And in the Industrialised North lots of people actually live _below_ zero, with consumer debt at unprecedented levels.
First, he likely got that wealthy by taking aggressive positions. Meaning he is comfortable with it.
Second (and this is obviously an extreme example). Say I have $50m. I borrow another $25m. I put all of that money in a single concentrated position, that is very likely to go up (i.e. Amazon). It doubles in a year. Now you made $75m (excluding some interest payments).
Obviously, there is a limit as to how much money a single individual can have - It doesn't need to be written into law. Wealthy individuals are a flaw of capitalism and the system will always keep trying to get rid of them.
If someone has too much money, working people will stop trying to produce goods and services for each other; instead, they'll focus all their attention and energy on trying to extract money from the rich person.
That's kind of what happened with the tech industry in the past few years; nobody is really trying to provide value to regular people (that's just a pretext); instead, everyone is trying to extract value from rich investors; that's where the money is.
If you want to make money, why bother go after regular people who don't have much? Our whole economy today is built around fooling rich people out of their capital.
Which is easier; 1. To convince 100K working class people to give you $10 each in exchange for 100K units of goods/services or 2. To convince 1 wealthy person to give you $1 million in exchange for a 4-slide pitch deck and a speech that you put together the night before.
A one-guy example vs. "the system" - which overall clearly works towards concentrating wealth, not towards distributing it. https://www.economist.com/finance-and-economics/2014/11/06/f... Or do you really see "the system" (especially when left alone) work towards spreading wealth away from the rich? Even just away from the concrete person who are rich right now, to new people, even if the overall distribution remained the same. As far as I know not even the second option is happening, being rich seems to be very much "genetic" (in quotes, of course), to different degrees in different countries but even in the best of cases a clear trend.
In any case, I'm a little confused about who meant to say what and whom I should be responding to since it was the OP who wrote
> Wealthy individuals are a flaw of capitalism and the system will always keep trying to get rid of them.
Edit: just to poke some fun at The Economist whose link I posted, here is another one from the same paper with a contradicting headline: https://www.economist.com/books-and-arts/2017/06/29/why-the-...
EDIT^2: Before anyone else mentions it, I find discussions such as these silly: https://www.pbs.org/newshour/economy/is-increasing-income-in... To me this is a discussion about how wet water really is. With tens of millions uninsured, articles like this: https://www.theguardian.com/world/2017/dec/01/un-extreme-pov... -- I think discussions like the linked one are like discussing if there really is more or less water coming through the leak in the roof (or the ship's hull). Overall, over longer periods, the problem does not seem to be going away one bit. Whether it gets half a percentage point worse or better depending on the measurement period and the measures chosen, so what. The main point remains.
If that's very likely, it'd already be up.
Not really. X% interest compounds at the same speed if you have $100 or $100 million in your account.
Consider a gambler. He walks into a casino and has a good run at the tables. His 1000 turns into 10000. The success was so easy; surely it can be done again.
A funny thing happens. You're up 6000 now, but 6000 is a lot less than the 10000 from earlier. Now 6000 (6x your starting money) _seems_ like a fraction of what you _could_ win.
It's the human adaptability problem. It's also an ego problem. The next success should be bigger than the last one, or it's not exciting. And since you were so good that you 10x-d your money earlier, surely you can something-x your money again.
Now consider the conservative (limited?) mind. You walk in with 1000. You win 150. You go home, because you've gained 15%!!! (You never 10x your money. You never get a million.)
So that's the problem. The mind that knows when to stop stops so early that it never achieves something extra-ordinary.
That would barely get you a flat in SF/NYC/HongKong/London. It really takes $10M to be comfortable.
The interest won't cover the rent in a major city, especially the rent for a place big enough for a family.
Like everyone else, I don't get to choose.
Do you realize that people have roots, family, friends? Do you realize that border and immigration control is a thing? It's disingenuous to consider changing city as a trivial option.
When someone has $1M, it's because he is in a location that made it possible in the first place.
That's not my current net worth, to be sure, nor would I necessarily stop earning income if it were.
It's just a nice example to highlight of a world-class city that isn't that expensive all things considered.
But tech workers native to Montreal who consult remotely for SF/NYC tech companies or VCs after spending some years doing a US work stint for networking purposes can definitely build up savings rapidly. I know one such example personally.
At least, this is based on historic stock data However, I was taught in undergrad econ, that this 4% return above inflation is considered the risk premium, over what a CD would get you. So there is a real risk of losing everything. Which means hedging is a good idea, some of the money to buy a reasonable house, some %age of rest in bond fund, and quarterly rebalancing can go a long way to preserve a lot of wealth in a black swan event.
I have less that 10% of that in my investment portfolio and don't actually have a FTSE 100 tracker I have around 20 investment trusts and individual shares.
He was probably betting a few millions on what appeared to be a relatively safe trade, then a rare succession of events lead to a 1:100 ratio in the other way.
$10m, sure, you should be able to net $200k while still topping up your fund to cope with inflation, so you'd be well off.
If I had ten million I'd just keep it under my mattress. I expect to live for another seventy to eighty years. I don't need 100k a year to be happy.
Don't put all your eggs in one basket, don't put all your files on one raid, and don't put all your assets under the mattress.
Those without the safety net have far more to risk, so are far less likely to succeed. For every richard Branson who starts up a company from the back of their van there's 9 who do that and fail, and are currently on minimum wage stacking shelves. For every millionaire actor there's a thousand waiting tables. For every musician there's 100 teachers. Very little to do with how good they are, all to do with the lucky break.
Hell where your parents live makes a massive difference. When you start out with a job in the big city, you either live rent free with parents and thus save £10-15k a year, or you put your entire wage to paying bills.
After 5 years you have 70k, enough for a confortable deposit on a house, or a few years of speculation, or investments that will grow to half a million by retirement.
If your parents don't live close to where you start your career you're far more hand to mouth.
Weighed up by good years giving far more than 7%, but one needs to have time.
If you're like this guy, and in your late 40s with $250m in the bank, you're going to be hard pushed to ever spend it. Betting it all on red seems ridiculous. Surely better to enjoy the benefits of it and leave his family set for generations. Keep $20m for silly bets, and cover your trades. :)
He was probably accounting for some risk and a $20M silly bets times 17 times leverage wiped the whole fortune.
Feels somehow ironic - this guy losing so much because surprise weather patterns filled up Northern Europe hydroelectric reservoirs, coupled with German carbon tax.
Perhaps karma builds up when you want to hoard and keep living with minimal risk.
My pet theory is that a lot of people who come into such money do so suddenly, and they don't appreciate the nature of the risk involved, on the upside or the downside. Huge wins are due to their genius, huge losses due to the market misbehaving.
If you can afford to gamble half go for it if you want to, but if it goes all tits up you still can live off half of $X which in this case is a lot $$$!