How to become a millionaire and why that does not qualify you for public office.

Back in May I published a review of an excellent book by Jane Meyer on Dark Money, the vast amounts of private wealth deployed my multi-billionaires to promote a libertarian agenda in the United States. Central to the book are the Koch Brothers, owners of the second largest private company in the US, Koch Industries, which has made both of them multi billionaires. Generally they don’t come out of the book well but there is one story which does indicate at least a glimmer of self awareness.

It relates to a speech given in 2003 to alumni of the Deerfield Academy when David Koch was pledging $25m to the prep school he had attended. He asked himself the question he thought they would all be thinking: How did David Koch become so wealthy as to be able to donate $25m to his former school? He explained thus.

It all started when I was a little boy and one day my father gave me an apple. I soon sold the apple for $5. With the five dollars I bought two apples and sold them for ten. Then bought 4 apples and sold them for twenty. This went on day after day, month after month year after year until my father died and left me $300m!

This story displays a degree of humility which does not seem to have been evident at any other time in the life of either Koch brother. Unwittingly however, I believe it goes to a profound truth. Immense wealth is a matter of immense good luck. That good luck might be being heir of a man who built his fortune in the run up to world war two building the third largest oil refinery in the Third Reich; it might be being a KGB operative in the years of marketisation of the Russian economy acquiring state assets at knock down prices; it might be being part of a landed gentry that had the foresight to acquire large tracts of land which became central London; it might be coming up with an operating system which gets adopted as a key component in an industry just as it experiences exponential growth.

For those multi-millionaires whose fortunes are not wholly good luck, simply arriving with birth, their effort is at least matched by good luck. Being in the right place at the right time. When a significant fortune is acquired a series of reinforcing processes start to kick in.

As Mr Piketty points out “…once a fortune passes a certain threshold, size effects due to economies of scale in the management of the portfolio and opportunities for risk are reinforced by the fact that nearly all the income on this capital can be ploughed back into investment.” You can diversify your investments to reduce risk, you can employ some very clever people to help you, you can also employ some other very clever people to ensure that you do not pay the level of tax on your earnings that lesser mortals do.

So for example the fortune of Liliane Bettecourt, heir to the L’Orael cosmetic fortune saw her wealth increase without doing a days work in her life between 1990 and 2010 from $2bn to $25bn. Bill Gates, the epitome of en entrepreneur saw his fortune increase over the same period from $4bn to $50bn. This provided a real return on capital for both of them of around 10% per annum. Interestingly that rate of growth has continued since Mr Gates stopped working.

Now the question arises as to whether any of this matters. These fortunes are built on industries that employ thousands of people, contribute millions in taxes, is this not simply the politics of envy? If we did not allow this concentration of wealth would not entrepreneurialism collapse? Would we be killing the goose that lays the golden eggs? These are all legitimate issues and they need to be addressed but there is an underlying risk which is threatening the very foundation of wealth creation in the modern world. A legitimate and effective state.

If we put aside any moral question about how people can “earn” $100m or $10bn or $50bn there is a fundamental problem about the way in which wealth and power interact. In multiple and complex ways wealth enables people to exercise much more power within a state than less wealthy citizens, not just in areas  like the business they own and know, but across a much wider range of matters.

Obviously, wealth can be deployed in very direct ways to buy media to shape opinions, it can support election campaigns to ensure the right people get into public office. These and a host of other practical things can be facilitated by those that have lots of cash

There is another, more insidious exercise of power however which we all collude in to some degree. We still have a tendency to see wealth through a secular version of the Protestant work ethic as a sign of being one of the elect. Perhaps they have not been chosen by God but the talent for getting rich is seen as a sign of generic skill. The skills and temperament that enable you to become very rich should enable you to be good at other things indeed at anything. Your views should be listened to on whatever is the question of the day.

A variation of this is the view that the “business” of government would be better managed by people who are good at making money.  Who is going to make government work better, a lowly paid Building Inspector or a a multi-billionaire property developer?

Fortunately, Donald Trump is working hard to dispel this myth. We will take as fact that he has increased the fortune left to him and he is a canny property developer. I appreciate these are both moot points, but put that to one side.  If we look at his period in office, not just from the wishy washy, Guardian reading viewpoint of someone that thinks misogyny,  Islamaphobia, racism and generally being uncouth is bad, but just in Trumps own terms. His performance as President has been an unmitigated disaster. Despite controlling both houses of Congress he has not managed to secure one significant piece of legislation. He has made the United States and the Presidency objects of pity and derision respectively.

His incompetence goes to the people he has surrounded himself with. People who can not even collude with a foreign nation effectively. Donald Jnr and Jared Kushnar run off to a meeting to secure adverse information about Hilary Clinton from someone who is presented as an emissary of the Russian government. Kushnar then reveals the meeting. Donald Jnr thinks that is not incriminating enough so sends out an email trail that clarifies the offence. Perhaps worst of all, if they are to be believed, they didn’t even get any dirt on Hilary. Collusion a la Johnny English.

As the heat of the multiple investigations has grown President Trump has now appointed a team of lawyers to defend him. His incompetence seems to know no bounds, even when his personal liberty might be at risk he seems to appoint people he is comfortable with rather than people that might be competent. Leading the his legal team is Mark Kasowitz, a lawyer who has worked for Mr Trump for some time on property and matrimonial issues.

Mr Kasowitz shares President Trumps forthright way of expressing himself. He has just had to make a public apology to someone that emailed him suggesting he might not be the best person to represent President Trump. This triggered a series of email responses containing threats and profanities in equal part. You might think this is not the measured temperament you would prefer in what is likely to be a high stakes legal defence. I think you would be right.

The challenge to his professional strength on constitutional and political matters may be more or less correct however of much greater significance for President Trump Mr Kasowitz has not applied for security clearance and given revelations about his personal life this might be because he assumes he wont get it.

Why is this important? Because much of what Donald Trump might be in legal jeopardy about is classified. Not only would Mr Kasowitz not be able to see the information, no one could tell him what it was about!

Mr Kasowitz and the rest of the legal team defending President Trump will cost a lot of money. It is fortunate for President Trump that his talents for making money in the private sector mean he can afford to pay such fees in order to defend his lack of talents for leading in the public sector.

It seems increasingly likely that Mr Trump’s Presidency will not end well. Bizarrely he seems to be doing everything he can to ensure it does not end well for himself. It is vital however that his boorish incompetence is not allowed to further undermine faith in politics and the state. If the experience of the Trump presidency confirms being a millionaire is largely a matter of luck and more importantly no indication of a more general competence embracing public office then President Trump will have done at least one good thing in his hopefully brief term as leader of the free world.

 

 

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