> Generally, someone’s wealth level can be inferred from their net worth.
> 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.
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 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.
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 :)
> 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.
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.
Liquidity can be broken down further into volume profile and net proceeds.
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.
It sounds like you may simply be misinterpreting or assigning different values to wealth levels than the author?
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.
>> 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 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.
Liquidity matters. Net worth is a notional value in most cases. Without an extremely liquid market it will not be realizable. There can be very large gaps between notional value and realizable value.
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.
Can't you borrow against relatively illiquid assets though? Like a house? It's only when you max out the line on those that you might hit a liquidity crunch
A house is a liquid asset outside of rare cases e.g. towns that have been severely hollowed out.
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.
Too granular, there are 4 levels of wealth: the destitute, those who have to work, those who have enough assets to not work, and finally the elite who influence the rules of society.
I think he was spot on. There is a huge difference between his -1, 0, and 1. Likewise, the 1, 2, 3, 4 and 5 are vastly differently even though they all have to work.
(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.)
I see where you're coming from on a methodological level, but
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!
Yup, exactly this! To clarify a bit more for the lurkers:
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.
>Capitalists control our society, and live completely different lives than the rest.
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.
> 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.
I disagree, high degrees of wealth inequality result in manipulation of our society to act against the best interest of the common man. Unfortunately, this article seems to be more inline with quantization for the sake of navel gazing.
Though I agree that inequality is less important than the quality of life of the poorest people, this article explicitly tries to characterize the latter, so even though this is done in the name of discussing wealth inequality, I'm not sure your comment applies here.
Why is it "precisely the wrong approach"? And why does it have to be just one?
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?
Yes, and also numerical "wealth" is not the same as stuff. Rich people often have very high numerical wealth, but actually don't have so much more "stuff" - houses, medicine, food, etc. They will certainly have more of these things, but maybe 100x not 1Mx.
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.
This is contradictory to how I understand economics. The consumption of "stuff" contributes to GDP, which is one of the first things people use to correlate to quality of life.
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.
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.
It reminds me of how Sam Altman recently said: "I'd rather hear from candidates about how they are going to make everyone have the stuff billionaires have instead of how they are going to eliminate billionaires." But the hyper-wealthy don't just have _stuff_, they also have power to make decisions affecting society -- to buy elections, to buy social networks, to influence which countries we do AI chip deals with, to start new cities, and so forth. A world in which everyone has the same amount of this decision-making power is probably not a world in which billionaires exist.
Yes, "don't look at wealth inequality" boils down to an argument for shifting political power to the wealthy — which I'm sure its proponents genuinely believe is for the best.
> I'd rather hear from candidates about how they are going to make everyone have the stuff billionaires have instead of how they are going to eliminate billionaires."
I'm sure you would prefer the impossible dream than the guillotine, Sammy boy.
More to the point, he has the same 24 hours in a day as everyone else. His money lets him do different things with those 24 hours than you and I, but he still only gets 24. (Until he gets to Mars, then it's 24.66.)
Between Bryan Johnson, and then also Xi and Putin getting caught on a hot mic discussing how they're going to live to 120 or 150, I wouldn't be so sure.
Eh, even the ‘taking’ in this example isn’t so simple.
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.
Money is not like mana in a game, it does not create things by itself. It is more similar to votes, each dollar is a vote into the economy for what should be created, and where the goods and services should go. And the more money you have the more votes you have.
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.
Yeah, there's an economist comment on "We can afford everything that we produced".
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)
All you say is true. I never argued for the irrelevance of money. The voting power into the economy is extremely important, and it plays a vital role in the orchestration of the real economy (the part actually producing stuff and services).
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).
Billionaires don’t generally become billionaires by spending a lot of money on watches or apples or the like.
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.
So much so that even if the quality of life of the lowest improves greatly, if the quality of life of everyone around them improves even more rapidly, they will feel worse off, not better off
"You don't have to run faster than the bear to get away. You just have to run faster than the guy next to you."
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)
This is extremely reductionist of leftwing politics and ideas, and I sincerely hope you are not basing your political orientation from that. Wealth inequality is power inequality, which in a society leads to terrible outcomes for the majority.
