Though Rolling Stones’ guitarist Keith Richards’ autobiography is a great read on its own for the remarkable story it tells, there are economic lessons within that apply to all manner of concepts made frequently prosaic by books and newspaper articles. From the wealth gap, to what drives success, to taxation, Richards’ amazing story explains them all in exciting, uplifting fashion.
Considering the wealth gap, it’s often a confused concept. No doubt there are broad income differences throughout the world, but that’s frequently the case because the highest earners regularly reduce the lifestyle gap through innovations that make former luxuries quite commonplace. Richards revealed this numerous times in Life.
Indeed, while Richards’ mother worked as a Hotpoint washing-machine demonstrator, “it took her ages to get her own.” Maytag (NYSE:WHR) and Sears (NASDAQ:SHLD) come to mind as successful businesses headed by highly paid executives who achieved their pay by virtue of making washing machines broadly accessible. Richards also notes that his family “didn’t have a record player for a long time”, but thanks to innovators who were doubtless well compensated for mass producing the once obscure disc player, someone of Richards’ humble beginnings was eventually able to buy and play music.
The above was particularly important when we consider Richards’ career path. As he put it, “I’ve learned everything I know off of records”, and “Being able to hear recorded music freed up loads of musicians that couldn’t necessarily afford to learn to read or write music, like me.” Economic commentators love to bash the rich as greedy, but the profit motive driving music industry executives provided Richards with a musical education on the relative cheap.
Commentators regularly bemoan inequality in terms of opportunity while seeking government fixes, but Richards’ inspiring story reminds us that starting at the bottom is often a blessing. His first guitar cost 10 British pounds, but since his mother couldn’t afford to pay for it, she got someone else to purchase it, and then that someone eventually defaulted. Notable here is that Richards “couldn’t afford an electric” guitar, but his family’s inability to pay for an electric was instrumental in his rise as a guitar player.
As he explained it, “I firmly believe if you want to be a guitar player, you better start on acoustic and then graduate to electric.” Rather than allow his reduced economic circumstances to act as a barrier to achievement, he accentuated the positive, that he had a guitar, and proceeded to “play every spare moment I got.” Clearly Richards started at the bottom, and had less financial resources to fund his development much as there’s inequality among children today, but this was no deterrent.
Richards’ view is that “if you want to get to the top, you’ve got to start at the bottom, same with anything.” Wise words from a wise man, and something politicians would do well remember as they seek to achieve equality through legislative fiat. Being at the bottom often drives creativity, as Richards’ story attests. Thank goodness British politicians weren’t giving out electric guitars back in the ‘50s.
Considering the Rolling Stones’ humble beginnings as a band, where they began and where they ended up exposes in living color the lie that says upward mobility is a myth. As Richards recounts about the Stones’ early days, “At the time poverty seemed constant, unmovable.” Living in a horrid Chelsea flat with Mick Jagger and Brian Jones, Richards tells the reader about live music venue Wetherby Arms, and how “Usually I’d go round the back and steal their empties and sell them back to them. You got a couple of pence on a beer bottle.”
Every little bit counted because while the Rolling Stones sell out stadiums today, in the early ‘60s they were lucky if they got paid at all for their concerts. Modern theorists would call this exploitation as they do any time individuals or groups are “underpaid” in their eyes, but for the band these allegedly stingy concert promoters provided them with invaluable experience that eventually put them in a position to charge quite a bit.
Still, at the time “hunger was the order of the day” given how bands almost by definition start at the bottom. Of course any profits they were able to cobble together went toward “guitar strings, mending amplifiers and valves. Just to keep what had going was an incredible expensive.” All of this can’t be stressed enough.
For one, the fact that limited profits were immediately reinvested in the business that was the Rolling Stones reminds us how crippling corporate taxes can be, particularly on businesses just getting started. When politicians seek high taxes on businesses they’re robbing them of their future. Second, in the early days they desperately wanted a drummer by the name of Charlie Watts, but they couldn’t initially afford him. Again, when profits are taxed, the ability of a company to grow is compromised.
The above deserves even more mention. So often we hear about “excess profits” used to pay “exorbitant salaries.” But as Richards noted time and again throughout Life, a bad band is a function of bad musicians. As he put it, “To a musician, playing below your mark is soul destroying”, and as such, the genius of the Rolling Stones was the accomplished nature of all the band’s musicians. Sure enough Richards recounts how Mick Jagger essentially tried to go solo on the cheap with unfortunate results. Talent matters, and it costs money.
