You vs. A Billionaire: compare your income | Hacker News Reader

You vs. A Billionaire: compare your income

youvsabillionaire.com

65 points0xedb92 comments

I absolutely hate stuff like this.

My net worth has grown substantially in the last several years, however my income has actually gone down in that time.

So do I have an income of millions of dollars? I haven't sold anything that has appreciated (and I don't intend to).

Elon Musk's net worth may have increased, and most certainly Elon Musk is much, much richer than I am, and has a higher income, but this shell game of conflating "income" and "net worth" is just stupid.

There are examples here like:

"If you buy a donut, thats like Elon buying a dunkin donuts franchise!"

Yeah, except I don't sell property or land to buy donuts. How much money does Elon actually take per year in income is the relevant question here.

Elon Musk borrows against his assets to pay for things. You could too.

In fact I did exactly that to buy a Tesla!

Many Americans do. Cash out refinancing of homes is very popular

Elon was able to leverage his vast personal wealth to secure loans to _buy Twitter_. His purchasing power doesn't extend solely to what he is able to liquidate. In any case he can liquidate a million dollars a day in holdings and burn it in a barrel and it wouldn't move the market in a meaningful way. In fact he could tweet that and people would probably buy more of his meme stocks.

You seem to be peeved about a distinction that is not worth making at the scale we are talking about.

I'm annoyed that people feel the need to lie in order to make a point, when the point would have easily been made without the lie.

If they just said: Elon makes $200 MILLION dollars a year, then the point would still be just as valid, and it wouldn't be a lie.

It's the same idiocy involved in people talking about needing to tax people more money. They're bait and switch income with net worth, which are radically different things.

We don't know what Elon makes a year because money gets very weird at those levels. Loans are effectively free so you don't have to "make money". Accounting chicanery is pervasive. So you have to start somewhere, which is a statement that should apply to revising how we tax ultra-wealthy people as well.

> If they just said: Elon makes $200 MILLION dollars a year, then the point would still be just as valid, and it wouldn't be a lie.

Obviously it would a lie to claim that somebody who doubled their net worth to >$200bn last year having earned all that fortune in quarter of a century, and who earned a $23bn performance bonus last quarter earns "only" $200m a year.

Whereas the $120bn appreciation in the value of Musk's assets the website highlighted might be unrepresentative of his typical annual earnings, it actually is how much he earned last year, unlike the much smaller number you made up.

> it actually is how much he earned last year

No it’s not. It’s how much his assets appreciated. If he tried to sell that much it doesn’t convert to cash that easily.

Once you reach a certain level of wealth, your net worth increasing becomes a substitute for income because these people live off the debt backed by their illiquid assets. That allows them to avoid a large tax bill.

Take out a $1b loan using $10b in assets as collateral. When that $1b loan comes due, your net worth has grown to $15b. Take out a $2b loan, pay off the original loan and have $1b left to live on. No taxes are paid because no gains have been realized and loans aren't taxable.

> Once you reach a certain level of wealth, your net worth increasing becomes a substitute for income because these people live of the debt backed by their illiquid assets. That allows them to avoid a large tax bill.

Income is periodic. I get a salary every year. I can spend that amount every year as long as I'm employed at the same salary. Elon Musk can't spend 220 billion every year. If you want to compare net worth to income you should look at if he were to sell his shares and put it in a safe annuity earning 4% a year or so in perpetuity. So take his wealth, and multiply it by 4%. Also note that the annuity won't grow, unlike my income.

> Take out a $1b loan using $10b in assets as collateral. When that $1b loan comes due, your net worth has grown to $15b.

So you can expect his assets to grow at 50% a year? Here's a life hack: invest in Tesla if you think its going to grow 50% a year. Then even with $100,000 invested today would have you become a billionaire in 23 years!

Notice I said "your net worth increasing becomes a substitute for income" and not "your net worth becomes a substitute for income". These billionaires can get periodic influxes of cash through taking loans on their increased net worth. So I agree Elon's $220b net worth isn't directly comparable to my income, but the $121b increase in his net worth is pretty comparable to my income.

The numbers I made up in that example are obviously made up. I included them to illustrate my point and not as a prediction that all billionaires see their net worth increase 50% every year. That said, Elon's net worth went up over 100% last year.

The page compares it with the $120bn growth in his net worth last year, which absolutely is a capital gain over a fixed period comparable with how much salary and capital gains you made last year.

