Mag Wealth (2024)
saul.pw
saul.pw
> But also, “assets minus liabilities” offers some large shadows to hide behind.
> So a better quantity to measure would be: the amount of money someone could bring to bear on a problem if they had to. If someone they loved fell deathly ill, but the treatment would cost some large amount of money, how much could they pull together in a month or two? How much could they borrow, and from whom, and on what terms?
The following breakdowns are largely just people's net worth (assets minus liabilities) with the credit they can tap because of their assets.
Not sure I entirely understand the point. Yeah, people with assets are generally more credit-worthy and can tap lines of credit.
> Not sure I entirely understand the point. Yeah, people with assets are generally more credit-worthy and can tap lines of credit.
Liquidity is a useful concept to think about when evaluating your risk levels. Having 500k in stocks is different than 500k in your primary residence. Same net worth but if you need to tap into 500k of stock, you can do that tomorrow. Liquidating your primary residence takes a few weeks (or months) and you’re then homeless.
I think that’s what this article is getting at. Net worth + resilience to risk. You can take bigger bets (with higher rewards) when your risk is losing some paper money vs your car or house.
edit for everyone suggesting helocs: yes you can also take a margin loan against stocks. This lowers your net worth and is a great choice if you expect inflows to continue or come back soon. It is not a good choice in all scenarios. Again back to different risk profiles :)
This is well said and the main reason why when calculating if someone is an accredited investor they always exclude the value/equity of a person's primary residence.
Someone who is renting but has a large pile of cash is in a better position to repay than someone who has their equity in their home as selling equites vs selling their primary home have far different stresses on the person, all other things being equal.
1) There is a good likelihood that a house and a stock portfolio can both be sold tomorrow, no problem. But you may have to offload the house at “fire sale” prices , vastly lower than the price it would bear if you had it on offer for 30+ days.
2) T-bills and stocks can both be sold tomorrow, but if your stocks have cap gains then the net proceeds after tax are going to be much lower from the sale of stocks than the t-bills.
These are some of the ways “paper gains” and “market price” fundamentally lie to you (irrespective of bubbles etc), that are seldom broken down in too much depth in personal financial discussions.
——
Another dimension that is missing is financial freedom. The author says:
> These wealth levels have existed throughout human history, even though the unit of currency changes.
↑-1 Wealth: Destitute (less than $3) At the bottom-most level, a person can’t even scrape together a few bucks for some food. Societal services aren’t accessible unless they are completely free. Finding a toilet and shower may be difficult. They have no possessions; their shoes and coat are probably decrepit and dirty.
Hard disagree here. An indentured servant in the 17th century, with a negative net worth, might have a very decent standard of living. Nice shoes, coat, bountiful table, etc. But they are not free to leave the land and move somewhere else. They are not free to pick up a different occupation.
There were unquestionably many people in the 17th century who fit the description there. Just because you can come up with an example of someone who might plausibly fit the basic "has negative personal net worth" criterion who doesn't fit the rest of it doesn't refute that.
I have a HELOC. I've never used it. Hopefully I won't need to, but it was free to apply for and a good thing to have in case you do need it. I can tap into about 50% of my house's value any time I want instantly by writing a check or transferring money to one of my other accounts.
The same is true of stocks - loans can be taken against them, and in the form of certain options leverage can hit 100%.
this is only available to the richest of the richest.
Most other brokers, even Schwab and Fidelity, will not.
Agree it's probably not a good idea for most people. (I might argue the same for a heloc, depending on what for, what emergency savings, what level of job security, etc)
FWIW my brokerage gives me a margin loan at 4.9% up to 30% of the portfolio. The interest is literally lower than the mortgages I see advertised these days.
The real use of margin is that it enables the holder of the stocks to use them with the broker to take on cash obligations in the form of other stock options, or to take on obligations which require holding certain shares which create cash, such as a short call option.
It is a slightly more complex trade using both available margin and a stock option which effectively results in the "interest" showing up as a capital loss, and helped keep the risk minimal of actually being forced to sell. When the transaction was all done, then I sold enough of the stock to have a capital gain to offset the capital loss.
The purpose? Moving very quickly to buy a property which required 10% of the purchase price in cash on a specific day (buying property at auction). The auction house offered to "wait to deposit the cheque" until a Tuesday for an auction on a Saturday... which coincidentally is how many days it takes a cash-out transaction from a brokerage account to clear, after making the trades at market-open on a Monday morning. We showed the auction house the brokerage account and the trades (which they were not unfamiliar with) and they were quite agreeable to sit on the cheque until the funds cleared.
