Economic Perspective: How to Get Rich

MARY WALDEN:

“Today’s program asks how to get rich. Mike, books and ideas about getting rich are always popular. When researchers look at who is getting rich today, do they find there’s a certain method or formula?”

MIKE WALDEN:

“Actually this question has been asked in research several times. So the research I’m going to quote today is new, but fortunately the same results have come out of that new research from previous versions of it. So we have this new paper from the National Bureau of Economic Research, a very high-profile economic research firm, and they showed that on average people that get rich are not those who make big gains in the stock market. They’re not those who have inherited wealth. Instead, people who get rich over time are people who’ve taken risks, they’ve started companies, and they’ve started companies that ultimately have become successful.”

“Now just because you’ve started a company doesn’t mean that you are going to be successful, but those who do, on average, this is the best way; this is the best path for someone to become rich. And in this new study what they found is that most of the folks who are starting those companies are under the age of 60, they’re starting small to mid sized companies, and what they find is, in terms of our questions about social mobility, people who do this and are successful, this is a way to do better than your parents did.”

“So once again I think this is another emphasis on how important entrepreneurship; how important risk-taking is. Not everyone wants to do that, but the rewards can be high.”

Mike Walden is a William Neal Reynolds Distinguished Professor and Extension Economist in the Department of Agricultural and Resource Economics at North Carolina State University who teaches and writes on personal finance, economic outlook and public policy.