>I’d argue focusing on wealth inequality is precisely the wrong approach.
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.
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.
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.
> A better approach would be to look at the quality of life of the poorest.
But "quality of life" is relative. What is it relative to? The "quality of life" of other humans. There may be other metrics, but certainly wealth inequality has to feature prominently in any discussion of "quality of life". No?
Also "quality of life" is subjective whereas wealthy inequality is objective. Hard to define and masure "quality of life". Easy to measure and compare wealth.
Edit: Instead of mindlessly downvoting, why not just offer up other metrics or define "quality of life" and how to measure "quality of life".
Agree. Focusing on the inequality bit feels closer to envy. But if the quality of life or something like inflation adjusted wealth is going up for everyone, or if it is above some acceptable minimum, then is it really a problem? Or just a reflection of how concentrated things can be in a technologically advanced world?
I’m from Europe, and that’s what I focus on when talking about inequality: even if everyone’s living standards are rising, extreme wealth concentration can erode social cohesion, limit access to essential services, and distort political influence. You seem to view this through an American lens, very focused on individual opportunity, while to me it's about fairness, shared responsibility, and the health of society.
I think it's not even the billionaires that are the biggest problem. It's more like the top 10-20% that are driving up housing prices and many other things. They are a large enough group that it makes sense to mostly cater to them which is something we already see in most new apartments being higher end, less and less cheap cars on the market, no small houses to buy, restaurant prices shooting up, concert tickers becoming crazy expensive and so on. Las Vegas used to be the place for the average guy to fun. In the last few years they have publicly stated that they don't want that population anymore but want more of the upper end.
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.
Is criticizing dictatorships just envy? Because wealth inequality is the same thing as power inequality. Wealth doesn't just mean more goods to consume, it means power, and that power is mostly used to gain even more wealth and power. Eventually we'll have power concentration similar to a real dictatorship. Opposing such a future is not envy.
I don't think many look at wealth inequality in isolation, it's usually accompanied by how people are starving. E.g. "over 20 people die from malnutrition in the US but we have over 900 billionaire's" - e.g. each billionaire would probably only have to give $300k each (equiv to what the average tax payer gives to the defense budget each year) to prevent most deaths in the US due to lack of food - etc.
I get the feeling that you're winging the specific numbers because they're spectacularly incoherent.
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.
In practice, it seems that politics generally takes precedence over problem solving. If you look into the psychology of it, neither politicians nor voters are really incentivized to solve big problems. This is especially true for big problems that will take more than an election cycle to solve.
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.
In the US, the poorest people suffer from an obesity epidemic. Virtually no one is starving in the US anymore, besides mental health problems or other edge cases creating it.
Volunteering at a food bank in any large city will change your perspective.
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.
The poor are food insecure. This leads to obesity not because they have access to an abundance of food but because their access to food is not stead, leading to over eating to compensate, and the food they can afford is not healthy.
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?
Yes, both cheaper and more accessible and easier to eat without having to spend the time (which the working poor don't have) to then cook the raw foods. They're called food deserts.
Thanks for the link. I agree that preparation time is an important consideration. I do think that the food desert criterion (> 1.6km to the nearest supermarket in urban centres) seems very restrictive -- this would make half of most suburbs "food deserts" in the affluent western country where I live.
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.
One of the things you learn quickly when you look at these kind of problems is that they’re not so easy to solve with money. The budget for SNAP, the US’s primary food benefits program, is about $100 billion; the additional $270 million you propose would be a tiny drop in the bucket.
The "↑11" bucket -- which Saul labeled as "Megacorps ($300b-$3t)" -- now contains at least one individual human. How far we've come (or fallen?) in just a year.
Interesting. I guess I would be a 5, but live like a 2, as it’s less stressful that way.
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.
> ‘“Net worth” is an unfortunate term, because a human’s “worth” is obviously more than just their wealth.’
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.
I don't understand this (and I didn't understand the point in the post).
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?
This doesn't seem to reflect the whole story or the gparent post about the word choice of "worth" instead of something closer to what you're describing. Trying to twist the point into credit risk also doesn't fit here.