All entirely legal, and all why savvy 4's, most 5's, and every single 6 are able to use their wealth to acquire property whereas the 3's and below are perpetually mired in poverty, despite working very, very hard.
Liquidating 500k in stocks also takes more than a day to get in the bank.
A non-liquid asset may effectively be unusable as a security for credit, which is the point being raised. You can have a large net worth on paper and literally no way to leverage those assets into cash should the need arise. In financial economics this is commonly called a "liquidity crunch"[0].
I recently read somewhere that in the US something like two-thirds of assets are non-liquid. Startup founders should understand this pretty intuitively.
Non-liquid assets are typically small businesses or physical assets with no market. This can be because there are no buyers e.g. there are some asset markets where there might be a single transaction per decade on average. This can also be because there are contractual or statutory restriction on salability, which often extend to use of the asset as a security for credit purposes.
Another common reason is that the value of the asset is inextricably connected to who owns it. Selling the asset doesn't convey the value because that value is conditional on the current owner owning it, rendering it nearly worthless unless it is never liquidated.
One of the main points of Mag World is that different orders of magnitude are qualitatively different. Yes, of course, with more assets you can get more credit. But the types of credit are so different as to be incomparable. At ^2 wealth, without greater wealth around you, you probably can only get a usurious payday loan. At ^5 wealth you can take out a HELOC against property you hold title to. At ^10 wealth, a person can apparently buy and control a social media platform, without even "spending" any of their own money!
As they say, quantity has a quality all of its own.
> the amount of money someone could bring to bear on a problem if they had to. If someone they loved fell deathly ill, but the treatment would cost some large amount of money, how much could they pull together in a month or two?
When people or countries potentially disrupt the equilibrium, kill them.
But anyway, the United States is extremely rich and has essentially no big problems that can be solved by a small amount (say, a few billion) of money. The problems are either so big that it would take trillions to solve (supporting aging population etc), or blocked by something other than money (politics, regulations, etc). The big problems that can be solved just by throwing a few billion at them are solved quite easily by either the government or by private entities like the Gates Foundation.
It seems to me that it would be easy to support an argument that suggests more big problems could be solved if incentives were better aligned toward problem solving and if competent people, not professional politicians, were chosen to solve them.
Are you really claiming that it's cheaper to buy an appetite-satisfying amount of unhealthy food (chips/sweets/snacks/fast food) than fresh vegetables and staples like rice or potatoes?
Serious question.
I find the more recent concept of "food swamps", also explained on that page, to be a (perhaps unwitting) direct challenge to the theory that absence of nearby healthy food is the root cause:
> A related concept is the phenomenon of a food swamp, a recently coined term by researchers who defined it as an area with a disproportionate number of fast food restaurants (and fast food advertising) in comparison to the number of supermarkets in that area.[13] The single supermarket in a low-income area does not, according to researchers Rose and colleagues, necessitate availability nor does it decrease obesity rates and health risks
If this claim is true -- that is, if areas with 1 nearby supermarket have obesity rates no better than areas with 0 -- then it's essentially impossible to blame health outcomes on the availability of healthy food nearby. If an area has nearby supermarkets, it is much harder to make the case that obesity is purely the result of external factors outside a person's control.
Food insecure people load up on cheap carbs. Most of them don’t know you to cook or lack gear and will buy a $5/16oz boil in bag rice vs. a 10lb bag for $6.
If you’re not where the rubber meets the road your knowledge of a system will always be incomplete and inaccurate. Literal trade secret of S Class developers, you’re welcome.
All this leads to a system that favors the top 10-20% who can afford things, own assets like stocks and real estate, get better education for their kids and leaves the rest of the polulation out in the cold.
The guys who were gonna fly in and drop $10k already blew their kids college fund on Draft Kings.
Because on one level, we are all just competing for finite resources - especially quality females - economics is in that context an ordinal competition, not cardinal.[1] But on another level, it's the mutual cooperation, wealth creation from nothing (making the "finite" a little less finite and a little more infinite), etc that allows us to advance both as a society and as individuals.
