In a recent op-ed, economist Robert Samuelson said “there is
something unsettling about extremes of wealth and poverty.” He
obviously meant it pejoratively, but in truth, extremes of wealth
and poverty are the very source of the economic advances and
creativity that we regularly witness around the world. As Canadian
economist Reuven Brenner wrote in his 1983 book, History: The
Human Gamble, “it is the perception of inequality that induces
people to take risks.”
USA Today founder Al Neuharth recently
wrote about the career paths of himself and CNN’s Larry King.
Neuharth observed: “[King] was a poor Jewish kid from Brooklyn
whose father died when Larry was in grade school. I was a poor
German-Russian kid from South Dakota. My dad died when I was two.
Larry and I both knew we’d have to take some big risks if we wanted
to make it big time. He gambled on a late-night radio talk show
that he got syndicated nationally in 1978. It ultimately developed
into CNN’s Larry King Live. I gambled on USA
Today in 1982. It became ‘The Nation’s Newspaper.”
At one point, British author J.K. Rowling spent time on the
“dole” in England. Her gamble was the Harry Potter series
of books that have sold 377 million copies worldwide, and which
have made her the second richest female entertainer in the world
behind Oprah Winfrey. The latter was born to an unmarried teenage
couple, and experienced an early life of molestation by a cousin,
family friend, and uncle. Winfrey’s ambition took her to mostly
smaller media markets around the country until 1983 when she
gambled on a low-rated talk show called AM Chicago. Within
months, the show went from last place in the ratings to besting the
talk-show juggernaut Donahue, and today she’s arguably the
most influential woman in the world.
Near suicide due to mounting debts, a broken family, alcoholism,
and a drug arrest, Dominic Dunne fled Beverly Hills in the '70s in
shame and rented out a room lacking television and telephone at the
Twin View Resorts in rural Oregon. Finished as a Hollywood movie
producer, Dunne was in his fifties when he gambled on a career as a
writer. Though his first script was roundly criticized, and his
first book (The Winners) was a flop, Dunne wrote in his
journal, “I have never believed in myself more than when I was
writing my script. I was never happier with myself.” With a burning
desire to succeed while in possession of very few options, Dunne
persisted and today is one of the best-known writers of criminal
fiction in the world.
At the age of 35, Bernie Brillstein wrote in his autobiography
(Where Did I Go Right?), “I owed money, and I’d begun to
believe that I might not make it in life.” Constantly burdened by
the success of others in the entertainment industry, and his own
relative failure, Bernstein gambled on what became his eponymous
talent management company; one that ultimately morphed into
Brillstein-Grey Entertainment, the most prominent firm of its kind
in the entertainment industry. Brillstein’s firm had a hand in
everything from Saturday Night Live to The Muppet
Show to Ghostbusters, along with more recent
blockbusters such as The Sopranos. Inequality fueled his
creative fire.
Patillo Higgins was a one-armed mechanic utterly convinced that
there was oil beneath a hill in Beaumont, Texas. Even though
numerous geologists ridiculed his ideas, he bought a book on
geology, read it passionately, but couldn’t find anyone who shared
his belief that a big oil find was in their midst. Desperate, he
placed an ad in a magazine and found an Austro-Hungarian engineer
named Anthony Lucas who began drilling in 1899. Despite
near-universal ridicule, neither Patillo nor Lucas had anything to
lose. Their gamble was Spindletop, the greatest oil find of its
time, and the catalyst for the Texas oil boom of the early 20th
century.
New York Mayor Michael Bloomberg was fired by Salomon Brothers
in 1981. Driven by burning ambition and an ego to match, he chose
not to sit on his $10 million severance package, and instead
gambled on the idea that investors and traders desired access to
market information that up to that time had been very diffuse.
Bloomberg LP was his creation, and its terminals line trading
floors around the world.
Michael Milken was hired by Drexel Harriman Ripley out of
Wharton in 1969. With his firm mostly a bit player relative to the
“white shoe” investment banks who led the rush to conglomeration by
established U.S. —based companies in the '60s and
'70s, Milken gambled on “junk bonds.” The latter were in truth
sources of finance for ventures that establishment banks would not
go near in terms of financing. Milken’s innovation funded the
gambles of other entrepreneurs, including Ted Turner’s challenging
the big-three networks with CNN, and Steve Wynn’s shake-up of Las
Vegas with the creation of the Mirage.
Milken’s financing innovations led to an efficiency-enhancing
buyout boom, and the formation of other spectacularly successful
firms, including the Blackstone Group. Pete Peterson and Stephen
Schwarzman founded the latter after losing a power struggle with
Lew Glucksman at Lehman Brothers in the mid-80s. Their gamble is
about to go public, and most accounts suggest what began as a small
venture will command a market capitalization of $40 billion once
the shares are floated.
Importantly, none of the people described here started out rich.
Indeed, while the fortunes of many are presently the source of
unease about wealth gaps, there was a time when all were on the
outside looking in. If income equality were the norm in the world,
it’s arguable that some would not have taken the risks that are at
the root of our economic vibrancy today. As such, fears of income
inequality are misplaced. The latter is the driver of economic and
human creativity, so rather then bemoan it, we should embrace
it.