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.
> It is not a metric that is attempting to define their worth as a person.
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.
> “It is not a metric that is attempting to define their worth as a person.”
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.
Net worth is purely about assets minus liability. “How many dollars are attached to your tax identity and how many dollars of stuff can be taxed”
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.
I’m not conflating the two. I’m describing my experience encountering a culture that uses “worth” to mean the sum of a person’s material possessions. My own cultural background had primed me to think of these as entirely unrelated concepts.
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.
One can be very wealthy and have zero net worth. Wealthy in family, security, etc. The net wealth of a toddler in perfect living conditions is almost infinite. Their net worth however, is 0.
I don't get the point of these types of "5 levels of X"...
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??
They're massively overused, but sometimes continuous variables cause effects that are more discrete in nature. Like, sizes of human torsos follow the normal distribution, but t-shirts come in a few very much discrete sizes, so at some point it makes sense to make a simplification that in certain contexts, torsos themselves have a few discrete sizes.
I think in my ideal society it would be possible to move up a level by hard work alone (and, conversely, laziness would cause one to move down a level). Unfortunately it seems to me almost everyone stays at the level they were born at and changes happen only rarely due to good/bad luck.
This is a nice start to develop a language to discuss wealth.
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.
I really like the introduction of the ↑N notation as a way to less crassly discuss people's financial standing in life.
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.
"Hard drugs are plentiful at this level" appears to be something the author invented out of thin air. Cigarettes, alcohol, marijuana, and "hard drugs" all cost money and therefore the rates of abuse of these things are positively correlated with income, which should not surprise you.
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...)
These things would be positively correlated with income only to some bare minimum level. Most drugs seem to be relatively cheap, so it doesn't strike me as odd that someone with an utterly miserable life would be more likely to use their meager savings towards substance abuse to try and temporarily make themselves feel better.
One thing that previous societies definitely got right is to talk about envy negatively. Everything these days is about envy. It’s not enough for one’s life to improve. It has to improve relative to others or people get upset.
“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.
No. I can be envious of people who are independently wealthy, and control their own time.
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.
What you said is impossible to argue against. "I said you were envious, so you are. Anything else is just you trying to cloak your envy." You already decided that everyone must secretly want to become a billionaire above all else, and the sole and exhaustive reason why all of them spew hatred towards that class of people is "they hate us cuz they aint us".
No, these are orders of magnitude. It's like a short man who is 5 foot tall, standing next to a 6 foot man and feeling envy. But standing next to a 50 foot tall creature would be abjectly terrifying for any human of any height.
Your armchair psychoanalysis is extremely distasteful. Can you engage with the other side without straw manning them?
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.
We’ve had ten years of this cloaking of disgraceful sin in the language of vulnerability. It hasn’t yielded anything of value and now with hindsight we can affirmatively declare that it was an abuse of people’s desire to care for the vulnerable.
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.
Traditionally when talking about money as it relates to social class, people refer to an income bracket
I think this article is worth the read for the interesting data it highlights with the arbitrary framework, but it's hard to ignore the elephant in the room: the author's "traditional" experience here excludes a huge part of the economic thought of the last 200 years.
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"?
I have a feeling you'll be downvoted, but you are correct. Marx was an economist before he was a political commentator, or philosophist, or activist or whatever you want to call him.
I think writing an article that starts by "We need to have meaningful discussions about structural class differences, and segmenting the population based on wealth is an obvious starting point" and then not even mention Marx once is strange. This article does not give sufficient motivation for the construction of its complex 14-layers scale: why is it needed and how is it more useful to understand power dynamics in our society than the traditional capital vs labor distinction?
Not sure I see the point of these breakdowns. It reads as if written for a school-age child.
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.
Why the weird notation? Apart from very high net worth individuals, the metric seems pointless, navel gazing at best.
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.
> Generally, someone’s wealth level can be inferred from their net worth.
> 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.
(author here)
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 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.
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 :)
> 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.
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.
Liquidity can be broken down further into volume profile and net proceeds.
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.
It sounds like you may simply be misinterpreting or assigning different values to wealth levels than the author?
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.