[1]There is an interesting tie into Mises here if I wanted to rabbit hole it (value is subjective, not measurable in cardinal units, and exists only in the mind as a ranked preference of options)
When we treat everything as a zero sum status game, especially when it comes to other human beings, we tend to slide into ugly, destructive dynamics (up to and including wars) where everyone burns resources just to keep their relative place. Cooperation and innovation, on the other hand, are how we turn a fixed pie into a growing one.
So yes, relative position matters in some contexts, but the whole reason our species has gotten this far is that we are not limited to fighting over scraps. We can change the size and shape of the pie together.
For example, let's say that Musk is 250k times wealthier than I am. Does he have 250k shoes? Houses? Not really.
And it's the consumption of stuff that is really the share that one takes from society, not "wealth." Having $1 might be wealth, but it is not until I spend that Dollar on an apple that I have taken something from society.
By spending that $1, you’ve also given a farmer (plus middle men, plus a retailer) $1 they otherwise wouldn’t have had - and relieved them of an apple they already have too many of.
The big ‘taking’ events are when things are destroyed without an exchange of value (aka if those farmers can’t sell the apples because a new law passes, or there is a disease event, or the like), or where a market is cornered/controlled/manipulated to the extent someone is forced to sell for an artificially induced (lower) price, or sell at an artificially induced (higher) price.
Smaller ‘taking’ events are when something is actually consumed, but that has to happen eventually, and someone paid for it to happen. Which means they also traded something else for that money (time, work, whatever).
Otherwise, it’s numbers moving from one side of the book to the other. Things aren’t lost/destroyed, but are moving around.
So yes, he payes for the apple, and that's good. But the apple existed, and would be sold to someone else if he had not bought it. The accumulation of wealth does centralise power over the economy, what gets produced, and how it gets consumed.
Like when the Apple is produced it's not because a dollar bill was sowen into the ground. The actual inputs of production are not money but money is the lubricant that allows the goods and services to flow around in the economy. We always run into the situation where goods and services are produced and not demanded and that causes them to no longer be produced but the lack of money didn't cause their existence no more than money produced them in the first place.
Without it, societies had to have informal debts where you knew you helped your neighbor harvest crops so they would later do something for you (or perhaps you helped them harvest their crops because they provided shelter). That whole barter shit is made up.
There would not be so many orchards or apple farmers growing apples if they could not exchange those apples for goods and services they wanted effectively.
At the level of a large scale apple orchard, money is the only thing that works effectively for that.
If people only grew enough apples that they wanted to eat, most people would be unable to get apples, and most apple lovers would be spending a lot of time they could be doing something else trying to grow apples. Overall edible apples would be dramatically lower, even non-existent at some places/times.
For example, imagine the shitshow if people had to refine their own gas, or barter/trade for it directly. Zero chance 99% of society would be able to do that.
Same with miners and raw materials, machine manufacturers and machines, solar panel manufacturers and solar panels, etc. etc.
Money itself isn’t a good/service, but it makes the act of making/exchanging/selling/etc. easy and possible at scale. Which is valuable on its own. And since it provides a generic ‘value’ proxy for all goods/services within the economy, if anything it is the most consistently valuable thing in a functioning economy - it’s a wildcard for value.
This does have a limit of course - too much money in too short/concentrated an area causes all sorts of crazy things to happen, as the induced effort/incentive to produce something outstrips the realistic ability to do so, causing escalating ‘money fights’ for the same goods, as the value of the goods starts to dwarf the perceived value of the money itself. (Inflation)
Just like too little money in too concentrated an area/time causes crazy things to happen because the perceived value of the money itself starts to outweigh the actual value of the transacted goods, and transactions can start to grind to a halt in an effort to conserve the increasingly valuable money itself. (Deflation)
But it is not such that billionaires provide some value with their consumption (they can provide value in other ways though). Yes, for the individual Yatch-producer (or farmer) is it nice that they get to sell their product, but for the economy at large all it does is move production-resourced from other things which could otherwise be produced to the production of yatches(or whatever the billionaire wants).
So yes, the billionaire does not take from the farmer. But he does take from the economy at large (in the same way as my consumption does, but to an extremely different degree).
They become billionaires (generally) by owning things and making those things more valuable in other people’s eyes.
The vast majority of Elon Musks wealth, for instance, is in stock of Tesla, SpaceX, X, etc.
It’s an entirely different kind of situation, because the wealth is generally due to other people’s estimates of the productive output/wealth generation of those assets increasing over time.
