HOW MUCH MONEY DO YOU NEED?

by Bruce Dunlavy

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The title of this essay poses a question which many people answer by simply saying, “More.” By and large, that answer is given by a roughly equal percentage of people in the upper reaches of the economic scale and people in the lower levels.This suggests that money is more than just a tool; it lends a sense of personal value as well as economic value. As noted in one of my earliest (and best-received) posts, Americans tend to consider the money they have to be about average, and they would like to be above average.

Is there a point at which money stops being valuable for acquiring things, be they needs or wants? If so, what happens when you have enough money to buy more than everything you want? Perhaps that amount can be achieved. Perhaps it already has been by many people, especially the super-rich. But studies have shown that getting more money makes people happier, even if they already have more than they know what to do with.

Perhaps money is important only when you don’t have enough. Perhaps once you have “enough” – whatever that may be – it loses its value and becomes merely the means of keeping score.

Last week it was announced that Steve Ballmer, former CEO of Microsoft, became the ninth person worldwide to have 100 billion dollars. How much is 100 billion dollars? Think of it this way. It used to be that the very rich were “millionaires.” If you made $50,000 dollars a year, you would have to do it for 20 years, without spending any of it, to accumulate a million. A million dollars is still considered a hefty chunk, but inflation has eroded its purchasing power. For most middle-class people, it’s not enough to retire on all by itself.

So consider ten times that much, or ten million dollars. That would be the equivalent of $200,000 a year – an annual income achieved by the top five percent of Americans – every year for 50 years. That’s half a century, and it would mean not spending any of it, not on goods, services, taxes, or anything else. Just invest it all and hope the returns cover the effects of inflation.

Now do that ten times – 500 years of $200,000 a year, spending none of it. You would have 100 million dollars. Now do that ten times, and you’ll have one billion dollars. So $200,000 a year added to your net worth, for fifty centuries – five thousand years – is what it would take to get to one billion. Steve Ballmer just reached 100 times that. In order for Joe or Jane Average to get to that level, they would have to accumulate $200,000 a year (which, mind you, is achieved by just five percent of American workers), and not spend any of it, for 500,000 years.

What about making a million dollars a year, which three-tenths of one percent of Americans do? Then how long would it take to amass a hundred billion? Much, much less time – only 100,000 years. On the other hand, if you could set aside 50 million dollars a year, about two thousand years would be enough.

Putting it another way, if you started with 100 billion dollars in Caesar’s time and spent a million dollars every single week, your money would just now be running out. I have the feeling spending a million dollars a week would get tiresome eventually, when you run out of things to buy.

Imagine a stack of one million dollars in hundred-dollar bills. That stack would be a bit less than four feet high. A pile of one billion dollars in hundred-dollar bills, on the other hand, would be twice as high as any building on Earth except Dubai’s Burj Khalifa. A pile of one hundred billion? That would stretch into the sky over 70 miles.

As I write this, two of the world’s richest people are about to take short flights into space, paid for by their own fortunes. One of them, Jeff Bezos, has an estimated net worth between 210 and 200 billion dollars, raising him to the status of “richest person in the world,” a position he had previously relinquished when he gave his wife 36 billion dollars in their divorce settlement. The other amateur spaceman is Richard Branson, a comparatively low-rent rich guy at a paltry six billion.

Money begets money, they say. The more you have, the easier it is to increase. As Edgar Bronfman, Sr., of the Canadian family founded the Seagram’s liquor business and later sold it for 30 billion dollars, put it, “To turn 100 dollars into 110 dollars is work. To turn 100 million into 110 million is inevitable.” Given the experience of Bezos and those like him, dropping ten billion might set them back a year or so. It’s not a catastrophic, life-shattering loss.

What could such people be doing with their wealth? Certainly some have been – or promised to be – philanthropic with some of it. But most of it they keep. Imagine, though if all the multi-billionaires decided that they could get along well enough with just half their wealth. Selectively used for the public good, that wealth could solve a lot of problems.

For example, it would cost $20 billion to provide satisfactory housing for all the homeless people in America. Ending hunger in America could be accomplished for $25 billion. Finding cures and treatments for diseases, improving primary/secondary education, making higher education more affordable, and seeding small businesses are a few other ideas.

Considering that the total net worth of the richest 400 people in the USA alone is over two trillion dollars. If you had two trillion dollars, would building your own private spaceship be at the top of your “to-do” list before, say, ending child poverty?