Wealth

Part 12 - Wealth Creation

https://www.youtube.com/watch?v=Oi9cq7tXkmg 

Wealth is created by an increase in productivity which means that all goods and services can be purchased with less time spent working to pay for them. (Until Henry Ford adopted the assembly line, to mass produce cars, automobiles were hand made one at a time and were far too expensive for most people).

Anyone can create wealth. It's very simple. The trick is to make, or sell, or buy something that pleases other people. (Note the BUY. Sellers cannot sell if there are no buyers and if there are no sellers there is nothing to buy. Hence the importance of consumer confidence (buyers) in a modern economy.

Bill Gates didn't become one of the richest men on Earth by stealing from others. He devised software that everyone wanted to buy. No one was forced to buy his products, they did so willingly and very pleased that he was providing them with a very useful product at a reasonable price. 

Joanne Rowling did not become one of the richest women in Britain by forcing people to buy her Harry Potter books about teenage wizards. People lined up to buy them. They were very pleased to have the chance to read about one of their favourite fictional characters. Afterwards, they were delighted to line up to watch the movies based on the books.

But notice that both Joanne Rowling and Bill Gates did much more than get rich. They employed tens of thousands of other people at good wages to create, publish, print, distribute and sell the books and software. Some of these also became much richer in the process. And all of them spent their wages on homes, cars, clothes, food and vacations, in turn employing thousands more people. Neither Joanne Rowling nor Bill Gates set out intending to create multi-billion dollar enterprises employing tens of thousands of people. They just wanted to make some money by selling something other people might like.

This is the creation of wealth in a free, competitive Market Economy also known as commerce or capitalism. Almost all working people are creating wealth directly or indirectly. Savings are invariably invested and this provides the capital to buy land, make machinery or build infrastructure that create jobs and improve productivity, thereby creating wealth. This includes buying shares in a company which is simply a means of creating wealth. A well managed company typically becomes more valuable over time and often pays a dividend to shareholders.

Most people with steady jobs also save by paying into a government pension plan, like the Canada Pension Plan, and often, in addition, into an employer pension plan. Others, such as the self employed, may open a registered retirement plan into which they can deposit a limited amount of funds tax free. The funds accumulated in these pension plans are invested in government and company bonds (loans) and the shares of companies to generate more money to pay larger pensions.

Many people are unaware that their pension plans are invested or that they can set up their own retirement savings plans, in addition to other government or employer plans.

The economy works because most people earn money by some specialized activity which they can provide cheaper than anyone else. They then exchange their product or service to others at a fraction of what it would cost them to do it themselves. 

Unless you were born rich or can beg money from someone else, you have to make a living so you have no choice but to work. Okay, now how do you start acquiring wealth? It is very simple. Start systematically saving and start investing early. Make or sell something that others will buy or get a job working for someone who does. You will get more dollars per hour if you have a profession or a trade skill and this means as much education and training as you can afford but make sure the skills you learn will payoff in a good job. Too many people spend time and energy on art courses only to find that very few of these result in high incomes. 

 Medical doctors are well paid but they spend eight years or more learning the skills. Other professions include science, finance, engineering, dentistry, accounting, the legal profession, nursing, teaching, pharmaceuticals, etc. Do not overlook the skilled trades. Electricians, welders, gas fitters, plumbers, nurses, technicians, even truck drivers often earn more than many professionals particularly at times in booming businesses such as the oil and gas industry.

See later chapters for details of how to invest your savings.