Admittedly that's an atypical return from the most hyped stocks in a bull market. But using a made up figure for Musk's earnings based on normies' annuities is just as unrepresentative of the typical annual return of being Elon Musk

This isn't an infinite money cheat. You eventually have to settle the debt. The only way to do that is with income.

Which can happen by liquidating assets. As long as your net worth grows faster than your debt, this is absolutely an infinite money cheat.

OK... liquidating assets is a taxable event. You aren't avoiding the taxman by borrowing money.

If you can hold off on liquidating assets until death, your estate will pay no capital gains when it liquidates due to the step up rule.

That’s not an infinite money cheat when the required input is infinite wealth growth.

There is obviously an upward limit on the debt they can acquire. The problem isn’t that this is an infinite money cheat. It is a tax avoidance cheat because now the income is all long term capital gains that can be realized whenever is most convenient and gains can be offset by losses. That is how these people have tax rates below 5%.

There is a $3000 cap on capital gains loss offsets. Useful for the middle class, but useless if you're Jeff Bezos.

You are misremembering the details of that cap. The $3k cap is for offsetting ordinary income. These people have little ordinary income. Almost all of their money would be from capital gains. A $1b capital loss can be used to completely offset a $1b capital gain and leave a tax bill of $0.

Right. Because the tax due on $0 net is $0.

You never have to settle the debt. You die with the debt and the assets and your estate settles the debt then passes the rest in to your heirs

To piggy back on this a bit, there's something cost step-up cost basis and so while you pay have bought stock at 1$ and it appreciated to 100$ your estate's cost basis will be 100$ so there is 0 capital gains. Which means that the loan can be paid off without paying any capital gains tax.

heirs don't inherit debt. Your debt will be settled by the estate which will pay the tax. What's left will be passed down to your children/heirs.

The step up basis rule applies to the estate and it is stepped up to the current value on the date of death. So the estate settles the debt and pays no capital gains tax on any assets that had to be sold to pay off the debt. Then, the remaining assets go to the heirs. Or, if it is setup like most super wealthy, the assets left in the estate will more or less be cancelled out leaving little in the estate thus avoiding estate tax. Most of the assets will have already been passed along or will remain in various trusts and non-profits for the benefit of the heirs.

Only counts for estates less than $11.2 million. Again, useful for the middles class. Meaningless if you're Bezos.

[Citation needed]

Step-up cost basis is useless for a middle class estate because below $11.2M you don't pay an estate tax. [1]

Propublica has done a lot of research of this which you should read. [2]

[1]: https://en.wikipedia.org/wiki/Tax_Cuts_and_Jobs_Act_of_2017#... [2]: https://www.propublica.org/article/the-secret-irs-files-trov...

No, I don't believe there is a limit for the step up rule.

You are thinking of the estate tax exemption. That is avoided through other loopholes.

During a period of low interest rates, yes this was the case, but now that rates are rising, this won't be as common.

You can get 2.33% margin loans through Interactive Brokers right now. I guarantee you a billionaire can get much less than that. Banks will always give rates near zero to billionaires because the risk is very low and they want to curry favor and possibly get other, much more lucrative deals from said billionaire.

I hear you, I am not keep of this type "propaganda" either, it's inciting to say the least.

It compares and contrasts the 0.01% with the rest of the world. Silly? Maybe. Maybe the intent is actually malice.

People should study and comprehend Normal Distribution, and how it applies to virtual everything.

Mic drop.

Thank you for coming to my TED Talk.

https://en.wikipedia.org/wiki/Normal_distribution

Well, IIRC Musk doesn’t technically have a salary and maybe (?) the target audience for this site doesn’t know their own net worth off-hand. So I could see why they’d make that choice.

Why is it the relevant question?

I agree whole-heartedly with you and that too was my initial reaction, yet you obviously did not persevere. The website is not about how trivial your income is compared with Elon's but how significantly wealthy most of us are vs "10% of the world, or over 750 million people, (who) live in extreme poverty on $1.90 or less a day." Take a moment to do it again and take it to the end. Having the wealth to even participate in this conversation makes us all truly fortunate.

Thanks for pointing this out! I now persevered and indeed it will end in you being a 1%-ter.

Since I'm unemployed, I just put in '0' (not quite true, I own some dividend stocks lol); every comparison was just infinity (∞).

