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Comment by jonnathanson | Hacker News Reader

"Even if you'd eventually make $50m, your life wouldn't change much from a net worth of $14m to $50m. You could buy a nicer jet?"

I know you're kidding around here, but all kidding aside, whether your net worth is $14M or $50M, you can't afford a jet. (I mean, nominally speaking, you can front the sticker price -- but you'll get eaten alive on fuel and maintenance over the jet's useful lifespan, and the jet as an asset is depreciating all the while.)

I say this almost as a reflex. I used to work in talent management many lifetimes ago, and I'd actually find myself having this talk with people in this specific situation. Explaining to someone who just made $10M on a single movie that s/he can't afford a jet is a surreal experience. Sorry for the tangent!

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I dined once with a billionaire and a couple of multimillionaires. The billionaire owned a jet. The multimillionaires were envious of him because they only owned jet timeshares.

(If you own your own jet, it's always where you want it, you can decorate it the way you want, and you can leave your stuff in its bedroom and living room. It's like having a pied-à-terre in a city instead of renting a hotel room each time you visit.)

The operating cost of a jet that's actually ready at your beck and call also includes its crew. That's maybe another $200k/year, or 4% annual interest on $5M principal, so add another ~$5M to the wealth required in order not to go broke this way. (Disclaimer: I unfortunately have neither the practical experience nor finance knowledge to know if I've used the right fully burdened labor costs and multiplier, but it's going to be in that ballpark.)

Such hideously wasteful extravagance, and how sad that these people who are already absurdly rich are still greedy for more.

Not really. Buffett bought a jet, after calling it indefensible for years, and actually named it The Indefensible.

I reckon it is a good investment for many CEOs. There time is worth FAR MORE to their companies than whatever a jet costs to run, the saved time is invaluable as is the clarity that comes with better conditions when flying.

How much time does owning a jet actually save?

Door to door from NYC to NC is about 4hrs best case commercial and 2hrs private (Teterboro). Longer distance saves less as a percentage.

It's not just door to door time, but schedule flexibility. Not every route has a direct flight, multiple flights per day, etc.

Many people schedule meetings to end right before they have to leave for the airport and catch the last flight back home for another important meeting the next day. Would prefer that someone making decisions impacting the livelihoods of thousands of people each day is focused on the issue at hand, not catching the next flight.

Because video conferencing is so 1990s

I am a [piston-engine] pilot (only use mine for business a few times/year; most is personal/family travel). However, I spend a lot of time with other entrepreneur pilots and many believe that their airplane is instrumental in their business.

Being able to show up, in-person, walk around, shake hands, interview the customer, look them in the eye, walk their factory floor or otherwise see things first hand and then still make it home to put the kids in bed is far more impression setting than dialing into a video call.

What little I've used mine for business, being able to be out and back the same day, direct, makes it more likely that I'll bother to show up (vs call or visit annually). Video conferences are better than phone calls, but a poor substitute for an in-person visit.

Because video conferencing, at least the kind that most of us can afford without specialist equipment, is still annoyingly unreliable in 2017.

Not saying every meeting has technical issues, or even most of them, but some do and finding a technology that everyone who needs to be in the meeting can use given different corporate standards is a PITA.

It's still also no substitute for meeting face to face over the long term.

He changed the name to the Indispensable.

A major advantage to buying a jet is depreciation.

Buffett, yes. But I remember talking to a group secretary who'd been an executive secretary in the Dot Com heyday. She flew to Paris on the Concorde for bi-weekly meetings.

Cuz it was important.

Buying a jet creates high paying, skilled jobs which support families, their children's education, and so forth. The downstream effect from the purchase includes the pilot, the airport expenses, maintenance crew, and the taxes on the expenses and all of those salaries.

Not a cent of the money is in any way wasted.

I'm reminded of the Maryland luxury tax, which allegedly crippled their boat building industry and put a lot of middle class people out of their jobs. I say allegedly because I remember the story, not the source that confirmed that there weren't other coinciding factors.

May I suggest you read this: https://en.m.wikipedia.org/wiki/Parable_of_the_broken_window

Fuel and depreciation is simply wealth being destroyed.

umm that is literally the opposite of broken window fallacy

It certainly seems like an example of the broken window fallacy to me. Invoking the creation of jobs to refute the claim of wasting labor is the same illogical argument. It's just redefining bad as good and pretending it is an argument. Jobs are not a scarce resource. Labor is a scarce resource. Capital is a scarce resource. Instead of making cake for the rich, a baker may instead make bread for the poor.

Making cake for the rich isn't an example of the broken window fallacy either, and I'm not sure what that has to do with anything.

