Transcription
You most likely remain poor for the rest of your life if you um entirely depend on hard work to get rich. The reason why this is so hard for people to accept is because of what we talked about before in this class.
This man called the Gaul is one of the most clever figures in post-war history. He quickly figured out that America was printing dollars and then using those dollars to buy it uh real assets in Europe, which basically means the exorbitant privilege. You can actually take advantage of the same system and get rich through the exorbitant privilege if you really really understands that that money is just a collective hallucination. Because if everyone realized tomorrow that the dollar is backed by nothing, the entire system collapses overnight.
So the way I want you to think is using the secret history framework we've been building in this class. Okay. At the center of the hallucination, you have the game masters who control the bank for international settlements in Switzerland. Um, no one has ever seen the game masters because re real power is invisible. This exorbitant privilege is how the elites families made generational wealth for over 500 years and to become very very wealthy. So you have no choice but to do the same.
What happened is that Leonardo and Michelangelo did was they made the Medici look like they were part of the divine order. And this is what I mean when I say wealth is really about controlling the narrative. Once people believe you are part of the divine order, they will give you their money.
So now the step-by-step mechanism on how do people actually move from being poor and change to being wealthy like the billionaire administrators of the game masters is to actually make a transition. The most important factor of of all in determining who gets rich and who doesn't is the conjf waves phenomena and they last roughly 40 to 60 years. In each cycle there's a period of expansion where new industries are being created. There are enormous opportunities for new entrance. But the problem is that there's a period of contractions where debt is being paid down where opportunities are concentrated in the hands of existing players.
So what happened is that if you were born at the beginning of an expansion phase, the system will almost hand you wealth. Any Chinese entrepreneur who started a factory in Shenzhen in 1985 or 1990 basically became very wealthy because they were at the beginning of China's manufacturing expansion. And then you compare that to someone who tried to start a factory in China in 2010. Everything was already much more expensive. The easy money had already been made.
The reason why Xiinping's anti-corruption campaign removed hundreds of billionaires from China, what she was essentially doing was redistributing the wealth that was accumulated in that first wave of expansion. Taking it from the first generation of billionaire administrators and redistributing it either to new game players or back toward the state. Does that make sense?
Rule number two is even more important and this is really where it gets interesting. You cannot become truly wealthy by owning a small business. I know this is going to upset some people, but the problem is that a small business is still operating at the retail level of the economy. You're still taking dollars that have already been diluted dozens of times by the time they reach your customer's pocket. If you really want to become rich, you have to learn the difference in the kind of business that can actually make you wealthy as opposed to just making you a comfortable professional. The businesses that make you truly wealthy are businesses that have what economists call increasing returns to scale. It means that as the business grows, the cost of serving each additional customer goes down, not up, down.
When people ask why can't I get rich the real answer is you are too far from the source of money creation. Money is created at the moment of lending. By the time the money reaches you as a worker, as a consumer, you are getting maybe 10 or 15 cents out of every dollar that was originally created.
Now, let me push this further because I want to connect it back to the money creation framework. And I I think this is really important for you guys to understand given what's happening in the world right now. So the most important new infrastructure in the world is data. Okay, data is the new oil because data is the raw material of the next wave of the financial system. Only the elites are positioned to take advantage. Sometimes when I get into these pictures ideas, people lose their minds. So let me be very very specific.
Your generation faces a wealth creation challenge that is fundamentally different from the challenge faced by previous generations. And I want to be very honest with you about this because I think you deserve honesty. So the mechanisms that allowed the baby boomers to become wealthy are largely closed off. So if you try to do what your parents did, you will likely end up being comfortable, but you won't be wealthy in any meaningful sense.
AI is going to be the next great wave. All right? And I think this is actually true. AI and like every previous technological discontinuity, it will create an enormous amount of new wealth. The question is who really captures that wealth? And the answer so far is very clear. The wealth from AI is going to be captured by a tiny number of companies and some few individuals. The cause the problem is that every worker has to compete with AI. If some countries don't have the infrastructure to develop AI, they will not capture the value. they will bear the cost. And this is exactly the pattern we've seen with every previous wealth revolution.
Let's talk about what this means for you specifically because I know some of you are thinking, how do I actually navigate this? And this is where I want to be really honest with you because I think most most wealth advice is designed to keep you inside the system rather than help you understand it. Okay. So the first thing to understand is that there are certain paths that the system allows and certain path that the system blocks. The paths the system allows are the ones that ultimately serve the systems interest. Okay. So the system will allow you to start a tech company if that tech company produces data that the game masters can harvest.
It is really important know exactly what happens to the global middle class over the next 10 20 years from now. Right? The conditions that created the middle class expansion of the past 30 years are weakening and what replaces them is not clear. But what I think is almost like is a bifurcation. The the people who are connected to the new AI and and financial infrastructure will do well. The people who are not will fall behind and the middle will hollow out.
But I want to go deeper because I think this is one of the most important things you can understand about the modern econ economy. So there's this concept called the Great Gatsby curve and it's named after the novel by F. Scott Fitzgerald. This curve shows the relationship between inequality and social mobility. The more unequal a society is, the harder it is to move up. Okay. What happens is that high inequality means that wealthy families can invest much more in their children than poor families. All of these things give their children an enormous advantage and poor families cannot afford any of these things. And then you throw in the fact that elite universities don't look at grades. They look at extracurricular activities, at leadership experience, at community involvement, all of all of which cost money. All of which are much more accessible to wealthy families. And so the educational system, which is supposed to be the great equalizer, actually reproduces the inequality of the parental generation in the next generation. The percentage of students at institutions that train the administrators who run the world come from the top income quintile is about 70%. So if you're born poor, you are statistically almost certain to stay poor. Not because you're not smart.
That's why the poor are chained with hallucinations such as defending the rich people all the time. All right. Why do people who are being economically exploited defend the people who are exploiting them? The real answer is much more interesting and it connects directly to these two important effects. The first effect is a grandiose self-image. A poor white American doesn't primarily see himself as a poor person. And as an American, he believes that he too could one day be wealthy. And if he's going to be wealthy one day, then he'd better make sure the tax system is set up for wealthy people. He's voting for his future imaginary self, not his present actual self.
The second effect is a concept called the Matthew effect. Matthew effect comes from the Bible and the verse is this. For to him who has more will be given and from him who has not even what he has will be taken. Okay? And this is actually the most accurate description of how the modern economy works that I have ever found. And the fact that it comes from a 2,000-y old religious text tells you that this this dynamic is not new. It's not a product of capitalism. It's a fundamental feature of how complex human systems organize themselves. If you have capital, capital generates more capital. Your wealth grows faster than the economy grows. And this means that over time, capital owners captures an ever larger share of the total economic output. And wage earners capture an ever smaller share. This is what Thomas showed in his book capital in the 21st century. meaning how fast wealth grows is almost always higher than the growth rate of the economy as a whole. And this means that inequality is not a bug in the system. It's a feature. It's the natural ma mathematical outcome of a system where capital can generate more capital. And the only times in history when equality has decreased are times of catastrophic disruption, world wars. These things destroy capital and redistribute wealth.