Solving the Wealth Gap based on Credit Suisse Report 2017
The Credit Suisse Wealth Report 2017 is out again.
Each year the percentages of the Wealth Gap keep getting worse and yet we keep applying Einstein’s principle of Insanity, “Doing the same thing over and over again and expecting different results.”
Let me be very clear. We will not solve the current problem with the current level of thinking or the present solutions.
In the first 8 years of the 2000’s the inequality was actually being rectified, but from the Global Financial Crisis (GFC) in 2008, the wealthier have got wealthier at a far faster rate than the rest. There is one very simple reason for this. In the early 2000’s due to globalization and rise of the middle class in the emerging markets they increased the broad base income. However since 2008 there has been a dramatic increase in the value of the assets. Real Estate, Stock Market, businesses, collectables or even Cryptocurrencies. The top 1% are heavily invested in a diversity of assets, not only locally but internationally and this is why their net wealth has increased so dramatically in proportion. Assets increase far quicker than income growth.
And the so the question is what about the rest? Why do the 99% not invest in the same assets as the top 1%?
There are 3 reasons:
- Financial Exclusion
- It is not good for the top 1%
- Our education system is broken. No one is taught financial education. We are taught language, science, biology, history, geography, etc but why are we not taught business, sales, marketing, people skills or how to balance a profit and loss account. Why are we not taught about investing?
- The middle class think that investing in houses and apartments, buying THEIR home, will make them wealthy. Prices around the world statistically keep going up every 8 to 10 years, due to economic and political management of the economy and a focus on inflation which ensures this happens. It makes them feel wealthy and it is called the Wealth Affect which ensures the middle class to keep consuming things.
- Middle class people tend to focus on capital growth.
- Truly wealthy people (the top 1%) do something different. They invest in different assets. They invest in commercial, institutional grade assets and they focus on income, as one’s passive income is actually a true symbol of wealth. Whether this is medical real estate or Coca Cola shares, it is the same principle. Why do you think Warren Buffett invests in Coca Cola, it is one of the best paying dividend (income) shares.
- Wealthy people focus on income and actually just use common sense (WHICH WE ALL HAVE).
- In 2009 I met two very wealthy men and they were investing in medical centers in Australia. I remember asking them, “Why medical?” Hennie who had been investing in medical real estate since 1992 explained to me that firstly no matter what happens in the economy people need doctors, secondly doctors never leave their premises and thirdly they are wonderful at being doctors, but not financial experts and so sign excellent long term favorable leases. I remember thinking I had helped over 2500 people invest in houses and apartments, had a Honours and Masters Degrees in this topic and yet why has no one ever taught me this. It is such common sense. I asked how I could participate and they said the minimum investment was AUD $5m per person. I couldn’t get involved. 8 people invested $40m and today, 8 years later, this is a listed company worth over $700m on the Australian Stock Exchange. This is financial exclusion.
- Another example is the accredited / sophisticated investor status in many jurisdictions around the world. This makes no sense. It is there to protect the ill informed and the grannies with their pensions. Thus they are not allowed to invest in sophisticated (quality) investments. They are always last to find out or be able to participate in an investment and are basically at the bottom of the value chain. All in the name of their protection. Funny though that we need to protect these people and yet they can gamble (recklessly) any amount of slot machines or in Vegas. Better yet they can invest in middle class investments like houses and apartments, with Americans wiping out $10 trillion in value as the USA house market crashed in 2008.
- The middle class invest in these houses or on the stock market through mutual and hedge funds which are laden with fees. There is no transparency and yet in the name of THEIR protection, the clever financial advisors and financial institutions will look after their financial well being. Interesting that in the last 100 years less than 1% of people who retire in America, the UK and Australia actually retire wealthy at 65.
- Compare this to the top 1% who invest differently. As an example are our various partners in medical real estate in America. While residential crashed by as much as 70% in some states in 2008, they never lost a medical tenant. Yes, you heard me right, they never lost a tenant and thus they never lost their income. With a strong cashflow, as the middle class were focusing on capital growth, floundering and getting into distress, the top 1% was able to acquire more distressed assets, accumulating more wealth, exactly what Hennie and Pieter were doing in 2009.
