An unknown Briton has won £113,000,000 in the European Lottery.

With no more physical effort than it takes to walk into a shop and hand over a few coins, and in the space of a few days, he has achieved a place on Britain’s Rich List above all but the most successful entrepreneurs – above people who have built their fortunes over decades, through trial and error, effort and initiative, and risk and self-sacrifice.

The Lottery winner is in fact even richer than his official place on the Rich List might suggest. Rich Lists are based on estimates of wealth that are arbitrary and inaccurate. Few could actually liquidate their assets for anything like the notional sums claimed on the Rich List. The very act of liquidating a very large holding devalues it. The Lottery winner’s holding, however, is real because it is all in cash.

As if that was not enough, the Lottery winner, unlike those who earn their money the hard way, pays no tax on his windfall.

This is obviously wrong. It is a poorly run economy in which reckless gambling is rewarded more than enterprise and judgment, and in which it is easier to keep the rewards of a game of chance than it is to keep the fruits of one’s labours. It is unfair to those who earn their own money by adding value to the economy.

It is also unfair to the Lottery winner. Few are psychologically prepared for sudden wealth. Those who build it gradually over many years are better equipped to enjoy it sensibly. They are also trained to manage their money properly. Anyone who is suddenly given £100 million in untaxed cash has the potential to become a considerable player in the markets overnight. It is a great responsibility. Few have the necessary experience and expertise to live up to it.

No wonder many big lottery winners end up unhappy. They lose their privacy as the media shines an unflattering light on every aspect of their private lives. They lose their friends as it becomes harder to tell the sincere from the free-loading. They lose the satisfaction that comes from knowing that they have something because they worked for it. They lose the ability to live a normal life as security becomes an issue. Eventually many of them lose even the money itself as they become addicted to high spending without the ability to earn more.  

Better by far to earn a million over a decade through one’s own enterprise and effort than a hundred million overnight in a lottery.     

America’s recovery is slow, but there are signs of improvement, at least in some states and some sectors, for those prepared to look for them.

The problem for US politicians is that most voters are not inclined to look. They judge economic progress by the crude measure of “jobs”, and economic growth does not necessarily mean an increase in employment. On the contrary, it might mean that companies are finding more efficient ways of operating.

Some say the policies of the Federal government actually discourage growing businesses from taking on new people.

Since this blog is strictly non-partisan, and since the government’s record on employment will probably be the decisive issue in November’s mid-term elections, it is not for us to take sides.

However, it would be interesting if we could construct an experiment which enabled us to compare different approaches to the economy. For that experiment to be fair, the different approaches would have to be applied to identical situations.

That is impossible in the real world, but it is possible to compare different approaches in places where there are several common factors.

California and Texas are both big states with ethnically diverse populations. Both border Mexico and rely on immigrant labour. Both have significant agricultural and technology sectors. Both have known the extremes of prosperity and poverty in the past. Both have Governors of the same political party.

Yet it is generally accepted that Texas is coming out of recession far more strongly than California.

Perhaps one should not read too much into this. After all, the economic strength of a state varies according to how one defines “wealth”, and most definitions produce patterns that defy neat explanation. For example, several states with “left wing” reputations have a higher percentage of millionaires than most.

So it is unwise to generalise – except to say that it is clear that local variations do matter, and that different policies do produce different results. If this is true within countries, it is true between countries. US politicians should not assume that a return to economic growth will mean a return to high employment. Job generation requires effort – or at least a friendlier attitude from government towards those who might be willing to make that effort.

This post is published in conjunction with our Podcast #121 – Wealth Creation

It might seem odd when a podcast dedicated to business warns against trying too hard to get rich.

Yet it is a truism so anciently established and so authoritative that it is found even in the Bible: wealth gotten hastily will not endure.

In business circles, one often meets people who act like successful entrepreneurs. They have the suits and the cars, and they throw money around. However, something about them does not ring true. Perhaps it is the very fact that they are spending so ostentatiously – most genuinely successful entrepreneurs have learned the value of a penny on their journey and retain a healthy respect for money, even when they can afford to spend.

The high-spenders usually fall into one of two categories. Category One are basically con-men, who rarely have any real money of their own, but they pretend that they do on the principle that money attracts money.

Category Two high-rollers really do have money, and are usually honest and sincere, but they still do not quite ring true.

These are the people who suddenly became rich. Yes, it does happen – quite a lot in fact. Perhaps they won the lottery or inherited a fortune from a distant relative or happened to stumble on to a single successful business deal, almost by accident. Sometimes it is simply a matter of being in the right place at the right time.

A man can live a thoroughly unenterprising life, perhaps as an employee rising very slowly through the ranks, but if he is the one who happens to hear some decisive inside information about the markets, or who crawls his way up to board rank just in time for a management buy-out, or who exercises a share option just as the company goes public, or who owns a crucial strip of land when a new supermarket comes to town, then he can go from salary drone to millionaire almost overnight.

It is the modern equivalent of the prospector who happens to strike gold. The odds against a major strike in a gold rush were high, and most prospectors made a loss overall, but there were always enough who hit the mother lode to keep everyone else digging in hope.

The depressing thing is how even those who struck it rich often ended up poor in the end. Watching the modern versions, it is easy to see how.

They find that money does not bring happiness. Many get addicted to high spending. They forget that their windfall was a one-off. They end up scrabbling around for more money. Even where that does not happen, the suddenly-rich often feel a sense of inadequacy. Part of them feels guilty that they have not really earned their wealth.

Whether it is because they need more money or self-respect or both, they try to become real businessmen. They hang out with the genuine article and try to talk to the talk. So they become the Category Twos – and easy meat for the Category One con-men they encounter.

Without the education that can only come from years of business experience – and, above all, from learning from mistakes along the way – the poor Category Two is wholly out of his depth. Some survive long enough to learn from the mistakes, and may in time flourish. Most do not.

If all this sounds too negative, it is leading to a very positive conclusion: there is a good way to get rich – and, oddly enough, one that is also mentioned in the Bible.

If you want to be rich, stop thinking about being rich. Do not spend your time thinking about the yachts, the helicopters, the sports cars, and the supermodels you will have when you are rich. Those who spend their time fantasising on those things never end up rich. Think instead about what people want and need. Focus on developing the best possible products and services that meet those wants and needs, and on getting them to the market. Then stop thinking and act – and one day, perhaps almost without noticing, you may end up seriously and permanently rich.