September 20, 2024
Institute for New Economic Thinking - Ellora Derenoncourt is an Assistant Professor of Economics at Princeton University and faculty director for the Program for Research on Inequality at Princeton Economics.
Perry C. Douglas @appliedintelligence
This video provides evidence and clarity into the discourse of fallacies surrounding closing the “racial wealth gap.” Part of Prof. Dereroncourt’s talk provides real insights supportive of the reality that no amount of government policies, ambitious academic proposals from racial equity-focused non-profit organizations, programs and groups, reparations, and DEI arguments can close the racial wealth gap.
Ultimately, it all comes down to “you” and what you choose to do instead of relying on what others say they can do for you.
The major driver of wealth creation is the rate of change for capital gains, comparing that between White and Black groups gives us a good understanding of how the “gap” has developed. Looking at the capital gains in the composition of wealth portfolios across Black and White groups. The average Black wealth portfolio was mostly invested in housing. Almost 70% of Black wealth is held in housing today. Compared to white Americans, that number’s more like 40%, with a good chunk of that held in equity, something like 15 or 16% held in equity. For Black households, that number is 5%.
In the last 40 years, both housing and stock markets have appreciated, but stock markets have appreciated by about five times as much. And when you include private equity business appreciation, the capital gains rate of change is even more profound. From an investment perspective, the difference in price appreciation for housing and equity explains the wealth divergence between Blacks and Whites in the modern era.
The differential is the investment in EQUITY (stocks, private businesses, entrepreneurship) for the average white household that has allowed them to gain more from growth in equity over the last 40 years compared to Black households.
With all the rhetoric in the discourse, one thing remains steadfastly true: the policies and bright academic and experimental ideas toward “closing the racial wealth gap” have not and will not work. Stick with reality, not nice stories. The fundamentals of wealth creation have not changed, it requires investing in equity, having an entrepreneurial and growth mindset, creating our own opportunities and investing in each other’s opportunities/businesses. This is how every other community has done it. So let’s not make excuses about what we haven’t done right, and just get it done right.
We have allowed ourselves to be distracted and suffer in ignorance, seeking out alternative paths to wealth that don’t exist and relying on government programs to do for us what we must do for ourselves. Believing in the nicely contrived but not true stories that self-serving non-profit Black activist organizations pacify our minds with.
Don't be fooled; there are no safe spaces in the universe if you want to thrive in it.
In the end, nobody is coming to save you, nobody. Absolutely nobody! It is up to you to invest in equity and entrepreneurship—yourself and each other. The economics you create will produce the social and political power you need to become relevant and powerful in the universe.
Economics is not a morality play; it’s a power play!
Don’t suffer fools with new trendy but uninformed and stupid ideas. Learn for yourself with rigour. We live in the information era where you can build an intelligent investment growth strategy yourself that suits your aspirations best. Believe in yourself, become antifragile, and follow what has been proven versus the distractions, the nonsense and the noise of the day.
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