Just a short but very interesting follow-up video to our last post, When 50 Percent Of U.S. Households Were Insolvent, which illustrated the stunning and parabolic growth of wealth inequality in the United States.
We feel this post is necessary and very relevant as many dismiss and have no worries about the growing inequality throughout the country. In fact, we had a conversation with a “not a problem” journalist today. We couldn’t disagree more.
Much of the growing angst in our society is caused by widening income and wealth gaps.
Even in the investment world, there is ample evidence of conservative investors taking foolish risks with their capital because they see friends and neighbors getting rich — albeit temporary – during asset bubbles. They feel stupid being left out and suffer anxiety watching their comrades increase their wealth while they sit on the sidelines. Unfortunately, they usually succumb and get sucked in right at market tops.
We suspect this is how Issac Newton really discovered the law of gravity through a very costly lesson in the financial markets.
In an updated and annotated text of Benjamin Graham’s classic “The Intelligent Investor,” WSJ’s Jason Zweig included a small anecdote about Newton’s adventures with investing the South Sea Company:
“Back in the spring of 1720, Sir Isaac Newton owned shares in the South Sea Company, the hottest stock in England. Sensing that the market was getting out of hand, the great physicist muttered that he ‘ could calculate the motions of the heavenly bodies, but not the madness of the people.’ Newton dumped his South Sea shares, pocketing a 100% profit totaling £7,000. But just months later, swept up in the wild enthusiasm of the market, Newton jumped back in at a much higher price — and lost £20,000 (or more than $3 million in [2002-2003’s] money. For the rest of his life, he forbade anyone to speak the words ‘South Sea’ in his presence.” — Business Insider
Even Animals Feel The Angst Of Inequality
The following video is based on a widely-cited 2003 paper published in Nature by Sarah Brosnan and Frans de Waal. They used capuchin monkeys in nearby enclosures to perform an equal task, which they would then be rewarded. In the equal reward condition, both monkeys received cucumbers. In this case, the monkeys did the task well, cooperated, and formed a well functioning and productive mini-economy.
In the unequal reward task, one monkey got a cucumber, but the other monkey got a grape, which, apparently, is perceived and tastes more valuable in the capuchin kingdom.
Then all hell broke loose.
The angst, or whatever you want to label it, caused by inequality seems innate, does not induce cooperation, and is generally disruptive and unhealthy for societies even in the animal kingdom.
Take the 2 1/2 minutes and watch the video.