Parasites with MBAs

There was a time not long ago when creating wealth in the United States primarily involved starting a business. The idea of getting rich without being your own boss made little sense. So if you were smart, hard working, comfortable taking risks, and wanted to accumulate wealth the natural thing to do was to identify an opportunity to create a new business and serve a market that was undeserved, unrecognized, or perhaps didn't even exist yet. You'd save money while you worked for someone else until you had enough capital and a clear enough vision to try and achieve your dream. I can speak from experience and say this was at least how my career looked and I'm grateful that I had the drive, took the risks, and achieved some measure of success. It honestly never occurred to me that there was any other way for an individual who wasn't born into wealth to achieve financial success. As a young man I certainly never met anyone who had achieved any real measure of financial success who pursued an alternative path.

Fast forward to 2010 and consider the path to financial success and it becomes exceedingly clear why our country is in the mess that it is in. The best and the brightest no longer strive to create a company that provides a real good or a beneficial service as it is far easier simply to be a parasite and suck wealth off a "host" who has already achieved financial success. This new attitude towards wealth creation was given the federal government's seal of approval when it determined that it would save the banking industry and the investment banking industry in the past 20 months. While commercial banks do provide value to society, they are nevertheless parasitic in nature as they produce nothing and only exist because other individuals do produce goods and do provide services that are in demand. Investment banking is entirely parasitic with no redeeming benefit whatsoever. However, if you were smart, hard working, and wanted to achieve financial success there are few better ways to do it than to work for an investment bank. You assume zero personal financial risk and can "earn" more money than most business owners, so why would you choose to build a business in light of that?

Of course if you are an investment banker you'd say there is definitely a better way to make more money and that is to manage a hedge fund. These are the kings of the parasites and literally can make billions rather than just the millions that investment bankers make. This group "manages" money that belongs primarily to producers and keeps more than 20% of any gains they achieve. The good news for the hedge fund manager is if they loose money they don't owe the producers 20% so it is the king parasite gig for sure.

The problem, which we are beginning to see in America now, is that at some point there aren't enough hosts left for all the parasites to be fed from. An economy does need some producers to make it work, everybody can't be a parasite. The paradox of course is that the rewards without risk lie in being the parasite not in being the host so more smart people want to be the parasite than the host.

As a thought exercise consider all the people in your sphere of influence, particularly those that you believe have achieved a measure of financial success. How many are producers and how many are parasites? It gets kind of interesting when you really ponder it. Worse yet, if you are a producer, or more accurately in this economy, were a producer consider all the parasites that you feed or fed while running your business....lawyers, accountants, bankers, financial/investment advisers, consultants...

This transition from being producers to being parasites isn't new or peculiar to the United States in 2010. Perhaps this time it will be different (famous last words) but the Dutch, Spanish, and British all tried to move from producers to parasites at different points in the last 400 years and all failed. There comes a point where there just aren't enough hosts left to support all of the parasites.