Intergenerational Wealth

 

For a long time, I have been studying Intergenerational Wealth without really understanding what it really means. For 20 years, I have studied the thinking of Robert Kiyosaki and in the last 10 years, Robert’s thinking on CASH FLOW and his game CASHFLOW. I really was very poor at connecting the dots of “Intergenerational Wealth” and the meaning to “ME” and my family. This is my best attempt to explain what I have learned on the subject.

This is from Thomas Pikkety:

Capital and Wealth to simplify the text, I use the words “capital” and “wealth” interchangeably, as if they were perfectly synonymous. By some definitions, it would be better to reserve the word “capital” to describe forms of wealth accumulated by human beings (buildings, machinery, infrastructure, etc.) and therefore to exclude land and natural resources, with which humans have been endowed without having to accumulate them. Land would then be a component of wealth but not of capital. The problem is that it is not always easy to distinguish the value of buildings from the value of the land on which they are built. An even greater difficulty is that it is very hard to gauge the value of “virgin” land (as humans found it centuries or millennia ago) apart from improvements due to human intervention, such as drainage, irrigation, fertilization, and so on. The same problem arises in connection with natural resources such as petroleum, gas, rare earth elements, and the like, whose pure value is hard to distinguish from the value added by the investments needed to discover new deposits and prepare them for exploitation. I therefore include all these forms of wealth in capital. Of course, this choice does not eliminate the need to look closely at the origins of wealth, especially the boundary line between accumulation and appropriation. Some definitions of “capital” hold that the term should apply only to those components of wealth directly employed in the production process. For instance, gold might be counted as part of wealth but not of capital, because gold is said to be useful only as a store of value. Once again, this limitation strikes me as neither desirable nor practical (because gold can be a factor of production, not only in the manufacture of jewellery but also in electronics and nanotechnology). Capital in all its forms has always played a dual role, as both a store of value and a factor of production. I therefore decided that it was simpler not to impose a rigid distinction between wealth and capital. Similarly, I ruled out the idea of excluding residential real estate from capital on the grounds that it is “unproductive,” unlike the “productive capital” used by firms and government: industrial plants, office buildings, machinery, infrastructure, and so on. The truth is that all these forms of wealth are useful and productive and reflect capital’s two major economic functions. Residential real estate can be seen as a capital asset that yields “housing services,” whose value is measured by their rental equivalent. Other capital assets can serve as factors of production for firms and government agencies that produce goods and services (and need plants, offices, machinery, infrastructure, etc. to do so). Each of these two types of capital currently accounts for roughly half the capital stock in the developed countries. To summarize, I define “national wealth” or “national capital” as the total market value of everything owned by the residents and government of a given country at a given point in time, provided that it can be traded on some market. It consists of the sum total of nonfinancial assets (land, dwellings, commercial inventory, other buildings, machinery, infrastructure, patents, and other directly owned professional assets) and financial assets (bank accounts, mutual funds, bonds, stocks, financial investments of all kinds, insurance policies, pension funds, etc.), less the total amount of financial liabilities (debt). If we look only at the assets and liabilities of private individuals, the result is private wealth or private capital. If we consider assets and liabilities held by the government and other governmental entities (such as towns, social insurance agencies, etc.), the result is public wealth or public capital. By definition, national wealth is the sum of these two terms:

 

National Wealth = Private Wealth + Public Wealth

 

The Capital/ Income Ratio

Income is a flow. It corresponds to the quantity of goods produced and distributed in a given period (which we generally take to be a year). Capital is a stock. It corresponds to the total wealth owned at a given point in time. This stock comes from the wealth appropriated or accumulated in all prior years combined. From Piketty, Thomas (2014-03-10). Capital in the Twenty-First Century (p. 50). Harvard University Press. Kindle Edition.

Okay John…… why Piketty?

For years I have pondered the subject of Flow/Wealth and what wealth really is.

For “ME”:

Wealth is always what is left over – the “Entropy” = a measure of the energy in a system or process that is unavailable to do Flow work yet holds advantage by being available to the owner of what’s leftover as a leverage tool (Buildings, Machinery, Infrastructure, Gold, Money, Shares etc.) In our human economic exchange systems, the “left-over” has been important in creating “Intergeneration Wealth”.

 Flow is what is happening right now. The human energy deployed to create futures in any given circumstance.

That leads “ME” to understand that as a human, I can decide to create leftovers in any given circumstance – Physical/Meta-Physical, Negative/Positive, Right/Wrong. All of these thoughts leave something left over and I consider that to be my wealth.

In my thinking, Flow is Positive + and Wealth is Negative - and there is a duality, meaning that they +- coexist. It is not a case of good or bad, right or wrong. It is a matter of the dualities of Universe that exist, like it or not. For every action, there will be a reaction and there will always be something left over as entropy.

Here is the part to pay attention to now!

Physical=Leverage the mechanical advantage gained by being in a position to use a lever mechanical phenomenon -a physical phenomenon associated with the equilibrium or motion of objects

 

 

 From Random House Kernerman Webster's College Dictionary, © 2010

 

 

Meta-Physical= Ephemeralization: a term coined by R. Buckminster Fuller, is the ability of technological advancement to do "more and more with less and less until eventually you can do everything with nothing". Fuller's vision was that Ephemeralization will result in ever-increasing standards of living for an ever-growing population despite finite resources. The concept has been embraced by those who argue against Malthusian philosophy. From Wikipedia.

 

 

 

 

 

 

 

 

 

 

 

 

 

 The Brain/Mind is Meta-Physical and is Ephemeral. When understood, it is far more powerful than physical leverage. For the past 5 000 years, we as humans, have been developing an economic exchange system and it has now moved to Ephemeralization, seemingly doing ever more with ever less. Intergenerational Wealth may well be the most important consideration for you and your family to understand. What “-Intergenerational Wealth+” is in its simplest form is a human’s ability to have choice over their future outcomes, albeit inside Universe and its G.O.D. principles.    

 

My great friend and partner Jason T created this diagram below that next week, I will endeavour to explain.

 

 

As for Thomas Piketty and “Capital in the Twenty-First Century”, it will be a study of mine until I get a much better understanding of the true purpose of his thinking. I think it is safe to say that in today’s world of economic exchange, the humans that create something left over in everything they do will live a far more abundant life than the humans that just rely on their physical labours without care for the left over “-Intergenerational Wealth+”    

 

JDS OUT!_!