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« Ultra Capacitors | Main | A Question For Kevin Drum »

More on Specialization

Rand observed that "one of [his] biggest mistakes in life was not recognizing early that the most effective way to achieve my goals would have been to get wealthy first, then to apply that wealth toward them". The basic economics point is that if you earn as much money as possible by specializing in what the economy will pay you the most for, you can often hire a specialist to do far more good with the money you made than you could have doing the good personally.

Another way to state this is doing nice things is fun; nice is an economic good. So if you want a pleasant job, other people who like pleasant jobs will compete and drive the price down until the low pay makes it unpleasant enough to clear the market.

This makes Bill Gates's career change to spend his fortune a global tragedy worse than the monetary damage of Hurricane Katrina. He is likely to be much closer to average in his ability to make the world better by giving, compared to making the world better by making better software and operating systems.

The salary offered to you for different occupations summarizes what the economy values most from you. Accountants and lawyers may seem less useful than teachers and engineers, but that is a fallacy of confusing the average value of a teacher--which may be very high--to the market price of a teacher which will be much lower if there are lots of people who want to be teachers.

Posted by Sam Dinkin at November 05, 2007 11:48 AM
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I don't think that Bill's billions could have been realistically reinvested in MS in such a way as to efficiently use them to hasten new software and thereby improve civilization. MS is already investing a considerable sum (which therefore is not being paid out to Bill's remaining shares) on that goal, and you can only throw so much money at any one area before you start seriously wasting it.

That said, I would have loved to have seen Bill focus on targeted technology-driven investing and philanthrophy. There are plenty of areas where a few million in high-risk investments with little or no care for personal return could yield rapid change. Space, yes, is one of those, but there are many others.

Posted by Big D at November 5, 2007 04:52 PM

Sam, Warren Buffett has apparently decided that Bill Gates is better at charity work than he is, and has outsourced his philanthropy to him. I disagree (well, OK, it could be that Bill is better than Warren at that...) that Gates is spending his money all that wisely, though.

Posted by Rand Simberg at November 6, 2007 07:26 AM

He is likely to be much closer to average in his ability to make the world better by giving, compared to making the world better by making better software and operating systems.

Closer to what average?

You can't possibly be comparing him with the average guy who doesn't have 50 billion to spend.

Billionaires doing good with their money is finding new and useful ways to spend their wealth. American philanthropy at this level is a wonderful thing, and a good reason to justify the continued existence of billionaires. Bloomberg getting into the 2008 race would be an example of such. It would help people focus on real issues, solving real problems, instead of the rubbish spewed out in 30 second sound-bites in these so-called debates. A heck of a lot better (for us anyway) than racing his yacht with Gisele Bundchen on his knee.

Posted by Toast_n_Tea at November 6, 2007 07:29 AM

I met some doctors who think vaccination is still the number one intervention in terms of cost benefit. Gates does appear to be doing a good job. But suppose he does 10% or 20% better than the average charity at relieving suffering, promoting development or whatever good he wants to do. That would be a very large value add (tens of billions say) to his (and WB's) amazing fortune. But suppose instead that he stayed hungry and founded another Microsoft or helped steer Microsoft toward lower energy-use servers and laptops, harnessed laptop batteries and UPSs to become part of peak load demand reduction, or whatever is in his brain about moving along the road ahead. That might be hundreds of billions over the course of a decade or two. The consumer surplus generated will be another multiple of a hundred billion on top of the good he can hire others to do with the fortune he might create in the second half of his career if he sticks to his knitting.

Posted by Sam Dinkin at November 6, 2007 10:19 AM

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