- Finally the above does not take into account the 3 billion unbanked people, 87,1% of the global population who has no access to real estate at all or the people who live on a marginal income and are exploited with cash loans, pay as go data contracts, funeral policies, high cross border money transfer fees, etc.
It is not good for the top 1%
- The twentieth century and current economics is all based on scarcity. The thinking of everyone is that to economically empower the 99% we would have to take away from the top 1%. Due to this, the top 1% has done everything in their power to protect their position. They do not teach people what they need to know, they do not provide them access to opportunities using regulation and protection as the reason and most importantly keep them happy with inflation, social services, government support systems, consumerism, media messages, etc.
- While people live in bliss and ignorance they keep going to school and university to be trained to be employees, pay taxes, they keep investing in the current financial system and thus paying the fees which pay the shareholders returns of the top 1%.
- If the 99% were to also get access to the best opportunities then asset values will go up and the 1% will struggle to continue to control the quality assets – whether that is in real estate, stock market, new businesses, etc and thus control the income.
- The masses are controlled by access. First it was the Church who originally controlled the masses with access to information and this was only solved through the technological invention of the printing press. Then it was the Monarchs who controlled access to land, again solved through technological innovation of the industrial revolution and now the Financial and Political Systems control people with access to knowledge and opportunities with regards to wealth.
- If you want to understand more about this I highly recommend you read the book by Robert Kiyosaki which explains this in a lot more detail – Second Chance.
It is time for a change and once again technology is going to provide the answer. There are 8 major macro trends which are all converging and will provide the solution to solve the Wealth Gap by 2020:
- Gamification & learning while doing, fundamentally changing the education system, going back to natures laws and allowing people to learn while doing.
- Blockchain & crypto currencies, increasing trust and reducing friction costs massively. Blockchain is decentralizing trust and ensuring there is no need for a middle man or institution anymore. This is a great video to understand the impact of the Blockchain – click here
- Social Commerce & Collaborative SMART Investing, increasing returns and reducing risk for investors.
- Personalization and people wanting personal solutions for them and their families. They want the power to create the freedom they want in their lives and have a meaningful connection with their investments.
- Rise of the middle class in emerging markets and 3 billion people unbanked people joining the global economy through mobile adoption and internet connectivity.
- Globalization and with local volatility investors wanting to be diversified across countries, assets and currencies. Cyrptocurrency’s, mobile adoption and internet connectivity are allowing everyone to participate and to allow true globalization.
- Social pressure to democratize access to wealth to empower the 99%.
- Investors wanting to have a purposeful impact on co-creating the planet they want to see.
On the 15th December 1791 the Bill of Rights was Voted into the American Constitution. It is widely seen as the beginning of democracy and freedom for all. Today 143 countries out of 193 on the planet have adopted this democracy for all.
It is time to create democracy for all when it comes to wealth.
Every single person on the planet, whether a rice farmer in China, a rickshaw driver in India, a goat herder in Africa or an investment banker in New York understand the intrinsic value of real estate, whether they have access or not. Our belief is that with Blockchain and a crypto currency based on real estate, we can truly democratize access to wealth. 49% of the worlds wealth is held in real estate and yet only 12,9% of the population have access to real estate.
On the 15th of December 2017 we are launching the WealthE Coin as this day will represent the day where once again a technology solution solved one of the worlds greatest challenges and provided access to wealth for the 99%. The WealthE Coinwill truly democratize access to wealth for all and help create a better and more sustainable planet for all. Our vision is to make investing as simple as a swipe of a finger from $1. When we achieve this we will be able to empower every single person on the planet and enable them to be wealthe!
I want to finish with a great video from David Orban. He is a global authority in this space, recently invested in Wealth Migrate and the WealthE Coin and is an advisor to our Board. Here is where he sees the future of wealth – https://youtu.be/lKsXlA1424s
To a better future for all and thinking differently to solve this challenge. It will require abundance thinking to solve this grand challenge!
Founder & CEO of Wealth Migrate & WealthE Coin