Have’s vs. Have Not’s: A three-part solution to America’s wealth gap

I’m what they call a self-made man, but I’m also a product of my life experiences. By fate, I’ve been in every socioeconomic class in America—poor, middle class, and wealthy—and the first class I saw, the one I was born into, wasn’t the “first class”— and to me it’s worse than poverty—you guessed it, the middle class.

When I was 13-years-old, my middle class safety net was ripped away when my father became addicted to drugs, lost his job, and left us. I went from a nice home in the suburbs (with every type of toy I wanted) to abject poverty—a one room shack in a gang-infested neighborhood in Ventura County—where I lived with my single working mother, until I was 18. I got a front row seat to the way the wealthy lived in the upper class when my mother remarried, and I found myself with a much needed mentor and surrogate father.

It was the dawn of the “Age of the Internet” and I had picked up some computer skills (by way of liberating them) on the streets. I got a job changing back up tapes at a data center, and started buying Internet stocks on the side. By the time I got to my sophomore year in college, I had made it to the middle class making that beautiful $100K a year salary, living in my newly purchased townhome in Simi Valley, California, with a leased BMW in the garage—so I could keep up with the Jones’s of course (a favorite middle class pastime). I was about twenty years old.

But the memory of watching my father lose everything trying to stay in the middle class stuck with me. I remember him buying brand new cars to show off with, and blowing his money on drugs and other superficial diversions. And one day, he had nothing. I saw the middle class not as a comfort zone, but as a compromise and a trap—an economic strategy set by the rich—and I swore I’d rather be poor than stay in the middle the rest of my life.

If I wanted to move up in life, I had to act quickly. I started my first company 24/7 Tech, a computer repair business, and left college for the world of entrepreneurship.

This was 1999, when Jeff Bezos, Marc Andreessen, and Bill Gates were the kings of the hill (they still are). Credit was flowing, and people like me were buying their first, second, or third houses—it was easy to win. In a little more than a decade and a half, our society completely shifted. The housing market crashed, we went through a recession, our economy changed, the wealth gap widened, and the middle class began to shrink.

We went from an economy built on manufacturing jobs, to a society built on innovation and intelligence. Today, the tech industry, and some of the smartest minds in American history, have the most amount of capital available to them ever—at the lowest cost, ever. Twenty years from now, there’ll be more computers than jobs, and twenty years from then, I predict the trend will continue, if Moore’s Law holds true—and it has thus far.

And while the middle class was in decline, a larger share of the nation’s wealth was captured by those at the top. According to a recent Pew report,

“Fully 49% of U.S. aggregate income went to upper-income households in 2014, up from 29% in 1970. ”

This is partly our government’s fault. I was one of those fortunate enough to sell my company after the Great Recession; I had assets. As a result of our monetary policies, those with assets were granted access to capital, nearly for free. And the people like me, the working wealthy and the newly wealthy, took this free money and spent it on innovating and automating as many jobs out of our companies as we “humanly” could. Facebook’s messaging application WhatsApp has 55 employees serving 450 million customers . I wonder how many employees it takes at Verizon to serve 450 million customers?

The “have not’s” on the other hand, didn’t have assets, and didn’t get access to free capital. Many sank below the poverty line, while the wealthy extracted as much value from the middle class as they could, and “tapped those assets,” starting with the equity in their homes and adjustable rate no-income verification mortgages, and many predatory lenders perfected their craft.

In essence, the Titanic is sinking, but the band—our middle class—is still playing the music.

Our politicians have all made commitments to restoring our middle class, but I just don’t see that happening anytime soon. Hillary will probably instate a mandatory wage increase, and Trump wants to build a wall around the country (destroying our trade agreements in the process), but neither of those are going to make you any more secure in the middle class. The reality is that the gridlock in our political system is going to delay any gratification you think you’re going to receive from your vote this November (possibly forever). Monetary policy has to change, but our government has no solutions. We are going to have to solve the problem ourselves.

I’ve been in the low income brackets and I know from experience that it’s actually easier to be ambitious when you’re living poor or paycheck-to-paycheck with nothing to lose. You’re in survival mode, and every second counts—you have to grind it out. You have to hustle. (I talk about my own “hustle” in my new book, Rock Bottom to Rock Star: Lessons from the Business School of Hard Knocks. I learned to leverage my environment, or be leveraged by it.

Thanks to our new “gig economy ” peer to peer platforms—I’ve invested in several, including Heal, Saucey, Surkus, ViSalus, and SenStay)—and some that you’re probably more familiar with, like Airbnb, Uber, Postmates, are helping to level the playing field. Starting a business doesn’t carry the risk it once did; the barriers to entry are lower than ever. And with millions of micro-entrepreneurs fueling our economy and sparking innovation, more middle class jobs will become available to those that create their own.

Those of you in the middle class: don’t get too comfortable. The problem is that you are not really secure, and you should know the problem better than anyone else, because you’re living it. So, either find a solution to stay where you’re at, or study how to become wealthy. Learn from those who have found a way out. That’s what I did. As they say, the best trail up the mountain is the trail forged by others. If my path up the mountain isn’t the one you’d like to follow, here’s a Forbes list of some of the richest self made billionaires to inspire you.

For those of us who have access to capital, the wealthy, we need to invest in solutions. We need more social entrepreneurs, people out there that aren’t putting profits above all else, and foundations targeting specific causes that are eroding the good quality of middle class jobs. There are entrepreneurs out there that are creating their own city models, like Tony Hsieh’s downtown Vegas, or Dan Gilbert that nearly singlehandedly resurrected the city of Detroit. I’ve sat and talked with these men about it, personally. To those with the desire to create an entirely new societal model I say,

“You should.”

Like I said in my last piece on Criminal Justice Reform, the one thing we can’t do is sit around and wait for the government to make all our problems disappear. And we can’t make excuses. Take responsibility for where you’re at, and for your own path to success, whether you’re riding high in the one percent, floating in the illusory comfort of the middle class or digging loose change out of your couch cushions to fill up your gas tank (like I once did)—we all need to play our part and be the solution to our nation’s problems.



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