Amazing Money Secrets of the Super Rich!?

Buy low, sell high; get an effective monopoly on something in high demand; be lucky. So far, not too amazing, but these ideas explain a lot. The richest man in the world today, Mexico's Carlos Slim, built his fortune on monopolies. Some of these he acquired by shrewd business deals, some he acquired through sweetheart political deals, and others he got through various techniques of suppressing rivals. The sixty billion dollars or so he's worth is about 7% of Mexico's GDP - proportionately more of the economy than Rockefeller, Morgan, and Carnegie at their peak. His wealth has put him beyond any political power, save his own.

Rockefeller, Carnegie, and others used similar tactics to achieve a similar result. Bill Gates had slightly different tactics, but the money machine was the same: an effective monopoly that allowed him to build millions of software products and sell them dear.

The WalMart story looks different. The Waltons built their empire in a commodity market that was already fiercely competetive. WalMarts secret has just been the relentless quest for efficiency and low prices, but in success, its much the same. Competitors are driven out and an effective local monopoly emerges.

Waking up with much of the world's oil in your backyard also works.

How, though, do we explain the latest generation of zillionaires, the hedge fund managers? How is it that they justify their fabulous earnings? Why doesn't market competition lead to lower fees? This question has been bothering Kevin Drum and Brad DeLong

FINANCIAL WIZARDRY....Brad DeLong asks a question today that's also perplexed me for quite a while:

I wound up being quite unhappy with my "fear of finance" piece, because it completely ducked one of the most important questions: why the extraordinarily outsized pay packets of the high financiers? Why doesn't competition — which sorta works elsewhere in the economy — cause us to see greatly reduced earnings? We understand, we think, why celebrities get paid so much — a combination of increasing returns in distribution, being the genuinely best in the world, and being well-known for your well-known-ness. But why financiers?

What is it that blocks effective entry and competition, exactly?

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