Wealth and income variations -- some numbers

[Swammerdami]

(I prepared these two lists for my own amusement but, having spent the time, feel I may as well share them.)

How to compare wealth domination over time?
In the following I multiply net worth by U.S. population and divide by U.S. GDP.
For example, in 1848 U.S. GDP was $2.5 billion and population 20.8 million for Pcc (per capita product of U.S.A.) of $120.
That same year John Jacob Astor died with an estate valued at $25 Million, or 210,000 times the Pcc.
* 1848 John Jacob Astor = 0.21M * Pcc
* 1901 Andrew Carnegie = 1.73M * Pcc
* 1913 J.D. Rockefeller = 2.22M * Pcc
* 1937 J.D. Rockefeller = 1.86M * Pcc
* 1957 J.P. Getty = 0.33M * Pcc
* 1976 Howard Hughes = 0.70M * Pcc
* 1980 Nelson Hunt = 0.78M * Pcc
* 2000 Bill Gates = 1.60M * Pcc
* 2025 Elon Musk = 4.55M * Pcc
In each case, the person was considered richest in the world on the given date, though Nelson Hunt held this title only briefly during his famous Silver corner.
Note that rapid industrialization led to record-breaking wealth by Carnegie and Rockefeller, but wealth extremity decreased until the technology boom.



Following is a VERY rough calibration of income levels. As is done with decibels for sound power, ten decigreens represents a 10-fold increase in income. (The basis changes to wealth at the top of the scale.) Examples by occupation are for U.S. The chart is "to scale" in the sense that there are 4 lines for every ten decigreens.


* 81 decigreen Elon Musk
* 80 decigreen Larry Ellison
* 78 decigreen Jeff Bezos
* 76 decigreen Michael Dell
* 73 decigreen Charles Koch
* 70 decigreen Miriam Adelson
* 69 decigreen Rupert Murdoch
* 67 decigreen Ray Dalio
* 64 decigreen George Soros
* 60 decigreen Jamie Dimon
* 59 decigreen Taylor Swift
* 57 decigreen Bruno Mars
* 53 decigreen NBA star
* 50 decigreen Tucker Carlson
* 48 decigreen Harley-D, ceo
* 44 decigreen median NBA
* 42 decigreen Wolf Blitzer
* 40 decigreen large company cfo
* 38 decigreen medium company cfo
* 36 decigreen neurosurgeon, avg
* 34 decigreen lawyer, 99-percentile
* 30 decigreen lawyer, 85-percentile, $700/day = $175k/yr
* 28 decigreen bank officer
* 27 decigreen registered nurse
* 24 decigreen construction worker
* 20 decigreen U.S., low pay
* 18 decigreen Thailand, middle pay
* 15 decigreen Malaysia, low
* 12 decigreen Thailand, low
* 10 decigreen Guatemala, low
* 8 decigreen India, low
* 4 decigreen Burundi, low
* 2 decigreen Somalia, low
* 0 decigreen starvation

 

[bilby]

Minor quibble (which the usual suspects will doubtless decry as a basis to completely reject your analysis): Wealth and income are very different things.

I would suggest that as wealth exists mainly as investments (for those at the top of the distribution); And that as investments return typically in the order of 10% pa, rather than the 100% implied by equating wealth with income, one should reduce by one decigreen the scores derived from wealth.

I would also be interested to know which those are; you say the basis changes "at the top", but where is the transition?

 

[Swammerdami]

I would suggest that as wealth exists mainly as investments (for those at the top of the distribution); And that as investments return typically in the order of 10% pa, rather than the 100% implied by equating wealth with income, one should reduce by one decigreen the scores derived from wealth.

I would also be interested to know which those are; you say the basis changes "at the top", but where is the transition?

I should have clarified that I was not equating wealth to income at 100%; the figure I used was 5% (rather than the 10% you might use), but I didn't specify details in my brief synopsis. (Did you mean "reduce by ten decigreen"?) Elon Musk's fans vote him a huge salary: I should show him a decigreen higher than his wealth already places him.

There were other problems in preparing the list. Singers and athletes have brief careers, so I demoted their income slightly in their placement. Some individuals have BOTH high income and high wealth already accumulated. At the low end of the scale I used "nominal" income rather than PPP-adjusted. Et cetera. I already spent some time preparing the list, but if there's interest or utility further care and refinements are possible.

 

[bilby]

I should have clarified that I was not equating wealth to income at 100%; the figure I used was 5% (rather than the 10% you might use), but I didn't specify details in my brief synopsis.

Fair enough.

 

[Loren Pechtel]

Following is a VERY rough calibration of income levels. As is done with decibels for sound power, ten decigreens represents a 10-fold increase in income. (The basis changes to wealth at the top of the scale.) Examples by occupation are for U.S. The chart is "to scale" in the sense that there are 4 lines for every ten decigreens.

But you are mixing wealth and income interchangeably here, that's completely not valid.

Furthermore, those people at the top almost all are highly invested in their companies, to sell the shares would crash the price and thus the money is not truly available.

There's also the effect of the tax code--it's not really "wealth" or "income" that matters, but assets commanded. The dip in the early 20th century was a period where the tax code favored leaving assets in a corporate entity but spending as the person wanted. Thus we can not truly compare income or assets.

One more thing that I think would be relevant--extreme wealth almost always comes from doing something which provides a bit of value to an awful lot of people. The population that they can reach has increased considerably. I think the comparison of the super rich would be more meaningful if divided by the population size. (And note that for the last two on your list the population reached is far beyond just the USA.)

