The Upward Mobility Myth

arnegrim · Jun 21, 2005

nvxplorer said:
Thanks for the graph, but it only goes to 1993. What is your point in posting it?

The GDP is continually growing anually. People have the opportunity for a bigger 'piece of the pie' if they want.

nvxplorer · Jun 21, 2005

mnphysicist said:
A lot of folks equate success with luck, and connections. Not so.

The connections are easy, whether it be a CEO, VC, angel invester, or business advisor. I know a 13 year old kid, that impressed the heck out of me. He has no wealth, his family is very poor, he had no personal connections with influential folks, and lives in a small rural community. However, I met him, and we talked for a bit, and I was so impressed, I made an investment in his future. I am not the only one, he now has connections with senators and congressman in Washington DC, and a number of high level CEO's providing far more connections, and financial backing as well. Luck has nothing to do with it. Passion does, and that will drive one to do what it takes, and to accept over 638 rejections before getting one afirmative response. Most folks will quit tryng before they even reach 50 rejections.

Now as far as luck goes. I have another friend, who road out the dot-bomb era and ended up loosing everything. CEO to homeless.... he is coming back with a vengence. He will go far beyond the millions he had years back. It is this persistence, passion, and drive that will bring success to him sooner or later. It may take more failed businesses, and bouts in the street, otoh, if one of his ventures becomes the next Sony, his peers will say it was luck, rather than years of 24/7 hard work, and determination. Its not, its learning from ones mistakes, and continuing to go forward.

Those are wonderful success stories, and I applaud your friends, but their experinces don't negate the fact that luck plays a major role in many things. Getting caught in traffic behind an accident can cause you to miss an interview. Many equally qualified applicants are rejected for jobs. Someone that already has connections, such as an heir, has an advantage over someone without them. People's time is limited. While your friend may have succeeded in meeting the senator, the senator does not have the time to meet everyone.

Yes, determination is what separates us, and those who are determined are better equipped to succeed, but even if everyone were equally determined, there still would be winners and losers.

nvxplorer · Jun 21, 2005

arnegrim said:
The GDP is continually growing anually. People have the opportunity for a bigger 'piece of the pie' if they want.

Yes, I addressed this in my post, arnegrim. THe GDP does not grow continually. Over time, yes it does, but durring a recession it does not, and during a depression the GDP goes down. These are significant features of the economy which can't be ignored.

My point was that it does not (it cannot) grow sufficiently for everyone to earn a million dollars in a year. The growth is limited. People can innovate, contribute to the growth, and become successful themselves. But in the end, we are all still competing for the same land, food, energy and shelter.

Also, capitalism does not work without labor (no system can). Therefore, it is essential that an underclass exists for anyone to become wealthy.

If I invent a great new form of entertainment, yes, I will become wealthy. But, for every dollar I take from you, you will have one less to spend on your former entertainment. Therefore, my competion's business suffers even though he was as determined as I. The cycle continues. He must now find a way to get those dollars back, and those will come from my customers. Dollars are limited. Yes, the economy grows, but growth is limited. Also, you have to subtract inflation from the GDP numbers to see growth in terms of real dollars. We've been successful in keeping inflation in check, but a 7% growth rate with 2% inflation yields only 5% real growth.

All the growth is going to the wealthy anyway. That's the way the system is set up. Corporate profits are up significantly, while wages have been stagnant. The elite control the capital. Capital creates wealth. The elite are not going to just give it away because someone is determined to take it. They will fight to keep their wealth, and they are equipped to do so, unlike the common man.

arnegrim · Jun 21, 2005

nvxplorer said:
Yes, I addressed this in my post, arnegrim. THe GDP does not grow continually. Over time, yes it does, but durring a recession it does not, and during a depression the GDP goes down. These are significant features of the economy which can't be ignored.

My point was that it does not (it cannot) grow sufficiently for everyone to earn a million dollars in a year. The growth is limited. People can innovate, contribute to the growth, and become successful themselves. But in the end, we are all still competing for the same land, food, energy and shelter.

Also, capitalism does not work without labor (no system can). Therefore, it is essential that an underclass exists for anyone to become wealthy.

If I invent I great new form of entertainment, yes, I will become wealthy. But, for every dollar I take from you, you will have one less to spend on your former entertainment. Dollars are limited. Yes, the economy grows, but growth is limited. Also, you have to subtract inflation from the GDP numbers to see growth in terms of real dollars. We've been successful in keeping inflation in check, but a 7% growth rate with 2% inflation yields only 5% real growth.

Ok... now prove to me that everyone in the US wants to earn $1 million...