Rather obviously someone can simply take a heloc against their home, and the payment from that will still be less than comparable rent.
The same is true of stocks - loans can be taken against them, and in the form of certain options leverage can hit 100%.
> The same is true of stocks - loans can be taken against them
this is only available to the richest of the richest.
>> 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 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.
Uhhh if you have $500k in house equity you can setup a HELOC line of credit in a week. If you want to fully cash out the equity you can do that too.
Liquidating 500k in stocks also takes more than a day to get in the bank.
Liquidity matters. Net worth is a notional value in most cases. Without an extremely liquid market it will not be realizable. There can be very large gaps between notional value and realizable value.
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.
[0] https://en.wikipedia.org/wiki/Liquidity_crisis
Can't you borrow against relatively illiquid assets though? Like a house? It's only when you max out the line on those that you might hit a liquidity crunch
A house is a liquid asset outside of rare cases e.g. towns that have been severely hollowed out.
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.
Too granular, there are 4 levels of wealth: the destitute, those who have to work, those who have enough assets to not work, and finally the elite who influence the rules of society.
I think he was spot on. There is a huge difference between his -1, 0, and 1. Likewise, the 1, 2, 3, 4 and 5 are vastly differently even though they all have to work.
(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.)
Those who have to work capture almost all of society.
It’s a little odd to clump everyone into the same bucket of wealth.
Yet the ones who don’t work cause an outsized amount of social problems.
less than half of the us population is employed.
What was the line again? The 80 richest men own as much as the bottom 50% of humanity?
I see where you're coming from on a methodological level, but
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!
How do you define "capitalists", in this context?
Probably the way it’s always been defined: those that own capital.
Yup, exactly this! To clarify a bit more for the lurkers:
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.
>Capitalists control our society, and live completely different lives than the rest.
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.
https://en.wikipedia.org/wiki/Proletariat
So, lumpenproletariat, proletariat, petite bourgeoisie and bourgeoisie?
I’d argue focusing on wealth inequality is precisely the wrong approach. A better approach would be to look at the quality of life of the poorest.
Eventually huge wealth inequality impacts quality of life because quality of life is not measured exclusively in cheap toasters.
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.
I disagree, high degrees of wealth inequality result in manipulation of our society to act against the best interest of the common man. Unfortunately, this article seems to be more inline with quantization for the sake of navel gazing.
Though I agree that inequality is less important than the quality of life of the poorest people, this article explicitly tries to characterize the latter, so even though this is done in the name of discussing wealth inequality, I'm not sure your comment applies here.
The whole article is about creating a log-ish scale comparison system.
This is how you end up with aggressive taxation on middle class, all the while the wealthy are laughing their way to the bank.
Why is it "precisely the wrong approach"? And why does it have to be just one?
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?
Yes, and also numerical "wealth" is not the same as stuff. Rich people often have very high numerical wealth, but actually don't have so much more "stuff" - houses, medicine, food, etc. They will certainly have more of these things, but maybe 100x not 1Mx.
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.
This is contradictory to how I understand economics. The consumption of "stuff" contributes to GDP, which is one of the first things people use to correlate to quality of life.
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.
He has infinitely times more jets than me though.
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.
It reminds me of how Sam Altman recently said: "I'd rather hear from candidates about how they are going to make everyone have the stuff billionaires have instead of how they are going to eliminate billionaires." But the hyper-wealthy don't just have _stuff_, they also have power to make decisions affecting society -- to buy elections, to buy social networks, to influence which countries we do AI chip deals with, to start new cities, and so forth. A world in which everyone has the same amount of this decision-making power is probably not a world in which billionaires exist.
Yes, "don't look at wealth inequality" boils down to an argument for shifting political power to the wealthy — which I'm sure its proponents genuinely believe is for the best.
> I'd rather hear from candidates about how they are going to make everyone have the stuff billionaires have instead of how they are going to eliminate billionaires."
I'm sure you would prefer the impossible dream than the guillotine, Sammy boy.
Biologically speaking Altman is what we’d call a “piñata”.
More to the point, he has the same 24 hours in a day as everyone else. His money lets him do different things with those 24 hours than you and I, but he still only gets 24. (Until he gets to Mars, then it's 24.66.)
