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Selling Shovels

Jonathan Clements  |  December 3, 2016

REAL ESTATE seminars. Initial public stock offerings. International lotteries. Hedge funds. Franchising opportunities. Penny stocks. Multi-level marketing companies.

This is the American lexicon of easy wealth—and yet the only people who seem to end up rich are those who peddle this nonsense. It’s the story of the California gold rush: Riches accrued not to the miners, but to those who sold them shovels, picks, pans and other supplies.

To be sure, hollow promises and empty hype are rife in other areas of our life. Just check your spam folder for the latest phony diet, male enhancement and nutritional supplement.

Still, the world of money seems especially prone to such garbage. If the financial stakes are low enough, I’m not much bothered. Arguably, if you buy a $1 lottery ticket with an expected payout of 50 cents, you’re getting good value—because, in return for the money lost, you get the chance to dream briefly of riches.

But much of the time, there’s far more than $1 at stake. Real estate seminars can cost $25,000. Hedge funds often charge 2% of assets, plus taking 20% of all investment profits. The psychic pleasure of dreaming a little couldn’t possibly match the price paid.

You might argue that, if the buyers are so naïve, they deserve to be separated from their hard-earned dollars—and I might agree, if a thorough understanding of personal finance were required to graduate high school. But as things stand, I find myself horrified by the shameful fleecing of the ill-informed.

The prosaic reality: For the vast majority of Americans, the only sure road to riches is socking away one dollar after another, month after month, year after year. Nobody’ll pay you $25,000 to deliver that seminar. But it’s the truth.

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