Why you'll never get rich studying African feminism in the 19th century

Submitted by Dmitri Davydov on Sun, 2006-10-15 09:13.
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THERE is extreme income inequality in this country. It is hard to say whether it’s the fault of President Bush, since there was also extreme income inequality under former President Bill Clinton, and in fact there has always been extreme income inequality.

Just to give you an idea of current inequality, statistically speaking, the top 1 percent of all income earners in this great land earn roughly 20 percent of the total income. The top 1 percent of wealth holders have close to one-third of all wealth. The top 5 percent of wealth holders have very roughly 50 percent of all wealth in this country.

As you can see, that does not leave a lot for everyone else.

There are a number of ways to respond to this situation. You can become indignant and say that it’s a violation of American democratic principles. This is a good way to put yourself into a sanctimonious mood, and it offers some psychic satisfaction.

I’m not sure that there is any historical basis, though, for believing that the founders of the nation wanted everyone to have equal wages. Certainly, many of them were wealthy men, and the Father of Our Country was said to be the wealthiest man in the colonies from his land and slave holdings. But, again, if you want to be exercised about inequality, you’ll have plenty of company.

Another way, possibly more satisfying in the long run, would be to ask yourself how the top 1 percent of wealth holders and income earners got to be that way, and then to try to do it yourself. My own observation, having been both a critic and a moderately well-paid person, is that while it’s nice to be a critic, it’s also nice to have your own swimming pool. (The best is both, but that’s another story.)

In other words, look at two recent business stories and decide which side of them you want to be on. Sumner M. Redstone, the chairman of Viacom, recently fired the company’s chief executive, Tom Freston. Mr. Freston was a pioneer at MTV, immensely well liked — people on the Paramount lot literally wept when he said good-bye — but Mr. Redstone decided that he had to go because he had not done a good job for the stockholders and the stock had languished.

In the last paragraph of an article about his departure, The Wall Street Journal dryly noted that Mr. Freston’s severance package would be about $60 million and his pay this year was about $20 million.

An even more recent story has been about Brian Hunter, a commodities trader for the large hedge fund called Amaranth Advisors. Mr. Hunter made big bets in natural gas trades and had been getting good returns for his investors. Then the market turned against him and he lost roughly $6 billion — yes, billion — for his investors within a few weeks. He’s no longer at Amaranth, and the fund is being dissolved. However, it was noted that his pay for 2005 would have been between $75 million and $100 million. Yes, you read it right.

That is, Tom Freston, an undeniably great guy, gets $60 million for leading a company whose stock performance was deemed unacceptably poor (although it’s been good lately). Brian Hunter is presumably still a wealthy man despite leading his investors to disaster.

You can be furious about that, and you should be. But you might also think how nice it would be to make that kind of money, or even a small fraction of that sort of wage.

For students slogging their way through school, here are the merest hints of how you can and cannot reach that top 1 percent, that place where you are paid well even if you make mistakes:

• You do not get to it by studying African feminism in the 19th century, whether or not you are at an Ivy League college. You do not get to it by studying Bulgarian poetry. You do not get to it by any field of endeavor or study that is esoteric and has no connection with helping other people either become healthy or make money.

• You do not get to it by being a civil servant unless you are the kind of civil servant — say, a cabinet member or a United States Senator — who can use his or her connections later to lobby for well-heeled clients. You do not get to it by a lifetime of work in any field in which there are government price caps on earnings.

• You do get to it by working in fields in which you can fix your wages, preferably with the government’s help. These include law, where you need a license to practice, and thereby can lift yourself out of working for free-market wages. (Everyone in this country pays homage to the free market, but no one wants to work for free-market wages.) They also include medicine, where a far more difficult license is required, and where desperate patients will pay almost anything to look and feel good. They also include accounting at the C.P.A. level.

• You are always better off working in a field where torrents of money are sloshing through and you can grab a handful as it goes by. That means Wall Street. Finance is the ultimate great business. (Warren E. Buffett famously said that you are always better off being mediocre in a great business than great in a mediocre business, and he easily could have been talking about Wall Street.) Money pours through Wall Street in vast oceans. Even if you take off a tiny helping, you are going to wind up in that 1 percent. If you can do the daily double and work on Wall Street and be in a position to fix your own wage — say, by being in high management at a major Wall Street firm that has such prestige and connections that it can control its fees and other compensation — you will wind up living a great life, at least money-wise. (It is very difficult in many other ways, and I do not envy the people who do it. The tension is just far too much for little me.)

• You make money by making money for people who already have money. This is another reason finance is such a well-paid field. One good day’s work for a man who has a $100 million account you are trading is worth far more than a lifetime’s work at the checkout counter at Wal-Mart. Yet, amazingly, managing wealthy people’s money is far less difficult and stressful than checking out customers at Wal-Mart. It’s not even close. As my smart sister Rachel says, you make money by making money. It’s tricky, but it’s right.

• You make money by learning skills that lead to any of these: making people feel and look better, learning how to draw their wills, learning how to manage their money so they don’t underperform the bogey terribly, learning how to make complex things like computer parts in ways that lead your employer to make money and reward you with stock options. This is by no means an exclusive list. You also make it by manufacturing cardboard boxes and selling scrap metals. But usually, education in finance, medicine, law, accounting, electrical engineering — something in which you learn to add value instead of having fun in school — is the key.

YOU can try to get into that 1 percent by acting, playing drums or shooting hoops. That rarely works. The sure way is to learn skills that allow you to help make money for other people (or that give them the illusion you’re doing that) or make them feel better (or that give the illusion of doing that on national television).

But if you are not one of these people — if you feel better making pottery or teaching school or policing the streets — you can have a fabulous life, too. In fact, from what I have seen, you can have a better life if you just stop thinking that everyone is supposed to make the same wage and just feel happy with who you are.

Or, with apologies to the big dogs at Goldman Sachs, and quoting the genius Bob Dylan, “I mean no harm, nor put fault, on anyone that lives in a vault, but it’s alright, Ma, if I can’t please him.” But if you do want to please that inner him, now you have an idea of how to do it.

How To Ruin Your Life By Ben Stein