Login

Sign In

Enter your details below.

The Only Way to Measure True Wealth

Today I wanted to share one of my earlier Prophecy emails, because a lot of people have joined since we first started. It’s important for everyone to be on the same page about what it takes to discover true wealth and create a deep passion for learning.

I’ve sent that information below but before you read it, I’d like to hear what you think so far.

Please click here to send us an email letting us know how we’re doing.

Now, let’s dive into this important Prophecy…


So you want to make a million dollars!

That is the most commendable of all worldly goals.

Why commendable?

Because it means you want to provide goods and services worth a million dollars — you want to do a million-dollars-worth of good for your fellow citizens.

This is not just a symbol of accomplishment. It is an emblem of virtue. It is a sign of orientation toward the needs of others.

Because make no mistake: If you are chiefly focused on your own needs, it will be nearly impossible for you to gain your million.

Why not?

In a reasonably free economy, where you cannot readily bilk or steal your million — or induce politicians to give it to you after seizing it from your peers — you will have to serve others.

They will have to voluntarily award you your million dollars.

So your success cannot depend on your self-serving desires. It depends on your understanding of the world and your imaginative response to the wants and needs of others.

Of course, you may invest the fruits of previous service or borrowings premised on new service.

But in the end you must provide new things to the economy.

This is important, because it underscores a critical point.

The need to supply goods and services in exchange for your million dollars suggests that, in itself, money is not wealth.

Instead, money measures wealth.

That might sound obvious to you. But believe me, everywhere you go you will find confusion about the nature of wealth.

The fact is that Americans, much like King Midas of myth, are forgetting what wealth is. And that is a danger to all of us.

Which leads us to…

The Socialist Smoothie Lie

Let me take that one step further to make another point.

We know now that money measures wealth. But what exactly does wealth measure?

Wealth is widely considered to be tied to power.

Politicians, in particular, want to persuade you that if you give them enough power — for a long enough period — they will create wealth for all, equally distributed, sweet and safe as a banana in a smoothie.

This is the great socialist smoothie lie — that wealth is a power blend.

The truth is that wealth in essence is knowledge — a voluntary creation of individual minds.

How do we know this? Simple.

“The Neanderthal in his cave,” as Thomas Sowell has written, “had all the physical resources we have today.” The difference between our age and the stone age is entirely the accumulation of knowledge.

Cesar Hidalgo, the MIT economist, makes a similar point. He observes that “when an expensive car crashes into a wall, all its value disappears, though every atom and molecule remains. Value is information. The car is knowledge.”

The acquisition of knowledge is called learning. All economic growth is learning.

So knowing this, if we take a step back, we can surmise that wealth is a measuring stick for learning.

That means that the pursuit of your million is going to entail study.

Learning is finding out things you do not know already. In economic terms, across an entire economy, learning is the discovery of things — refined economic knowledge — that no one knows now.

It comes from innovation and surprise often signaled by price changes.

What do I mean by “surprise”?

This is an important insight closely aligned with Claude Shannon’s “information theory.” In 1948, he showed that all information on a network is essentially surprise: unexpected bits.

He measured surprise by an index he called entropy.

So that adds one more element.

Money is a measuring stick for learning. But if you are not being surprised, you are not really learning.

But as I mentioned earlier, this strong link between learning and wealth has been largely forgotten.

Let’s take a look at how the stock market measures wealth so you can see what I mean…

The Curse of the Government Guarantee

Interest rates measure average blended yields across an economy. Signifying learning and surprise are profits.

The best path to profits, the best way to find out things that you don’t know, is the “scientific method.” As Karl Popper showed, scientific progress entails stating hypotheses in a form that they can be refuted or “falsified.”

What does that have to do with our economy or the stock market?

Well, capitalism is simply the way the scientific method is translated into economic activity through business plans and projects.

The indispensable key to a capitalist project is that it can be refuted by bankruptcy and failure. Capitalist businesses, like scientific propositions, must be falsifiable.

If a business by law cannot fail, it cannot produce new knowledge or wealth.

In other words, government guarantees prohibit learning and growth.

For example, when the Federal Reserve Board attempts to guarantee economic growth through a 2% inflation target or a 0% interest rate, it actually prohibits growth.

The more the government exercises its power, the less knowledge and growth it gets.

These days the big banks are mostly guaranteed by governments. They are “too big to fail.”

In league with the Fed, they may create money, but they no longer foster real wealth.

Growth is learning and learning is the accumulation of new knowledge, not the exercise of government power to print money.

Again, we know growth is learning because existing knowledge constitutes existing wealth.

New knowledge generates new wealth, and your million will have to reflect new wealth.

There is no way around it.

Bottom line: If you are going to get your million, you are going to learn a lot. At least a million dollars’ worth.

That will be the purpose of this Daily Prophecy — to engage you in an adventure in learning.

As I wrote in my new book Life After Google, the best way to learn about something is to invest in it.

So this adventure in million-dollar learning will be punctuated with investments based on surprising new learning.

Let’s get on board for this adventure in learning and profit. I can hardly wait.

Regards,

George Gilder

 

You May Also Be Interested In:

George Gilder

George Gilder is the most knowledgeable man in America when it comes to the future of technology — and its impact on our lives.

He’s an established investor, writer, and economist with an uncanny ability to foresee how new breakthroughs will play out, years in advance.

And he’s certainly no stranger to the financial newsletter...

View More By George Gilder