Cash for clunkers is an example of the fallacy, operating a vehicle (be it a car or jet) for work/pleasure is not.

No, I don't believe fuel and depreciation are being destroyed. I think that is the difference between this situation and the broken window parable. They are simply being traded for a service to arrive at destinations swiftly. If we judge purely off opportunity cost the billionaire's time is worth a lot more than the average layman. The extra cost in the goods and services of a private jet may very well be worth the expense to the billionaire.

Renting a jet to get from A > B is no slower. But, it's a lot cheaper and the difference in costs is not a net economic benifit.

Fuel and depreciation are only destroyed wealth if there is no lost opportunity by not purchasing them, and that entertainment alone is not a sufficiently worthy value.

Presuming so would also argue that the majority of human endeavor is also waste; everything from entertaining TV shows to having small animals as pets to music lessons to trips to private space flight to works of fiction.

> Such hideously wasteful extravagance

You're moralizing the issue, which points to the fact that most of what you said is nothing more than a personal subjective judgement. For someone with that wealth, it's not usually going to be a wasteful extravagance at all.

Billionaires are like large corporations unto themselves. Their business interests are of the scale of small companies in the S&P 500.

Take Patterson Companies, an S&P 500 company, among the smallest with a $3.4 billion market cap. $3.4 billion in wealth isn't enough to get you onto the Bloomberg global richest 500 list.

By contrast, Henry Kravis of KKR fame, is worth $5.x billion (merely #345 on the billionaire list). It makes perfect sense for someone with his large business interests to utilize a personal jet for optimization of time. It's about as wasteful as an average person in the developed world owning a car. Oh those average people in the developed world, living that luxurious extravagant life in which they own a car (or a home, gasp!).

> most of what you said is nothing more than a personal subjective judgement

Indeed it was, I was offering my own considered opinion, not some absolute universal truth.

No surprise such opinions don't go down favourably on HN though. Amidst all the interesting technical and scientific discussion, there are disappointing overtones of wealth worship, and a weird cult-like following of billionaire entrepreneurs.

My experience tells me you're lowballing the crew salaries; your pilot alone draws at least $200k. You probably don't pay for the rest of the crew, but you do pay monthly fees for storage, private airstrip clearances, and ad hoc (big) costs each time you fuel it up, 'rent' an attendant, and cater the flight.

A commercial pilot at a regional airline makes less than $50,000 a year, many are closer to $30,000. When you get hired by a big airliner (over 1500 hours of flight time) and eventually you get to captain (not co-pilot) then you increase substantially, but nowhere close to $20,000, unless you fly a drug lord in strange places.

I have friends who are pilots at the majors who clear $300,000+ a year. Pay has risen substantially since the round of bankruptcies cleared legacy debts. FedEx and UPS apparently pay the most - although I'm not sure why.

This is correct (have family in the industry). Pay for pilots at major domestic airlines is based primarily on seniority and equipment you fly. Captains at the end of their careers flying the larger planes - 747, 777, 787, A350 - are easily clearing $300,000 with great benefits.

Flying cargo is more dangerous than flying people? There is stuff that is banned from being transported in a passenger plane that can be flown in a cargo plane.

I'd also imagine you are logging a lot more hours, facing more intense time pressures, and possibly flying some really irregular or odd-hours routes when you're flying cargo.

My gut tells me that calculus goes by the wayside when you're flying Bill Gates around the world, or even just flying your 'garden variety' billionaire and his/her family around the country. I could be totally wrong here, because I'm neither a jet owner nor a pilot. But I've worked around enough uberrich people in my day to know that their domestic staff gets paid really well, and I have to believe a private pilot cracks into the sixes rather handily. Whether or not he/she cracks $200k is another matter, but it seems likely.

There aren't very many of these jobs going around at any given time, and they involve exhaustive security and background clearances. You are also privy to a ridiculous amount of inside info flying these guys around everywhere, and you need to be trustworthy, i.e., come with references from other billionaires and such. It's a very hard world to break into, and if flying commercial paid better than this did, no one would bother trying.

You are essentially paying your people to become your confidant and to protect your image.

That's worth a lot to a billionaire.

A pilot has your life in their hands. Smaller jets can be very 'shifty' when landing which is scary. Also you want a pilot that can land anywhere.

I think it really depends on what you expect from your crew. Let's say you have a rotating pool of four 1-2K hour pilots, with 2 on deck for each flight on a week-on/week-off schedule. Skip the 'attendant', have the crew fuel up, and I think you could probably get away with $200K/yr for the personnel costs, depending on taxes/benefits.

Obviously the number, length, and complexity of flights would have a big impact as well. For 1 or 2 round-trip domestic flights per week, it should be doable.

