How investing in the poor creates wealth for all

The rich can get richer by investing in the poor.

When I tell my rich friends this, their first reaction is: "Are you crazy?" Adam Smith, the founder of capitalism, taught us to invest in the strong, the talented, the entrepreneur — the people "good with money." Money makes money.

The poor by definition have opposite characteristics. Also, government programs take care of the poor pretty well. The market forces take care of the rest of us who try to invest, work and make money.

I'm resigned to the fact that this thinking will be followed by most of the millionaires. They will buy extra yachts and sports cars thinking the purchase will buy happiness. But there are enough millionaires, maybe 10 percent, who might want to help the poor become self-sufficient. Ten percent of 10 million people is 1 million millionaires, a large enough number to go after.

Here are the arguments for my thesis.

Some of the poor have real potential. They are starting at a low bar with much room to grow. Often rich kids have already actualized their potential because their parents and community have given them the best education, the best work ethic and some money to start their careers. Their growth potential, by and large, will be in smaller increments.

If we create a world with fewer poor people, we will have less drag on the economy. We are not in the Dark Ages where we let the poor starve on the streets. The U.S., state and local governments give the poor income security, health benefits and many kinds of "wealth distribution" benefits. But these kinds of entitlements don't create wealth. They can have the perverse effect of taking away the drive of people to work.

An "investment" in the poor, on the other hand, will create wealth because work creates wealth. And by "investing" in the poor, I mean putting them to work by education, job training and start-up capital for small businesses. The poor become workers and owners in the store, not just occasional shoppers.

If some rich people get to know an ambitious poor person, they will understand. This experience will change minds. A wealthy friend got to know a linen towel folder in a hotel and found out the person appreciated his job because it helped him educate his kids and it was a needed service for the hotel guests. That rich person became more interested in helping the poor get jobs.

But after the rich person knows a poor person and sees the value of their work, they need to act systemically to change the system by funding nonprofits helping in this area (there are many: charter schools, micro loans, micro grants, scholarships to trade schools and work-readiness programs) or by being more helpful about critiquing government spending in this area. These sorts of programs help millions of people; a millionaire's help to an individual is more personal, but limited.

How about communities starting clubs for rich people who want to invest in the poor? They will learn from each other as they go. Some will want to give to Third World countries because their dollars might go further. Think Books for Africa. Others will want to give locally so they can keep their eye on the money by knowing the local folks running the programs. Think Project for Pride in Living or Twin Cities Rise! Education will be a priority for some, and small-business creation or character building will be more important for others. Hundreds of ideas will emerge.

Let this club membership be for "millionaires only," the way the "billionaires club" of Bill Gates and Warren Buffett is exclusive. This keeps executive directors and development officers of nonprofits from joining just to meet the rich, scaring the rich from joining. That was the demise of the former One Percent Club where I was the executive director.

This voluntary path is the "American way." Most Americans don't like to pay taxes because they think the government doesn't watch the money as closely as the private sector. This plan enables them to watch their money close up and volunteer their time and talents to help magnify positive effects.

Let's hope some "rich persons" step forward to lead this effort to build a wealthier community. There are both short-term and long-term arguments for doing so. The wealthy today have their feet — or at least their investment portfolios — straddling the oceans and the equator. Poverty restricts wealth accumulation both at home and abroad. The shrinking middle class and population growth of the working poor are clear threats to America's consumption-driven economy (70 percent of U.S. GDP) and to holders of America's business equity.

Remember, Warren Buffett and the leading families of Minnesota's commerce and industry could not have accumulated their wealth if they had been born in and lived in a poor country.