And roughly 80 or so years as well!
Between Bryan Johnson, and then also Xi and Putin getting caught on a hot mic discussing how they're going to live to 120 or 150, I wouldn't be so sure.
"Until he gets to Mars, then it's 24.66."
That's a cool life hack! Venus is even better with 5832
Eh, even the ‘taking’ in this example isn’t so simple.
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.
Money is not like mana in a game, it does not create things by itself. It is more similar to votes, each dollar is a vote into the economy for what should be created, and where the goods and services should go. And the more money you have the more votes you have.
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.
Yeah, there's an economist comment on "We can afford everything that we produced".
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.
Eh, that is overly reductive.
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)
All you say is true. I never argued for the irrelevance of money. The voting power into the economy is extremely important, and it plays a vital role in the orchestration of the real economy (the part actually producing stuff and services).
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).
Billionaires don’t generally become billionaires by spending a lot of money on watches or apples or the like.
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.
Agreed. Unfortunately humans are hardwired to compare themselves to others.
So much so that even if the quality of life of the lowest improves greatly, if the quality of life of everyone around them improves even more rapidly, they will feel worse off, not better off
"You don't have to run faster than the bear to get away. You just have to run faster than the guy next to you."
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)
This is extremely reductionist of leftwing politics and ideas, and I sincerely hope you are not basing your political orientation from that. Wealth inequality is power inequality, which in a society leads to terrible outcomes for the majority.
>I’d argue focusing on wealth inequality is precisely the wrong approach.
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.
I'm reflecting more these days on what I call "trust inequality." I'm curious how much trust in each other relates to wealth. Any thoughts?
What does trust inequality mean to you?
Not sure yet, curious to reflect on it more.
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.
There's a lot of research in this area. You might not like the conclusions.
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.
I am very very fascinated by these leads. Thank you so much for sharing them, and excited to hear about any more that you may have.
"Collectivist societies promote security, but at the same time destroy trust"
Yes, very fascinated.
https://link.springer.com/book/10.1007/978-4-431-53936-0
That's exactly what someone who isn't poor would say.
> A better approach would be to look at the quality of life of the poorest.
But "quality of life" is relative. What is it relative to? The "quality of life" of other humans. There may be other metrics, but certainly wealth inequality has to feature prominently in any discussion of "quality of life". No?
Also "quality of life" is subjective whereas wealthy inequality is objective. Hard to define and masure "quality of life". Easy to measure and compare wealth.
Edit: Instead of mindlessly downvoting, why not just offer up other metrics or define "quality of life" and how to measure "quality of life".
Agree. Focusing on the inequality bit feels closer to envy. But if the quality of life or something like inflation adjusted wealth is going up for everyone, or if it is above some acceptable minimum, then is it really a problem? Or just a reflection of how concentrated things can be in a technologically advanced world?
I’m from Europe, and that’s what I focus on when talking about inequality: even if everyone’s living standards are rising, extreme wealth concentration can erode social cohesion, limit access to essential services, and distort political influence. You seem to view this through an American lens, very focused on individual opportunity, while to me it's about fairness, shared responsibility, and the health of society.
I think it's not even the billionaires that are the biggest problem. It's more like the top 10-20% that are driving up housing prices and many other things. They are a large enough group that it makes sense to mostly cater to them which is something we already see in most new apartments being higher end, less and less cheap cars on the market, no small houses to buy, restaurant prices shooting up, concert tickers becoming crazy expensive and so on. Las Vegas used to be the place for the average guy to fun. In the last few years they have publicly stated that they don't want that population anymore but want more of the upper end.
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.
Is criticizing dictatorships just envy? Because wealth inequality is the same thing as power inequality. Wealth doesn't just mean more goods to consume, it means power, and that power is mostly used to gain even more wealth and power. Eventually we'll have power concentration similar to a real dictatorship. Opposing such a future is not envy.
I don't think many look at wealth inequality in isolation, it's usually accompanied by how people are starving. E.g. "over 20 people die from malnutrition in the US but we have over 900 billionaire's" - e.g. each billionaire would probably only have to give $300k each (equiv to what the average tax payer gives to the defense budget each year) to prevent most deaths in the US due to lack of food - etc.
