Core Concept Conversation: What is wealth?

This is a Core Concept Conversation post. The topic is what wealth is and what it means to create it, largely based off of Paul Graham’s essay How to Make Wealth.

I’m not clear on what wealth actually is. PG seems to contradict himself in the essay. In footnote #4 he says:

There are many senses of the word “wealth,” not all of them material. I’m not trying to make a deep philosophical point here about which is the true kind. I’m writing about one specific, rather technical sense of the word “wealth.” What people will give you money for.

But he also defines wealth as the stuff that you actually want:

Wealth is the fundamental thing. Wealth is stuff we want: food, clothes, houses, cars, gadgets, travel to interesting places, and so on. You can have wealth without having money. If you had a magic machine that could on command make you a car or cook you dinner or do your laundry, or do anything else you wanted, you wouldn’t need money. Whereas if you were in the middle of Antarctica, where there is nothing to buy, it wouldn’t matter how much money you had.

This might be a nitpick, but I think there are some concrete differences between these two things.

One example PG mentions as making wealth is open source software (OSS). There is a lot of OSS that I use but wouldn’t pay for if it costed money. For example, I use the library lodash but if it wasn’t free I would just use underscore instead, which is extremely similar. So that’s a situation where you get value from something but wouldn’t pay for it because there happen to be similarly valuable products available for free.

I get the sense that the OSS would still be considered wealth though and that the question of whether people would spend money on it is moreso intended to be used as a proxy for whether they assign any value to it. If you assign some amount of value to something (greater than $0.01) in theory you’d be willing to spend some amount of money on it. Here the only reason people wouldn’t actually be willing to spend money on it is because there happen to be other libraries available for free. I don’t think this is uncommon though. For example, there are a lot of blog posts available for free. In a world where this wasn’t true I’d probably pay to read some of them, but in our world where it is true I would not.

Another question I have is about what wealth actually is involves the distinction between what people want and what they like. Consider Facebook. People want to continue doomscrolling but they don’t actually like it: it doesn’t make them happy. So is that wealth?

And how exactly does wealth relate to transient things? Consider a really good croissant. It’s something that you want, like and will spend money on, so it seems to fit the all of the potential definitions of wealth I’ve discussed so far. But after you eat it, it’s gone. Does that mean that you lost the wealth? That it only existed temporarily?

What about if Alice and Bob have a good conversation? Alice creates wealth by providing conversation to Bob that Bob enjoys and vice-versa? And if it’s a bad conversation would that mean Alice is taking wealth away from Bob or just pissing him off?

What about platforms? Facebook without the user generated content is nothing. So is Facebook making wealth, or is it enabling it’s users to make wealth? Probably both, I suppose. If there was user generated content but the news feed showed you stuff you weren’t interested in, that wouldn’t be wealth since you don’t actually want it, so I think it’s the combination of user generated content and presentation.

Something else I’m not clear on is when you are a step or more removed from the end product. Is that wealth generation? Ie. if I as a programmer refactor some code, that has zero impact on the end user (immediately after I finish) but it’ll enable me to move faster in the future and create more wealth. So did I actually create wealth with the refactor or did I enable my future self to create wealth more easily? I’m not clear on what the answer is.

And what about product managers and designers? Suppose a product manager comes up with a cool feature, the designer creates some mockups, and then I as the programmer code it up and deploy. The proximal cause of the new feature existing in production is me deploying it, but the work of the product manager and designer were distal causes. So did they create any wealth?

To continue that story, suppose we all go to the beach after work and enjoy swimming in the ocean. If wealth is the stuff we actually want (or like), is the beach wealth that we have access to for free? I think so, right?

I’m also interested in hearing about whether these are just PG’s ideas about what wealth is or if this it is commonly agreed upon, eg. by economists.