 

[Swammerdami]

Following is a VERY rough calibration of income levels. As is done with decibels for sound power, ten decigreens represents a 10-fold increase in income. (The basis changes to wealth at the top of the scale.) Examples by occupation are for U.S. The chart is "to scale" in the sense that there are 4 lines for every ten decigreens.

But you are mixing wealth and income interchangeably here, that's completely not valid.

No. I want to be able to compare the "affluence" of a high-earner with low savings with the "affluence" of a wealthy low-earner. Fool's errand? It sounds like you do not want to do that: That's good because with your lack of a method the BEST you could hope for is the admission "Does not compute."

Furthermore, those people at the top almost all are highly invested in their companies, to sell the shares would crash the price and thus the money is not truly available.

Wrong for multiple reasons. One of the simplest to understand among the reasons for wrongness has been discussed right here at IIDB, about how men like Musk obtain spending money WITHOUT realizing "income." One simple mechanism they employ for this is something called a  Bank loan.

There's also the effect of the tax code--it's not really "wealth" or "income" that matters, but assets commanded. The dip in the early 20th century was a period where the tax code favored leaving assets in a corporate entity but spending as the person wanted. Thus we can not truly compare income or assets.

Did you think Carnegie or Rockefeller paid themselves high dividends and spent most of their wealth on lavish living? I'm sure there is much to quibble with the 5% multiplier I used to compare wealth and income. Congratulations on not wanting to ever make such a comparison. Do you think it's impossible to attempt such a comparison?

One more thing that I think would be relevant--extreme wealth almost always comes from doing something which provides a bit of value to an awful lot of people.

Relevance?? Bill Gates' wealth is "better" than Pablo Escobar's wealth? (And will you need to quantify the "value" of recreational drugs for whatever your program is?) Do you think such value judgements are on-topic in this thread?

The population that they can reach has increased considerably. I think the comparison of the super rich would be more meaningful if divided by the population size. (And note that for the last two on your list the population reached is far beyond just the USA.)

There are various ways to do wealth comparisons that span long time periods; the different methods have different issues and purposes. A popular one you can find on the 'Net -- and which is NOT what I've done here -- is to measure wealth as a percent of US GDP. World GDP might be used instead or, as you seem to be suggesting, Average World per capita GDP. (Difficulty of estimating world product is one issue -- "The light's better here.")

- - - - - - - - - - - - -

Just to provide some actual economic content to this economics discussion, let's review Piketty's two equations which reflect the relationship between wealth and income. (The equations precede Thomas Piketty, but he emphasizes them.)

(1) α = r × β

where α is the portion of national income which accrues to capital; r is the rate of return on capital; and β is the capital/income ratio.​

(2) β = s / g

where s is the savings rate; g is the capital growth rate (the product of population and productivity growths). β is again the capital/income ratio.​

The first equation is a tautology; the second holds asymptotically.

 

[Swammerdami]

But you are mixing wealth and income interchangeably here, that's completely not valid.

Let me try to explain this to you in simpler words. First, I assume you skimmed enough to understand the x20 scaling factor I used.

The "effective income" of Larry Ellison is about ten times the effective income of Miriam Adelson. Is it difficult to define or measure "effective income"? You betcha! One can ATTEMPT to do so, while admitting that any result will be vague, approximate and FUZZY. Or one can abandon any attempt, and declare any such metric ridiculous, useless, inane and [insert seven more deprecatory adjectives].

Continuing the List I attempted, the widow Adelson's "effective income" is about ten times that of Jamie Dimon which is about ten times that of Tucker Carlson which is about ten times that of the CFO of a typical large U.S. corporation, which is about ten times the $175k annual wage of a U.S. lawyer at the 85th percentile. That lawyer has ten times the income of a low-paid U.S. worker, who has ten times the income of a low-paid worker in Guatemala. Altogether the list spans eight "Orders of Magnitude." You, it seems, might prefer to stop at Wolf Blitzer or thereabouts, disclaiming any knowledge of the access to spending power available to Adelson, Ellison, etc. "Something difficult to measure is impossible to measure." Whatever. Feel free to post your own list.

 

[Loren Pechtel]

One more thing that I think would be relevant--extreme wealth almost always comes from doing something which provides a bit of value to an awful lot of people.

Relevance?? Bill Gates' wealth is "better" than Pablo Escobar's wealth? (And will you need to quantify the "value" of recreational drugs for whatever your program is?) Do you think such value judgements are on-topic in this thread?

I didn't say whether the value is good or bad for society. I'm saying that doing X for 10,000,000 people will probably produce something like 10x the profit of doing X for 1,000,000 people. And that's not even considering that most tech stuff is high upfront, low marginal cost stuff which means the multiplier is even more than 10x. And you have to go halfway down your list before you find anyone who isn't doing a high upfront/low marginal thing.

The population that they can reach has increased considerably. I think the comparison of the super rich would be more meaningful if divided by the population size. (And note that for the last two on your list the population reached is far beyond just the USA.)

There are various ways to do wealth comparisons that span long time periods; the different methods have different issues and purposes. A popular one you can find on the 'Net -- and which is NOT what I've done here -- is to measure wealth as a percent of US GDP. World GDP might be used instead or, as you seem to be suggesting, Average World per capita GDP. (Difficulty of estimating world product is one issue -- "The light's better here.")

I don't think world GDP is too relevant to this. What's important is the number of consumers in a given market. Country borders aren't really too relevant to the digital marketplace.