Aside from Gordon Gekko in Wall Street, with his “Greed is Good” speech, rarely do people speak well of the investor. Somehow someone who does well while investing rather than working 9-5 and amasses a pile of money is considered evil. Even our friend, Mr. Gekko, turned out to be nothing but an evil punk in the end of the movie.
There is a belief that those who make money somehow did so by taking advantage of others. The factory worker is virtuous, the worker at the non-profit who takes in donations and distributes them is more virtuous, and the individual who advocates for the poor and the worker is saintly. The Sam Waltons, the Henry Fords, and the Andrew Carnegie’s of the world are evil.
Looking at the true benefit to society, however, Henry Ford and Sam Walton had a much bigger impact and have benefited far more people than the average charity worker. Thousands of people have had good jobs as car factory workers, dealership owners and employees, and car mechanics thanks to Henry Ford transforming the car from the plaything of the rich to the necessity of the masses. Likewise, while the wealthy who have the time to visit several shops during the day in the hamlets in Vermont lament the loss of the Mom and Pop store, the fact is that Mom and Pop stores tended to just employ Mom and Pop, and maybe an odd son or daughter. Thousands find jobs at Wal-Marts across the country and have the ability to move up into management if willing to put in the effort.
The benefit to employees, however, is less than the benefit to consumers. Think of the convenience of being able to go to the dealerships down the street and having hundreds of cars from which to choose. Likewise, even in small towns across America people are able to buy all sorts of things that were available only in big cities. And these things can be bought at any hour day or night, instead of the 10-4 hours kept by Mom and Pop. Also, the prices are far less thanks to the work of Mr. Ford and Mr. Walton than they would have been. This has led to the creation of all sorts of other businesses that would not have been possible without the low prices.
Sure, Mr. Ford and Mr. Walton did this not out of concern for their fellow man, but for profit. And sure, they both became very wealthy. The reason they became wealthy, however, was not because they cheated their customers or did something underhanded like Boss Hogg in the Dukes of Hazzard or Mr. Burns inThe Simpsons. They became wealthy because they filled a need that people had. The fact is, those who make the most money in a business fulfill the most pressing needs that people have. The more pressing the need, the more money they make since the more of their effort, in the form of cash, people are willing to hand over.
When investing, individuals are delaying their own pleasure – the spending of their money – in order to grow their wealth. This is not done by putting the money under a rock, but instead by supporting businesses that are providing goods and services to consumers. While it is true that most investing money doesn’t go to businesses directly – stocks are traded among individuals after the stock has gone public- because there is a market for the stock, businesses are able to raise capital through initial public offerings and later through subsequent offerings, issuing bonds, and other activities. They also use stock options, which only have value if the stock has value, as payment and incentives for various managers and rank-and-file employees.
In investing, like in business, those who make the most money aren’t the ones who are jumping in and out of various stocks or doing some complicated options trades. They are the people who put money into businesses that do the best – those that are best fulfilling the needs of their customers and society in general.
So if you are a good investor and have made a lot of money, don’t feel ashamed. While it is a good idea to use some of your wealth to help others around you, just in making the money you have helped a lot of people.
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Disclaimer: This blog is not meant to give financial planning or tax advice. It gives general information on investment strategy, picking stocks, and generally managing money to build wealth. It is not a solicitation to buy or sell stocks or any security. Financial planning advice should be sought from a certified financial planner, which the author is not. Tax advice should be sought from a CPA. All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.