How much money is too much money?

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How much money is too much money?

Postby Egaladeist » Thu Apr 16, 2009 3:48 am

From a conversation elsewhere...



It makes no sense to give money to the poor if they don't know how to use it.


Poverty does not equal incompetency...most poor people are equally capable of handling money responsibly...the vast majority of the poor are not poor because they are irresponsible, they are poor because our system is geared toward a pyramid structure...the further up you go the fewer positions and vacancies there are.

The structure, by necessity, requires a high volume of ' workers ' at or near the bottom of the pyramid...most of which will never be allowed to scale to the higher levels no matter how responsible or capable they are.


Suddenly, a man you don't know shows up and demands half of your silver. You ask him why you should give it. He says, because it will help the poor folk of our town. You protest that the poor folk didn't grow the wheat - you did.
Very few of the wealthy got there without the labor of the working class...and/or the manipulation of the ' working poor '...
yes, the farmer deserves to reap the rewards of his labor...but...was it his labor, or the labor of migrant farm workers?


I believe a man who ' invests ' in a business deserves the lions share...he is the one who took the risk of losing his money on a potentially bad investment...he was the one who created the opportunities for employment for others...yes, he deserves to be well-off.

But...to what extent?

How much money is rationally fair compensation for that investment?

If a person invests ( risks ) $500.000...what ' reasonable ' return should he expect?

What if he made 6 bad investments prior to hitting the good one? Then, how much should he be compensated?

Should he be allowed to recoup his previous losses first, before reasonable compensation takes effect?

Whatever reasonable compensation comes into play...whatever is left should funnel downwards to those who helped him recoup his losses and achieve that return on his investment.

ie.
a person invests $500,000...has previous un-recouped losses of $600,000 on two other ventures...he hires 50 workers...these workers generate $23,000,000 in profits over the next 12 years...
the investor recoups his $600,000 losses...and his original $500,000 investment...and is $12,000,000 in the black...
$1,000,000 a year in clear profits...
a more than reasonable return on the original investment...
the plant then becomes employee-owned...
and those employees are now working to create profits for themselves.

The only problem with this scenario is....greed...

there, unfortunately, is never a place of having too much money.
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Re: How much money is too much money?

Postby rapier57 » Thu Apr 16, 2009 6:16 am

... the poor folk didn't grow the wheat ...


Not the best illustration for modeling distribution. The reality of growing wheat today is that the farmer is a sole proprietor and does much of the work himself. He puts his future and the future of his family on the line to buy or lease the land, capitalize the operation, buy the necessary equipment, seed, fertilizer, fuel and other expenses. And, then pray for rain. Usually, the farmer will hire one other person to help with the shop duties (repair and maintenance of the equipment) as well as plow, disk, seed, spray and eventually, harvest.

Then it comes time to sell the crops. The farmer is left to the vagaries of the market and is lucky to break even and most years does not. Once in a while, though, you get $5 or $10 wheat. You make a lot of money that year. But, most of that only goes to make up for the losses in other years.

There are no migrant workers carrying the load, romantic as all that might sound. The only effective way to run a wheat operation is with machinery. There just are not enough workers, migrant or otherwise, to do the work the machines do.

A better illustration would be a fruit orchardist, since they use migrant workers for picking and packing the fruit. Still, this doesn't help the argument much, though, since the orchardist is like the wheat grower in that he has everything on the line. The migrant worker has little investment in the operation other than picking the fruit, collecting a paycheck and moving on to the next orchard. Aside from risking the trip to the area of the orchards on the chance of work, the migrant worker has little risk or investment.

Compensation in an open market is based on risk-reward. The ones able and willing to make the investments and take the risks are the ones who are, or should be, rewarded the most. The working class, or migrant worker, risk and invests little more than theirs skills and are compensated based on a contract with the employer. If the skills of the worker are higher, the risks greater, the compensation should be greater. But, only scaled based on the social contract between the worker and the employer.

However, comparing the working class or migrant worker's compensation scales to that of the entrepreneur, farmer or business person in a capitalistic system is comparing apples to horseshoe nails. Not alike in the least, and largely because the risks and investments of the two sides have nothing in common.

If you attempt to limit the compensation potential for the entrepreneur, farmer or business person artificially, you will have fewer and fewer of these people willing to take the risks and make the investments. They know that four out of five times that they take the risk, they will come up short or lose. It is the fifth time that they win. The win has to be big enough (perceived big enough or potentially big enough) to make the break-evens or losses worth suffering--and then finance future risk taking. Otherwise, there is no motivation to take the risks.

Without the risk takers, there will be no working class.

Yeah, I read Marx and Engles, as well as Mao's Little Red Book.
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Re: How much money is too much money?