Also the scrolling is a bit broken on Firefox on Linux.

Seems to be broken in Firefox on all platforms.

What are you doing in your mini-retirement?

This doesn't seem to account for the cost of living; living off $100/day in San Francisco might very well result in a lower quality of life than living off of $5/day in somewhere else in the world.

The general premise still stands of course.

I'm curious; are there any organizations where donations help build regions economies? One would think that if a region relied on donations to survive then, without change, they'd continue relying on donations which isn't a great long term solution. The ideal solution seems to be helping these regions jump start and build their economies through education and financial support. If people can afford to go to school and get an education then hopefully they are able to start moving their local community and economy forward.

Tough problems to solve, anyone know if there's any good books on the subject? I know there's nothing I can do to help but I'd be interesting in learning more about the problem and potential solutions.

Check out GiveDirectly (https://www.givedirectly.org/), a nonprofit which does what it sounds like. They give money to the poorest people, directly. You can browse the site to find out why that's incredibly effective at alleviating poverty.

Website scrollbar thing is completely broken in latest Firefox on Windows. I get 2 scrollbars and have to scroll the 2nd one manually for the effect to work.

Same here..

Can we tag this ‘thinly veiled website asking for donations’? I dont mind donating, but I don’t like getting sales pitches the way the website did. It’s cheap and nasty.

If you can’t take this sales pitch you need to get out more.

The real world makes me mad too. Walk into a pharmacy and look at all the products they sell with the association of ‘health’ that have no health value. Vitamins and chocolate alike.

Was that irony intentional?

Moron confuses increase in net worth with income, news at 11.

By this token, anyone who owns a house probably made a $100k+ extra in income the last couple of years.

> Moron

As opposed to needlessly pedantic hackernews readers deliberately miss the point of the exercise? It doesn't matter if musk is hoarding jelly beans, people don't realize just how rich billionaires are.

Personally I am a temporarily embarrassed startup founder so I'm alright jack

The point of the exercise is based on a fundamental understanding of wealth vs incomes. There is nothing to miss because the whole point pushes a misinformed narrative that makes you think billionaires have cash to just take.

Unless they want to buy Twitter, then somehow it transfers.

The fundamental nested misunderstanding is that the wealth vs income misunderstanding doesn't matter unless you're making a finicky point about the way equities work.

It absolutely matters because it chances the whole concept to retaxing more of peoples existing assets just because they appreciated in value. People for wealth taxes muddy this because the support for taxing things before any gains are realized is really thin.

This demonstrates something I kept say while people were dunking on Bloomberg for spending a bunch of money to try to get the Dem nomination in 2020 were being silly; for him, it was like the equivalent of buying new furniture or taking a vacation. He paid that kind of money to have a non-zero chance at becoming POTUS, and probably had a decent-enough time working on it. Made perfect sense.

If Elon runs for the republican nomination I'll take him over Trump. Or Bloomberg will do, yes. Or a small and friendly but fiscally conservative billionaire turtle.

Elon was born is South Africa, right? He can't run for president.

There's nothing useful about this tangential comment.

I would have actually liked Bloomberg as president. He seems like a reasonable man that could be reasoned with.

This is a neat data visualization but ultimately unpersuasive. The idea is that I am much richer than someone earning $1.90/day (I am), and that in consequence I should donate $5 of my money to help that poor person. But why ask me? Why not ask Elon Musk, the presented point of comparison, to donate $2,000,000, which as this site points out is worth less to him than $5 is to me? Not only would he be giving up less, he'd be helping 400,000x as many people as me.

It genuinely sickens me that people let billionaires walk all over the rest of humanity like this. Musk and his ilk could single-handedly transform the economic prospects of whole communities in poor countries. I can't. So why am I the bad guy for not donating the $5 I want to spend on a coffee to get me through my workday?

I can't remember where I read or listened to it, but apparently giving away money isn't really that easy. I mean, sure, you can just straight up give away cash to random people, but that's not really what we need.

Finding trust worthy organizations that have a good mission, know what they're doing, and can efficiently distribute large sums of money without a significant portion of it going to "administration fees" is apparently rather difficult.

Why is that not what we need?

>>Musk and his ilk could single-handedly transform the economic prospects of whole communities in poor countries

So why can't governments do this? They own way more money than billionaires and it is theoretically their responsibility. Shouldn't your anger really be directed there? Musk is not really responsible for other people's well being.