Source: Had a friend who worked on several private flight crews that operated like this.

Edit: They mostly worked with clients in the $100MM/yr range, who tended to treat their staff like garbage and consequently had high turnover. Über-rich lurkers, YMMV.

Interesting. The calculus is certainly different among billionaires (personal experience sample size = maybe 3 or 4, and no, sadly, I ain't one of 'em myself!).

The billionaires I've met, who by and large own and don't rent, have what I'd call three distinct use cases for private air travel: business, social, and family. Business travel can range from more or less daily to at least 3x per week. Family travel is less frequent and generally limited to whole-family trips, but said trips can and do occur a lot more frequently when you have those means. And then there are what I'd call social trips -- a bucket into which I'd lump anything from charity events, to fundraisers in DC, to golf tournaments, to spur-of-the-moment trips to the house in Aspen or the Hamptons.

Said billionaires, if asked, would consider most of the above to be business trips, because their business lives never stop, and some measure of business is usually baked into most trips -- even if it's a quick stop at one city to conduct business before heading on to the vacation spot.

In a somewhat crude and related note. felix dennis (the week weekly magazine founder) once said, “If it flies, floats or fornicates, always rent it.”

Not completely bad advice for most rich people that want to stay rich.

so Felix Dennis is the 'Old Wise Person' refereed to elsewhere in this thread with the same quote? Or is this another one of those quotes like the ones attributed to Einstein i.e. no-one know who said it.

It was in his book "how to get rich" or something similar to that title. Half memoir half advice. It's actually a pretty good read... title notwithstanding. I am not sure if he was he originator of that saying though.

The Audible version is extremely good. The narrator makes it sound like Monty Python, which seems to be an accurate tone for the book. It isn't a parody, but it's definitely irreverent and thoroughly entertaining.

One of the better books on wealth building I've read. Also very amuzing!

I don't think he coined the phrase, but his book is a strong read for sure.

It's ok to say "fucks" on HN, especially if it's a direct quote (and in this case fairly relevant since he was a fairly crass man).

I looked up the quote and it seems like it was fornicates though I remember it being fucks. I didn't do a ton of research to verify it though. i remember it as "if it fucks, floats or flies; rent" but I lost the book so I can't look it up easily.

I remember reading "fornicates" as well when I read the book. While I'm not able to find a direct online source to the quote, I did stumble upon this old HN thread where multiple people quote the same thing: https://news.ycombinator.com/item?id=680645 https://news.ycombinator.com/item?id=680633 https://news.ycombinator.com/item?id=681167

Many people don't strive to be trashy all the time, and that reddit style encouragement to always push the trashy envelope isn't always cute!

At 14M you are already in the territory where a jet card is definitely something you could afford. If I had that sort of money, I would use a jet card for flights within a continent and go first class commercial for intercontinental (and definitely use VIP terminal or at least meet and greet services).

But at 50M you might be looking at fractional jet ownership already.

There is a difference and it's a big one.

Well sure, but OP used the word "buy," and I felt the need to clarify that full ownership of a private jet is really not a great idea until you've got that precious third comma.

Let's pretend someone has arrived upon 14 million in after tax net worth (not the case in OP's scenario).

You want to be set "forever" and not dependent on working again. You'll probably work, but may not be able to replicate the same financial success you experienced previously, so it's hard to count on future income.

There's a debate around what's called the "Safe Withdrawal Rate" which is financial-market speak for: how much of my nest egg can I spend every year and never run out of money, ever?

There's some debate about the exact number but I'll use 3% net of investment fees as a solid number. 3% of 14 million is $420k. You've got $420k pre tax to spend. Fortunately taxes on capital income are usually lower than taxes on earned income, so your tax rate will decline and probably end up somewhere in the high 20s. You'll end up with about $320k after tax to spend. Not bad. But not what most people think about as rich, either. I wouldn't be buying jet cards at that level.

I'm not saying the money isn't important - to the extent it gives you control over your time in the future (a function of spending habits), it is extremely valuable. But there's often a disconnect between high 7 and very low 8 figure net worth and assumed income/perceived lifestyle that people can live, especially if they stop working or were in a field with one-time exits (some entrepreneurs, retired athletes, etc).

$320k disposable every year is very different from $320k post-tax income. With the latter, you'd probably be stashing nearly half of it away for various reasons. The annual spending of a person drawing $320k post-tax from their investments is more comparable to someone earning about $500k post-tax from work.

> You'll probably work, but may not be able to replicate the same financial success you experienced previously, so it's hard to count on future income.

If that is the case, then you should focus on learning how to invest properly and on achieving, say, 10% annual returns yourself (i.e. without having to pay bank fees for subpar investment advice, which is what you usually get).