In the musk example, it would be like if someone bought and then came in and funded the expansion of a big apple orchard that previously no one had ever heard of, and then made it internationally famous so that everyone wanted to be a part of it - and sold shares in that orchard to people.
Now people are eating more of that orchards apples, everyone values that orchard more, and now what previously he owned but was cheap is now worth a lot.
That is legitimate value creation, as much as you might hate him or the process.
If he did it by burning down other orchards, he would be a criminal. But like in the spacex case (or Tesla case), it’s pretty hard to argue that is what happened. Maybe some light fraud here and there, at most.
It mostly came from a lot of salesmanship and light/moderate gaslighting, but they are legitimately valuable companies - albeit maybe shouldn’t rationally be at the P/Es they are. But he is making the irrational happen.
And that is making a lot of people money that otherwise wouldn’t, and making something happen that otherwise wouldn’t. Those people are very happy he is doing what he is doing.
For the alternative, see the USSR. I’ve known people who lived in that system, and it was terrible.
Billionaires certainly CAN get more wealthy by a process as you describe. They can also get more wealthy by just owning stocks and do absolutely nothing. Last 20 years the S&P 500 has increased 8-fold. That means 64 times over 40 years, 512 times over 60, 4096 times over 80 years. With the s&p average since 1926 of 9.8%, the numbers are 42-fold after 40 years, 272 after 60 and 1770 after 80. Salaries has certainly not risen at the same rate.
My views are probably shaped by coming from a place with more old money, where more people are rich from inheritance than their own creation. And their share of the totalt wealth of the society increases even when they are just passive owners. For me this is a reinvention of Feudslism, where the owner class controls the economy because they inherited it.
Now, this is a bit of a tangent to the original discussion though. What I had been trying to say is that independently of the reason for why the billionaire has the money, the spending on that apple is not providing value to the economy. In your original post I read you to mean that, and that the billionaire provided value by buying that apple. Of course he did on the micro scale for the farmer, but not at the macro scale. All he is doing is slightly shaping the economy to provide what he wants, using money as the lube.
So billionaires can be so for a lot of reasons. They can have stolen the money, passively gained them, gained them on the back of others creating value, or they could have created the value themselves. Independently of the source, they now have power over the economic machine. They might use it to improve the machine (good) or they can make it create things the billionaire wants in place of things other people wants (less good).
What is the better alternative?
Because it’s actually in their interest to buy fewer real goods, and more ownership - assuming the ownership is of productive assets. That’s how they became billionaires in the first place. By using their Capital (literally excess assets/buying power) to acquire more assets/buying power, or grow the value of their assets/buying power. Yes, that includes the orchard example above.
In the USSR, you could only buy things approved by bureaucrats who ensured the ‘right things’ were available for sale, and people didn’t get jealous, and ownership of most classes of assets was restricted to the state.
There were no private billionaires in the USSR, but a lot of administrators that had to play political games - with those on the bottom being stuck with the leftovers.
Notably, for those complaining about the US military industrial complex - military spending in the USSR as a percent of GDP dwarfed even the US. (Albeit much lower in actual value, because the USSR’s economy was relatively tiny)
One could easily argue that the biggest priority of the USSR was in fact military spending - far more so than the US even at its peak, and they happily threw everyone else but the elites under the bus to afford it.
History rhymes for a reason, and people are similar all over.
That's a cool life hack! Venus is even better with 5832
But the focus on their personal consumption is not the most important. There is a limit to how much ice-cream a person can eat, and at some point the money is no longer used for direct personal consumption. But rather to influence the world in whatever direction they want.
Not everyone can be a billionaire, when it’s based fundamentally upon having exploited the have-nots. You’re always going to need a wage-slave class, if not a class of slaves proper. That money doesn’t come from nowhere - it’s drawn from those least able to afford it, and therefore least able to resist exploitation.
If anything, that should be all the more reason to do it.
Give the poorest more money. It’s the complete opposite of our current approach.
Also, spending money and the consumption of stuff isn't "taking something from society". It is someone's job to grow, harvest, process, transport, and sell apples. Spending a dollar to purchase an apple supports all of those people directly. Those people spend their money on stuff and it circulates. Nothing is being "taken" things are bought and sold on a free-market.
I am arguing that hoarding wealth is the share that one takes from society. You are right that Musk doesn't have 250k shoes or houses, but that's why its problematic, it is wealth that could be spent circulating through the economy, it is wealth that is a claim on future labor and resources, it is the power over his companies, employees, industry, and society. All of these are a much larger "take" from society than buying an apple, a pair of shoes, a house, or any other good or service.
