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Comment by Johnny555 | Hacker News Reader

Does that do something to the power relationships in the world?

The fact that you're even asking that is a reason we shouldn't have billionaires -- world power relationships shouldn't be based on the wealth of individual citizens.

For example, what did Musk really talk about when he met with the president of Brazil? Did he represent American interests, Amazon Inc's interests, or Elon Musk's interests?

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I somehow doubt he represented Amazon inc's interests.

He obviously meant Tesla’s

yeah,true, typo on my part, I was just reading about Bezos in another post and about the Amazon rainforest in an article about the meeting. Too late to edit it now.

What do governments really talk about behind closed doors? Not the interests of the people whose sons they conspire to send to die in their wars.

Good luck getting competing countries to agree on banning billionaires in one fowl swoop.

This is a very idealistic and impossible to ever implement take

Why not btw? I mean, why is it worse for somebody to have power because he worked and invested for decades and made optimal decisions (and probably some luck) than for somebody to have power because he was born into the right family, knows all the right people in The Machine, has nice hair and is able to conceal his rampaging cocaine habit long enough to make himself too big to fail?

I get that "wealth gets power" is not ideal, but the alternatives we can see around don't seem to be much better. Somebody will have the power, and we as a society would need some proxy to use so that it won't lead to a disaster. Being able to create and run successful businesses (yes, I know not all rich people are self-made, etc. - it's an imperfect proxy, but to a large measure a working one) doesn't look that bad, compared to "being born with right last name" or "being born with the correct facial features"...

There's no such thing as too big to fail in democratic politics and it is not a deterministic process of knowing people in "The Machine."

FWIW, most wealthy people are wealthy because of inherited holdings and 60% of all wealth in the US is inherited.

> 60% of all wealth in the US is inherited

Source? This fails the sniff test, as the amount of wealth has grown at such a rapid rate this seems almost impossible.

https://www.washingtonpost.com/us-policy/2019/02/06/people-l...

As I suspected, it counts dollars. Moreover, it attributes any subsequent income for somebody that received an inheritance as "inherited" (up to certain exponential boundary). I.e. if you received an inheritance of $1000, spent it, and in 30 years since you became a millionaire, then the amount of wealth you have up to what you could have if you invested $1000 at certain rate would be still counted as "inherited". I am very far from being qualified to understand the dense math in the underlying article (http://www.piketty.pse.ens.fr/files/AlvaredoGarbintiPiketty2...) but with such assumption, I imagine we could arrive at 60%. But it doesn't mean what you think it means.

> As I suspected, it counts dollars.

What do you mean? It counts ownership stakes & stocks as well.

> I imagine we could arrive at 60%. But it doesn't mean what you think it means.

It means exactly what I think it means - if you get bequeathed $1 million dollars and get 8% returns from investing this, it doesn't mean you "self-made" $3.66 million more 20 years later.

It doesn't. But on the other side, if you have 3.66 million 20 years later, it doesn't mean you got it from passively investing that same money at 8% returns. Sure, for some people it could be the case, but it's just one of the possible options.

All this calculation is doing is subtracting expected returns above what they would get from investing their capital. If they also start a business and make more money, that will not be counted as inherited wealth - unless they start a business by spending their inherited wealth and get returns below the growth rate of the economy. At that point, it's up to your interpretation whether they "self made" negative wealth or spent money on a vanity business project. I don't think it is unfair to not categorize those people as self made.

Isn't all that based on the assumption that "growth rate of the economy" is some natural process - like the universe expansion or radioactive decay - that happens regardless of what people do? It appears to me that this growth is rather the result of the effort of "self made" (to the amount of their achievement - some more, some less) people that cause it to happen, one way or another. And excluding it seems kinda wrong to me. Of course, sometimes the effort belongs to one person - e.g. the startup owner - but the benefits are shared with others - e.g. investors - and their function can be treated differently. But it's not what's happening here - here the whole investment capital is excluded altogether. I am not sure it's such a useful lens.

It also means that if you get “bequeathed” $1000 and use it to buy tools, start a contracting business, and expand it into a large construction corporation over 30 years, you didn’t “self-make” anything either.

