Quick money concept I think more people *NEED* to understand.
The Lauderdale Paradox.
It's the simple concept of whether you should go on Spring Break or not.
Kidding! It's actually a 200 year old puzzle about public vs private wealth and value creation.
<thread> 🧵👇
The Lauderdale Paradox.
It's the simple concept of whether you should go on Spring Break or not.
Kidding! It's actually a 200 year old puzzle about public vs private wealth and value creation.
<thread> 🧵👇
2/ James Maitland, a.k.a. the 8th Earl of Lauderdale, was a Scottish dude that sat around discussing money and wealth.
History nerds know him as the guy that had a bloodless duel with Benedict Arnold, but really – he played a fundamental role in discussing public wealth.
History nerds know him as the guy that had a bloodless duel with Benedict Arnold, but really – he played a fundamental role in discussing public wealth.
3/ Maitland speculated there's an inverse correlation between public wealth, and private wealth.
He theorized public wealth is "all that man desires that is useful or delightful to him." I describe this as things like air, water, and @rickygervais.
He theorized public wealth is "all that man desires that is useful or delightful to him." I describe this as things like air, water, and @rickygervais.
4/ Private wealth is public wealth, that "exists in a degree of scarcity."
Scarcity is a loaded term though. What's scarce? He used the example of water. You can walk to a body of water, and use it as you please. It has little financial value by itself.
Scarcity is a loaded term though. What's scarce? He used the example of water. You can walk to a body of water, and use it as you please. It has little financial value by itself.
5/ If you hoard the water though... you can turn it into wealth. Swiss chocolate company amounts of wealth.
In this case, private wealth was created. However, it was created by seizing, and hoarding public wealth.
By stealing public wealth, you've created private wealth.
In this case, private wealth was created. However, it was created by seizing, and hoarding public wealth.
By stealing public wealth, you've created private wealth.
6/ Maitland also wrote about tobacco planters in 1700s Virginia. The Assembly passed an act restricting plantations to 6,000 tobacco plants per slave.
At the passing of the act, each slave on average tended to 10,000 plants. Through this act, they reduced the supply by 40%.
At the passing of the act, each slave on average tended to 10,000 plants. Through this act, they reduced the supply by 40%.
7/ The shortage caused prices to surge on anticipation, but they still had to harvest the surplus supply. Naturally prices fell, like you'd expect.
Just kidding. They burned the extra supply to make sure prices didn't fall. The goal wasn't to grow tobacco, it was to make money.
Just kidding. They burned the extra supply to make sure prices didn't fall. The goal wasn't to grow tobacco, it was to make money.
8/ What does this remind me of? Housing.
Developers build and build and build. A developers goal isn't to make housing though. It's to make money.
So what do they do? They burn supply.
They sell it overseas to investors that will never need it.
Developers build and build and build. A developers goal isn't to make housing though. It's to make money.
So what do they do? They burn supply.
They sell it overseas to investors that will never need it.
8/ They bulk sell it to local investors, who slowly sell to the public.
By taking a public asset, space, and slowly selling it back to the public as a scarce asset, they manage to generate a fortune.
The more you spend on housing, the less you spend in the community.
By taking a public asset, space, and slowly selling it back to the public as a scarce asset, they manage to generate a fortune.
The more you spend on housing, the less you spend in the community.
9/ The less people spend in the community, the less prosperous a community becomes.
In other words, by monopolizing the natural public supply of wealth, they've managed to gain large private wealth.
The Lauderdale Paradox, 2020 edition.
In other words, by monopolizing the natural public supply of wealth, they've managed to gain large private wealth.
The Lauderdale Paradox, 2020 edition.
bonus/ Another good example is diamonds. By the end of this thread, you'll have another solid example – plus! you'll hate the diamond industry.
https://twitter.com/StephenPunwasi/status/1315465053529927682?s=20
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