99 vs 1%, normal vs millionaires vs billionaires, lower vs upper vs middle class, investor vs working class are some of the language I’ve seen used.
All of them are extremely inadequate and allow the |^7-11 folks to get away with a lot that they shouldn’t by scaring the folks at |^4-6 that it would apply to them.
Calling someone broke is seen as an insult, but maybe saying that someone is at ↑1 won't be taken as a horrible insult when discussing someone else's situation.
> But also, “assets minus liabilities” offers some large shadows to hide behind.
> So a better quantity to measure would be: the amount of money someone could bring to bear on a problem if they had to. If someone they loved fell deathly ill, but the treatment would cost some large amount of money, how much could they pull together in a month or two? How much could they borrow, and from whom, and on what terms?
The following breakdowns are largely just people's net worth (assets minus liabilities) with the credit they can tap because of their assets.
Not sure I entirely understand the point. Yeah, people with assets are generally more credit-worthy and can tap lines of credit.
> Not sure I entirely understand the point. Yeah, people with assets are generally more credit-worthy and can tap lines of credit.
Liquidity is a useful concept to think about when evaluating your risk levels. Having 500k in stocks is different than 500k in your primary residence. Same net worth but if you need to tap into 500k of stock, you can do that tomorrow. Liquidating your primary residence takes a few weeks (or months) and you’re then homeless.
I think that’s what this article is getting at. Net worth + resilience to risk. You can take bigger bets (with higher rewards) when your risk is losing some paper money vs your car or house.
This is well said and the main reason why when calculating if someone is an accredited investor they always exclude the value/equity of a person's primary residence.
Someone who is renting but has a large pile of cash is in a better position to repay than someone who has their equity in their home as selling equites vs selling their primary home have far different stresses on the person, all other things being equal.
1) There is a good likelihood that a house and a stock portfolio can both be sold tomorrow, no problem. But you may have to offload the house at “fire sale” prices , vastly lower than the price it would bear if you had it on offer for 30+ days.
2) T-bills and stocks can both be sold tomorrow, but if your stocks have cap gains then the net proceeds after tax are going to be much lower from the sale of stocks than the t-bills.
These are some of the ways “paper gains” and “market price” fundamentally lie to you (irrespective of bubbles etc), that are seldom broken down in too much depth in personal financial discussions.
——
Another dimension that is missing is financial freedom. The author says:
> These wealth levels have existed throughout human history, even though the unit of currency changes.
↑-1 Wealth: Destitute (less than $3) At the bottom-most level, a person can’t even scrape together a few bucks for some food. Societal services aren’t accessible unless they are completely free. Finding a toilet and shower may be difficult. They have no possessions; their shoes and coat are probably decrepit and dirty.
Hard disagree here. An indentured servant in the 17th century, with a negative net worth, might have a very decent standard of living. Nice shoes, coat, bountiful table, etc. But they are not free to leave the land and move somewhere else. They are not free to pick up a different occupation.
I have a HELOC. I've never used it. Hopefully I won't need to, but it was free to apply for and a good thing to have in case you do need it. I can tap into about 50% of my house's value any time I want instantly by writing a check or transferring money to one of my other accounts.
The same is true of stocks - loans can be taken against them, and in the form of certain options leverage can hit 100%.
Liquidating 500k in stocks also takes more than a day to get in the bank.
A non-liquid asset may effectively be unusable as a security for credit, which is the point being raised. You can have a large net worth on paper and literally no way to leverage those assets into cash should the need arise. In financial economics this is commonly called a "liquidity crunch"[0].
I recently read somewhere that in the US something like two-thirds of assets are non-liquid. Startup founders should understand this pretty intuitively.
I grew up in a fairly egalitarian 1980s Nordic society and English is my third language.
I remember the first time I heard “worth” used in this American idiom:
“Person X is worth $Y”
It was shocking; almost like the most forbidden thing you could say, a glimpse of eugenics. If a person’s worth is measured in dollars, what does that say about the worth of underpaid women and minorities and children with development challenges…?
In the decades since, Silicon Valley has moved so far right that this barely registers anymore.
When we discuss someone's net worth, we are specifically discussing their assets less their liabilities. We use it primarily to distinguish their purchasing power and credit-worthiness.
It is not a metric that is attempting to define their worth as a person. What standardized metrics could you possible use to measure that, and for what purpose would you use that metric?
If you're filling out a mortgage application in a Nordic country, are these hypothetical underpaid women and minorities considered more credit worthy regardless of their net worth and income?
Yet that’s literally the word being used.
Imagine if a language called men “the better sex.” One could argue that it’s just a word and people don’t take it for its literal meaning. But you’d wonder why people go along with that. Don’t they notice what they’re saying? That’s the feeling I got from “person X is worth $Y” back when I first heard it.
It has zero to do with the value of the the life of a person. You can conflate the two if you’d like, you’re picking on shortcut verbiage so we don’t say a paragraph of disclaimer text before talking about net worth.
You can argue it’s just a word, and that’s fine. There’s a whole another philosophical argument about if / how much words affect beliefs and actions.
