The Occupy Wall Street movement may have lost most of its steam but animosity towards the rich and affluent in America is still alive and well. Predominantly from the extreme left (though political allegiances hardly mean anything anymore) the extreme wealthy are expected to “contribute to society” and “pay their fair share” through extensive taxes on their companies, personal income, capital, and anything else to make their existence burdensome. They “hoard” their money away in Swiss bank accounts, or purchase rare opulent treasures that many would consider unnecessary. These modern day Scrooge McDucks, with monocle and top hat, have had their reign and now must pay the piper. What is their punishment to be? The government is to tax the ever living bejesus out of them to fund social welfare programs. Their wealth needs to be redistributed because it’s fair – because majority of people are much much lower on the totem pole and struggling to get by financially.
Having said that, I love rich people. Yes, you read that correctly. I love rich people. Filthy stinking rich. To quote the great philosopher Jay-Z, “fuck rich, let’s get wealthy.” I’m talking about people with so much money that you can smell it on them. They wipe their asses with Benjis. They drive cars so rare, you’ve never even heard of them. They own 15 different homes and they’re more hidden and secure than U.S. military bases. Since I adore these people, I must be wealthy too, right? I must be sitting a few rungs from the top as well.
Full disclosure: I’m broke. Not impoverished, but I still keep my belt tight. My head is barely above water. Know what I make? $15.40 an hour. A mere 40 cents over the minimum that Democrats want. And let me tell you something: it’s nothing to shout about. First of all, thanks to taxes and overpriced insurance, I only take 2/3 of that home. Despite “earning” more than twice the minimum wage – on paper – I take home $10 and some change an hour. Factor in that I gas up twice a week because my employer is an hour of interstate driving away and it quickly becomes apparent that “living wage” is a very subjective phrase. Last I checked, working full time, I fall into the 4th quintile income bracket. I’m barely above poverty and I’m using (one of) my college degree(s) too.
So what gives? Why don’t I get some assistance that I “rightfully deserve?” I may not be in the bulls eye of the demographic that the Dems want to help, but I’m still on the board. I should marching with the Occupy protesters. I should be writing letters to my Senators and Representatives, urging them to do something about this damn evil income inequality. I contribute just as much to society, right? I should be compensated accordingly.
Here’s the thing: none of the above can truly help me.
Imagine I’m trying to climb the income ladder, except I have a broken leg. And it’s nasty too. Compound fracture. Not a clean break but multiple pieces. I’m going to need corrective surgery, a titanium rod, and physical therapy – ALL on top of 6 months in a boot. Government assistance (let’s call it what it is – wealth redistribution) is somewhere between a band aid and a roughly assembled tourniquet. Yeah, it’s something, but in the grand scheme of things… it doesn’t change my situation. I’m still crippled. I could maybe advance up the ladder but it’s going to take a while and it’s going to be very painful. I want my leg to be in one piece and functional. The wealthy 1%ers, in this analogy, are somewhere between the actual surgeons and the administration of the hospital performing my surgery. They’re the ones directly contributing to me getting better.
At the core of it all is risk management. You may call it cost-benefit analysis. All decisions – especially economic decisions – carry risk. As you accumulate wealth, that risk becomes smaller because the loss to you is smaller. Imagine a used Chevy Cavalier for sale for $1,000. To someone making minimum wage, $1,000 is risky. Saving up that amount of money is difficult. What about reliability? Will the car break down five miles down the road? Those are the risks for someone making low wages at an entry level job. However, as they learn valuable skills and move up in the company, their wages increase because they’re more valuable. At $7.25 an hour – federal minimum wage – the Cavalier is a risky decision. What about at $8 an hour? $10 an hour? Salaried and making $40k a year? As the wealth accumulates, the margin of acceptable risk also increases.
For same car, what’s the margin of risk for someone clearing $100k a year? Probably zero. The car can be purchased easily. Any necessary repairs can taken care of just as easily. But now enters the second element of a financial decision: subjective value. What is the value of this car for someone making minimum wage compared to the doctor/lawyer/etc clearing six figures a year? For the former, it is access to mobility in the world. This may open up their opportunities to pursue a job with better pay or benefits. They value getting from Point A to Point B more than they value leather seats, touch screen navigation, and panoramic sun roofs. For the big wig, the ability to obtain transportation is nothing short of guaranteed. The questionable reliability of the aforementioned Cavalier is not a risk for them. They can afford factory fresh with the expectation of a long service life.