> The consumption of "stuff" contributes to GDP, which is one of the first things people use to correlate to quality of life.
It's one of the first things governments use to correlate to quality of life, and imo it's a good way to get away with papering over inequality. A country's GDP can be stable or slowly growing and it won't be in recession, and yet much of that GDP can be produced by one generation of people who are in a class that's multiple orders of magnitude wealthier because the newest generation of people has to pay them to have a roof over their head and subsidize their retirement. The GDP comes from the appreciation of their property value and the rental income, while a massive proportion of working age people are just able to consume and work, largely for those same people. Very wildly different qualities of life even below what Mag World would consider Rich, maybe not in the moment when someone can but themselves some literal or metaphorical candy, but in terms of viable upward mobility and precariousness long-term.
In order to buy the house I live in the basement of, not even owned by a much older generation person in this case (seemingly a single mom, but an investment banker afaik), I would need to be able to sustain a $2m+ mortgage and come up with a $400k+ down payment, it will never be possible, and even though I never wanted that for my future, it's depressing that it's just laughably and insanely out of reach, GDP kind of hides that this is the case for many.
What actually increases long-run prosperity isn’t consumption itself, but efficient use of resources and investment - choices that expand the stock of tools, knowledge, and productive capacity in the future. New wealth is created when resources are not immediately consumed, but are instead used to boost productivity.
That’s why wealthy people who don’t spend all their wealth aren’t “hoarding” in the economic sense. Their capital is usually invested - financing factories, startups, research, tools, and infrastructure that generate more output. And when they die with wealth still invested, the state captures a chunk through estate and capital-gains taxes.
A better way to think about wealth is as decision-making power over how resources are allocated - toward current consumption (including luxuries) or toward future production (investment). Capitalism tends to concentrate that decision power in the hands of those who are best at growing capital, which raises total prosperity but also increases inequality.
Consumption uses up wealth; investment grows it. People like Musk have a lot of wealth because they’ve been good at growing it. We should absolutely guard against wealth hijacking politics - but it would be shortsighted to treat their continued investment as a net negative for society.
Wrt your points about wealth holding and investment, you're assuming the allocation of a billionaire's wealth is efficient and productive. This ignores that private returns are not social returns, it assumes that growing capital is what is best for society, and frames the question as investment vs consumption, when the question is "who controls investment decisions?" Your argument smells very similar to Reagan's trickle-down economics which has been disproved through decades of data showing tax cuts don't generate promised growth. Inequality continues to increase, while median wages stagnate.
I agree invested capital finances production, but I disagree that extreme concentration optimizes for this. Broad and diverse investment mechanisms would allocate capital more effectively than a small number of individuals basing their decisions on private returns.
Consider the equation of exchange: MV=PQ (money supply x velocity of money = nominal GDP). As wealth concentrates, velocity in the real economy decreases. Billionaire capital cycles through financial assets instead of cycling through the real economy (wages buy goods and services which pay wages). A lower velocity means either lower GDP or central banks must increase the money supply, risking asset bubbles (hmm, sounds likes whats happening right now ). Evidence suggests a dollar is stronger in the hands of the working class creating immediate economic activity and supporting local businesses, compared to a dollar in an asset portfolio.
On who controls investment, it is fair to worry about political influence, but it does not follow that highly concentrated private wealth is mostly idle or socially useless. Large fortunes are usually claims on productive assets that employ people and produce goods and services. Capital markets already involve broad and diverse mechanisms like index funds, pensions, and institutional investors that pool the savings of millions of non wealthy people and allocate them based on expected returns. That is not perfect, but it is not simply a handful of billionaires directing everything according to whim.
The equation of exchange point also overstates the role of velocity in judging what is good for the economy. A dollar that flows into an asset is not disappearing from the real economy. It is funding someone else who is selling equity or debt and who will use that for wages, R&D, or capital spending. Lower velocity at the cash register can be consistent with higher long run output if more of today’s income is channeled into projects that raise productivity tomorrow. High velocity tied to fragile consumption and low investment can look good in the short term but leave people poorer over time.
do you only have 1 shoe?
