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Leonardo

Destroying the Myth "The Rich Create Jobs"

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Leonardo
The most important reason the theory that "rich people create the jobs" is absurd, argues Nick Hanauer, the founder of online advertising company aQuantive, which Microsoft bought for $6.4 billion, is that rich people do not create jobs, even if they found and build companies that eventually employ thousands of people.

What creates the jobs, Hanauer astutely observes, is the company's customers.

The company's customers create demand for the company's products, which, in turn, creates the need for the employees to produce, sell, and service those products. If those customers go broke, the demand for the company's products will collapse. And the jobs will disappear, regardless of what the entrepreneur does.

Read more: http://www.businessinsider.com/rich-people-do-not-create-jobs-2011-12#ixzz1gELEanTu

It's so obvious, so it's no wonder many don't see it.

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Monetary economies only work if the money keeps flowing, but not from the one pocket of a rich guy to another nor almost unidirectionally towards the rich guy. That just creates Scrooge McDuck money bins. Works for a while but creates a liquidity crunch that then has to be fixed by someone printing more money making money worthless in the process.

Time some learned that being rich is not having money but be capable of using money. And then we have to say that there are more poor than we expected.

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little_dreamer

My understanding is that the rich are basically sitting on their cash reserves, and not spending or investing it in business expansion.

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libstaK

It's so obvious, so it's no wonder many don't see it.

Frankly, I've been saying the same thing for years. All this chasing profit by crunching the workforce numbers and pay rates is the height of stupidity "hello, consumers can only consume if they have the funds to do so with" - yep damned obvious and case in point that wealth does not equal intelligence, in fact it seems to kill more brains cells than alcohol.

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Frankly, I've been saying the same thing for years. All this chasing profit by crunching the workforce numbers and pay rates is the height of stupidity "hello, consumers can only consume if they have the funds to do so with" - yep damned obvious and case in point that wealth does not equal intelligence, in fact it seems to kill more brains cells than alcohol.

Depending on the economy type hoarding money could be right, but certainly not in a end-consumer driven economy like the US. If Joe Doe has to put the belt a notch smaller all will have to do the same, regardless of how much money they think they have. But that is something that very few understand... if we discount Warren Buffet none of the super rich and certainly nobody on the hill (who just know what the lobbyist tell them anyway...if that).

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Caesar

The rich do create many jobs just about everything you see somebody invested in. many small companies need capital to go public so they offer private placement offering before they can sell shares to the public. these fall under Regulation D. so only Accredited Investors may invest in them. this proccess is done way before a company sell common shares or before you see the product or service on a national or international scale. they could also raise capital thre speculators or investment banks but those are also done with the money of rich people.

Regulation D is a rule by the SEC. it was made to protect people from investments they don't understand. while it does protect people, it also blocks those from the best investments. these investments are huge. insted they can buy stocks with a minimum rate of return.

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Caesar

Depending on the economy type hoarding money could be right, but certainly not in a end-consumer driven economy like the US. If Joe Doe has to put the belt a notch smaller all will have to do the same, regardless of how much money they think they have. But that is something that very few understand... if we discount Warren Buffet none of the super rich and certainly nobody on the hill (who just know what the lobbyist tell them anyway...if that).

hoarding money or the tighting of they money supply hurts just about every economy. now it would be even worst if it was an economy backed by a gold standard.

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Caesar

My understanding is that the rich are basically sitting on their cash reserves, and not spending or investing it in business expansion.

Yes thats true many investors don't like the leval of uncertainty in the economy right now. Congress not passing a budget, taxes and the propblems in Europe like the Euro.

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Leonardo

The rich do create many jobs just about everything you see somebody invested in. many small companies need capital to go public so they offer private placement offering before they can sell shares to the public.

No investor, whether an individual or an institution, will provide venture capital without the entrepreneur being able to provide a sound business case - and that requires there be a demand for whatever product or service their business produces.

The foundation of any business is the customer demand - without that there is no business.

Also, note that it does not require that any individual be 'rich' for capital to be available to an entrepreneur. Financial institutions can provide that by concentrating wealth from many individuals of moderate or lower means, and this is supposed to be one of their primary roles in the US economy.

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Damrod

It is a very cyclical system...this supply and demand scenario. If people have money, they want to buy things...a company produces a product and more and more people want that product so therefore they have to expand and hire more people to facilitate the increased demand...those new workers take their earnings and buy product and the cycle ...in theory...should continuously expand as more money is earned and spent and more products are needed...but we see...there is something wrong...

The foundation of that has to come from somewhere...someone has to inject that money into the hands of the average worker for the cycle to begin...and in the 40's and 50's when we were building bridges and roads and parks, the Government did it and it worked. Yes taxes went up BUT, the companies made it back in the form of increased product demand and thus profit. The wealthiest always do better when the average citizen has surplus money to spend on frivolity, entertainment and self expression...when they don't, the expanding spiraling cycle begins to shrink...as we are and have been seeing for the last few years.

The American Jobs bill was not a bad thing...it was based on past practices of success and it should be pressed through for the benefit of rich, poor and middle class...it makes long term sound sense...but perhaps the rich have become so rich that they don't care about anyone else and cannot see the long term benefits to themselves...so they squeal "no more taxes" even when in the long term, they will make it all back in profits from increased sales...

Just my opinion though...

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Caesar

No investor, whether an individual or an institution, will provide venture capital without the entrepreneur being able to provide a sound business case - and that requires there be a demand for whatever product or service their business produces.

Yes thats right however its the business system that investors look at first, the final product is last in many cases.

The foundation of any business is the customer demand - without that there is no business.

