Book summary: Unlimited Wealth: Theory and Practice of Economic Alchemy by Paul Zane Pilzer
The fundamentals of economics are supply, demand, and scarcity. Economics best describes how to divide these scarce resources among a growing population. Paul Pilzer takes a very different approach to economics. He believes in Unlimited Wealth and shows examples of why technology and human ingenuity are the keys that unlock that wealth.
Why is this important to me?
I am not doing this summary to waste your time. My vision is to provide concise action steps you can take right now to improve your financial life. Paul Pilzer writes about unlimited wealth creation. The twist on him is that alchemy is the creation of wealth, while economics is simply the method of moving it around.
I am really intrigued by the concept of unlimited wealth creation. If you look at human progress in free societies, the real difference has been in creation. Commodities and resources are indeed finite, but the way we use them is limitless. The ideas are limitless. An acre of land today produces much more food than a generation ago.
Unlimited Wealth discusses several important topics. For reasons of time, I will review the salient points outlined by Pablo.
1. Supply Side Alchemy – The Wealth Equation: W=PT^n – This equation means – W (Wealth) = P (Physical Resources) x T (Technology) to the nth power where n are the effects of technological advances. The expansion of physical resources depends on technological advances. Supply-side alchemy consists of three laws. The key to this equation is what Paul calls the third law of alchemy: the speed at which a society’s technology advances is determined by the relative level of its ability to process information. Let’s see how society has progressed based on the third law of Alchemy. Humans figured out how to write, then the printing press was created, then the computer was created and the average consumer was able to buy it. Now we have the internet, social networks, search engines and everything else to share knowledge. The speed of information exchange is exponential, and so is our level of wealth.
2. Demand Side Alchemy – Demand side alchemy consists of the fourth and fifth laws. The Fourth Law states: by providing us with new products and processes that change the way we live, technology determines what constitutes a need, and therefore the nature of consumer demand. Simply put, demand can be created by creating and innovating new products. Apple is on track to be the first company to reach a trillion dollar valuation. All their products were created first and then the demand arose.
3. Sixth Law of Alchemy: The immediate economic potential of an individual, an industry, or a society can be explained by examining the technology gap, best possible practices with current knowledge, and practices in actual use. This is important today because China and India are way ahead of the US in terms of science and math. Technology struggles in science and mathematics and the societies that adapt it the fastest will create wealth the fastest. This is where the balance of power can shift over time.
Unlimited Wealth is definitely a controversial study based on regular economic theory. Being in the technology field, I agree with Paul that unlimited wealth can be created through technology and innovation. Products are being created right now that there is no market. Some of these products will fail while others will explode. Take a look at Facebook. This company came from nothing and is now valued at over $50 billion.
I hope you found this short summary useful. The key to any new idea is to work it into your daily routine until it becomes a habit. Habits are formed in as little as 21 days. One thing you can take away from this book is that scarcity is a negative mindset. I say this because if you believe in unlimited wealth creation, ideas will flourish.