I agree looking at the quality of life of the poorest is a valuable barometer for the quality and success of a society to serve all its people. Similarly I think looking at the richest and what checks exist on their power also says a lot about the health of a civilization. It also makes perfect sense to me that we would look at wealth distributions as well. After all comparison and competition is core to the human experience, is entirely relative, and more visible than ever in the age of the internet and social media. These dynamics massively impact individual perceptions of success and political priorities, fairness being a deeply baked value in the human wetware (just ask any 5-year-old), so not sure why we wouldn't want to address them directly. Certainly there's more value than in the superficial tribalism and dog whistle culture that passes for political discourse today?
But initial take is that some environments people trust each other more. Trusting intentions, actions, words, ability. For example, a low-trust environment would probably be most prisons. High-trust might be a neighborhood where people don't lock their doors.
I remember reading a World Bank economist saying that we might be able to explain the difference in GDP per capita between the US and a place like Somalia based on how much people trust each other. How mistrust can add so much friction to interactions.
Fukuyama (Trust) or Putnam (Bowling Alone) might be a good place to start, or here is a public paper by Putnam: https://www.puttingourdifferencestowork.com/pdf/j.1467-9477....
Here's another prominent paper: https://www.sciencedirect.com/science/article/abs/pii/S00472...
Uslaner (2002) makes a distinction between moralistic trust ("Can people be trusted?") and strategic trust ("Can THIS person be trusted?") that you may find interesting.
There is also Yamagashi's Paradox: Japanese cooperate more, but trust less. Americans trust more, but defect more in specific situations.
Yes, very fascinated.
Okay, so whats the argument? Wealth inequality and the QoL of the lowest wealth individuals are intrinsically linked, because we live under systems of government with powers of taxation and goals to increase the QoL of their citizens. At what point does the poorest become wealthy enough that immense levels of wealth-hoarding, especially by individuals, is okay? I cannot believe with a good conscience that at any point it becomes okay, unless we are all living in a utopia. If you don't agree with socialism, that is what it is, but to care about the QoL of the poorest without wanting actual support networks for those people isn't rational and seems more like moral posturing.
For starters, look at the proportion of income that goes to rent:
https://www.jchs.harvard.edu/blog/rental-housing-unaffordabi...
> The net effect of this longer history is that renters today spend much more of their incomes on rent than they did in previous generations. The median renter household in 1960 spent less than a fifth of their income on rent. By 2022, housing costs consumed 31 percent of the median renter’s income.
As inequality has increased, life has become more uncertain for those towards the bottom, because the cost of recovering from adverse life events (health crises, unemployment, etc) has become increasingly unmanageable.
People on the bottom are just as helpless as they were before. They carry on with benefits and modest income. They get (shitty) healthcare fit free. The next two tiers of working poor are the ones that have gotten screwed.
Inequality is a problem parroted by middle classes mostly due to envy. It has nothing to do with improving lives of the destitute.
For instance, shelter being expensive implies either that it's fundamentally difficult to construct shelter (which is not the case, as seen in every slum and homeless camp everywhere) or the existence of rich landlords.
It’s a little odd to clump everyone into the same bucket of wealth.
1. Capitalists control our society, and live completely different lives than the rest. A typical CEO is certainly quite privileged, and may even work their way up to true wealth eventually! But at the end of the day, they're still clocking in for at least 40 hours a week to do something they'd rather not do, and their life would be completely upended if they had to stop working for some reason. The difference between Pichai and Bezos dwarfs the difference between Pichai and me for these reasons, IMO.
2. Capitalists directly control ~50% of the capital in the US last time I checked. It makes sense to split any given pie in half IMO, at least to start!
Also, the Capitalists are good at keeping thing hidden from us. For example, we do not know how they arrive on Earth. I certainly don't believe they aren't born to a mother and a father like the rest of us.
Obviously the line can be hard to draw for most (intentionally so, even!), but at the end of the day there’s people who work for their living and people who invest for their living. Besides not having to work, investors are very intentionally & explicitly tasked with directing society.
Being raised in the US, I often assumed that “capitalism” meant “a system that involves markets”, or perhaps even “a system with personal freedom”. In reality, it’s much drier and more obvious: capitalism is a system where the capitalists rule, just like the monarchs of monarchism or the theocrats of theocracy. There are many possible market-based systems that don’t have the same notion of personal property and investment that we do.
Looking it up, it seems that marxists use the word "capitalists" to refer to the class of owners of capital. I've always used "capitalist" to refer to a market-led country or to people who believe in capitalism. My dictionary helpfully uses "capitalist" to mean anything related to capitalism.
