Where Does Wealth Come From?

Where does wealth come from?  

Where will it come from in the future?

This question is one for which there are many answers, that usually do not provide people with a useful direction to focus on for their needs and desires. Wealth exists in the context of economy, and is generally experienced as visible signs of prosperity and high quality of life. The focus of this answer is going to be on the invisible dynamics that are behind the visible manifestations of what we call wealth. In order to get at these underlying patterns that cannot be seen in the physical world, I will start by with another question as a doorway.

What is one usable answer proposed to the question – Why exactly is the United States the global economic powerhouse it is, and has been for over two centuries?  Try this on for size. Our continued global dominance comes from the fact that we have been able to sustain and grow the velocity of unfettered transactions for mutual benefit at the local level beyond anything ever seen before in history. This is reflected locally in what is called the multiplier effect, which simply says that every time a dollar is spent in a local human geography, after the first transaction, the next one doubles the economic wealth, and thereafter each transaction of that same dollar locally continues to create additional wealth. Once that dollar exits the local economy, its value contribution to local capital ends.

There could be said to be three aspects to the wealth of a society, the foundation of which is the degree that it stewards the natural resources with which it has been endowed by life. There is the wealth of individuals, businesses and organizations, and the social capital. The fundamental underpinning of the social capital is the trust that has built up over time that allows the individual and organizational wealth to be contained in a whole cultural web. That web is an ecology of relationships that is maintained by a few groups and individuals on behalf of their whole local society. The more cohesive that web of relationships, the more resilient and thriving that economy will tend to be. In addition to the money that gets exchanged, the communities with the greatest social capital are the ones that figure how to optimize non-cash, as well as cash transactions. The ability of a community to exchange value without every transaction requiring cash is the single greatest asset in building and leveraging its social capital.

The wealth of businesses is fundamentally built by two things. One is that it follows through completely on all the contractual agreements into which it enters. That builds its reputation for service and reliability, which guarantees its valued position with both its customers and vendors. The most wealthy businesses are the ones which figure a way to always leave its customers and vendors feeling that they got more than they paid for. This secret is of huge leverage, and gets delivered primarily because of the quality of energy present in the transactions, and not because of cutting corners to provide a ‘better deal’, or being the cheapest.

The second piece is that the business is managed in such a way that it retains earnings, manages its cashflows to track consistently with profit, and thereby builds its internal capital and equity consistently. It is crucial that it do all three of these things well when times are good, so that it has a rock-solid foundation for those times when things are not going so well. While the first piece of its wealth building is entirely within its control, the second is not due to the fact that financial information that is compliant with US GAAP (generally accepted accounting practices) is not designed to enable the data to be uses in optimizing the three ‘bottom lines’ described above. There is one book, Managing by the Numbers, which if followed, transforms that situation, and makes financial data usable on its face for optimizing wealth creation in a business.

The wealth of individuals is inextricably tied to that of businesses and the community, and hinges fundamentally on two things. The first involves finding a way to express his or her natural talent, or personal genius, in such a way that value is shared that can be remunerated. This ability to find, develop and apply one’s unique gifts through vocation is the most crucial thing for a person to achieve, if they are to accumulate personal wealth. That is also the foundation of both deep personal satisfaction in life, and the ability to come from a place of consistent joy that provides that experience of getting more than expected through the uplifting presence of another in a transaction of mutual benefit.

The second piece for individuals is the same as for businesses – only entering into agreements that you are committed to and able to perform on, and keeping a continued focus on retaining and building reserves of material and goodwill for the times when things are challenging. These reserves may only be in the form of goodwill generated when others observe steadfast, competent and effective action backed by strong ethics.

These two go together in the great American tradition of taking calculated risks to fulfill a vision of value creation and delivery of great results that does not yet exist. This entrepreneurial spirit is what sets the US Economy apart from every other one on earth, although there are a few others starting to really get it too. The main thing that we Americans can fail to notice is that after two centuries of consistent progress toward democratizing opportunity, we are far and away ahead of any other society in making real the promise that anyone can become anything they choose to be if they will do what it takes to succeed. That ‘what it takes’ cannot however be taken lightly, or we will tend to find a ‘them’ to blame for our failure to built a solid foundation and stay the course over what can sometimes be decades to achieve our personal vision.

Any way you slice it, the level of productivity and generosity in the United States, for all its shortcomings, is still a strong engine that helps significantly to drive the planetary economy to greater creativity and wealth creation. We are now more than ever in the position that we must take all this groundwork to the next level of synergy, co-creative flow and transformation of the fact that along with our productivity, we are also the most wasteful society on earth ( do you know what the product/non-product ratio is for the US economy?). Having had the freedom and leverage to do what we have done in the past, now we need to take responsibility for the social and environment capital that wastefulness is rapidly draining away. 

We have made it this far. There is no reason we cannot learn to work together to create not just greater efficiency for the individuals and businesses, but also greater effectiveness for the social capital we have used for that success. We must all now also make the regeneration on the social and environmental fabric part and parcel of our success, or we will see an end to steady improvement of quality of life we have enjoyed so far.

LETS RUN THE NUMBERS   ~  PMI  ~  1(877) $Cash Fl(ow)  or   (877-722-7435)  9 - 5 Pacific Time