Monday, October 6, 2008

The Mechanics of Wealth

A note from for Tuesday October 7 2008

Welcome to this very fine Tuesday.

As a young school lad in Scotland, we were indeed subjected to many learning’s that will forever be debated as to their true “learning” use or purpose. It often seemed that organized schools in Scotland were simply training grounds for legions of laborers and soldiers, both honorable professions, but both left men at the end of their careers with much to be desired.

That being said, we were however caused to read the works of many Scottish writers that were having an impact in the much larger world. On of these folks was philosopher Adam Smith. The reason I take time for all of this now is that our contributor of today’s reader mentions him in his piece. Smith’s works, although somewhat rare and difficult to find, are certainly worth adding to your library if you can hunt them down.

Enjoy what Dr. Keith has to share with us today. It’ll hit some points.

The Mechanics of Wealth
by Dr. Keith Scott-Mumby

A lot has been published about the motivation of success but very little about understanding the mechanics of wealth. The big secret is hidden in a famous little 18th-century classic book by oaty Scots philosopher Adam Smith. It is called "An Inquiry Into The Nature And Causes Of The Wealth Of Nations," nowadays just shortened to "The Wealth of Nations."

Smith published it in 1776, the year of American Independence, which is interesting, because if anything started the American Dream it was this book. It is a text that is as valid today as when it was written. In fact this book is in the economics curriculum of just about every university on the world.

Smith uses one critical word in his powerful book which is the key that unlocks the door to personal prosperity, self-esteem and happiness at work. The word we are looking for which leads to all wealth is... Exchange.

You have to give something in order to get. You cannot get rich by dreaming or thinking positive thoughts. You can only succeed if you have something to give - in return you will naturally receive all the wealth you can handle. You can't get more out of the system than you actually put in. It's as simple as that.

Businessmen (and women) in any society in the world, talk obsessively about "making money". Leaving aside counterfeiters, only governments make money. The treasury prints the stuff and then declares it valuable (Someone, I think it was another Adam Smith, the 20th Century US "funny money" philosopher, actually George J W Goodman, who joked about money from the treasury, saying that a government is the only institution that can take a valuable commodity like paper and, by adding ink, make it into something worthless).

Nobody "makes money." You trade for it. You earn it.

To understand the economics of success further, Adam Smith introduced the idea of Exchangeable Products. In earning a living, dealing with others and sharing relationships, we are all responsible for doing or making something which we can call a "product."

The product need not be a thing. We can carry out a service. But there is still a SOMETHING at the end of it. A gardener may serve with knowledge and skill of horticulture (plants and crops); what he does we can call "gardening." But his product would be stated slightly differently. His product might be flourishing healthy plants in an attractive fertile garden setting. You get the difference.

Society has become too complex for us to do everything we need to do for ourselves. So we each specialize and do what we are good at. In The Wealth of Nations Adam Smith called this the "division of labor". By working together on a project, we can achieve many times the success of a single individual working alone.

Cooperation is the key to success. What we each produce is our contribution to making all this work, by which we earn our place in society.

Now here's the thing: if you want to get rich you just have to work out a way to leverage it, so you move product faster. For real wealth you need a good product, that people consider valuable, and you need to figure out how to move lots of that product into the hands of customers.

But did you ever hear this mentioned at wealth-building seminars? You'd think the magic of getting rich was just drawing it in. "Attraction". Just hold out your hand. It's baloney. You can't "attract" wealth. You have to give something.

Only by serving the needs of others and listening to their wants, can you create true success and real wealth. "Serving" doesn't mean you go and work for free (necessarily). It does mean you work on other peoples' needs, not just your own.

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