What pointless designation.

not sure where you are getting this from, maybe you are making it up? but that sort of person would be categorized as self-made minus their inherited $1000 and its expected returns.

“Expected returns” is a bullshit statement. Whether you invest in a personal company or a different company, it’s still capital gains.

There is significant income mobility in the US, which is why "the one-percent" discourse consistently fails to resonate with Americans. When 73% of Americans have spent at least a year earning a top 20% income [0], focusing on the inherited wealth of others comes off as whining. As long people feel that the pie grows, and that they can move themselves forward, these observations are at best statistical curiosities. They feel very much of a piece with the deboonkers on Twitter who tell the truck owner/operator facing 50% higher gas prices that technically there's no recession.

[0] https://www.nytimes.com/2014/04/20/opinion/sunday/from-rags-...

73% of Americans being in the top 20% of income earners for one year in their lives does not in any way diminish what I am saying.

The median dollar of wealth is inherited by the wealthiest top 5% of families, not earned as income - which your statistic doesn't even address.

My point is that your statistic doesn't mean anything to the everyday reality of normal Americans. If I believe that I can achieve my goals, and the facts suggest that I'm right to do so, why should I care that someone else's parents left them their money?

Banging your drum even more loudly doesn't change the fact that you are off beat.

> There's no such thing as too big to fail in democratic politics

Are you sure? Please tell me the top 10 names on the Epstein client list. I'll wait.

> most wealthy people are wealthy because of inherited holdings and 60% of all wealth in the US is inherited.

I'd like to see your sources. They probably counts by dollars, which is pointless, since one hyper-rich individual completely skews the picture - you can have a million self-made millionaires and one Elon Musk's son - and claim that the majority of millionaires is created by being Elon Musk's son. That's an obvious nonsense. It's like calculating average income of a people in a bar where Bill Gates just walked in, and making conclusions that everybody is rich. You need to count people, not raw dollars.

Mine say:

One measure of the percentage of the wealthy who are self-made is Forbes' own Forbes 400 list. In 1984, less than half the people on The Forbes 400 list of richest Americans were self-made. By 2018, in stark contrast, this same figure had risen to 67%.

https://www.forbes.com/sites/rainerzitelmann/2019/06/24/amaz...

Around 41.4 percent of the wealthiest one percent say they have inherited some money.

https://www.peoplespolicyproject.org/2017/10/10/the-wealthie...

The market research firm analyzed the state of the world’s ultra-wealthy population — or those with a net worth of $30 million or more. The report, which is based on 2018 data, “showed muted growth” in the number of ultra-wealthy people that year, “rising by 0.8% to 265,490 individuals,” says Wealth-X. Of those folks, 67.7% were self-made, while 23.7% had a combination of inherited and self-created wealth. Only 8.5% of global high-net-worth individuals were categorized as having completely inherited their wealth.

https://www.cnbc.com/2019/09/26/majority-of-the-worlds-riche...

Relying on people to honestly self report on being transferred wealth.

Counting people is not the important bit because I am concerned about the distributional equity of wealth not wealthy people.

In current total surveillance panopticon, you can hide transferring a $20 note maybe, but hiding transfer of something that can be called "wealth" is virtually impossible. Especially at scale we're talking about here. Especially if you aren't Pablo Escobar or somebody of a similar caliber.

> I am concerned about the distributional equity of wealth not wealthy people

If you exclude people, I am not sure I understand what you're talking about at all.

> has nice hair and is able to conceal his rampaging cocaine habit long enough to make himself too big to fail?

You are indoctrinated into believing that democracy cannot work and good government is impossible.

> good government is impossible.

At the scale of continental countries like US (or any BRIC country), it is. The decision makers are simply too far removed from the people who get to live with the policies.

I am indoctrinated by the reality I am observing daily. And before you are tempted to tell me "oh, it's because $not_my_favorite_political_party prevents $my_favorite_political party from achieving its true potential as the paragon of democracy" - this happens regardless of your tribal squabbles.