Considering the Stones’ eventual grand success, it can’t be stressed enough how much work it required to get to that point. Former Congressman Richard Gephardt once said that the rich, far from having achieved wealth through hard work, had simply won “life’s lottery.” The story of the Rolling Stones exposes Gephardt’s musings as patently absurd.
Indeed, as Richards noted about the band’s early days, “Benedictines had nothing on us. Anybody that strayed from the nest to get laid, or try to get laid, was a traitor. You were supposed to spend all your waking hours studying Jimmy Reed, Muddy Waters, Little Walter, Howlin’ Wolf, Robert Johnson. That was your gig. Every other moment taken away from it was a sin.”
Speaking of “gigs”, Richards recounts that “The gig never finished just because you got off stage.” Particularly during the early years, the band worked nearly non-stop with concert tours, then would immediately go back into the studio to record another album that would beget another tour. Richards has over the years played through fevers, a finger burned to the bone, and the death of a child. Commentators are often blinded by substantial wealth enjoyed by successful people, but they rarely acknowledge the hard work and personal sacrifice necessary to reach that point.
That’s why the commentary suggesting the rich must “give back” has always bothered this writer. Implicit there is that they’ve taken something, rather than done something pleasing for consumers such that those same consumers have showered them with their dollars.
Along the lines of the above, a more confiscatory estate tax is often trotted out as a way of equalizing wealth inequalities. Richards not surprisingly didn’t talk about the estate tax in Life, and happily kept his autobiography free of the nitwit political commentary that so often fills celebrity memoirs, but his story reminds us that we all stand on the shoulders of giants such that we’re the beneficiaries of success whether we inherit the fruits of success or not.
Indeed, though Richards once worshipped and learned from Elvis Presley guitarist Scotty Moore from afar, “Now I know the man, I’ve played with him.” Richards wasn’t handed the money earned by Moore, or for that matter some of his other idols including Chuck Berry, Jimmy Reed and Bo Diddley, but their brilliance on the guitar surely informed his, which means Richards inherited something far greater than money.
Considering income taxes more broadly, Richards exposes the hubristic absurdity of confiscatory rates. With England taxing the country’s highest earners at 83% by the 1970s, Richards saw those rates as the equivalent of “being told to leave the country.”
And sure enough the Rolling Stones did just that. As Richards recounts, “The last thing I think the powers that be expected when they hit us with super-super tax is that we’d say, fine, we’ll leave. We’ll be another one not paying tax to you.” Of course that’s the beauty of wealth of the mind, as opposed to immovable wealth of the earth (think oil). Wealth of the mind which the Rolling Stones possessed in abundance made them highly mobile on the way to the band producing its classic album Exile on Main St. away from England in the South of France. England made the cost of success in the ‘70s expensive, so the Rolling Stones moved on. Amen.
Considering trade, the deal that ensured the Rolling Stones’ long-term success was a 1965 contract with Decca Records. As Richards recalls, “It was an incredibly successful deal for both parties. Which is what a deal is supposed to be. I’m still getting paid off of it; it’s called the Decca balloon.” So often economic journalists decry imports given the belief that they weaken us, or that trade between “countries” must be balanced, but as Richards reminds, trade is always a two-way street whereby individuals exchange what they have for something they don’t. The Rolling Stones’ surplus was popular music, and they exchanged it with a company whose surplus was successful distribution of that music.
Both sides made out big on their trade, and that describes trade more broadly. If left alone by governments, it involves individuals exchanging what they have for what they don’t, and it’s wealth enhancing for both sides. This should be remembered the next time some politician laments the opening of markets and the economic “losses” that will result from letting individuals transact with whomever they want, and without regard to country border.
Lastly, a frequent question posed to Richards is “Why don’t you give it up?” Richards’ response, one that is typical of very successful individuals is that “I can’t retire until I croak. I don’t think they quite understand what I get out of this. I’m not doing it just for the money or for you. I’m doing it for me.”
Richards has achieved on a stratospheric scale because he’s doing the work he loves for himself. Rich people tend to love what they do, so to achieve economic success it’s important to find something you enjoy so much that you’ll work incredible hours at it. In a fascinating book full of lessons, that’s the most important lesson of all.
John Tamny is a senior economic advisor to Toreador Research & Trading, a senior economist with H.C. Wainwright Economics, and editor of RealClearMarkets and Forbes.