- It’s difficult to understand exactly what a billionaire’s spending power looks like in real-life terms.
- If you scale a billionaire’s income down to median American income of $50,000 per year, you see that $4,000 is about equivalent to $1.
- On this scale, a year of tuition at a top university costs about $15, and a mansion in California costs about a week’s pay.
The world’s wealthiest are prospering. As of February 2017, there were about 2,000 billionaires in the world. This micro-elite controls over US$7.6 trillion, an increase of 18 percent from 2016.
A billionaire’s spending power is difficult to grasp, both because most people do not correctly intuit large numbers, and because a billion dollars far outstrips most people’s experience.
What does a household budget look like to a billionaire? To find out, let’s scale down a billionaire’s income to $50,000, the median American income, adjusting budget items proportionally.
A year in the life of Joe Billionaire
To start, we need to estimate a billionaire’s annual income.
One cube represents the median U.S. worker’s income.Andrew D. Hwang, CC BY-SA
In the 30 years from 1987 to 2016, Bill and Melinda Gates amassed about $120 billion. This figure represents $80 billion in net worth and $40 billion controlled by their charitable foundation.
The Gates’ average annual income for these years is $120 billion divided by 30, or $4 billion. (The Bill and Melinda Gates Foundation is a strategic partner of The Conversation US and provides funding for The Conversation internationally.)
According to Forbes, the wealth of Amazon CEO Jeff Bezos increased last year from $72.8 billion to $108.7 billion. Despite billion-dollar hiccups caused by daily stock price fluctuations, Bezos’ 2017 wealth increase was at least $32 billion, over $1,000 per second around the clock.
The Gates and Bezos are extremes. But what about a more typical billionaire’s income?
Let’s assume a new fortune has been acquired over about one decade. Since the median worth on Forbes’ list is about $2 billion, a ballpark estimate of annual income is one-tenth of this, or $200 million.
In absolute terms, $200 million per year is over $6 per second around the clock, equal to the global median annual income every eight minutes. Each year, Joe Billionaire amasses 4,000 median American incomes.
In 2017, Jeff Bezos raked in 150 times more than Joe Billionaire – the equivalent of 600,000 median incomes.
A billionaire’s household budget
Because Joe Billionaire accumulates 4,000 median American incomes, a $4,000 expenditure for Joe Billionaire is the same fraction of income as $1 for a median American earner.
Let’s call $4,000 one “Joe buck,” or J$1. Joe Billionaire’s annual income is J$50,000. Thus, a $2,000-vacation package costs J$0.50, proportional to a half-dollar from a middle-class income.
At this scale, a generous annual food budget comes to J$3. One year’s tuition at a prestigious university costs J$15. An extended stay in a top-quality hospital might run J$50. For J$150, Joe Billionaire can pick up a large middle-class home in most parts of the United States. If that’s too modest, a week’s income buys a mansion in Rancho Palos Verdes, California. Who needs student loans, health care and mortgages?
Joe Billionaire can and does purchase goods and services not available to the rest of us. J$2,500 builds a media mouthpiece. Comparable political donations may be followed by a Cabinet appointment.
Unlike a tithing purchase for you or me, a one-time J$5,000 donation for Joe Billionaire has no effect on spending power. We’re speaking of a scale where lavish living costs a few hundred Joe bucks. Next year will bring another J$50,000.
Matters of perspective
Shutterstock
Ronald Reagan fomented outrage at one welfare recipient cheating the government of $8,000, or J$2. Unfortunately, we are not proportionally outraged by theft and losses dwarfing the human scale.
By comparison, the Reagan-era savings and loan scandal, the Enron scandal, the mortgage-backed securities crisis and the annual losses to offshore tax havens cost ordinary taxpayers hundreds of billions of dollars, tens of millions of times more than one welfare cheat. That’s enough to drain or break even Jeff Bezos’ bank.
Public services are inexpensive by comparison. The 2017 budget for the National Institutes of Health was about $33 billion; for the National Science Foundation, $7.5 billion; for the National Endowment for the Arts, $150 million. The 2017 Boston city budget was just under $3 billion, including about $1 billion for public schools, $200 million for pensions and $78 million for the Public Health Commission.
Most Americans don’t understand how inequitably American wealth is distributed. Worldwide, wealth inequality is even more stark.
We live in a world where two dozen of the wealthiest individuals could collectively fund health and science research for the United States, where any of the thousand billionaires could individually fund the NEA with no practical impact to their purchasing power. Participatory government may remain, but only the ultra-wealthy need apply.
A simple solution in only 10 stepe:
1 Abolition of property in land and application of all rents of land to public purposes.
2 A heavy progressive or graduated income tax.
3 Abolition of all rights of inheritance.
4 Confiscation of the property of all emigrants and rebels.
5 Centralisation of credit in the hands of the state, by means of a national bank with State capital and an exclusive monopoly.