I get the feeling that you're winging the specific numbers because they're spectacularly incoherent.
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.
In practice, it seems that politics generally takes precedence over problem solving. If you look into the psychology of it, neither politicians nor voters are really incentivized to solve big problems. This is especially true for big problems that will take more than an election cycle to solve.
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.
In the US, the poorest people suffer from an obesity epidemic. Virtually no one is starving in the US anymore, besides mental health problems or other edge cases creating it.
Volunteering at a food bank in any large city will change your perspective.
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.
The poor are food insecure. This leads to obesity not because they have access to an abundance of food but because their access to food is not stead, leading to over eating to compensate, and the food they can afford is not healthy.
> the food they can afford is not healthy
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.
Yes, both cheaper and more accessible and easier to eat without having to spend the time (which the working poor don't have) to then cook the raw foods. They're called food deserts.
https://en.wikipedia.org/wiki/Food_desert
Thanks for the link. I agree that preparation time is an important consideration. I do think that the food desert criterion (> 1.6km to the nearest supermarket in urban centres) seems very restrictive -- this would make half of most suburbs "food deserts" in the affluent western country where I live.
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.
883 billion divided by 200 million is like 4 grand. How do you figure each taxpayer pays 300k/yr in taxes to the defense budget?
You make your currency the reserve currency, tax the world by inflating it while restricting circulation, print money, then borrow.
When people or countries potentially disrupt the equilibrium, kill them.
Sorry, I meant the math part
One of the things you learn quickly when you look at these kind of problems is that they’re not so easy to solve with money. The budget for SNAP, the US’s primary food benefits program, is about $100 billion; the additional $270 million you propose would be a tiny drop in the bucket.
The "↑11" bucket -- which Saul labeled as "Megacorps ($300b-$3t)" -- now contains at least one individual human. How far we've come (or fallen?) in just a year.
I might be dense today but I thought the upper arrow was like a "Level of wealth" thing. However here:
> 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))
Ah, I was missing important context: https://saul.pw/mag/
It's an order-of-magnitude notation used in Saul's "MagWorld" writings and podcast. Recommended: https://saul.pw/mag/
This seems very similar to an old book on the subject, which was a fascinating read:
https://en.wikipedia.org/wiki/Class:_A_Guide_Through_the_Ame...
Reminds me of this 2019 post: https://ofdollarsanddata.com/climbing-the-wealth-ladder/
Interesting. I guess I would be a 5, but live like a 2, as it’s less stressful that way.
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.
> ‘“Net worth” is an unfortunate term, because a human’s “worth” is obviously more than just their wealth.’
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.
I don't understand this (and I didn't understand the point in the post).
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?
This doesn't seem to reflect the whole story or the gparent post about the word choice of "worth" instead of something closer to what you're describing. Trying to twist the point into credit risk also doesn't fit here.
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.
> It is not a metric that is attempting to define their worth as a person.
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.
> “It is not a metric that is attempting to define their worth as a person.”
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.
Net worth is purely about assets minus liability. “How many dollars are attached to your tax identity and how many dollars of stuff can be taxed”
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.
I’m not conflating the two. I’m describing my experience encountering a culture that uses “worth” to mean the sum of a person’s material possessions. My own cultural background had primed me to think of these as entirely unrelated concepts.
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.
It is just a word, or rather a phrase. Words are given meaning by people.
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.
I'm also not a native speaker and wondering the same. Why is not called net wealth?
One can be very wealthy and have zero net worth. Wealthy in family, security, etc. The net wealth of a toddler in perfect living conditions is almost infinite. Their net worth however, is 0.
I don't get the point of these types of "5 levels of X"...
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??
No you can't, because these are orders of magnitude. Try it with "27 levels of tallness" and see what you get.
I think these groupings are meaningful: there are pretty clear social boundaries between these levels.
They're massively overused, but sometimes continuous variables cause effects that are more discrete in nature. Like, sizes of human torsos follow the normal distribution, but t-shirts come in a few very much discrete sizes, so at some point it makes sense to make a simplification that in certain contexts, torsos themselves have a few discrete sizes.
