Daily Archives: October 7, 2016

1 Investment: an Ethical Revolution?

You can read Kiyosaki’s “Rich Dad, Poor Dad” as a morality tale.  Remember the cartoon angel and devil sat on the hero’s shoulders?  Poor Dad works hard for money and spends it all on things like mortgages and food.  Rich Dad invests and builds income sources to fund his lifestyle and his family’s.  So, what are the ethics of investment?

We’re left in no doubt which is on the side of the angels and yet, the author repeatedly alludes to his Poor Dad and how his moral approach to money was important too.  I part company with Kiyosaki to the extent he implies the wealthy are somehow superior to the rest of us.

Revolting Against the System

I suspect many people contemplate revolting against the system that expects us to work from 9-5 most days of our lives.  If not, we can languish on the dole, excoriated for being welfare scroungers.

There is a degree of common ground between right and left, where right means support for those who build their own sources of income.  The right in UK politics looks after the interests of  investors; the left cares for those in employment.

Many people on the left make a similar break from the system.  I did way back in the early eighties, when I left research science and took up community development.  Whilst I was in employment for most of my working life, I believed I’d made a radical break with the system.

There’s more than one path

Many people break away from the road they start out on and find their own path.  Others don’t and perhaps suffer for it as they find life is not rewarding, even though they put everything into their chosen career.

But others find great satisfaction in their careers.  They may be artists or creatives, scientists, carers of various types, even teachers!  Many remain in the system, as I did but that does not mean their choice was futile.

I can see why Kiyosaki’s approach is attractive.  It combines learning to play an exciting game and the security at the end of it.  His approach is actually based on his privileged education, with his Rich Dad.  That gave him an advantage and has led him through many cherished experiences.

But this does not make him better than all the others who have found ways to accommodate with the system, some more successful than others.  What inadvertently undermines his argument is his relationship with Donald Trump.  Trump is an unfortunate standard-bearer for the right.  He comes over as a blustering toddler with an overweening sense of entitlement.  His contempt for anyone he disapproves of, such as women, is well-known and he makes no secret of it during his current political campaign.

Should Investors be Taxed?

The right do not like being taxed because they have worked hard for their money and don’t see why they should pay it to governments who do not spend it as wisely as they would.

Even the Conservative Prime Minister in the UK, in her speech to the Tory Conference this week, was highly sceptical of their arguments against taxes.  She pointed out taxes pay for the infrastructure everyone uses to support their businesses and investments.  Someone who makes a lot of money does so through investments many people have made before them.

OK it may be clever and brave to spot a potential bargain, eg a house that might sell for below its real value.  It may be a risk to buy it outright (not always how they do it), put in tenants and wait for the price to go up.

Is the Prime Minister Right?

Let’s say you buy a house for £10K and its price goes up to £100K.  It may have been under-priced when you bought it and it may be overpriced now but you’ve made £90K.

I don’t have much of a problem with this but I do believe the transaction should be taxed.  The house didn’t pop up out of nowhere.  Someone built it, perhaps several decades ago; there would be nothing to invest in without their work.  It will be on a road and receive the usual services.  The fact is this sort of investment exists because of  the work of hosts of other people, perhaps over decades.

The investor speculates on its value.  I don’t object to them doing this but I do not agree their profit is solely the result of their enterprise.  Of course, it is impossible to estimate the contributions made by others that enable someone to make a large profit.  But the state is entitled to tax such transactions.

A Game of Cat and Mouse

I can see it is something of a game of cat and mouse.  There are many ways to protect funds from  tax authorities, by reinvesting them in various ways.  If we plan to maintain the freedoms we all take advantage of as we choose our life paths, we do to some degree need to compromise.

However, the world I want to see is one where entrepreneurs see their role as primarily their contribution to building their local economies.  Stable businesses, supported by investment may be ideally how we can build sustainable communities.

If an entrepreneur cannot point to how the world benefits from their success, perhaps there is something wrong?  Paying taxes is only one way they can do this but why not expect investors to contribute to the general good?  Remember many others make their contribution from within the system. For one reason or another they do not build up personal assets but that is no reason to treat them with contempt for not being clever enough.

It is worth reading Kiyosaki’s book because it will transform the way you hear news bulletins.  This sense of entitlement pervades modern politics and it helps to understand what politicians actually mean.  We need desperately a left or Green take on investment.  I’m sure some have tried.

Let me know what you think.