Postby Elsparrow » Thu Apr 16, 2009 4:02 pm

In regards to the point that if someone makes 5 bad investments and 1 good one:

On the good investment, it is solely reasonable return.

Why should he be compensated for either his bad choice or management or external influence on the investment.

He made the choice, aware he could lose his money. Hence why it's a risk.
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Re: How much money is too much money?

Postby outerlimit » Thu Apr 16, 2009 4:58 pm

rapier isn't saying that he should be paid for his losses...
Hes saying that the one good return needs to make up for the losses.

If you are saying that he should only be allowed to make back his initial investment, then a little bit more that may or may not exceed their previous losses - then why would anyone ever bother in trying?

I agree with rapier, people are needed to invest their money and take the risk on things. Without someone fronting the money on the idea, there would be no money to pay the working class, no money to buy materials and supplies.
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Re: How much money is too much money?

Postby Panama Red » Thu Apr 16, 2009 6:09 pm

What is happening though, thanks to investors mistrust of Wall Street is the recent trend to save or place funds in to savings accounts, which will make it worse for the economy as no one is buying anything...I think in the long run though, the consumers will win out in this war, as the real costs of production and manufacturing will be borne out on the reduced prices of big ticket items in order to get people buying again and investors, investing again...too many years have passed where corporations and banking institutions were recording quarterly record breaking profits, this included the big 3 who chose not to see the writing on the wall and reinvest as they should have done, instead the money left with the shareholders or went pffft in other investment schemes that went bad...the oil companies (still) were also recording record profits over the last 10yrs or so...to me this is a huge correction for wall street, it will weed out the corrupt and stupid investors and firms that cater to the lowest denominator of greed and the smart ones will win out...hopefully... :wink: sort of like the Dot.com era...it went bust, but over time corrected itself...everything goes in cycles, will depend on who wants to get to the surface and who wants to sink... :pleasantry:
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Re: How much money is too much money?

Postby Elsparrow » Thu Apr 16, 2009 6:23 pm

outerlimit wrote:rapier isn't saying that he should be paid for his losses...
Hes saying that the one good return needs to make up for the losses.

If you are saying that he should only be allowed to make back his initial investment, then a little bit more that may or may not exceed their previous losses - then why would anyone ever bother in trying?

I agree with rapier, people are needed to invest their money and take the risk on things. Without someone fronting the money on the idea, there would be no money to pay the working class, no money to buy materials and supplies.


I was actually referring to Eg's point.

Basically just cos the guy made losses first 5 times doesn't by default mean he gets back all his losses before any one else gets a sniff.
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Re: How much money is too much money?

Postby Egaladeist » Thu Apr 16, 2009 9:38 pm

I was actually referring to Eg's point.

Basically just cos the guy made losses first 5 times doesn't by default mean he gets back all his losses before any one else gets a sniff.


My point was the same as rapier's and outer's...that the person does need to recoup lost investments for those very reasons outer pointed out...

ie.
a person invests $500,000...has previous un-recouped losses of $600,000 on two other ventures...he hires 50 workers...these workers generate $23,000,000 in profits over the next 12 years...
the investor recoups his $600,000 losses...and his original $500,000 investment...and is $12,000,000 in the black...
$1,000,000 a year in clear profits...
a more than reasonable return on the original investment...
the plant then becomes employee-owned...
and those employees are now working to create profits for themselves.
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Re: How much money is too much money?

Postby Egaladeist » Thu Apr 16, 2009 9:45 pm

We should cap how much a person can reasonably be expected to get in exchange for his investment...this would result in fewer monster companies and more medium-sized companies run and owned by the people who work there...building a far more stable economy as we would be less dependent upon mega-corporations...

however...greed...is a problem...

people simply aren't satisfied with a reasonable return...they don't want $40 million, they want $40 billion...

capping investors...would simply cause them to leave...because there is no such thing as having too much money.
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Re: How much money is too much money?

Postby cgkanchi » Fri Apr 17, 2009 11:04 am

Capping isn't a solution. If that was the case, no one would invest in high-risk investments and you'd kill innovation...
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Re: How much money is too much money?

Postby cheapscotchron » Fri Apr 17, 2009 11:45 am

the recent trend to save or place funds in to savings accounts, which will make it worse for the economy


Maybe the White n Wooly Sunday lunch on legs are, but I'm still investing. In fact, I am making money. Good money. I went all cash in August 2008, not because of mistrust and greed. In fact quite the contrary. I took the money off the table because I wasnt greedy.
Been buying on dips since October. The market still works.

the major problems are:
- a lack of oversight. AIGs investment insurance was not properly monitored or regulated.
- too much debt (personal, commericial and governments). Most people live above their means.
- a corrupt Congress.

The answer is a free market AND effective oversight.

We should cap how much a person can reasonably be expected to get in exchange for his investment...