Just because you made bank doesn't mean you have to get all conservative. Or at least, I wouldn't.

One example: you could make calculated bets when there's "blood on the streets", e.g. wait (for years) until the market crashes, but when it does, leverage up that $14m to $50m and book a nice 20-30-40% gain.

Or acquire an existing company using mostly debt (and a bit of equity), etc

> You'll end up with about $320k after tax to spend. Not bad. But not what most people think about as rich, either.

I think that's firmly in what people consider to be rich, and certainly is by any reasonable metric. I may not be 'jet rich', but that's an incomprehensible amount money for 99% of the people on this planet.

99.99% of people don't pay SF/NYC/LON/HK rent.

$14MM isn't really as much as some folks seem to think. As you point out, there are expenses associated with having that much money. There are constraints to what you can spend while still having enough money to work for you, so that you don't have to.

Buying a jet, with just that much money for assets, is probably a bad choice.

You're going to want a house, perhaps more than one. You're going to want someone to manage your assets. You're going to want vehicles. You're going to want to do something to increase your security. You're going to want to keep at least one lawyer on retainer. Things like that...

What that money is enough to do is make more money. Once you have a goodly amount of capital, it becomes much easier to make more money.

So, instead of them buying a jet, they should hire a good finance manager and lots of insurance. I'd also recommend living frugally while using the bulk of their newfound wealth to increase their wealth.

$14MM is good money but it's not really 'fuck you' money. If they insist on buying a plane, I'd recommend a used Piper Cub. That's about all they can realistically afford, at least at first.

Nah, 14M isn't enough to practically afford a NetJets card - unless you are making about 5M - in which case you'd expect to have more than 14M. I work on WS and am very senior, so often fly private, and I have a bunch of friends who always fly private. The generally accepted threshold is about 25M with an income of 2-3+ before it makes any sense. I suppose that if you had no other expenses (like a nice house and cars or a thing for vacations or art) you could afford it for a while as your only extravagance, but it isn't that special. In fact, for long haul, 1st on an airline like Cathay or Singapore is better than a G650ER in many ways. For short haul domestic a private jet blows away commercial, but mostly I'd rather spend my money in other ways.

I’d buy a Pilatus PC-12 and fly it myself. Why be a passenger when you can be the captain!

"If it flies, floats, or fucks rent it." ~ Old wise person.

Nah, you can get a small four or five seater jet (eclipse) for pretty cheap these days - https://www.controller.com/listings/aircraft/for-sale/178755.... Maintenance is expensive, but it's doable. Not saying it's a wise purchase, and not a 747, but my very conservative father-in-law is in that realm and loves flying his jet around (he lives in the middle of nowhere and owns a lot of farms, so it's almost a necessity). All in you're probably looking at $1,000/hr to fly it. But then no TSA...

That said, point taken, most people wouldn't buy a jet if their net worth was $15m. I might.

If you cleared $10MM on the sale, you could absolutely buy and operate a baby jet (a 501, 525, 510, Premiere, etc, maybe even a 560) without going broke.

I'm likely to buy one if I ever crack $7MM. $5MM is a bit too snug I think though to contemplate owning a jet personally (unless it's a business enabler).

Would a small helicopter make more sense?

Will bunch of Cessnas do?

50k to 150k per plane

https://www.globalair.com/aircraft-for-sale/Cessna-172

You don't even need a $500k net worth to afford a Cessna. Most guys I know that have them are firmly middle class. They have to make some compromises on houses and cars, but it's worth it to them because they love to fly.

brb, launching cesna uber startup for rich folk.

Somebody was asking about this on Reddit (/r/flying I think) a few months back. Short answer is that the FAA does not take kindly to receiving payment if you don't have a commercial license, and if you do then there's better work out there than Uber-for-cessnas.

https://en.wingly.io/

Not allowed in US though.

I worked with one of the cofounders of Intuit. He has what he described as the "Honda Accord" of helicopters. If someone worth many hundreds of millions only has an average helicopter, you probably need many tens of millions for a small helicopter.

I'd say that an R44 is the "Honda Accord" of helicopters, and they're around $500k brand new. With a net worth of hundreds of millions, I'd expect that he went for something safer (with a turbine), like a Bell Jetranger.

Maybe a used TBM 850?

Or this: https://www.iconaircraft.com/home

Privately owned aircraft are referred to as "that hole in the sky into which the money goes."

... and may be your coffin.

I want more of this tangent.

I’m reminded that when Jobs returned to Apple, he had a weekly salary of $1 — and a $90 million corporate jet.

Yep. You're better off just chartering private flights when you need to.

Uber for jets... for millionaires?

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