$not_my_favorite_political_party_1 wants to destroy government besides police and military. $not_my_favorite_political_party_2 wants to increase welfare spending. Neither party is focused on good government. Mostly that is because voter dissatisfaction with government is channeled into the two competing ideological camps so that obvious, practical improvements never happen.

There's no party that has anybody elected to Congress (or to a state Congress afaik either, though there I may be missing one or two persons) that wants to even reduce substantially, let alone destroy, government. TBH, let's not be cute and drop "substantially". No major party wants to reduce the government at all. Didn't for a long while. The only disagreement is about how fast the government will be growing and who gets the benefits of the wealth transfers that would follow from that and who gets to control these trillions and get the goodies that come from controlling trillions of other people's money. There are disagreements on other subjects, but on the subject of Big Government the consensus is clear and present. No agency ever gets reduced power (or, the horror, disbanded!) whatever party is in power, the worst could happen is that one party's functionary would temporarily disrupt the implementation of other party's schemes.

I don't think anyone who says a billionaire shouldn't have power also believes that someone born into the right family should have power. Ideally those in power should be democratically elected by the people they hold power over and be protected from lobbying attempts by wealthy individuals.

Someone like Elon Musk having political influence is a bad thing because he's raging capitalist that can, will, and does exploit those below him. It's why he has such a love for his Chinese labour force. They have less rights and they will work 16 hour days in his factory making the cars that make him money.

Elon Musk is great as a wealthy private businessman, that's where capitalism firmly belongs. But he has no place in any sort of politics. Countries aren't run like businesses.

> (and probably some luck)

I'd reverse the skill and luck relationship. Success at that magnitude is almost entirely luck (and probably a little skill).

When one becomes rich because of one IPO that went right - ok, let's say it's luck. When one creates several successful businesses in a row - no, sorry, I can't say "it's just dumb luck" anymore, it's more realistic to assume there's something else involved.

Taleb has a more succint way of putting it[1], but no it can still be luck just like hitting black in roulette several times in a row can also be luck.

[1] https://mobile.twitter.com/nntaleb/status/153417277358051328...

Hitting black multiple times in roulette is always luck (barring cheating).

What the tweet is saying, and it seems right, is that looking at a probability graph the only way to get the billionaire-like outcome/outlier is to dramatically increase volatility, i.e. bet on long odds. If everyone went to work, maxed out their 401k, bought blue-chip stocks, and called it a day, basically nobody would have outlier net worth. But some people choose to increase the volatility of their money (buying crypto, starting a company, options trading, whatever) and as you'd expect 99.9999% of them don't get rich and the rest of them get uber-rich.

> buying crypto, starting a company, options trading, whatever

I think these activities are quite different however. Saying starting a company is the same nature of activity as betting on an extremely volatile asset ignores all the work that goes into successfully creating a working company. Surely, there's no guarantee this work will bring result - but it's still not the same as just betting on random high-volatility assets. Even options trading is not (always) just betting, and for more successful traders probably involves certain amount of knowledge in addition to luck. But I don't think describing creating a company as completely probabilistic activity makes any sense.

The tweet (and me) aren't saying creating a company is "completely probabilistic", just that they're risky. Risky meaning there is an outsized chance vs. an established company that the new one doesn't exist in 5 years and the established one does (where "chance" means looking at outcomes in retrospect, not a roll of the dice).

The tweet is saying that founders becoming massively rich is a natural outcome of probability distribution -- huge payoffs require either huge bets at a smaller win multiplier (less "risky") or comparatively smaller bets at a huge win multiplier (more "risky").

Yeah, after the first successful IPO, the traveling IPO CEO has contacts at investment banks, media houses, etc and is on a first-name basis with many key analysts. That's why they keep getting brought in to help a company IPO, after you've done one, the subsequent ones are easier.

Why? A good reputation and wealthy, powerful friends are very helpful. "When you're rich, they think you really know." Further, how many people were nearly identical after that first success, but then failed to continue with a second?

> made optimal decisions

Optimal decisions for themselves, not for the country.

Are you advocating against billionaires & capitalism, or against power relationships?