AND show me that the 'common man' has no chance at upward mobility... which you STILL have not done.

nvxplorer · Jun 21, 2005

arnegrim said:
Ok... now prove to me that everyone in the US wants to earn $1 million...

AND show me that the 'common man' has no chance at upward mobility... which you STILL have not done.

I don't have to prove what people want. I only have to show that it is impossible, which in turn proves upward mobility to be a myth. Something which is impossible is indeed a myth. This assumes the definition of upward mobility, which I addressed in another post.

Did you read my points on average GDP? Average GDP is $60,000 per year. No one can make more without someone making less. At a 5% real growth rate, that means next year everyone will make $63,000. And so on. If your definition of upward mobility is a 5% yearly increase, then you are correct, but I think upward mobility means moving between classes, not getting a 5% raise each year.

Please address the points I make rather than pose a simplistic question.

arnegrim · Jun 21, 2005

nvxplorer said:
I don't have to prove what people want. I only have to show that it is impossible, which in turn proves upward mobility to be a myth. Something which is impossible is indeed a myth. This assumes the definition of upward mobility, which I addressed in another post.

Please address the points I make rather than pose a simplistic question.

But it has been shown by multiple posters now that it is NOT impossible. That people DO work hard and go from lower to upper class financially.

nvxplorer · Jun 21, 2005

arnegrim said:
But it has been shown by multiple posters now that it is NOT impossible. That people DO work hard and go from lower to upper class financially.

It's not impossible for an individual. That's not the point of the OP. The OP deals with the entire population, which is the only way to make such a statement.

The myth is that anyone and especially everyone can acheive it. Those are improbable and impossibe, respevctively. For each success story there is a story of failure. Much of the failure is due to the success stories. That's how it works. It's give and take. Win and lose. It cannot be all take or all win. That is the myth.

It's impossible for EVERYONE to make $1 million per year. Will you grant me that? That is what I claimed, by the way. I never said it was impossible to make $1 million.

CJ.23 · Jun 21, 2005

Actually it is quite posible in some circumstances for everyone to make $1 million US a year. You would need chronic inflation and devalued currency, or even if you did not have them to start with they would soon follow. Lots of people in Germany became Deutchmark millionaires after World War One.

Yes, some will make it rich, and some will not. The question is to what extent your laws and system facilitate people with talent engaging in wealth creation. Not the question 'an it happen', but 'how does it happen and why'.

Then for those who fallalong thsi path to riches, you need a safety net. How shoudl it function? These are interesting questions though!

cj x

arnegrim · Jun 21, 2005

nvxplorer said:
It's not impossible for an individual. That's not the point of the OP. The OP deals with the entire population, which is the only way to make such a statement.

The myth is that anyone and especially everyone can acheive it. Those are improbable and impossibe, respevctively. For each success story there is a story of failure. Much of the failure is due to the success stories. That's how it works. It's give and take. Win and lose. It cannot be all take or all win. That is the myth.

Wrong. First... the OP does not specify whether it is national or individual... but besides that... it is not a myth that anyone can acheive it.

You are correct that everyone cannot acheive it... but then you would be hard pressed to find a society where everyone wants it!

As for your 'give and take' - 'failure due to success'... prove it... give me statistics that show that the majority of failures was due to successes of others.

nvxplorer said:
It's impossible for EVERYONE to make $1 million per year. Will you grant me that? That is what I claimed, by the way. I never said it was impossible to make $1 million.

Granted.

Now grant me the fact that it is possible for anyone to make $1 million a year.

mnphysicist · Jun 21, 2005

nvxplorer said:
Those are wonderful success stories, and I applaud your friends, but their experinces don't negate the fact that luck plays a major role in many things. Getting caught in traffic behind an accident can cause you to miss an interview. Many equally qualified applicants are rejected for jobs. Someone that already has connections, such as an heir, has an advantage over someone without them. People's time is limited. While your friend may have succeeded in meeting the senator, the senator does not have the time to meet everyone.

Yes, determination is what separates us, and those who are determined are better equipped to succeed, but even if everyone were equally determined, there still would be winners and losers.

Very true, but we are not all equally determined. Most people do not want to succeed. Nor will they go to multiple interviews to get the right job, or be persistent enough to see the senator. They want to go to work, put in 8 hours and get a paycheck. Thats fine... but they should not be critical or envious of the person who created a new GM, by giving up years of their life, all of their spare time etc to do so. Its paying your dues.