6 Centralisation of the means of communication and transport in the hands of the State.
7 Extension of factories and instruments of production owned by the State; the bringing into cultivation of waste-lands, and the improvement of the soil generally in accordance with a common plan.
8 Equal liability of all to work. Establishment of industrial armies, especially for agriculture.
9 Combination of agriculture with manufacturing industries; gradual abolition of all the distinction between town and country by a more equable distribution of the populace over the country.
10 Free education for all children in public schools. Abolition of children’s factory labour in its present form. Combination of education with industrial production
Fucking Marxist eh?
I am assuming sarcasm. I have assumed before and been oh so wrong.
1) did they, or whomever they married for it, or whomever they inherited it from, earn it legally? Yes? Hooray for them! No? Send them to jail.
2) You did not earn it? Too bad for you. Hopefully you believe in re-incarnation so as to get another chance in a later life.
The whole “inequality” argument is bullshit. What they mean is that those that are successful need to have their assets stripped off them by force and redistributed to those poor, unfortunate souls that are too lazy, too stupid, too irresponsible, too poorly educated and skilled, or just victims of bad luck. Yep, that will work -punish the successful.
A great many billionaires are self-made, including the two mentioned above, Bezos and Gates. They worked long and hard and skillfully to get what they have. They employ hundreds of thousands of people. They worked and created value for what they got. They were ruthless businessmen, but that is not illegal, nor even immoral. It is just how business often is.
Here is an idea. People need to quit whining, and go out and get some. Get educated in a field that affords the opportunity for a good income, and not in English or Art History. Work hard. Get skills. Marry wisely. Spend less than you earn. Work at jobs pay well, and avoid those that do not.
Life was never meant to be fair, nor to be equal. It requires you to compete. But that is too damn hard. Stealing it from someone else is so much easier than actually working for it. Yes, that will surely work. Look at the nations where that has been tried. Has it worked? No. And who ended up with the confiscated wealth in the end? Why, it is the politicians and their cronies.
Envy is a terrible thing. Get over it.
Envy and greed are related. They are both evil.
Yep. Witness the preceding comments.
The whole inequality thing is mostly misstated.
If you earned it (Gates, as much as I don’t like him) vs. The Lockheed stockholders (who made out due to crony capitalism).
BTW, I’ve got a bigger sailboat than those dweebs in the photo and I’m POOR! A question of allocation of resources, don’t cha know.
Greed. Ambition. Where you see a sin, I see a benefit for all humankind.
Socialism and stifling human ambition and stealing from the productive, no matter how much they have, will end in disaster. The world has shown that over and over.
What gives anyone a right to take what someone else has honestly earned? Tax, especially for redistribution, is theft.
Gates has already given away billions. He intends to give almost 100% of it away. That does not sound greedy to me. Bezos has not stated his intentions. So far he has given little away. But it is his, to do with as he sees fit. To eye up that which he has made honestly, best I know, as on object for redistributeion is far more evil than greed.
I think you’ll find lots of monopolistic practices, crony capitalism, dynastic wealth, criminal activity and outright fraud and regulatory moat building along with payoffs and anti competitive bullshit all over the place. Add to that the funniness going on with the value of OUR money. Yes, OUR money. We are forced to use it, aren’t we. It isn’t envy that you are reading from me but believe what you will.
Answer this question: what will be your opinion when the 1% own 99% of the world?
Remember, all those $$$s are a claim on real world resources.
You think you see? Well, then, please enlighten us on what your examples have done, re monopoly, cronyism, fraud, regulatory moat building, payoffs, etc..
Bezos, then Gates. They both started with nothing. Wonder how that happened given all the roadblocks you say exist.
You are lying, and you know it. With Microsoft, you can make a partial case re monolpoly (countered by that little outfit Apple, of course). They did a few shady things re some add-ons. But how about examples of those things re Bezos and Gates. Come on, big boy, you must have examples of the things you are accusing them of.
What a crock. Envy is consuming you.
The billionaires will never own 99% of the world. The one percent now own half the world’s wealth. Given so many own nothing, it is hardly surprising, now is it? Hell, I probably own more than the bottom 30% myself. You too, for that matter.
I can’t help you LLPOH.
Both Amazon and Microsoft are monopolies. Also, dynastic wealth is and has been a scourge on mankind. Don’t we rail against the Rockefellers, Morgans and Rothschilds? You don’t think they’re the only ones do you? How about the DeBeers et al?
You hate big government but you love big corporations. Weird.
Remember, all those $$$s are a claim on real world resources.
Que sera sera.
Amazon and Microsoft are not monopolies. That is silly,and is totally incorrect.
Amazon has literally millions of competitors. Walmart. Kmart. Etc ad infinitum. Microsoft has Apple, open source, google, etc. etc. etc.
Re inherited wealth, I am no big fan. I on the one hand believe that if people have paid taxes on their wealth they should be able to leave it to whom they please. On the other hand, it tends to concentrate wealth over generations.