Suggest you read Atlas Shrugged.

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Re: How much money is too much money?

Postby Elsparrow » Fri Apr 17, 2009 1:57 pm

Egaladeist wrote:
I was actually referring to Eg's point.

Basically just cos the guy made losses first 5 times doesn't by default mean he gets back all his losses before any one else gets a sniff.


My point was the same as rapier's and outer's...that the person does need to recoup lost investments for those very reasons outer pointed out...

ie.
a person invests $500,000...has previous un-recouped losses of $600,000 on two other ventures...he hires 50 workers...these workers generate $23,000,000 in profits over the next 12 years...
the investor recoups his $600,000 losses...and his original $500,000 investment...and is $12,000,000 in the black...
$1,000,000 a year in clear profits...
a more than reasonable return on the original investment...
the plant then becomes employee-owned...
and those employees are now working to create profits for themselves.


Yes he needs to recoup his losses. But if he didn't pay the workers etc, and just took all the money, well, no one would then work for him later.

It's a fundamental within business. You invest and need to have people work for you to make it happen, you gotta pay em else you'll have no money OR workers.

Thats the point I was making, just think you guys were twisting it to what you wanted it to say so you could shoot me down.
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Re: How much money is too much money?

Postby Egaladeist » Fri Apr 17, 2009 2:04 pm

Capping isn't a solution. If that was the case, no one would invest in high-risk investments and you'd kill innovation


Live Free or Die.


I agree, it wouldn't be a practical solution within the present mindset. Nor would it work rationally in the present environment of International trade.

But it would more fairly distribute the wealth...reduce poverty...create more medium-sized viable businesses...create a much larger functioning middle-class...reduce unemployment...create more business owners...reduce the reliance on mega-corporations...create a better overall economy less subjective to the fluctuations of the market...cause fewer bankruptcies and bailouts...etc...

Unfortunately...the only way it could be implemented in today's market would be to become isolationist.
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Re: How much money is too much money?

Postby Egaladeist » Fri Apr 17, 2009 2:06 pm

It's a fundamental within business. You invest and need to have people work for you to make it happen, you gotta pay em else you'll have no money OR workers.


That's a given...that's why I specifically referred to profits... :mrgreen:

Thats the point I was making, just think you guys were twisting it to what you wanted it to say so you could shoot me down.


No...no one is doing that. :P
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Re: How much money is too much money?

Postby |3lack|ce » Wed Apr 22, 2009 11:20 pm

Eg, your original post has a basis in sound fact. Give a man a fish, he'll eat for a day. Teach him to fish and he'll eat for a lifetime.

Now to the topic question - how much is TOO much?

Well, that's a matter of individual perspective. For me, "enough" money will be when I can retire comfortably and live out my years needing nothing that I cannot provide for myself with my own finances. "Plenty" is defined by me as enough money so that my grandchildren can't possibly spend it all, even if they started now - impossible because they've not yet been conceived.

"Too much" therefore, by my definition, cannot exist.

I once heard a very wealthy person put it to me this way: "After a certain point, when it becomes impossible to ever be broke again, money becomes a way of keeping score - competing with the other guys out there who've also reached that point." In his terms, "too much money" also doesn't exist. The more he makes, the higher his 'score' becomes in his perceived competition against others.

Can one ever have TOO MUCH money? Unlikely. Money begats desire for more money - our basic instinctive greed defines this about us. "Give us an inch and we'll take a mile."

Philosophers and true Theocrats find solace in being destitute, a 'perfection' in their 'humility'. Again, this is a perceived definition, not an absolute.

To reiterate, semantically, "Too much" is a relative term, not an absolute. One cannot have too much of anything because one's definition of "too much" varies widely from another's. Null referent.
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Re: How much money is too much money?

Postby Egaladeist » Thu Apr 23, 2009 1:17 am

I agree...that it's very subjective...and that there is no such thing as too much money...but there should be...IMO...

let's say..for the sake of argument...we determine a realistic and fair figure to be $20 million per person...that no one person needs or can retain more than $20 million dollars in personal assets...so...a family of two parents, 5 children, and 8 grandchildren, could have between them $300 million...

this doesn't mean you can't make more than $20 million...it just means you have to distribute anything over $20 million...

and this would only be in regard to ' personal assets ' not corporate or other assets...assets you do not have...but must sell or liquidate to get..

this would still mean you could make billions...you just would have to redistribute it once you turn it into personal assets and it exceeds $20 million...

but this is just one example.

We need to find a solution to an equitable distribution of wealth...because if we don't...the gap between the rich and poor, the owners and workers, will only get wider...and eventually, like has happened in every part of the world where the gap becomes too wide, a bloody civil war or uprising occurs...eventually.

And yes, it can happen to us.
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