Posted by: Martin | April 24, 2010

“But everyone has to work!”

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When I talk about my little venture in the Ivory Coast,  surprisingly,  the overwhelming majority of people are very supportive, and I have actually had more inquiries about co-investing with me, than skeptical or critical remarks.

I almost want more naysayers, so I get a bit of drive to prove them wrong! The most common critical remark (received twice) is along the lines “Are you crazy to be putting your money in Africa? You risk getting scammed!”

Recently, talking to a few people about money, I got a different skeptical remark. They were saying one shouldnt give too much importance to money in life, and I said that the purpose of my venture wasn’t really money, but more freedom and to not depend on my job. To which they responded “But everyone has to work!”

In hindsight I would have added that it is also about the thrill of building something up over the long term, and to work for oneself, and that money is the means, but not the goal. Anyhow, I just answered “No!”

High Net Worth Individuals

Thinking about it, the “But everyone has to work!” remark is quite curious, especially when pronounced by intelligent people who maybe should know better.

First of all, it’s incorrect. There are tons of people who could stop working and still live the rest of their lives in a developed-world middle class or higher standard. With 2 million € conservatively invested in index funds and not so risky bonds, I think one can siphon off 4% every year and still have the notional to increase with the inflation or better. 4% a year is 80,000 € a year, and since capital gains taxes are normally lower than income taxes, the net income of the 2M € could correspond to a gross salary of 100,000 € or so in a West European country.

I have not seen figures of how many people in the world have 2 million € or more, but Cap Gemini compile an annual “World Wealth Report” that includes figures of so called High Net Worth Individuals having at least US$1 million in investable assets, excluding primary residence, collectibles, consumables, and consumer durables.

In 2008, which was an unusually bad year, there were 8.6 million High Net Worth Individuals in the world, whereof 100,000 in Africa. As an aside it would  be interesting to see how many of these 100,000 are [self-made entrepreneurs] or [dictators and their families] and how these two subgroups have developed over the years.

From these numbers it looks like that there are many talented people with a big enough wealth not to have to work, and that to some degree the world depends on these people working anyway. One example would be the drop in Apple’s share price upon the news of Steve Job’s medical problems.   I don’t think the world needs to worry though, as most of these people continue working  due to – I would speculate: (a) they enjoy it and (b) don’t want to lose status relative to their peers.

On top of the high net worth individuals there are those who do not have much wealth to speak of, but which have passive income large enough to live off.

Psychology of Naysayers

I think the roots of the “But everyone has to work!” remark, doesn’t really lie with thinking there are no rich people, but rather with an uneasiness that there are people that don’t have to work or aspire to not having to work, compounded by the person making the remark maybe not enjoying his or her own job. I think there’s a bit of conservatism in it too (in the non-political sense); a wish for conformism and skepticism against alternative life choices.

Additionally, I don’t think the problem is that Bill Gates doesn’t have to work. The uneasiness felt by the person making the remark comes, I think,  from the fact that it is his or her peer that aspires to not depend on a job. I’d speculate there is some deep rooted fear in humans – possibly evolutionary based – of falling behind one’s peers.

A few years ago, I read a quite interesting book called the Status Syndrome by British Professor Sir Michael Marmot, making the case that one’s health and well being is linked to one’s social status for all levels of social status. That would explain why it makes sense to care about relative social status.

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