The Biggest Misconception of Wealth

The pursuit of wealth always entails learning… [Gilder's Daily Prophecy] September 19, 2019 [ARCHIVES]( | [UNSUBSCRIBE]( This piece of paper could save your retirement… [blurry document](A renowned certified public accountant has released a shocking document… It’s explicit evidence of a new income strategy with a one-year success rate of 100%. You read that right… It’s a [revolutionary income technique]( that allows its users to collect $$$ hundreds in cash… And a recent one-year audit showed it worked an amazing 100% of the time. Trust me, this document will shock you. [Click here to see it for yourself](. The Biggest Misconception of Wealth [George Gilder]Dear Daily Prophecy Reader, As Cole Porter lamented in his famous song: Who wants to be a millionaire? I don’t. Have flashy flunkies everywhere? I don’t. Who wants to journey on a gigantic yacht? Do I want a yacht? Oh, how I do not! He implied that wealth consists of things: particularly the toys and trinkets of the leisure class. Capitalist wealth is not things. It is doing things for others. Under capitalism, capital flows not to the people who can most readily spend it, but to the people who can best expand it. That means it goes to entrepreneurs and investors. The paradox of wealth is that entrepreneurs and investors can only keep what they give away to others. That is, they need to produce goods and services in exchange for wealth. This reveals that, in itself, money is not wealth. Money is a measure of wealth. That might seem obvious. But from Cole Porter’s songs to Elizabeth Warren’s plaints, everywhere you go you will find people clueless about the nature of wealth Retirees: Wall Street Does NOT Want You to See This [men in zoot suit]( Wall Street is Scheming $17 Billion from Retirement Accounts... And want to keep these [49 Retirement Income Tricks of the Rich]( to themselves. [Click here now]( to learn the way you can claim access them today... FOR FREE. But hurry! Only the first 959 people who respond today will have the chance to use these secrets... And collect the equivalent of up to $1,168, $2,551, and even $4,377! [Click here now for more details.]( The True About Wealth, Knowledge, and Learning For instance, wealth is often mistaken for power. Politicians often want to persuade you that if you give them enough power — for a long enough time — they will create wealth for all. They will even promise to have it distributed equally, sweet and swish as a yogurt in a smoothie. The socialist smoothie lie is that wealth is a blend of power and politics. The truth is that wealth is essentially knowledge — a creation of individual minds. As Thomas Sowell has written, “The Neanderthal in his cave had all the physical resources we have today.” The difference between the cavemen and us is the accumulation of knowledge. Making the same point for our own time, Cesar Hidalgo of MIT observes that “when an expensive car crashes into a wall, all its value disappears, though every atom and molecule remains. Value is information. The car is knowledge.” The increase of knowledge is called learning. That is the definition of economic growth, learning. It’s not like learning. It’s not learning as a metaphor for something else. It is learning. Now, capitalist economies register this learning process through learning curves. The learning curve ordains that with every doubling of total sales, the unit costs of producing a good or service drop between 20-30%. Learning curves are the most thoroughly documented phenomenon in capitalist business. That means that the pursuit of wealth always entails learning. Learning means finding out things you don’t know yet. Across an entire economy, learning uncovers things — new economic knowledge — that no one knows in the present. This knowledge reflects innovation and surprise. It is often signified by price-changes. The centrality of surprising new knowledge in capitalism is an important insight closely aligned with Claude Shannon’s “information theory.” You see, in 1948, he showed that all information is defined as surprise: binary bits that are unexpected and measured by their degrees of freedom of choice. His measure for surprisal in the conveyance of information is a metric he called entropy. A critical moment in the development of my information theory of capitalism came when I read an essay by Princeton economist Albert Hirschman on the success or failure of UN development projects. The key was not good plans or available resources or virtuous developers. What differentiated successful from unsuccessful projects was entrepreneurial creativity. “Creativity,” he wrote, “always comes as a surprise to us. If it didn’t we wouldn’t need it. And planning would work.” As I added later, if creativity could be planned — if it were not surprising — socialism would work! Now, if both information and entrepreneurial creativity could be measured as surprise… I realized I could link the two together in an information theory of capitalism. The Importance of Failure Put simply, capitalism is not chiefly an incentive system, driven by rewards and punishments… or by greed and desire. It is an information system, driven by curiosity and imagination, experiment and learning. So entrepreneurial ideas must be presented in a form that they can be refuted by failure or bankruptcy. They prosper because they follow the scientific method, which ordains that to yield knowledge, experiments must be open to failure. If a venture cannot fail, it cannot product new knowledge or wealth. Socialism, for instance, is based on the use of government power to guarantee outcomes. And government guarantees incapacitate the processes of learning that comprise all real economic growth and progress. When the Federal Reserve Board tries to guarantee economic growth through printing money, it prohibits growth. Real money depends on entrepreneurs with projects that they expect to become profitable. Under real capitalism, as opposed to crony capitalism, the amount of money banks can lend is determined by the existence of projects that entrepreneurs are willing to pursue by borrowing money. This means real projects that seem promising enough to induce entrepreneurs to face the risk of failure. When the government bails out banks, it redistributes wealth but undermines the creation of new wealth. By prohibiting failure, it falsifies the scientific method of capitalist experiment. Banks are only creative when they are open to surprise. Guaranteed loans are not loans; they are subsidies or bequests. When the government attempts to create economic growth by expanding government spending and consumer demand it suppresses growth. The more the government exerts its power, the less it enables the surprises of human creativity and new knowledge, the sources of wealth and growth. This is the central rule of capitalism. It is illiquid. Capitalists can only keep what they give away. Regards, [George Gilder] George Gilder Editor, Gilder's Daily Prophecy  P.S. A Few Important Updates Great news! Our website is officially live. You can view all of your content at [www.GilderPress.com.]( If you have any questions, please don’t hesitate to contact our Customer Service team [here.](mailto:support@gilderpress.com) Also, if you’ve signed up for my research newsletter The George Gilder Report, I’m pleased to announce that the inaugural issue is available to download. 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