Its the same scenario in a job. There are 25 year olds making $200,000 plus a year in some occupations. But the costs are very high, and few are willing to pay their dues so to speak. It's easy to be envious of the guy with a 40 foot boat, Mercedes, and a high 6 figure home in his early 30's. However, that same guy had no social life, and worked like a dog for 10 years to get there. He gave up getting married, having kids, having fun outside of his profession etc for wealth. Few people will do so, and thats fine. Yet those same people who chose a different path will look at the young millionaire as being lucky. Its not, it was a conscious choice each took. Its also one of the reasons that within those occupations, it is very rare to see anyone over 35. There either retired, changed careers, or became burned out mental cases. The personal costs are very high. It is also why you never see kids following their parents footsteps in such a career. They would never advise one to go down that path, even though it may have been fun for them. They have seen the fallout for failure, and it is not pretty.

Ron

mnphysicist · Jun 21, 2005

nvxplorer said:
It's not impossible for an individual. That's not the point of the OP. The OP deals with the entire population, which is the only way to make such a statement.

The myth is that anyone and especially everyone can acheive it. Those are improbable and impossibe, respevctively. For each success story there is a story of failure. Much of the failure is due to the success stories. That's how it works. It's give and take. Win and lose. It cannot be all take or all win. That is the myth.

It's impossible for EVERYONE to make $1 million per year. Will you grant me that? That is what I claimed, by the way. I never said it was impossible to make $1 million.

I think its a cart and horse scenario. If everyone wanted to make $1 million, outside of inflation etc, it could not happen. There is not enough value that can be provided to make it so.

However, in real life few want to, few even want to make $200,000/year. That's really the key, not the ratio of success to failure, but personal choice.

Ron

nvxplorer · Jun 22, 2005

mnphysicist said:
I think its a cart and horse scenario. If everyone wanted to make $1 million, outside of inflation etc, it could not happen. There is not enough value that can be provided to make it so.

However, in real life few want to, few even want to make $200,000/year. That's really the key, not the ratio of success to failure, but personal choice.

Ron

Agreed, and that is my point.

Upward mobility is acheived by some, impossible for all.

From what I recall, escaping poverty is very difficult. Movement within the vast middle class is much easier, and can be acheived by any driven, prudent individual. Entering the elite class is next to impossible.

nvxplorer · Jun 22, 2005

mnphysicist said:
Very true, but we are not all equally determined. Most people do not want to succeed. Nor will they go to multiple interviews to get the right job, or be persistent enough to see the senator. They want to go to work, put in 8 hours and get a paycheck. Thats fine... but they should not be critical or envious of the person who created a new GM, by giving up years of their life, all of their spare time etc to do so. Its paying your dues.

It's not about envy, Rob. Envy is a human emotion that should be left out of the debate. People who are satisfied working for a paycheck are just that - satisfied. I'm sure there are high salary earners who are "envious" of people not married to their job, but that is a different issue.

The point of the OP was that the deck is stacked, which it is. While opportunity exists for everyone, the odds are decidedly in favor of those born into money.

mnphysicist · Jun 22, 2005

Thanks for getting me back on track to the OP. I would say the deck is stacked against those with money. Now this is based upon personal experience, and not stats, although one might be able to do some digging to either validate or trash my opinion.

Generally grandpa starts a business. Father screws it up some, and junior runs it into the ground. Even smart kids have been known to totally waste what should have been a golden oppurtunity. They did not deal with the hard life of grandpa to build it, and as a result, they blow it big time. Some of it is the families fault. They shelter the kids from the tough parts, and then the kid doesn't know what to do. In other cases, the mindset is just totally wrong.

Now if we take a look at Forbes list of the richest people in the world. Less than 10% became that way through inheritance. The Walmart family is the a large part of that 10%. They took Sam's business and ran with it. The rest of the folks on the list generally did not have much of an advantage to start with.

Ron

HouseApe · Jun 22, 2005

mnphysicist said:
Thanks for getting me back on track to the OP. I would say the deck is stacked against those with money. Now this is based upon personal experience, and not stats, although one might be able to do some digging to either validate or trash my opinion.

Generally grandpa starts a business. Father screws it up some, and junior runs it into the ground. Even smart kids have been known to totally waste what should have been a golden oppurtunity. They did not deal with the hard life of grandpa to build it, and as a result, they blow it big time. Some of it is the families fault. They shelter the kids from the tough parts, and then the kid doesn't know what to do. In other cases, the mindset is just totally wrong.

Actually I think most of the time grandpa turns over the company to the financial manager as president. The son then becomes a member of the company's board of directors. The finance guys then begin the process of running the company into the ground because they don't understand the importance of the original engineering that made the products unique and valuable.