At the very least, I'll have learnt something from this conversation :)
I don’t understand: Pichai is a billionaire.
(Oddly enough the -1 and 0 don’t work, because they can’t, so the -1 and 0 have something in common with the 6 and above.)
In finance you have three basic statements:
- balance sheet
- profit & loss
- cash flow
It seems like looking at net worth of a person is like only looking at the balance sheet. The mag wealth approach also takes potential cash flow into perspective, by estimating ability to raise cash, even if it is through loans. It does provide a more complete picture.
https://en.wikipedia.org/wiki/Class:_A_Guide_Through_the_Ame...
That said, still think it has a lot of great insights.
> About 16 million people (↑7) are designated as HNWI.
What does the ↑7 means? Later he starts using it in a context that I don't understand (e.g. > About 250,000 people (↑5.5))
E.g., "Unfortunately, one’s economic status, especially if they are impoverished, can increase their likelihood of experiencing a substance use disorder, as this is one of the most common risk factors for this condition." (https://adcare.com/addiction-demographics/socioeconomic-grou...)
I grew up in a fairly egalitarian 1980s Nordic society and English is my third language.
I remember the first time I heard “worth” used in this American idiom:
“Person X is worth $Y”
It was shocking; almost like the most forbidden thing you could say, a glimpse of eugenics. If a person’s worth is measured in dollars, what does that say about the worth of underpaid women and minorities and children with development challenges…?
In the decades since, Silicon Valley has moved so far right that this barely registers anymore.
When we discuss someone's net worth, we are specifically discussing their assets less their liabilities. We use it primarily to distinguish their purchasing power and credit-worthiness.
It is not a metric that is attempting to define their worth as a person. What standardized metrics could you possible use to measure that, and for what purpose would you use that metric?
If you're filling out a mortgage application in a Nordic country, are these hypothetical underpaid women and minorities considered more credit worthy regardless of their net worth and income?
Yet that’s literally the word being used.
Imagine if a language called men “the better sex.” One could argue that it’s just a word and people don’t take it for its literal meaning. But you’d wonder why people go along with that. Don’t they notice what they’re saying? That’s the feeling I got from “person X is worth $Y” back when I first heard it.
It has zero to do with the value of the the life of a person. You can conflate the two if you’d like, you’re picking on shortcut verbiage so we don’t say a paragraph of disclaimer text before talking about net worth.
You can argue it’s just a word, and that’s fine. There’s a whole another philosophical argument about if / how much words affect beliefs and actions.
You’re attaching a different meaning to the phrase than is intended by the user of said phrase. This is a “you” problem and not some moral quandary.
You may not read it that way, but when you've never encountered the question before, the first time you see it being asked in the first place, it's comes across, not as an innocent question on a form that's just a reasonable part of a big process, but as a confrontation of a foreign culture that you've read and heard a lot about your whole life, only to be confronted by in that moment: What are you worth as a person?
That's not a common question to get asked. Okay, fine, the questionnaire is only asking as a business process thing, but the estimate is at about $10 million when broken down for parts, but at the point where someone's asking that question in the first place, you have to ask why are they asking?
Which you also point out,
> for what purpose would you use that metric?
The difference between worth and net worth is only one word, but like "guys" and "you guys", that one word makes a world of difference.
How would you define someone's worth as a person? It's because we don't talk about that at all, that even the question of net worth in the first place comes across as having a slight whiff of eugenics, because we have no other standardized measurements. Net worth is the only evaluation of how much any given individual a human is worth that has a magazine for it and list of all the high scores.
To paraphrase gp, they found it shocking to have the word for a persons value to be the word used when describing how much money they have access to.
I've personally heard many people many times describe money and income as a way to measure either someone's value to society or how much society values them. This is very much in line with the gp - why would wealth have anything to do with your value as a person.
I have friends who are 6’s and acquaintances who are 7’s and their manner of thinking and goals in life baffle me. I simply cannot relate to them at all.
99 vs 1%, normal vs millionaires vs billionaires, lower vs upper vs middle class, investor vs working class are some of the language I’ve seen used.
All of them are extremely inadequate and allow the |^7-11 folks to get away with a lot that they shouldn’t by scaring the folks at |^4-6 that it would apply to them.
Calling someone broke is seen as an insult, but maybe saying that someone is at ↑1 won't be taken as a horrible insult when discussing someone else's situation.
