You need to know that you have power to create wealth.
Do not take the above statement lightly. You truly have a capability to produce wealth for yourself and for others. The information that follows can be personally validated by you. Validate the information by reducing it to basic observations and experiences you know. You’ll discover that the facts presented here, you already know. These facts need to be seriously considered and reflected upon in order to increase your wealth and increase your prosperity.
Wealth and prosperity are not alike. Wealth is the collection of solutions a society can access to resolve the problems of its citizens. Prosperity is a state of existence, in which what you produce and what you receive, have high value.
The power to create wealth comes from two sources. One source of power is your mind. The other source of power is your ability to change the physical world; literally. Everyday, you and most people in your life change the world physically by moving and changing objects or materials. The wealth you and others create is made up of all the solutions that exist to problems. Those solutions exist in the form of products and services.
The power to create wealth is activated, only, when it is directed by motivation. Motivation directs the power to create wealth by identifying the physical changes that lead to solutions for problems that impact others.
There are two kinds of motivation.
For the first kind, people are motivated to demand solutions to their problems. Some solutions are essential to life, such as food, shelter, and health. Other solutions are non-essential to life, such as social interaction, having a good time, one’s overall appearance, and other examples. The people who demand solutions to problems are not necessarily the same people who solve the problems.
For the second kind of motivation, you or someone else must be motivated to create and provide solutions that are demanded, otherwise wealth cannot be created.
When you are motivated to create a solution to a problem by using both your mind and your ability to change the physical world, you are priming the wealth creation process.
You can create solutions by applying physical force to move or change material, energy, or information through space within a period of time; in order to structure and organize those items into other forms.
At the moment, I am using a computer keyboard to move my ideas from my mind onto the hard drive of my computer. The computer physically changes my keystrokes into a sequence of magnetized north and south poles on the spinning disks of my hard drive. My thoughts are moving from the electrochemical form in my physical brain into a digital form on the hard drive. This is an example of applying physical force to change the form of information and materials like my thoughts and the hard drive which is out in the space, not to far away from me, within a period of time.
Physical human power is your ability to complete work within some amount of time. The work you complete is a physical change you’ve produced. Physical changes require force. And force is what you use to move or change materials, information, or forms of energy.
When physical force is under the direction of your mind, you can produce results that would not otherwise have been produced; and you can increase those results so that every amount of force, space, and time produces greater results.
Physical force is under the direction of your mind when you can apply ideas to your actions. You can create those ideas through focused, disciplined, and rational thought; or you can learn those ideas from other thinkers. The ideas you create or acquire are terms, definitions, concepts, principles, theories, laws and operating principles that describe the world, both the physical and intangible (such as thoughts).
These ideas form the bedrock for technological advancement. The creation of technology is necessary for our advancement. Technology is created when natural laws, principles, and theories are applied to actions that create and organize structures of material, energy, and information to meet the requirements of a solution to a problem. The written description of your solutions are referred to as a design. The processes you use to transform designs into solutions consist of one or more methods for converting materials, energy, and information into other forms.
Value is created whenever we benefit from a solution that we receive. That value can be measured by what you and the people around us are willing to exchange for it; and the amount of items that we exchange in return for those solutions. In our modern world, currency is exchanged for value.
All of the above statements are an attempt to describe a very simple, yet meaningful thought. You and everyone of us are at the center of the wealth creation process.
So far wealth has been defined as solutions to problems. The form of wealth is not necessarily material in nature. It can exist as knowledge, kindness, service, and many other intangible forms.
So if each of us creates wealth, what can we do, and what have we done to increase the total wealth created?
There are many ideas we’ve developed throughout our history to increase our total wealth. Some of these ideas have been highly refined in our recent history. These ideas include cooperation, division of labor, trade, property rights, rule of law, money, and markets. There are many others, but we’ll only focus on the above ideas.
Cooperation reduces the amount of time in which work is completed. If a task requires 10 hours of work and 1 person is working, then the task will be completed in 10 hours. However, if 5 people are working on the same task, then the task will be completed in 2 hours. Each person working at the same time for 2 hours results in 5 people each working those 2 hours. The total amount of work is still 10 hours, but it is now split across the 5 people and completed in 2 hours.
Division of labor increases the amount of work a person completes per unit of time. By dividing work so that each person is focused on distinct tasks, the rate of learning for each person increases. It increases because each person is concentrating their attention and effort while increasing the amount of time they spend on performing distinct tasks. What the person learns is how to be more effective and proficient at completing the tasks. Additionally the person can think more about how to improve the results of the work. Dividing labors leads to specialization.
Division of labor can lead to further increases in output for each person by organizing people into hierarchies. The hierarchies enable easier coordination of work; across groups of specialists.
Ultimately, productivity can be higher when we create organizations of specialists.
Specialists only produce a limited type of work. In order for specialists to obtain the results of other types of work, specialists must trade. Therefore, division of labor leads to trading.
Trading requires that an object that is valuable to everyone be used for exchanges. People exchange the goods and services they produce for the object of value. The object of the exchange is called money. Money is a medium of exchange.
Money allows people to avoid having to barter. Bartering can be frustrating, especially when one cannot find another person with whom to trade.
Money is used to measure value. Money can measure value because it can account for any unit of human power. Human power is the force we exert through space and time to move or change material, energy, or information to create solutions. Therefore, money is also referred to as a unit of account. It accounts for human power.