You’re attaching a different meaning to the phrase than is intended by the user of said phrase. This is a “you” problem and not some moral quandary.
You may not read it that way, but when you've never encountered the question before, the first time you see it being asked in the first place, it's comes across, not as an innocent question on a form that's just a reasonable part of a big process, but as a confrontation of a foreign culture that you've read and heard a lot about your whole life, only to be confronted by in that moment: What are you worth as a person?
That's not a common question to get asked. Okay, fine, the questionnaire is only asking as a business process thing, but the estimate is at about $10 million when broken down for parts, but at the point where someone's asking that question in the first place, you have to ask why are they asking?
Which you also point out,
> for what purpose would you use that metric?
The difference between worth and net worth is only one word, but like "guys" and "you guys", that one word makes a world of difference.
How would you define someone's worth as a person? It's because we don't talk about that at all, that even the question of net worth in the first place comes across as having a slight whiff of eugenics, because we have no other standardized measurements. Net worth is the only evaluation of how much any given individual a human is worth that has a magazine for it and list of all the high scores.
To paraphrase gp, they found it shocking to have the word for a persons value to be the word used when describing how much money they have access to.
I've personally heard many people many times describe money and income as a way to measure either someone's value to society or how much society values them. This is very much in line with the gp - why would wealth have anything to do with your value as a person.
> 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))
https://www.kiplinger.com/personal-finance/605075/are-you-ri...
It’s a little odd to clump everyone into the same bucket of wealth.
1. Capitalists control our society, and live completely different lives than the rest. A typical CEO is certainly quite privileged, and may even work their way up to true wealth eventually! But at the end of the day, they're still clocking in for at least 40 hours a week to do something they'd rather not do, and their life would be completely upended if they had to stop working for some reason. The difference between Pichai and Bezos dwarfs the difference between Pichai and me for these reasons, IMO.
2. Capitalists directly control ~50% of the capital in the US last time I checked. It makes sense to split any given pie in half IMO, at least to start!
Also, the Capitalists are good at keeping thing hidden from us. For example, we do not know how they arrive on Earth. I certainly don't believe they aren't born to a mother and a father like the rest of us.
(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.)
“Keeping up with the Joneses” is now couched in socialist rhetoric about inequality. We can tell this is the case because when wage compression occurs, people get upset at “inflation” and “it’s so expensive now”.
The bottom percentiles saw unprecedented growth in recent years relative to the middle. Rather than celebrate, people got upset because things got expensive. When poor labor gets paid more, they get more expensive. That’s how it works.
But that is not the same feeling I have for Bezos, Musk, and other billionaires. That feeling is fear. Fear for the power they have, both politically and over the economy. Fear that the rise of the oligarchie and the extreme wealth differences will be the death of democracy.
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.
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...)
Traditionally when talking about money as it relates to social class, people refer to an income bracket
I know this isn't exactly a forum predisposed to Marx, but I would encourage even the most fervent anti-communists to take some time to appreciate his economic work on a scientific level. Wealth is absolutely more important than income when analyzing society, because a certain amount of wealth makes one a "capitalist" (in a literal sense, not an ideological one). Capitalists live a life of luxury without working, and they are explicitly+intentionally tasked with the lions share of social responsibility (or, more pejoratively, social power).
TL;DR: You don't need to be a Marxist to appreciate the utility of labor-based class analysis in our society! Given that the traditional SV goal is to become a capitalist as quickly as possible ("FIRE"), we'd do better to discuss this stuff more frequently...
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??
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.
"A person with lower ↑6 wealth is a “high-net-worth individual” (HNWI, $1m)"
"About 16 million people (↑7) are designated as HNWI."
Sprotch•1h ago
roflyear•1h ago
gishh•1h ago
Spooky23•1h ago
When people or countries potentially disrupt the equilibrium, kill them.
gishh•51m ago
solveit•1h ago
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.
rizzom5000•40m ago
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.
Workaccount2•1h ago
HumblyTossed•57m ago
akoboldfrying•34m ago
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.
miltonlost•12m ago
https://en.wikipedia.org/wiki/Food_desert
SpicyLemonZest•1h ago
SilverElfin•1h ago
kuerbel•56m ago
vjvjvjvjghv•9m ago
TFYS•55m ago
CGMthrowaway•1h ago
aprilthird2021•11m ago
CGMthrowaway•45s ago
Because on one level, we are all just competing for finite resources (food, mates, etc), 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)
bijection•1h ago
loeg•1h ago
hearsathought•1h ago
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".
Nifty3929•1h ago
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.
lazide•52m ago
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.
Epa095•35m ago
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.
lesuorac•28m ago
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.
lazide•27m ago
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)
fragmede•49m ago
vjvjvjvjghv•18m ago
That's a cool life hack! Venus is even better with 5832
Epa095•38m ago
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.
dougb5•28m ago
rectang•2m ago
wyre•1m ago
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.
dasil003•54m ago
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?
jimkleiber•53m ago
CGMthrowaway•11m ago
wyre•40m ago
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.
rectang•16m ago
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.
globular-toast•6m ago