Rich People and Hard (Smart) work

Note: This post is follow up to my earlier post. You dont need to read the earlier post, but reading will help get you the thread better...
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We teach our kids to do hard work while at school. We tell them if you study hard, you will get a good graduation degree and so better job hence better salary and better standard of living. But if you study richest of the rich in this world, you will find more than 60% of the rich (also true for successful people in general) did not do very well in school. Were their parents telling them to put in less of hard work? Or were they dumb? or were they focusing on different things? Answer to most of these question is "No". they were also trying equally hard. But just that they could not fair well in their student time.

I would like to take this to another level. If the people in developing countries are not doing as well as their counterparts in developed world, does it mean that they put in less of effort? again answer is "no". And I have explained in my previous post that it is because of unequal advantage the developed world gets, standard of living of developing countries is not as good.

If that is the case, then always people from developing countries should be laggards. In reality we see a fair share of rich people in forbes list of billionaires who are from these developing countries. Am I contradicting myself? Yes, and that is exactly what I wish to talk about....

Let me compare cost and price. (many woud already know it, but this is only for completion sake) Cost of an item is actual cost incurred by the producer. example, if a person takes 8 hours to dig a hole cost of the hole to the digger would be 8 * hourly rate of labour. If there is some raw material involved, you may add cost of te raw material, you may also add cost of renting of the equipment used. But PRICE is what consumer is ready to pay for. If you dig a hole in jungle, price of the hole may be zero. But if you dig a water reservoir in a place with scarecity of water, buyer may be ready to pay thousands based on their need.

After defining cost and price, lets start looking at these two things in play. You buy same artifact in a designer shop for whooping 500% additional cost without even thinking on the cost of the item. It may be becasue of the perceived value you get. Companies spend about 30-70% of the costs on marketing alone and marketing is only for increasing perceived value. We all know it well but keep pray to it again and again...

Let me come back to hard / smart work. You must have wondered as to why a stock trader makes millions withouot generating any value while as the businessman who is actually manufacturing goods get relatively less for all the efforts he put. Or for that matter a sales clerk after working for 10+ hours gets salary worth pea nuts when compared to the profits investor in wal mart. that takes me to my next principle. You get paid for either your effort, your knowledge or your risks. and in the same order. One who puts in effort gets the minimum and one who takes risks gets more. (Of course this is generic statement as more risks does not mean more gain)

This is why parents tell their children to acquire knowledge in early days to improve chances of earning more in future. But I would like to make one important point that to really becoming rich, we need to teach our children to rather take risks than to acquire knowledge.

Taking you back to my previous post, people from developed countries enjoy the benefits as their ancestors have taken much higher risks like travelling to new places without knowing the outcome. And surprisingly now, developing countries are taking far more risks than developed countries. With this economic power is definitely set to shift very soon... Please be warned...