A celebration of wealth

While it is fun to throw stones at the wealthy, they are generally loaded because they have created value.

Value is created in many ways. Entertainment and sports may be frivolous, but people are willing to pay vast sums in order to be amused or distracted from everyday life. Who in New England can deny that Tom Brady deserves his wealth? And Jeff Bezos, the fabulously wealthy founder of Amazon, pleases us every day when our toiletries and groceries are delivered promptly or we stream “The Man in a High Castle.” Or, by the way, purchase a book.

But it is interesting to note the sources of wealth in our vast country. A study of wealth creation by Arizona State Professor Hendrik Bessembinder, as reported in the Wall Street Journal, gives us a fascinating look into the process. The professor’s analysis shows that only thirty companies created a full third of all the stock market wealth since 1926. And that’s out of 25,782 publicly traded companies.

Who are these engines of prosperity and why do we care?

At the top of the list is Exxon Mobil, the energy behemoth that Attorney General Healey loves to hate. While we can argue anthropomorphic global warming till the cows come home, it is indisputable that the energy economy built up over the last century has enabled the plush lives that we live today. Plush, that is, in comparison to anyone living in an energy vacuum, such as our ancestors or today’s tribesmen.

Next on the list is Apple. Who would have guessed in April of 1976 what Apple would become? The awesome power of networked, interconnected supercomputers in everyone’s pocket has transformed our lives, in some ways even for the better. Apple has become the most valuable company of all time. And the end is nowhere in sight as Apple invests in such things as autonomous cars and augmented reality.

In third place is General Electric. Another energy related company, but focused on the infrastructure to bring usable energy into our homes, offices, and factories. GE was created in 1892 when the Edison Electric Company merged with the Thomson-Houston company (led by Charles A. Coffin, a former shoe producer from Lynn, Massachusetts).

Fourth on the list is Microsoft, founded by Bill Gates in April of 1975. Microsoft is the butt of many jokes, some well-deserved. But it undeniably enabled the personal era of computing, bringing the wonders of Solitaire and the internet into our homes. More seriously, Microsoft created a fabric of servers supporting business functions in thousands of worldwide businesses, and they have established a very credible beachhead in Cloud computing.

In fifth is IBM, the rock-solid purveyor of commercial computing. IBM is synonymous with mainframes, the computers which powered our information economy in the last half of the twentieth century. IBM has fallen on hard times lately, but is gamely fighting back with artificial intelligence (Watson) and Cloud computing.

These five firms, alone, account for over ten percent of the wealth created in the last 90 years. To a materialist, who believes that the universe consists of nothing but information and energy, this is no surprise. All five are either energy or information companies. We need to move a way down the list before we come to a Walmart or a Coca Cola.

Why do we care? Why should we cheer success and great wealth?

The bromides of jobs created and taxes paid by these companies and their stakeholders, while true, seem unconvincing in the face of social justice warriors such as Bernie Sanders and Elizabeth Warren. Economics and rationality don’t stand a chance.

But here is why teachers care. And firefighters, police, and an army of government workers. Their pensions are  paid from invested funds, and when the market does poorly, that is, wealth creation falters, there is less in the retirement pot. In a very real example, the Providence Journal recently reported “Rhode Island’s $7.9-billion pension system will expect lower future investment returns and larger taxpayer contributions to pay for public employee retirement benefits.”

It is simple, really. If the stock market can’t fund the retirements of state workers, then taxpayers will shoulder a greater burden or retirees will take a haircut or both.

So while it’s entertaining to stone the wealthy, remember that there are consequences. Wealth creation is good for us all and we should celebrate it.