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Billionaires: Bad For Society, Good For Innovation?

Wealth inequality is a bad thing, but when wealthy individuals have a mission, innovation can prosper

2Oct

On September 17 2011 a protest began in Zucotti Park in New York after the magazine Adbusters put out the call to protest. The idea of the protest was the occupy important areas in order to draw attention to the wealth inequality in the world. The problem hasn’t really abated, if anything it’s got worse, but it spawned the phrase ‘the 1%’ which describes the multi-millionaires and billionaires who make huge amounts of money compared to others in the country. The contrast in wealth hoarding is huge too, according to research conducted by Emmanuel Saez (Professor of Economics and Director of the Center for Equitable Growth at the University of California Berkeley) and Gabriel Zucman (assistant professor of economics at the University of California at Berkeley) the top 0.1% of earners in the US own as much as the bottom 90%.

It is in this environment that people like Mark Zuckerberg, Elon Musk, Jeff Bezos, Bill Gates, and Amancio Ortega have made billions of dollars and been widely celebrated for it. The issue that many people have is that with Bill Gates having a net worth of $81 billion, it simply means that every other person has less. Even the 100th richest person in the US, Randa Williams, still has $5.2 billion, more than the GDP of Barbados, a country of 2.8 million people. The problem this creates is that this money often does nothing except make more money for the person who holds it. Randa Williams, for instance, earned her billions through her inheritance after her father, who founded the oil company Enterprise Products died. Apart from some comparatively small scale philanthropy, this money does nothing but make more money.

This is an issue, because if it is not in circulation, isn’t being ploughed back into the economy, then it will ultimately just sit in an account and do nothing for anybody else in the world.

However, those who inherit this money and do nothing with it do not make up the sum total of billionaires, there are several who are using their huge fortunes to make a difference in the world through moonshot ideas that would otherwise have little chance of being funded.

The person who embodies this better than anybody is Elon Musk, who despite being worth $21bn, is constantly trying new things that on paper seem like impossibilities. His latest idea is a rocket ship codenamed BFR, the idea behind it is to be able to make high speed travel possible across the world. This isn’t Concorde speeds, the idea is that people can get anywhere in the world in under 1 hour. A trip between New York and Shanghai, for instance, would take 30 minutes.

As a concept it’s great, but as a reality, the money that would be needed to deliver such an ambitious project would be prohibitive for many companies. This means that despite the potential for massive profits if it could be made to work, most companies wouldn’t be willing to take the risk. However, when it comes to a personal beliefs and making a mark on the world, people with huge personal fortunes don’t need to worry too much about profit and loss. Ultimately, if Bill Gates lost $20 billion on a project, the difference in lifestyle between $81 billion and $61 billion isn’t too noticeable, if most companies lost that much money it would almost certainly lead to disaster. Many of the world’s most famous public museums and art galleries came from this same idea, with people wanting to give back or push the boundaries of what already existed.

People like Musk and Bill Gates, who have beliefs outside of simply making money (although this is clearly also a key driver) genuinely drive innovative ideas forward. Musk has his moonshot ideas, where he pledges his own money to make things work, whilst Gates has dedicated his post-Microsoft life to environmental and humanitarian work. These aren’t small investments either, with over $25 billion being donated by Bill Gates to both his own humanitarian and environmental projects. He donated $4.6 billion in August 2017 in one go, for instance.

The fact that these investments are most often made without the need for return means that moonshot ideas can be explored more completely and without the pressure of getting something done within a specific timeframe or in a specific way. With the pressure of financial returns off, the need for compromise to push a project through is gone, opening the way for genuinely innovative ideas.

There is little doubt that wealth inequality is very bad for society and we have seen throughout history that it never ends well. However, when there is money backing the ideas of certain people with a specific innovation vision it can create real change. With the constraints of innovating for profit gone, the ideas can mature and become genuinely great products or services. If only more of the 0.1% were willing to make the sacrifice. 

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