Much to the dismay of the socialists, rich people keep on getting richer, and the poor get poorer. A recent report from Oxfam indicates that the world’s top 1 per cent richest increased their wealth by $42 trillion over the last decade. Countries where socialist principles were adopted as the ideology for establishing governing policies seemed to have failed miserably. There is a renewed global focus on solving this economic disparity. From my simplistic viewpoint as a physicist and a math tutor in my retired life, the fundamental answer lies in knowledge of math.

If one wants to bring equity to society, the entire population must first learn mathematics as a mandate. Let us start with the economic basics. The first step in building wealth is to learn how to manage money. One must live within one’s means; the total money spent each month must not exceed the total money coming in (from income, donation, inheritance, gift etc.). Preparation of a monthly budget is essential. To make an accurate budget one must be able to anticipate all expenses; recurring expenses can be estimated based on actual numbers of past months. To plan a budget for unexpected expenses such as repairs, health problems and loss of job, some assumptions must be made which could be changed later if necessary. Clearly doing a budget requires math.

As part of the budget, one must keep provision for saving a fraction of spendable money, no matter how small the amount is. In this context it is necessary to understand how money grows, whether it is saved in a savings account or CD or stocks. Basic knowledge of interest rates, compounding of interest and exponential function are very helpful. Stashing money under the mattress is not an acceptable practice. Next comes an understanding of the taxation process. When total income is below a certain threshold, there are no taxes but income tax increases with income.

As a result, one must explore expenses which are exempt from tax (mortgage interest, property tax, interest on retirement savings and certain charities, for example in the US) and spend accordingly. The financial picture gets more complicated as income continues to grow. If one goes into business, the associated bookkeeping involves a lot more than basic arithmetic. One must have a solid grasp of how the business will make money; especially the difference between fixed and variable costs and the cost of carrying inventory. However, these topics are not that difficult to learn.

One must have a clear understanding of the difference between buying a house or tangible properties which appreciate with time and buying a car or similar items which depreciate. Unlike bank deposits, real estate investments do not continue to grow monotonically going through severe ups and downs but typically grow over a long period. Such investments are not for instant gratification. Knowledge of probability calculation will also teach the futility of gambling and playing lotteries. Investing in stocks and bonds takes financial planning to a whole different level. The stock market is the place where haves and have nots start to go separate ways.

It is a lot more than math; it requires a continuous tracking of the global trade, profit and demand in each sector, economy of key countries, government regulations, geopolitical events, and so on. One of my physicist friends once said, “Had we studied how to play the stock market instead of studying quantum mechanics, we would have been all millionaires by now”. That is a profound statement. I can readily confess that even though I understand the basic stock and bond trading I have no clue about lots of subtle items such as “derivatives”, “shorting a stock” and various types of “annuities”, even with a PhD in physics. People who are not wealthy by inheritance become so either by investing in real estate or stocks or both.

A poor person without a good education in basic math will never understand investments and not be able to get out of poverty. Here, I am not talking about calculus, algebra or trigonometry but a comfort level in dealing with numbers and simple operations such as addition, subtraction, multiplication and division. It is shocking for me to see so many people in America having no appreciation for the difference between buying something on credit versus paying cash. Here are my thoughts on how we can achieve this mastery of math. Middle-school students should be encouraged to follow sports statistics of their favourite professional players and understand their grade point averages.

They should engage in solving puzzles involving numbers, such as “Sudoku”. Financial growth can only happen when you know how to count money. It has nothing to do with race, culture, or educational level. In addition to classroom teaching, “labs” involving mathematical games should be introduced to make learning fun. Every student must be encouraged to open a bank account from age ten and learn how to balance a cheque book to get a flavour of owning money and associated satisfaction. In addition to selling lemonade (which involves nothing other than water, lemon and sugar) at street-side lemonade stands, kids should be encouraged to sell items they can make themselves (brownies, hotdogs) and keep track of all the spending involved in making them. Some business courses must be made mandatory at high school level.

When I was working at Sony, part of a management course was playing a board game where each participant was a make-believe CEO of a company with some “paper money” as initial investment. The dice could roll and land on different squares dictating the next step, such as, “Buy more material” or “Invest in Research and Development” or “Warehouse is burnt down; repair it” etc. We had to decide how much money to allocate to different causes At the end of each day, we had to prepare a “Profit and Loss” statement for the “year” (represented by a day). After a three-day session, we had to prepare a report for the shareholders. There are other similar games.

The whole point in these games is that the business environment changes continually, and we must adjust our strategy accordingly. However, changing strategy requires quantitative estimates of various outcomes on profit and hence math ability. Instead of young people getting addicted to meaningless video games involving mythical figures or online gambling, such business-oriented games would sharpen their brains. Game developers should be given incentives to develop such games. However, I do believe that the people in power have rigged the process of gaining wealth in their favour by making the mathematics involved unnecessarily complicated because wealthy people do not want everyone to get wealthy.

One must realize that the solution to social injustice is not to redistribute existing resources equally to all people in the society; it would only be a temporary solution because it is human nature to accumulate wealth by exploiting others by various manipulations. The solution is for everyone to learn these games. Successful investment in stocks requires knowledge of many topics other than math. However, once a person starts to accumulate wealth based on basic arithmetic, the desire to gain more wealth will drive him/her to learn other necessary subjects including more advanced math, economic principles and politics. This will be a secondary benefit of desire to become wealthy. Moral of my story: “Math is the path to wealth”.

(The writer, a physicist who worked in industry and academia, is a Bengali settled in America.)