Wednesday, July 2, 2014

Even Billionaires Are Complaining About Inequality

Li Ka Shing is losing sleep (excerpt):

Sleepless in Hong Kong

...I am 85 years old going on 86. I feel blessed to have seen more in life than I could remember, and happy to remember more than I have seen; so why am I sleepless in Hong Kong?

I fear that widening inequality in wealth and opportunities, if left unaddressed could fast become ‘the new normal’. Inequality is perhaps inevitable as some are simply better able than others to capture the opportunities that globalisation and the knowledge economy affords.

I fear that intensifying resource scarcity will pose challenges of immense proportions to our future.

We need to act now to turn challenges into opportunities. Technology is no panacea, but we need technological and innovative interventions to increase our options.

Our government must introduce new impetus to enable dynamic and flexible redistribution policies that can strike a fine balance between the need to promote equity and economic objectives.

The howl of rage from polarisation and the crippling cost of welfare dependence is a toxic cocktail commingled to stall growth and foster discontent. Government needs to lead change and galvanize its own to embrace innovation and inject a strong dose of liberating elixir into the education system. I have always believed that failing to invest in education is tantamount to a crime against the future.

What is most unsettling for me is that trust, the bedrock of an enlightened society, is crumbling before our eyes. If trust is no longer the reinforcing positive energy field, the consequences could be dire. Trust enables us to live in harmony, without which more and more people will lose faith in this system, breeding scepticism towards what is fair and just, doubting everything and believing all has turned sour and rancid....

[H/T The Star]

And here’s another billionaire, with a lot less hyperbole and a much more down to earth attitude, but with the same message (excerpt):

The Pitchforks Are Coming… For Us Plutocrats

Memo: From Nick Hanauer
To: My Fellow Zillionaires

You probably don’t know me, but like you I am one of those .01%ers, a proud and unapologetic capitalist. I have founded, co-founded and funded more than 30 companies across a range of industries—from itsy-bitsy ones like the night club I started in my 20s to giant ones like, for which I was the first nonfamily investor. Then I founded aQuantive, an Internet advertising company that was sold to Microsoft in 2007 for $6.4 billion. In cash. My friends and I own a bank. I tell you all this to demonstrate that in many ways I’m no different from you. Like you, I have a broad perspective on business and capitalism. And also like you, I have been rewarded obscenely for my success, with a life that the other 99.99 percent of Americans can’t even imagine. Multiple homes, my own plane, etc., etc. You know what I’m talking about….

…Realizing that, seeing over the horizon a little faster than the next guy, was the strategic part of my success. The lucky part was that I had two friends, both immensely talented, who also saw a lot of potential in the web. One was a guy you’ve probably never heard of named Jeff Tauber, and the other was a fellow named Jeff Bezos. I was so excited by the potential of the web that I told both Jeffs that I wanted to invest in whatever they launched, big time. It just happened that the second Jeff—Bezos—called me back first to take up my investment offer. So I helped underwrite his tiny start-up bookseller. The other Jeff started a web department store called Cybershop, but at a time when trust in Internet sales was still low, it was too early for his high-end online idea; people just weren’t yet ready to buy expensive goods without personally checking them out (unlike a basic commodity like books, which don’t vary in quality—Bezos’ great insight). Cybershop didn’t make it, just another dot-com bust. Amazon did somewhat better. Now I own a very large yacht.

But let’s speak frankly to each other. I’m not the smartest guy you’ve ever met, or the hardest-working. I was a mediocre student. I’m not technical at all—I can’t write a word of code. What sets me apart, I think, is a tolerance for risk and an intuition about what will happen in the future. Seeing where things are headed is the essence of entrepreneurship. And what do I see in our future now?

I see pitchforks.

At the same time that people like you and me are thriving beyond the dreams of any plutocrats in history, the rest of the country—the 99.99 percent—is lagging far behind. The divide between the haves and have-nots is getting worse really, really fast. In 1980, the top 1 percent controlled about 8 percent of U.S. national income. The bottom 50 percent shared about 18 percent. Today the top 1 percent share about 20 percent; the bottom 50 percent, just 12 percent.

But the problem isn’t that we have inequality. Some inequality is intrinsic to any high-functioning capitalist economy. The problem is that inequality is at historically high levels and getting worse every day. Our country is rapidly becoming less a capitalist society and more a feudal society. Unless our policies change dramatically, the middle class will disappear, and we will be back to late 18th-century France. Before the revolution.

And so I have a message for my fellow filthy rich, for all of us who live in our gated bubble worlds: Wake up, people. It won’t last....

If the billionaires are worried about inequality, we probably need to be too.


  1. As much as I like this article, I don't think inequality can be solved.

    If I have to zoom down to the center core of the problem, there is only one reason that caused higher inequality -- GREED.

    We are living in a world where greedy people are too competitive and conservative people are too slack. Such psychology factor can't be contained, let alone resolving it entirely. It is just human nature.

    Of course, the world hasn't been harsh enough to the dark-money owners, but what else can we do? Ada duit, ada jalan; takda duit, tak payah cakap.

    Rich should always become richer, that's how capitalism works. Else, who the hell would want to invest then?

    Having said all the above, I believe we will have some mean reversion on inequality in the near future, naturally. More people are coming out to become entrepreneurs nowadays; information are commodities which give everyone some improved chances to make more money; businesses are getting competitive thanks to more R&D and lower production cost; etc etc etc. Surely, we will see more Eastman Kodak and Nokia in the future.

    Well, at least, we have some billionaires who are concerned with inequality. That news is good enough for me.

  2. A lot of these bilionaires are business-owners. If they really want to repair the inequality, they already have the ability to do so. Pay a fairer wage to their workers. Narrow the gap between normal workers and the upper management. The gap now is obscene.

  3. Fung
    You can structure capitalist economies in many different ways with regard to (in-) equality outcomes. There are many levers to produce different outcomes: corporate, capital-gains & inheritance tax; level & form of unionization (e.g. Anglo-Am. style weak & contentious, or German-Skandi style strong & consensual); labour representation on boards of directors; levels & structures of welfare spending. Germany, Switzerland, Scandinavia, Taiwan, Japan prove that you can have highly competitive, wealthy economies with relatively low levels of inequality. It's not about psychology, but institutions

  4. Not a fan of imposing wealth transfers from the rich to the poor (e.g. taxes and subsidies). Would see this wealth accumulation more as a symptom of a broken system where businesses aren't allowed to fail. Part of the risks of doing business is going bankrupt and that is part of the wealth dynamic where the rich can become poor and the poor can otherwise be rich. By eliminating this dynamic between rich and poor, the rich will keep getting richer, while the poor has no social mobility. Time to let some companies fail.