In my book, Increase Your Financial IQ, I wrote about the four economic ages of humanity.
The Hunter-Gatherer Age: In the Hunter-Gatherer Age, humans relied on nature to provide wealth. They were nomadic and went where the hunting was good and the vegetation plentiful. You had to know how to hunt and to gather – or you died. For the hunter-gatherer, the tribe was social security. Socio-economically, everyone was even. They were all poor.
The Agrarian Age: The Agrarian Age saw the rise of classes between people. Due to the development of technology to plant and cultivate the land, those who owned the land became royalty, and those who worked it became peasants. The royals rode horses while the peasants walked. Socioeconomically there were two groups, the rich and the poor.
The Industrial Age: While many people would place the beginning of the Industrial Age in the 1800s with the rise of factories, I actually think of it as beginning in 1492 with Columbus. When Columbus struck out to find the New World, it was to find new sources of valuable resources such as oil, copper, tin, and rubber. During this time the value of real estate shifted from growing crops to providing resources. This led to the land becoming even more valuable. And three classes emerged: the rich, the middle-class, and the poor.
The Information Age: Today, we are in the Information Age, where information leveraged by technology and inexpensive resources like silicon produce wealth. This means that the price of getting wealthy has gone down. For the first time in history, wealth is available to just about everyone. There are now four groups of people: the poor, the middle-class, the rich, and the super rich.
This week I read about one of the major successes of the Information Age, Facebook. According to The Wall Street Journal, Facebook has struck a deal with Goldman Sachs and others to raise $500 million dollars in funding. The website is now valued
at $50 billion. It’s CEO, Mark Zuckerberg, is worth an estimated $6.9 billion. He’s now part of the super rich. Not bad for a 26-year old college dropout.
In my travels, I’ve literally seen local people texting on their cell phones while riding on the back of a donkey cart. In classrooms all across the world the Internet is readily available and technology is second nature to most kids. Regardless of socio-economic class, information is largely free and abundant. For the first time in history, people can access information and learn about anything no matter whether they are rich or poor.
And while information is valuable, it’s not as valuable as knowledge. Knowledge gives you the ability to filter out unimportant information to find the important information. Knowledge gives you the power to act on information. Knowledge is what makes you rich – not information.
My rich dad once said to me, “Oil is valuable. Many people would love to own lots of oil. But owning lots of oil won’t make you rich. It’s understanding how oil can make you rich that brings wealth. For instance, crude oil is of little value until it is refined. That is a complicated process that requires science and equipment. It takes knowledge to refine oil and make fuel. Fuel is valuable and will make you rich. But you can’t have fuel without oil.”
Today, it’s no different in the Information Age. You could have all the information in the world, but without knowledge, you would still be poor.