I don't agree with that entirely. I can make a better hamburger then McDonalds but I can not make a better system that delievers a basic hamburger then McDonalds. my point is, is that there are thousands of products, services, ideas, ect but its more about the costs and delivery involved in the final product. in order to offer these products or sevices, you need capital.

Also, note that it does not require that any individual be 'rich' for capital to be available to an entrepreneur. Financial institutions can provide that by concentrating wealth from many individuals of moderate or lower means, and this is supposed to be one of their primary roles in the US economy.

Yes even I can get a business loan for a Lemonade Stand but not at the leval you need to reach a big business that employees 50 people. entrepreneurship is the basic foundation for any new business that plans on going public. if it doesn't go public it still needs capital from investors or the owner more then likely is very rich.

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Travelling Man

I was going to ignore this due to the level of misguided thought... but I've got to.

The start of any Economics 101 course will teach the basics of supply and demand. For any business to START, there has to be a demand - or the company has to instill a "need" in the customer which creates this demand.

If I invent a widget, some consumable product or service, and nobody wants it, I will go out of business. BUT, if either they DO want it or I can talk them into wanting it (Pet Rock, anyone?), then my business will take off. BUT - for them to buy it, IT HAS TO EXIST!!! This is where the creation of jobs comes in.

To say that the purchasing of a product is what creates jobs is like starting the alphabet at "F"... they've forgotten what happened before that point.

Once my widget company is formed, with me and myself as the entire company, once I detect a demand, it is my business duty to feed that demand. NOW I can create jobs to create that supply. It's not the customers BUYING my product or service - it's the customers DEMANDING that product or service. No matter how much they demand, if I don't create the supply, my business will be extremely poor. The very few businesses that have succeeded by keeping demand high are things like ultra-high-end cars and things like Faberge (eggs).

Now I have to figure out how much to charge for my widgets - too low and demand will fall because of psychological ideas that my product is "cheap", but too high and I will price my product out of the hands of my customers. Now I have to figure out how much to pay the employees, what kind of benefits to offer, when do I expand the company to new locations (fabrication AND retail), and many other things.

THIS is the reason that I deserve a hell of a lot more money than a person at the low end. And this is what creates jobs. I have to meet the demand... NOT the buying.

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Damrod

I was going to ignore this due to the level of misguided thought... but I've got to.

The start of any Economics 101 course will teach the basics of supply and demand. For any business to START, there has to be a demand - or the company has to instill a "need" in the customer which creates this demand.

If I invent a widget, some consumable product or service, and nobody wants it, I will go out of business. BUT, if either they DO want it or I can talk them into wanting it (Pet Rock, anyone?), then my business will take off. BUT - for them to buy it, IT HAS TO EXIST!!! This is where the creation of jobs comes in.

To say that the purchasing of a product is what creates jobs is like starting the alphabet at "F"... they've forgotten what happened before that point.

Once my widget company is formed, with me and myself as the entire company, once I detect a demand, it is my business duty to feed that demand. NOW I can create jobs to create that supply. It's not the customers BUYING my product or service - it's the customers DEMANDING that product or service. No matter how much they demand, if I don't create the supply, my business will be extremely poor. The very few businesses that have succeeded by keeping demand high are things like ultra-high-end cars and things like Faberge (eggs).

Now I have to figure out how much to charge for my widgets - too low and demand will fall because of psychological ideas that my product is "cheap", but too high and I will price my product out of the hands of my customers. Now I have to figure out how much to pay the employees, what kind of benefits to offer, when do I expand the company to new locations (fabrication AND retail), and many other things.

THIS is the reason that I deserve a hell of a lot more money than a person at the low end. And this is what creates jobs. I have to meet the demand... NOT the buying.

Well true and yet kinda slanted...I'm going to post a video that has been discussed a few times on these boards...it is the story of the greatest marketeering mind that ever lived....Edward Bernays....it's called "The century of Self" and it describes how our modern marketing scenario came to be and is an incredibly enlightening expose of our modern world economics...it is very long...nearly 4 hours...so I recommend watching and re-bookmarking at the end of each session...I don't think you will be disappointed after you watch it in it's entirety...I have watched it maybe 3 times now and each time I absorb more and understand a bit more about the psychological and psychiatric motivations of consumerism...it gets deep

http://www.youtube.com/watch?v=IyPzGUsYyKM&feature=youtu.be

Edited by Damrod

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lightly

Because there are mice.. there is demand for mouse traps , and cats. It doesn't matter if mouse traps are produced by a rich person or a person of more limited means, as long as the mouse trap is produced?

Advertising is how people can be convinced to buy a mouse trap that is inferior to a better mousetrap . lol

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conspiracybeliever

Well true and yet kinda slanted...I'm going to post a video that has been discussed a few times on these boards...it is the story of the greatest marketeering mind that ever lived....Edward Bernays....it's called "The century of Self" and it describes how our modern marketing scenario came to be and is an incredibly enlightening expose of our modern world economics...it is very long...nearly 4 hours...so I recommend watching and re-bookmarking at the end of each session...I don't think you will be disappointed after you watch it in it's entirety...I have watched it maybe 3 times now and each time I absorb more and understand a bit more about the psychological and psychiatric motivations of consumerism...it gets deep

http://www.youtube.com/watch?v=IyPzGUsYyKM&feature=youtu.be

This is an excellent documentary. I've watched it twice. :tu:

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Damrod

When people understand that everything they are exposed to is the result of a psychological science project...maybe they will alter their positions...until then...we are left to absorb the redundancies of human failure....They anticipate how people will react...even us lowlife workers...and plan accordingly.....my position is...it is time to rock that opinion....if they think everyone is going to react one way....we need to react another...just to startle and dis-arm the masters....

Thumbs up for radicalism....change it damn it...yes...for the sake of change..... cause comfort zone is failing....

Edited by Damrod

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