I used to be grateful for rich people, but not so much anymore. In the old days when Ford Motor Company owned Jaguar, I was the finance manager for driver interactive systems on several car lines. We would develop expensive electronic modules to add cool features to the Jaguars because we knew rich people would buy the car even if it costs an extra $500 or so.
But then, what we learned from developing the innovative electronic modules allowed us to apply them to Lincoln Town Cars. These modules might cost $400 for a cool feature, but of course the rich people would gladly pay that much extra for a luxury vehicle. By then the plant had manufactured enough modules to introduce manufacturing cost reductions. The supply base had been established such that efficiencies could lower costs. Higher volumes meant that the price could come down. Soon the modules were inexpensive enough to add to the Taurus and Fusion car lines.
What does this mean? Today you can buy a compact Ford Focus that has more sophisticated electronics (think a voice-activated SYNC system or a Bluetooth connection to your iPod) because rich people were willing to pay for the development costs. Almost all consumer products are inexpensive today because wealthy people were willing to purchase expensive microwave ovens, cell phones, flatscreen TVs, and so forth. Even for all the evils of rich Gordon Gekko in the 1987 movie “Wall Street,” he carried a $3,995 Motorola cell phone the size of a brick. For this reason, everyone should be grateful for rich people in the world.
Remember, a capitalist economy is not a “zero-sum” game. In other words, I am not poor because someone else is rich (that is what happened in the days of the Vikings). Everyone benefits from the creation and distribution of wealth.
Gentle reader, why am I less grateful for rich people today? Please join us tomorrow for the rest of the story…
Part 1 of 2