In theoretically egalitarian systems like communism, a committee makes decisions about how to allocate resources. Then whoever holds most sway over the committee holds sway over resource allocation. If you do it by direct democracy, then whoever owns the news media & ad platforms (or has money to do massive PR campaigns and ad buys) holds sway over resource allocation. You can't escape this: somebody is going to make the decisions, unless you just run the world by computers and have humans slot in for menial tasks.

The question is who they're beholden to, i.e. who they derive that power from. The problem with the person with the most sway over a committee being able to make a decision is less because:

1) The fact that it's necessary to "hold sway" is a result of the power not actually being held by that person, but being loaned to that person by the rest of the committee in a way that can be withdrawn at any time.

2) The committee members are all subject to the process that chooses them. That's the power center, and the character of that process defines the legitimacy of what the committee does. If a billionaire chooses them, the committee is a mask. If the people being governed choose them, that's the basis of popular sovereignty, and the justification for post-Enlightenment government in general.

> whoever owns the news media & ad platforms (or has money to do massive PR campaigns and ad buys) holds sway over resource allocation.

You're talking about other billionaires. The conversation is about not having billionaire.

So this boils down to if billionaires choose a committee, billionaires will run things, and if people vote for a committee and billionaires control all of the information that those people get, billionaires will run things. You can escape this if you don't have billionaires.

Power is always loaned, and always beholden to someone (or a large group of someones) else. That's what makes it power: the ability to get other people to do what you want them to. If they don't do that, you don't actually have power, while if they do, you've got the power regardless of what the formal power structures (which are often misdirections anyway) say.

The rest of your post is largely true, but also applies to billionaires. They derive their power from people being willing to trade money for the goods and services produced by the assets they own. When people cease to make that trade, their money and their power evaporate. Just look what's happened to the shareholders of Kodak, Xerox, Pan-Am, GM, Sun Microsystems, Lehman Bros, etc.

Note also that systems without billionaires have existed, and have often been worse in terms of distributing power to many people. See eg. Soviet Communism, where power rests in the Politburo, and the local party apparatchik holds outsize sway over everything regardless of competence. Or even post-WW2 U.S, when the top marginal tax rate was 90% and executive compensation was far lower because there was no point in paying a lot when the government got 90% of it. Corporations instead compensated their top execs in-kind: usage of private jets, corner offices, ability to influence what every American thought through advertising and mass culture, influence on policy makers. Orwell's 1984 and Chomsky's Manufacturing Consent were about the 1945-1980 period, not the post-Internet era. Power was significantly more centralized during that time period than it is now.

> unless you just run the world by computers and have humans slot in for menial tasks.

BOFH: I've upped my priority, so up yours.

So then you are also OK with gutting capitalism and limiting company's abilities to make mad profits? Because, you can't have one without the other.

I don't understand how a tax on personal wealth guts capitalism and limits a company's ability to make mad profits?

Or distribute the profits more broadly? No need to be dramatic.

If we can't have capitalism without neofeudalist exploitation of the working class for the sake of enriching a privileged ownership class, then yes, I would very much prefer to gut capitalism.

Why do you think a wealth tax would limit a companies abilities to make "mad profits"?

Because why would anyone, corporate or not, invest substantial time & resources into chasing mad profits if they won't get to keep almost any of it?

Because I don't believe that most people are really aiming to be multi-billionaires, I think most of the effort comes from people trying to reach financial independence at various levels of cost of living.

A wealth tax doesn't just affect multi-billionaires, it guts all accumulations of wealth. If anything, billionaires are most able to shrug off a wealth tax. Your average Financial Independence strategy (pursue a high income to accumulate a sizeable warchest of assets quickly, then passively live off the illiquid assets slowly) is severely gutted by a substantial wealth tax that aggressively drains saved assets.

Do you feel like a wealth tax starting at the 50,000,001th dollar of 2% until you get to a billion is "gutting all accumulations of wealth" or would harm the average financial independence strategy?

No, probably not, assuming you keep it accurately adjusted for inflation. This will likely impact the next tier of wealth: tech startup founders. Either startups will represent a tax loophole or the wealth tax will slowly drain the illiquid assets of founders and early employees during the startup phase which nowadays often have a notoriously long gestation period.

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