Money is a concrete symbol of some minimum amount of human power. The minimum amount of human power it represents is agreed upon by the members of a society. It is reinforced through the trades those members of society accept.
Human power is both your ability to physically change the world and your ability to use your mind to guide your actions.
Whatever object a society decides to use for money, it must meet five conditions for it endure. It must be durable, divisible into smaller amounts, portable, fungible, and capable of storing value. Objects that are fungible are treated the same by everyone. When money can store value, it means that you can exchange it for the same amount of value in the future, as you can today.
Money, the items you purchase, and the items you produce are your property. Therefore, it is important that you live in a society that recognizes your right to property. Without property rights, people should not expect to consistently maintain ownership of the solutions they create. Therefore property rights are necessary in a society organized to produce and trade.
Additionally, the rule of law is essential in such a society. It outlines the consequences for violating the law, and no one is supposed to be exempted from punishment. People are more likely to engage in dividing their labor and creating solutions to problems, when both property rights and the rule of law are adopted by their society.
You do need to recognize that money can be used to control you and the people around you. When we accept money for the trades we conduct, we are in essence allowing our human power to be transformed into the physical object of money. Physical objects can be collected, stolen, moved, and manipulated by others.
You will now learn about two ways in which your power can either be blocked or siphoned from you
The total amount of money a society creates or has affects trade. If a society has not created or does not have enough money for everyone that is producing value, then some members of the society cannot trade with others when they want to trade. This reduces the overall effectiveness of that society’s ability to create wealth. Your power in such a society is blocked from benefitting you or others.
If a society creates too much money, then each unit of money is worth less human power. For example, suppose there are only two people on an island who have divided their labor. The amount of money used is 10 marked shells. If each person on average puts in equal effort for 20 hours of work per day, then each shell is equal to 2 hours of work; i.e. 20 hours of work divided by 10 marked shells. If another 10 shells are added to the money supply, then each shell is now worth 1 hour of work; i.e. 20 hours of work divided by 20 shells. This concept of money losing value is referred to as inflation. The purchasing power of the money has decreased. When there were only 10 shells, the money could purchase 2 hours of work. However, when the money increased to 20 shells, the money purchased less work time; 1 hour. Your power in a society that increase its money supply is siphoned from you. It occurs when others spend any new money created before you do. If you’ve saved money, those spending the newly created money in the money supply cause your money to lose its value.
The right amount of money for a society is equal to the outputs of its members and the average maximum number of trades that would occur in say a day, or whatever period of time is chosen.
The more productive its members are, the more money is needed to promote trade. The less productive its members are, the less money is needed.
The more trades that need to occur, the more money is needed to promote trade. Less trading, requires less money.
The more goods and services a person can produce per unit of time, the smaller is the amount of time they spend on producing one unit of the good. The smallest unit of money must equal the smallest amount of human power for producing a good or service. Sometimes the number of goods and services that can be produce in say an hour is so large, that one has to calculate the smallest amount of human power.
For example if the fastest person in a society can produce 5 goods in one second, then each unit of money in the society should be equal to 1/5 of a second of work.
Value consists of intrinsic and extrinsic components.
Intrinsic value is the amount of tangible human power applied in producing a solution.
Extrinsic value is an adjustment that is applied to intrinsic value. The adjustment can be in the form of a penalty or a reward.
The demand for a solution with respect to the quantity of that available solution determines whether the adjustment is a reward or a penalty. It will be explained below.
Markets are where trades occur. Those exchanging money for solutions are buyers. Those exchanging solutions for money are sellers. Buyers will trade with sellers until they are satisfied. The quantity of solutions a buyer acquires for a specific price is referred to as that buyer ‘s demand. The quantity of solutions a seller brings to market is referred to as supply.
A solution ‘s supply and demand determines its price. Price is another word for the quantity of money in an exchange. Sellers can price solutions in the market to equal intrinsic value.
Case 1 If there is no demand, then the seller can stimulate demand by lowering the price. Supply and no demand drives prices lower. Extrinsic value is no longer zero, but is now a penalty.
Case 2 Suppose there are other suppliers and demand for solutions exist, but the demand is not enough for all solutions. Some suppliers sell solutions. Other suppliers do not sell solutions. Suppliers with unsold solutions can stimulate more demand by lowering the price. Supply and low demand drive prices lower.
Case 3 Suppose the demand matches the supply of solutions. Then the seller doesn’t have to lower prices. When price matches intrinsic value, supply and demand are equal.
Case 4 If the demand exceeds all of the supply of solutions, then buyers can offer a higher price to convince sellers to exchange the solution with high bidders. When demand is greater than supply, prices can be bid up. Extrinsic value is no longer zero, but is now a reward.
In general prices rise when demand exceeds supply, fall when demand is less than supply, and matches intrinsic value when they are equal.
Price and value are not always equal. Value is the result of total supply and total demand for a solution. Price is the result of short term or local supply and demand circumstances. Prices deviates from value when local supply-demand deviates from global supply-demand.
Based on the above concepts, it will be easier for you to understand and apply the prosperity principles.
Prosperity Principle #1 Develop a solution that is in low supply for a problem that matters to people.
Prosperity Principle #2 Trade the solution with one person who highly demands it; or with many people who demand it.
You now know what wealth is, how to create it, and the two principles that must be applied to become prosperous.
The above topics are available in an easy to read online reference. Early concepts presented above are expressed slightly different in the online reference. The online reference format is more abstract.