The wealth dilutes over time, however, as it has done in the Rockefellers, Morgans, and Rothschilds.
I do hate government. Nothing especially wrong with big business unless they behave illegally. Big business allows for economies of scale that otherwisecould not happen, and allows for development that would be impossible without big business. Cars are one such example. It is damn near impossible to make cars affordable on small scale.
How does Bezos become the richest person in the world running a company that’s never made a true profit other than accounting gimmicks?
That’s not capitalism.
Any country that has a central bank isn’t capitalist. Having a central bank is 1 of the main tenets of communism.
The only 2 places that may be closest to a capitalist system are Hong Kong and Singapore.
Economan – a company is worth what someone is willing to pay for it. As for me, I look for profits. It is currently trafing on aP/E of around 300. That seems insane to me. I guess people believe that big profits are coming.
Underwear Gnomes’ Business Plan:
– Steal underwear
– ????
– Big Profits!
Still working Step #1…
Envy and Greed are better candidates for being the root(s) of all evil. While love of money encompasses greed and envy inspires brother to slay brother, nothing quite explains what enticed Eve to take that apple, taste it and then give it to Adam, does it?
She was female. That explains it all.
Heh, that was going to be my answer.
Eff the both of you on the horse (probably female) you rode in on.
See below and take a double helping.
25% of all PCs are owned by the government. Dealing with the government requires file transfers, etc. The presence of this “buyer” in the marketplace creates an artificial benefit to Mr. Gates that is funded through the direct theft of monies from everyone else. “Legally-earned?” Yes. Immorally earned? Yes to a great extent. Without the government purchases would the situation be the same? Who knows. And all those trillions to expand, buy, acquire, etc. all funded by the Federal Reserve (most definitely NOT US savers). If savers were being paid a TRUE and FREE MARKET interest rate for their monies, Mr. Gates and Mr. Bezos would have been required to borrow at MUCH HIGHER rates of interest. Would they have gotten so big? Doubtful. And what about all that debt-based buying that funds Amazon and even PC purchases. Without the criminal Federal Reserve would so many have had the money to buy up all these things?? Doubtful. And what about all the businesses that compete with them. Would they have had so many financial difficulties were savings not destroyed by the Fed, their property taxes so inflated by state and local governments, or regulatory burdens so high from state and federal regulators? Crony Capitalism is INSIDIOUS. There is virtually NO RICH PERSON ALIVE who didn’t get there with the DIRECT ASSISTANCE of the federal, state, or local governments or their policies. Could anyone have benefited from these same policies? Some, maybe, but most are written specifically with certain “friends” in mind. Mr. Gates and Mr. Bezos are definitely “friends” of the powerful.
“Why, it is the politicians and their cronies” Bezos and Gates are their cronies. Just sayin’.
Older version:
The ant worked hard in the withering heat all summer long, building his house and laying up supplies for the winter. The grasshopper thought the ant was a fool and laughed and danced and played the summer away. Come winter, the ant was warm and well fed. The grasshopper had no food or shelter, so he died out in the cold. Moral of the story: Be responsible for yourself!
Modern version: The ant worked hard in the withering heat all summer long, building his house and laying up supplies for the winter. The grasshopper thought the ant was a fool and laughed and danced and played the summer away.
Come winter, the shivering grasshopper called a press conference and demanded to know why the ant should be allowed to be warm and well fed while others were cold and starving. CBS, NBC , PBS, CNN, and ABC showed up to provide pictures of the shivering grasshopper next to a video of the ant in his comfortable home with a table filled with food. America was stunned by the sharp contrast.
How could this be in a country of such wealth, this poor grasshopper was allowed to suffer so?
Kermit the Frog appeared on Oprah with the grasshopper and everybody cried when they sang, ‘It’s Not Easy Being Green.’ Acorn staged a demonstration in front of the ant’s house where the news stations filmed the group singing, ‘We shall overcome’. Jeremiah Wright then had the group kneel down to pray to God for the grasshopper’s sake. Nancy Pelosi and Harry Reid exclaimed in an interview with Larry King the ant had got rich off the back of the grasshopper, and both called for an immediate tax hike on the ant to make him pay his fair share.
Finally, the EEOC drafted the Economic Equity and Anti – Grasshopper Act retroactive to the beginning of the summer. The ant was fined for failing to hire a proportionate number of green bugs and, having nothing left to pay his retroactive taxes, his home was confiscated by the government Green Czar.
The story ends as we see the grasshopper finishing up the last bits of the ants food while the government house he was in, which just happened to be the ant’s old house, crumbled around him because he did not maintain it. The ant had disappeared in the snow. The grasshopper was found dead in a drug related incident and the house, now abandoned, was taken over by a gang of spiders who terrorized the once peaceful neighborhood.
Moral of the story: This what happens when you give government your responsibility and your wealth.
“30 Blocks”
+10 Grog. Excellent.