Like yes you can take any continuous variable and draw as many lines in the sand as you'd like (5 levels of tallness, or even 27 levels of tallness, or whatever) and actually say nothing while apparently sound like you're saying something??
Somebody with $300k has a relatively different life than somebody with $3m, no?
In the US, that covers unsubsidized healthcare for two people ($30k-$40k/yr range), rent in a 2-3BR, and like a decent ish standard of living. Without working.
So... maybe? But also maybe not by a lot.
https://www.kiplinger.com/personal-finance/605075/are-you-ri...
Traditionally when talking about money as it relates to social class, people refer to an income bracket
I know this isn't exactly a forum predisposed to Marx, but I would encourage even the most fervent anti-communists to take some time to appreciate his economic work on a scientific level. Wealth is absolutely more important than income when analyzing society, because a certain amount of wealth makes one a "capitalist" (in a literal sense, not an ideological one). Capitalists live a life of luxury without working, and they are explicitly+intentionally tasked with the lions share of social responsibility (or, more pejoratively, social power).
TL;DR: You don't need to be a Marxist to appreciate the utility of labor-based class analysis in our society! Given that the traditional SV goal is to become a capitalist as quickly as possible ("FIRE"), we'd do better to discuss this stuff more frequently...
Thanks for this comment. I am remiss to not directly address how this ties into Marxist theory. I'll consider how to add references on the next rewrite.
A key point in Mag Wealth is that there are several meaningfully different levels of both labor and capital. "Capital" is generally regarded as $^6 and up, whereas "labor" is below $^6. But just as there's a huge difference in the lives of a waitress vs lawyer (though both are "labor"), there's also a huge difference in the lives of a millionaire vs a billionaire (though both are capital). There are people who are unable to work and have even less opportunity than a minimum-wage worker; are they "labor", or maybe we should call them something else, like "destitute"? And there are people who have hundreds of billions of dollars who buy and control institutions of power; are they "capital" or do they become effectively "sovereign"?
“Keeping up with the Joneses” is now couched in socialist rhetoric about inequality. We can tell this is the case because when wage compression occurs, people get upset at “inflation” and “it’s so expensive now”.
The bottom percentiles saw unprecedented growth in recent years relative to the middle. Rather than celebrate, people got upset because things got expensive. When poor labor gets paid more, they get more expensive. That’s how it works.
But that is not the same feeling I have for Bezos, Musk, and other billionaires. That feeling is fear. Fear for the power they have, both politically and over the economy. Fear that the rise of the oligarchie and the extreme wealth differences will be the death of democracy.
It is perfectly explainable for someone to fear Musk, pouring billions into influencing elections to prop up an anti-workers candidate, who runs on hate of minorities and ends up severely impoverishing the country through huge tax cuts to the wealthy and the destruction of all remaining social nets.
No, I do not envy Musk. Frankly, he looks rather miserable on his own. A healthy man does not send 50 tweets a day, cheat at videogames on stream to boost his fragile ego, or consume 10 different drugs.
Same thing with the others.
I couldn’t care less for this deceit.
Besides, the rest of your comment is some random screed that reveals your political inclinations as the primary motivation for your comments. This /r/MurderedByWords content is a telltale.
By all means, spend half of your comment replies on dunking on some guy who isn't here as a way to flash your tribal colours.
But as I said, I have no problem facing my envy. I can be envious of independently wealthy people, and the feeling I have for billionaires is not the same. I don't know why my psyche would accept the envy for some but not for others.
I also really don't feel the shame you seem to project to me regarding envy, I tvink it is a complicated emotion with good and bad sides, certainly nothing to feel ashamed of.
But before I continue, is there any point continuing? From the comments so far you seem pretty settled in your believes about my emotions, and if you have decided apriori that whatever I say it's my mind defending itself, there is not much point continuing.
"A person with lower ↑6 wealth is a “high-net-worth individual” (HNWI, $1m)"
"About 16 million people (↑7) are designated as HNWI."
Aside from that, why not just use log10(<individual's wealth>/<average wealth>) as a function of a particular market like EU, USA, Greenland, whatever. That way the metric is agnostic to inflation and differences in currency value.
In fact kids probably know intuitively exactly where they fall on this scale without having to read a blog, unless their parents are ultra-wealthy but hide it from them really well.
Also putting someone with 300k vs 3 million in the same "bracket" is wild.