The Myth of the “American Dream”

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The American Dream is a concept that groups several ideals such as freedom, prosperity and the pursuit of happiness into one. An important part of this “dream” is the individual liberties that people enjoy in the United States and other Western countries.

However, the core notion of the “dream” centres on opportunity and entrepreneurship, suggesting that one can easily build a business empire from scratch, rising from poverty to riches almost overnight.

I myself got caught up in this idea when I lived in New York in my twenties. I wanted a job on Wall Street, an apartment overlooking Times Square, and all the comforts I could imagine. I wanted to become a self-made man – Financially independent and free to make choices without having to worry about cost.

However, I quickly realized that I was beginning to long for things I didn’t need, getting caught up in a world of capitalism where people were competing to out-consume each other. That was not my dream!

Embellished Success Stories

America is branded as the land where anything is possible and everyone has the same chance of success, irrespective of their social background or economic status.

There are plenty of well-known success stories, like Steve Jobs creating Apple in his garage or Arnold Schwarzenegger arriving as an immigrant and becoming an international movie star and then getting elected Governor of California.

These stories help portraying the US as a place where success has no boundaries, as long as one works hard enough. Even if we just look at the past few years, we see stories of incredible corporate success.

Companies rising from the ground up to become major market leaders, often through the sheer genius of one or few visionary individuals. Thus, for instance, Facebook and Google were created by students with no previous business experience.

Yet their creators are now multi-billionaires, a few short years after the companies emerged. Hollywood helps with the promotion of these types of rags-to-riches stories through blockbusters such as “The Social Network“.

Of course, these types of stories have been around for years. Prior generations had entrepreneurial models such as Bill Gates (Microsoft), Steve Jobs (Apple), Ralph Lauren or Warren Buffet. All of these individuals are seen to be living the American Dream.

And we love hearing about self-made men who started with nothing and became wealthy. They provide stories that inspire us, set an example for others to follow, and keep fueling the capitalist ideal that anyone can succeed with hard work.

Governments love these role models as they lay the ground for the next generation of startups and hard-workers. Thus, these public figures and stories help keep the American Dream alive.

Uneven Chance of Success

We continuously see new waves of entrepreneurs that enter the market to try their own luck. However, for each advertised success stories, they will be many more failures.

Indeed, in many ways the distribution of economic success is similar that of a lottery win: There will be some people who win big, but most of us will end up holding losing tickets. Yet stories of big jackpots and how they change someone’s life is enough incentive to keep us playing!

(Un)fortunately, entrepreneurial success is as much a matter of hard work as it is a matter of luck. Most entrepreneurs are visionaries and hard-workers. Yet this is only a necessary not a sufficient condition to succeed. You also need to be in the right place at the right time, correctly anticipating market interest in the absence of perfect information.

Thus, the probability of someone creating a business and becoming a millionaire is very low, in much the same way as the probability of winning the lottery. There will be a handful of winners for thousands of losers.

Indeed, according to some studies, including an analysis from Joseph Stiglitz, a Nobel prize winner in Economics, the game is a little biased. We always assume every individual starts out with the same chances of success. However, in reality some people start with an advantage, for instance, being born into more educated and affluent social groups.

This is beneficial from an education, skillset, financial, and network point of view. It reduces barriers that others may need to first struggle against. Access to education and funding is key to success in most capitalist societies and is not equally accessible to everyone.

Looking back at the success stories we’ve reviewed, we see that many of these entrepreneurs started out as privileged or part of the elite. Bill Gates (Microsoft) and Mark Zuckerberg (Facebook) both attended Harvard University. Larry Page and Sergei Brin (Google) were PhD students at Stanford University. This is the competition we’re pitting ourselves up against when creating a start-up. Quite frankly, I don’t like our odds!

The Government’s Dream: Extreme Capitalism

I have seen hard-working people hopelessly chasing the American Dream without questioning the fairness of the game. They take multiple low-paying jobs in order to finance studies towards higher paying jobs. The sacrifice they make (long hours, low pay) are accepted as an initiation path into the upper-class life.

Unfortunately, many people never transcend their original socio-economic class. Temporary jobs become permanent as people get locked into student loans or mortgages. Their lives move on and they become cogs in the wheels of capitalism. And as the wheels turn, we hear the sound of broken dreams and shattered hopes.

The thing about the American Dream is that it is persistent. It smoothly becomes transmitted from parents to children, as parents make sacrifices to provide their children with the education and opportunity they never had, hoping that their kids may live the life they could not.

This means that people will continue to work hard and remain productive members of the labour force. Governments continue to earn taxes and the system remains intact. The problem is: If everyone follows this model and everyone supports their children as much as possible, then the end result remains dependent on income. The rich move higher than the average people can. Thus the class system is largely perpetuated in our world.

Sadly a large part of the American economy relies on cheap labour and – worse – the failure of the American Dream. It exploits the fact that people are willing to be exploited for a period of time as long as they can see themselves succeed later on.

Unfortunately, the majority will never become rich, and this felt even more acutely in an economic downturn. Ideally, governments want to keep people in the workforce and that requires low pay so that people don’t have a choice but to work for a living and sometimes for less.

The American Dream is just this: A dream. We dream of a better future, which generates hope, and makes us work hard. However, often the result of our hard work is a disappointing reality, rather than a beautiful dream. Unfortunately, if it sounds too good to be true, it probably is.

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Monkey Master

My wife and I are currently living in Sydney, Australia. We plan on becoming financially self-sufficient in 2015 so we can retire at 35. We are regular working people, trying to be smart about saving money and generating passive income. I want to share with you how we reached that decision and how we are planning towards financial independence. Continue Reading.

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