it’s brutal and it should be totally left alone. And I gotta say, I agree with him there.

Brittany: It’s funny cuz he would be seen to some people it’s like, oh, that crazy libertarian character in Park drag. But I think he’s probably one of the best TV characters. You said something that gave me a thought and that was that, you know, upward and downward mobility, but mostly upward mobility. The other thing that people don’t think about when we talk about these extremely wealthy people are that they create jobs. Yes. You know, Amazon works with other sellers, so I know people who have started their own business that sells on Amazon. So people who wanted to be entrepreneurs and maybe they didn’t know how, but they were able to do it through Amazon. So Jeff Bezos isn’t only creating mega wealth for himself, he’s creating wealth for other people. Elon Musk has to hire a lot of people for Tesla. He’s hiring those people. So the more money you get, the more ability you have to help people. You know, we talked to Magatte Wade a couple weeks ago who’s a good friend of mine and who’s just this amazing entrepreneur. And even though she has a company, and people might look at her as like, oh, you’re a capitalist. You know, you have a company. She uses her company to give people jobs in an area of Sen Senegal where people didn’t have jobs before. And so she’s able to create wealth by creating her own wealth. And so it’s this fun kind of the concept that self-interest is not necessarily a bad thing. And by self-interest, I mean, when you’re looking out for yourself and people like Ayn Rand we’ve also talked about, were big on, she wrote an essay called The Virtue of Selfishness, which on its face value sounds terrible right? We’re always being told don’t be selfish. And then there’s good reason for that. But when it comes to the market, when we’re incentivized by selfish motives, which is maybe to make more money, to earn more money it’s not necessarily a selfish thing in practice because by earning more money, we’re creating wealth for other people. We’re giving job opportunities to other people. And so it’s just, it seems almost absurd. You hate people who are better off than you because they’re the ones giving you that, you know, your opportunities. There’s that saying what, like, oh, we hate the man. I’m saying the man in scare quotes. You can’t see me doing it right now, But it’s like maybe what it means, the government. Yeah. The man’s not great. He’s always stifling innovation, but, but big corporations and entrepreneurs are the reason that we’re able to have so much,

Emma: You’re so right. And you don’t just build a business and get super rich without needing people to help you. And by that I mean, you know, hiring people and employing others who have different talents and skills and lifting others up with you. It’s not just like only one person can do all of this on their own. We kind of touch on that even in miraculous pencil, one of our Tuttle twin’s books that we have, and a lot of you guys have probably read that one. And you know, how interconnected everything is. And when we allow for freedom and when we allow for folks to pursue those self-interests and pursue that, you know, wanting to provide for themselves or maybe their family, they actually end up serving the consumer by coming up with better products that meet their needs. But also they serve their community by creating those opportunities. And when you look at countries that go the opposite way and that embrace, Hey, we’re gonna have the government take care of all of this stuff. We’re gonna have the government, you know, try to solve our problems and come up with these fixes for the things that we need in our lives. It doesn’t go so well. And a lot of times the government actually goes completely out of line and really takes advantage of people and you can read all about the disastrous outcomes of that. We see it in Venezuela even right now. Yes. And in the U S S R back of a few decades ago. So we have so many examples of how embracing that freedom and allowing people to get rich and allowing them to pursue those opportunities is actually really good for all of us.

Brittany: Absolutely. And there’s, I’ll link this in the show notes. There’s a really good fee video and they have, it’s animated, so it’s really fun to watch so that the kids and the parents can enjoy it. But it kind of talks about that, it talks about how monopolies, and we’ve talked about monopolies before, when you know somebody has complete power over something, which is usually the government. That is when you stop creating opportunities, right? A monopoly is when there’s really this quote-unquote fixed pie But when it comes to wealth creation, there is no limit to what we can do. And that’s kind of the beauty of being human beings who interact in the market because the market is us, right? We are the economy, we are the market. So there’s really no limits to what we can come up with and what resources, well, other than what we talked about, like water and things like that. But it is the free market that creates, you know, ways that we can expand these resources or make them more sustainable. So it’s something that we need to remember every time we hear somebody say something like, eat the rich, that there is no fixed pie, and that the more opportunities we have in the market, the bigger the pie grows.

Emma: Nailed it. I love it. I totally agree with you, Brittany. The more that we empower folks to pursue their dreams and pursue those self-interests, the better off we’re all going to be. So that’s all we have time for today, but we are going to link that fee video in the show notes and we can’t wait to talk to you guys again. Bye, Brittany. Thank you.

Brittany: Thank you next Time.

Emma: Bye-bye.