I want to talk about the rich. Not in the way you usually hear it, particularly during this politically hot climate. What I’m talking about is we should be, instead of condemning them or worrying about them, encouraging them and using them. That’s right, use them for our benefit.
Why do we need to use and have the rich there? I want to explain that a little bit, but let me first tell you a little analogy. Think in terms of the lottery now. Separately from everything else. We have the lottery. Every once in a while, we hear somebody won a hundred or more million dollars, etc. Why do people buy the tickets? The odds of winning are incredibly small. Why do they buy the tickets? They feel there’s some chance, some odds of them winning the jackpot. The jackpot used to be—now I’m talking about the Mega Millions, here, you can use different ones for different statistics, etc. but that’s the biggie—1 chance in 176 million, until I believe it was this past October, the odds changed, and they made it so that it would also bump up, because there would be fewer winners, it would bump up the prizes. Now the chances of winning are 1 in 259 million. It’s clearly a waste of money. When you hear somebody buying a ticket: Okay, I won’t condemn somebody who buys a ticket, figuring: “Okay, what the heck? It’s $2 or $1, whatever it is,” but when they say: “Oh, no, I buy a lot of tickets because it’ll increase my chances,” that is plumb idiotic, but they get there and they do that because they think there might be a chance of them winning.
Let’s first look at—back to the rich—the distribution of income. Wouldn’t most people like to be in the position that basically 90-95% of the people are below them, that means they’re in the top 10%, 5%? What about that enormous number, the top 1%? Well, there are different ways of measuring it; by individuals, male, female, personal income, family income, household income, etc. Just to give you an idea just for individuals, because that’s usually what we talk about: The top 1% is $235,000 a year. This is 2014 data. The top 1% for families, everybody that’s related in that household as a family (not relatives) is $365,000 a year. Certainly not the outlandish numbers we hear, but yes, it is a lot of money.
They are usually made out to be villains, or these people that somehow, nefariously, got their money from some “source” or something. Actually, 80% of the people who are considered rich came from poverty. This is why in so much that I talk about these things on the podcast of what you can do. Yes, you can at least do well. Keep in mind, the numbers are not that high, and these people didn’t have some special dispensation. 80% came from poverty. It also means a lot of them move in and out of poverty, up to being rich, and maybe lose it. They probably don’t fall all the way to the bottom, although some come close to it, and they get that way by what they do.
In the case of what we’re talking about is starting a business. Why do people start a business? Because they feel they might or can be one of those that make those high incomes, but the numbers show that most people fail within five years. I hear the number 80%, according to Forbes. Most of those that start small businesses; stores, franchises, etc., work ridiculous hours and may only make 50,000 to 60,000 per year. It is only when they finally get in the case of franchises, say, three locations, that they start seeing those six-figure incomes. Yes, there are exceptions, there are always exceptions; but then, yes, so many of them die off.
So, is it worth it? Well, it’s what drives people, just like the lottery. According to Houston Chronicle, there was a survey that had been done of franchises in the restaurant owners’ industry, and the average income was $47,000 as of 2013, but they still do it, and people still drive into these things doing small businesses. The small businesses, they hope to become medium businesses, etc.
Why is this beneficial, and why is it so good? Because where does employment and economic growth come from? It generically comes from the small and medium business. Small firms tend to fill in the niches in the labor market that are underserved. Large companies are the ones that usually whither, some take longer, etc., but they usually slow down as much more so.
According to the U.S. Bureau of Statistics, but I want you to be able to hear them so you realize what we’re talking about—over the last 20 years, about 95% of new employer firms started with fewer than 20 employees. Small business, 95% of those startups. Along with the startups come, of course, closures, because 95% of closures were also ones that were small. So they’re the lottery owners, they’re the lottery builders. Why are they going in? Not because they expect to fail, but because they expect to win, just like the lottery winners. Why do they think it can be? Because they see other people, and they’re encouraged by the success stories out there. Many of them don’t prepare themselves well, and there’s lots of reasons that they fail. That’s a separate topic, separate story, but listen to the other episodes and you’ll hear so many other points in it.
As of about 10 years ago, 90% of all employers had fewer than 20 employees, so that is how important these small businesses are, which then they’re the ones that become the medium businesses, and eventually if they do really well, become the large businesses. If 80% of the rich start from poverty and everyone isn’t ending up there in the rich, there are many among the rich who are losing their money. Everybody that’s starting, they think they’re going to get someplace, at least comfortable living, financial freedom – whatever they want to call it, for their personal success and their business success. Every week they hear and look around to see the things that are failing.
Go to a mall sometime. Walk by a strip mall. Today the economy is much worse than it normally is; however, even 10 years ago, you could walk by and you see those closures. The success versus failure is not just the closures, there. Keep in mind that those people who close those stores probably had personal guarantees, their home, their savings, everything on the line. So when they lost it, they lost everything; they were starting from scratch all over again. People are willing to do that gamble for those things that they think will succeed.
Now, since the rich are not this ever-expanding, and huge… It’s not like everybody is ending up rich, so what’s happening if 80% of the people started from poverty, and more are coming in all the time, what is happening? Yes, a lot of them are losing their money over time. What I’m pointing out is that the rich are recycling on a regular basis, so there’s a small number replacing the losers on a regular basis. Meanwhile, in order to get to where they want to go in terms of wealth, they need to grow, as do the millions of other small businesses in the country trying to get there. What happens? They employ people. We’re using them, encourage them. Don’t discourage them, don’t condemn them. Cheer them on, let them employ some more people. But let’s, even if they’re not, they’re encouraging those millions a year that go into business.
Let’s look at it. Number one: The odds are very much against success. Two: The income, in many, is really small until something happens or until they really become accomplished. Number three: The hours are long. Four: With all of this weight on them and the fact that 80% are going to fail, and many of them don’t know how to run a business, the stress is very high. These people create 95% of new employers. They’re the ones that will grow the economy.
Some idiots want to take their motivation away that they might make it big, hit the business startup lottery. Leave the rich alone. If you want to think that among the 20% that didn’t start from poverty, none of them deserved it—I’m not saying this—who cares? They’re just a sliver. But acting to the job creators has huge incentive to take on the success, whether it’s going to fail or not, but they believe in themselves, they believe they’ll be the ones just like the lottery winners. Their income may start out small, but they believe that it’s going to get better. Their hours may be long, but they believe at some point they’ll figure out how to do a little bit less; have other people working for them, etc. After a while, they’ll think even the stress, while it’s worth it, will partially go away.
At the same time, on top of all of this, I want you to think that: Yes, you can, but it’s not easy. Those 80% that fail, most of them are jumping in because they believe in some wild story, or somebody saying that X, Y, or Z is going to make them and give them financial freedom. I’m not talking about an individual. All of these are companies; they’re not MLMs or anything like that, because they all have to be employing people that I’m talking about, as small businesses. They all believe that they can do something, and attain their financial freedom, but most of them don’t know some of the simple basics of business, and it’s not just marketing, and it’s not just sales, but it’s a combination of a wide range of factors.
Go back and listen to some of the other episodes. When you’re feeling a little bit resentful, go listen to the one on jealousy. Remember: From jealousy, you should be learning, not condemning. Thank you very much.