Because of these guarantees, they can afford to accept a new kind of risk – innovation. Most people would consider a person who earns six figures to have “made it” in life. They can live comfortably and also pursue new adult toys. In contrast to the Chevy Cavalier, let’s look at Mercedes-Benz. I’m a big fan of German engineering – Benz, BMW, Porsche, and Audi. Not just any Benz model – let’s look at the S65 AMG luxury sports sedan. Starting at $222k before options, it is a tour de force of automotive engineering. The S65 boasts many luxurious creature comforts and amenities such as 12 way adjustable power seats with memory settings – front and rear, touch screen stereo, rear seat entertainment screens, automatic sunscreens, and even a small refrigerator in the rear arm rest. All of these were unimaginable 50 years ago. Much less, the idea that a car could cost more than a house. But remember subjective value: at this level, the consumer obviously values the comforts more than just getting from A to B.
Of all the luxuries and technologies offered in the S65, I want to focus on one that isn’t exactly brand new: turbocharging. For my not-so-mechanically inclined readers, a turbocharger is a device that harnesses the kinetic energy of the spent exhaust gasses in an engine to spin a set of fans that feed more air into an engine than it would normally draw in. More air in the cylinders means more fuel can be mixed in for a bigger boom and more power. The best part is that it only operates when needed. Cruising on the highway under a light load, the engine will return fuel economy as expected for the given engine size. But stomp on the gas, and the exhaust flow spins up the fan, causing an exponential increase in air flow and consequently, horsepower. With this technology, small four cylinder engines can have power outputs that rival V6s and and even V8s. The S65 doesn’t use turbos for mere efficiency though. No, the S65 features a massive 6.0L V12 engine with TWO turbos. It offers a whopping 700+ pound/foot of torque and over 600 horsepower! So not only are you getting from point A to point B in style, but you’re getting there pretty damn fast too.
As I mentioned before, turbocharging is nothing new in automotive engineering. The first turbocharged vehicle made its debut in the early 1960s. It is a proven technology. It can be found in quarter-of-a-million dollar luxury sport cars (the S65 in this case) down to the very affordable Ford Fiesta, a daily beater that offers a lot of bang for the buck (approx. $15k). Turbos did not start out as a perfect technology though. Someone had to take a risk with the first turbocharged car in 1960-whenever. Profits from the sales went into engineering and R&D. Time passes and then advertisers were able to say, “You know that thing you like? We made it better.” Thanks to advances and developments in material choice, engine tuning, and overall engine design, companies like Volvo (known for turbocharging much of its fleet) have developed a reputation for amazingly reliable vehicles that exceed well over 200,000 miles on the odometer during their lifespans. The consumer wins with a reliable product. The producer wins with a pay day. To paraphrase a quote printed on a former employer’s pay stubs, “A satisfied customer made this check possible.”
As I previously mentioned, the S65 offers extravagant amenities…
- 12 way power seats with memory
- seat massage
- seat ventilation
- power sunshades in the rear windows
- rear refrigerated storage
- 12″ touchscreen technology center (radio, navigation, WiFi, etc)
- rear seat entertainment screens
Compare these against the commonplace turbo. Now, in 2015, someone takes a risk with the new conveniences and technologies. In turn, Benz uses the profits from the sale of an S65 to reinvest into R&D and engineering. Is there a cheaper motor option for the power seats? Is there a material that improves the efficiency of the seat ventilation whilst still providing an elegant appeal? Is there a faster, smarter CPU for the in-dash technology center? Without someone willing to take risks, those questions may not be answered. Thankfully, there are people willing to accept that risk. Risks, along with other needs, wants, and desires, fuel innovation. Innovation not only creates jobs, but perfects risky technology (like the turbo in the 60s) into bomb proof reliability staples (see Volvo) at an affordable price (Ford Fiesta and Ecoboost).
So for the rich, the elite, the wealthy, the affluent, the connected, the powerful… The people of this country with big demands and even bigger bank accounts… Thank you for taking risks. Thank you for never being content with what you have. Thank you for treating luxury like a necessity. I’d hug you all if I could. Sue me, I’m an affectionate person. Because of your purchasing decisions, I (and many others) have future job prospects to look forward to. And maybe I’ll drive to that job someday in a budget daily beater Ford that offers 12 way power seats with massage, a touchscreen dash with WiFi, and a refrigerator unit that keeps my Kahlua mocha latte nice and chilled.
…..and a turbo.