This is also a good article with demarcations you can use to evaluate either family or personal finances and wealth,
https://www.kiplinger.com/personal-finance/605075/are-you-ri...
For me the link to forbes.com/billionaires isn't working right now. Archived copy https://web.archive.org/web/20251111072724/https://www.forbe...
I think in my ideal society it would be possible to move up a level by hard work alone (and, conversely, laziness would cause one to move down a level). Unfortunately it seems to me almost everyone stays at the level they were born at and changes happen only rarely due to good/bad luck.
This is a nice start to develop a language to discuss wealth.
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.
I really like the introduction of the ↑N notation as a way to less crassly discuss people's financial standing in life.
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.
"Hard drugs are plentiful at this level" appears to be something the author invented out of thin air. Cigarettes, alcohol, marijuana, and "hard drugs" all cost money and therefore the rates of abuse of these things are positively correlated with income, which should not surprise you.
There seems to be evidence for the OP's thesis.
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...)
These things would be positively correlated with income only to some bare minimum level. Most drugs seem to be relatively cheap, so it doesn't strike me as odd that someone with an utterly miserable life would be more likely to use their meager savings towards substance abuse to try and temporarily make themselves feel better.
Denominated in the unpronounceable character, previously known as "up arrow"...
I pronounce it 'mag', which I talk about at length on the parent pages (saul.pw/mag).
I would have just used the letter 'M' or 'W'...
Then you would have other design challenges :)
One thing that previous societies definitely got right is to talk about envy negatively. Everything these days is about envy. It’s not enough for one’s life to improve. It has to improve relative to others or people get upset.
“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.
No. I can be envious of people who are independently wealthy, and control their own time.
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.
Yeah, that fear is a way for you to feel envy without damaging your self-image.
What you said is impossible to argue against. "I said you were envious, so you are. Anything else is just you trying to cloak your envy." You already decided that everyone must secretly want to become a billionaire above all else, and the sole and exhaustive reason why all of them spew hatred towards that class of people is "they hate us cuz they aint us".
No, these are orders of magnitude. It's like a short man who is 5 foot tall, standing next to a 6 foot man and feeling envy. But standing next to a 50 foot tall creature would be abjectly terrifying for any human of any height.
What are the mags for (actual, observed) human height then?
All adults are mag 0 meters. Infants are mag -1 meters. Below that are zygotes. There has never been a human that's 10x taller.
Sure, because of physical danger. But I’ve stood next to billionaires and been at no equivalent risk.
Your armchair psychoanalysis is extremely distasteful. Can you engage with the other side without straw manning them?
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.
We’ve had ten years of this cloaking of disgraceful sin in the language of vulnerability. It hasn’t yielded anything of value and now with hindsight we can affirmatively declare that it was an abuse of people’s desire to care for the vulnerable.
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.
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...
(author here)
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"?
I would still refer to them as capital. They might have more money than the gdp of a small state but that doesn't mean they are a state.
I have a feeling you'll be downvoted, but you are correct. Marx was an economist before he was a political commentator, or philosophist, or activist or whatever you want to call him.
I found that if you omit to mention "Marx" from your comment and replace "Labor/Capital" by "Workers/Billionaires", people will generally upvote.
I think writing an article that starts by "We need to have meaningful discussions about structural class differences, and segmenting the population based on wealth is an obvious starting point" and then not even mention Marx once is strange. This article does not give sufficient motivation for the construction of its complex 14-layers scale: why is it needed and how is it more useful to understand power dynamics in our society than the traditional capital vs labor distinction?
If you’re familiar with Marxism you don’t need this article, but most people are not.
Not sure I see the point of these breakdowns. It reads as if written for a school-age child.
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.
Is ↑7 a typo?
"A person with lower ↑6 wealth is a “high-net-worth individual” (HNWI, $1m)"
"About 16 million people (↑7) are designated as HNWI."
16M = 10^7.2 ~= ↑7
Why the weird notation? Apart from very high net worth individuals, the metric seems pointless, navel gazing at best.
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.