> But why ask me? Why not ask Elon Musk

Why not both ?

There are far more middle class people who might give up $5 than billionaires who might give up $2 million.

The middle and upper middle class has far more spending power than billionaires. That’s why society generally revolves around catering to us instead of the rich (the most successful companies make products for regular people).

I really don't need a website to know that I make/have at my disposal far less money than any billionaire. Or even millionaire.

I think you didn't get to the end. There is a plot twist.

Not on Firefox Android there isn't. Just a giant blank page after two comparisons.

For the daily cost to rent the webserver Elon Musk could hire an entire department of developers and purchase a data center to make the website actually work.

No, you don't get it. You can't just live your life. This must enrage you.

it's quite a fun thought experiment but the guy really needs some lessons in economics.

imagine billionaires cashed up all their assets, I doubt they'd get the full amount, probably 15% of their way into cashing it will crumple the rest due to market confidence etc

The point isn't to compare if you took all your money out of the bank and put in your pocket vs Warren Buffett doing the same, it's that the proportional every day capital deployment/purchasing power that these people have compared to us is impossibly hard to conceptualize, so you have to start somewhere. This is almost certainly why the thought experiment focuses on menial, everyday purchases.

On the other hand, Elon Musk could use his existing assets as collateral to attempt to buy Twitter without offloading much stock, and this web page is talking about tiny amount of disposable income purchases like a cup of coffee (or a few dozen coffee franchises with Elon's free cash)

Ooof, I did not like this site. It feels like it's trying to take away from the hilariously disproportionate wealth of Elon Musk by shifting the focus to "the world", with the implied message being "see, you don't have it so bad!". Nice deflection.

In addition to GiveWell (which I definitely support), you can support politicians who want to make people like Musk pay their fair share.

I don’t understand the underlying math. Musk’s net worth went up by $121B yet he couldn’t afford to buy Twitter for 1/3 of that?

I think it's a question of liquidity. If most of his wealth is in equities, he can't just sell $40 billion of TSLA without causing a huge price drop and losing voting power, etc. The way a lot of super wealthy people get liquidity is by getting loans against their less liquid assets. I think Elon did a combination of selling TSLA and getting loans to put together enough money to try to buy Twitter, IIRC.

Most of his wealth is not liquid, it’s his ownership of his companies. It doesn’t represent his pay.

Because you can't transact with your net worth.

Most of his worth isn't liquid. As i understand it, it is difficult for him to liquidate enough stock to buy Twitter.

I don’t think the numbers are right. If you make $59,000 you are not in the global top 1%.

It’s absolutely correct. You’re forgetting India, China and African nations make the majority of human beings.

Here's their source. It seems like a pretty reasonable number.

https://howrichami.givingwhatwecan.org/how-rich-am-i?income=...

One thing to recognise here is that "income" isn't an entirely global concept, and has been pushed into a lot of places, which frequently go from something resembling a barter or trade economy into a place full of "low-income" people. Some people living on cents a day are living "fine" lives relative to their area, because not every exchange of goods or services is mediated by currency.

I put in $0 and got infinity for every answer.

I'm more of an undefined kind of guy.

> In 2021, Elon Musk's net worth grew by an estimated $121 billion.

And it's dropped by more than that in 2022... So I guess we should all be happy we've made billions more than Elon this year.

kinda broken in firefox, nice try though

Tl;Dr: you are extremely wealthy compared to the world's poorest

doesn't work on my firefox

So I get that this is a click-baity way to get people to donate to people living in extreme poverty. But why compare yourself to billionaires? I'm not Elon Musk, and I'm cool with that. I haven't started multiple industry-changing companies. If I start the next Paypal, Tesla, AND SpaceX, I sure hope I am worth many billions - because my companies would be worth a ton.

The wealth difference between Elon Musk and the rest of us is a historical anomaly that actually isn’t good for innovation. [1]

I’m also reminded of the line by not quite Steinbeck: “Socialism never took root in America because the poor see themselves not as an exploited proletariat, but as temporarily embarrassed millionaires.” [2]

1. https://www.nytimes.com/2022/06/07/opinion/ezra-klein-podcas...

2. https://hellyesjohnsteinbeck.tumblr.com/post/23486952183/com...

It’s fantastic that Elon is so wealthy. He deserves it. The world needs more hard core engineers leading breakout innovations and stirring things up.

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