Successive generations of children tend to diversify their holdings out of the company and live off the proceeds.

Now if we take a look at Forbes list of the richest people in the world. Less than 10% became that way through inheritance. The Walmart family is the a large part of that 10%. They took Sam's business and ran with it. The rest of the folks on the list generally did not have much of an advantage to start with.

Ron

Well, without any stats we just don't know. I would bet most of those people started fairly wealthy and had the smarts to grow their fortunes. Do you know of any of them that actually started out with nothing?

Sam's kids didn't run with the company. Sam had 2 great ideas. The first was the price point product. Walmart puts certain very low end products at the front of each section of its stores, which they sell at or below cost. These are things people don't really want, but it gives people the impression that all products in the store are cheaper than you can find elsewhere. So people see the product, say wow!, and move down the aisle to find what they really want, which WalMart actually sells at prices higher than competitors. Couple that with their advertising campaign of continuing lower prices, and people flock to WalMart under the false assumption that it has lower prices.

His second great innovation was outsourcing the purchasing of most products to Asia, where he could get products manufactured at near slave labor price points. He did this while running an massive advertising campaign saying that WalMart was all about buying American. People believed that WalMart was working hard to sell American products, while in fact Sam was working as hard as he can to import almost everything from asia.

Today WalMart is personally responsible for about $30 billion of the US trade deficit and is by far the most profitable mass retailer.

His kids however are not involved in the running of the company. That is left up to the management staff Sam left in place.

mnphysicist · Jun 22, 2005

I did some digging, its hard to say exactly, as historys often times leave out the early days of no success. Not sure how many of these folks are in the Forbes list though

Here are a few notables
Ann Winblad Hummer Winblad
Bob Metcalfe 3COM
Gordon Moore Intel
Earl Bakken Medtronic
Sergey Brin Google
Steve Jobs Apple

Thanks for the Walmart clarification.
Ron

billwald · Jun 22, 2005

Every economy - every system - has a top half and a bottom half. Also a top 10%.

Any aduly who could live through the post WW2 USofA era and not be in the top half would be in the bottom half any other times, any other place. Any person who is in the bottom 10% would be in the bottom 10% any other time or place.

On the other hand, the nature of poverty has changed. Except for winos and crazies (and the occasional spectacular run of bad luck) even the people on welfare have better (more) goods and services than the working class did before WW1 when half of the population lived in poverty.

Milla · Jun 22, 2005

billwald said:
Any aduly who could live through the post WW2 USofA era and not be in the top half would be in the bottom half any other times, any other place. Any person who is in the bottom 10% would be in the bottom 10% any other time or place.

I think I really disagree. My neighbor's a blacksmith. He shoes horses for a living. He's real good with animals and has a gift for working with his hands. He's a hardworking guy who works way more than the standard forty a week. But when it comes to book learning kind of stuff...dumb as a post. He's gotta be in the bottom 25% of US income levels, if not lower. A couple hundred years ago - or even less - he would have been one of the town's most prosperous tradesmen. We value certain skills and abilities, not how hard a person works. The skills and abilities we value have changed over time and presumably they will change in the future.

arnegrim · Jun 22, 2005

Milla said:
I think I really disagree. My neighbor's a blacksmith. He shoes horses for a living. He's real good with animals and has a gift for working with his hands. He's a hardworking guy who works way more than the standard forty a week. But when it comes to book learning kind of stuff...dumb as a post. He's gotta be in the bottom 25% of US income levels, if not lower. A couple hundred years ago - or even less - he would have been one of the town's most prosperous tradesmen. We value certain skills and abilities, not how hard a person works. The skills and abilities we value have changed over time and presumably they will change in the future.

There are no other opportunities for him beyond blacksmith?!?

mnphysicist · Jun 22, 2005

Hmmm, within a town yes, he would have been very valuable two hundred years ago. Not sure about pay scale though. However, today, a blacksmith, with good marketing skills can do very well.

A friend of mine changed careers, from a research scientist to a blacksmith. He does better financially than he did running a lab in corporate america.

I think its not the occupation that matters as much as the approach. I have no doubt that Dr Jim would have been in the same economic classification irrespective of the period in time.

The exact skills will change over time. The marketing of such skills and the modification of such skills to fit the market are the key. This brings me back to the OP. Attitude and approach create upward mobility. Does a socioeconomic status have an effect on that? Quite possibly.

I see it in farming. Those who have not done well for years, tend to not do well. Otoh, those who have been successful in other entities, when entering farming as a second career, seem to do better than those who have lived it their whole life if they started out on the lower side of the equation.

Ron

The Upward Mobility Myth

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