How Does Anyone Earn $1 Billion?
Some simple arithmetic tells us that the government is tipping the scales.
I’ve been thinking about billionaires. I’ve been thinking about how it could be possible for one man can earn a billion dollars. So I did a little bit of math to consider the problem of how someone can earn a billion dollars. Part of the problem is scale. Our brains are simple creatures when it comes to life. We like to break things down to abstraction so that we have at least a chance to escape predators and to comprehend the numbers we like to throw around. But once we make an abstraction of a number, we begin to think that we can comprehend that number.
Most people understand what 10 is, and what 100 is. We can fairly picture that in our minds. Many of us are familiar with the multiplication tables we had in school. The multiplication tables had two axes, with each axis running up to the number 12. In that table, we see 144 possibilities for multiplying any two numbers where each number could be from 1 to 12. Most of us don’t really have a problem with a set of data that size and many of us have memorized the results in the multiplication table so that they’re easy to recall when we need them. We often do math in our heads that way.
The brain begins to stumble a bit when we go beyond 3 digit numbers. When we start talking powers of ten, we venture into the world of abstractions in order to make sense of it. We even have words for those large numbers so that we can use them in a sentence without getting overwhelmed:
10 = Ten
100 = One Hundred
1,000 = One Thousand
10,000 = Ten Thousand
100,000 = One Hundred Thousand
1,000,000 = One Million
1,000,000,000 = One Billion
1,000,000,000,000 = One Trillion
1,000,000,000,000,000 = One Quadrillion
Most of us can imagine a hundred of one thing, maybe even a thousand. When we start multiplying thousands, we really begin to abstract the numbers. When we get into millions, we don’t even bother. By then, the number is so large that it might as well be a fuzzy cloud of…something. It’s not real to us. When we get to billions, trillions and quadrillions, well, then we try to think in terms of fractions or percent to put our heads around it. It’s not easy to imagine a billion or a trillion of anything. Even with computers, we still have a hard time putting that kind of scale in perspective.
We can say with some confidence that most of us, and the people we know, will never have a million in the bank. Over a lifetime, we might earn a million, but money comes in, it goes out. If we’re lucky, we’re left with something to save for another day. But there are a few people in America who have a million in the bank. They have assets worth a million or two that they’ve managed to acquire over a lifetime of work. Now let’s scale that up.
To get to one billion, we multiply one million times one thousand:
1,000,000 x 1,000 = 1,000,000,000
We have more than 614 billionaires give or take a few in America. America is number one in billionaires in the world, with China a distant second because they’re a communist country. To put a billionaire in perspective, we set an ordinary front line worker by his side to compare incomes. The average hourly rate paid to workers in 2019 was $19.33 an hour. Americans work roughly 2000 hours in a year on average. That works out to $38,000 a year.
1,000,000,000 / 38,000 = 26,315.7894737
The math above shows us that it would take 26,315 years for a front line worker to earn $1 billion dollars. To my knowledge, it’s simply not possible for one man to be 26,000 times smarter, more effective, or more innovative than one other man or woman. To say that a billionaire might deserve that kind of money is a little bit insulting to everyone else who works for him. That doesn’t even take into account that several men on this planet have a net worth well north of $100 Billion.
The genetic differences among men don’t really explain the disparity of income from man to man. The genetic difference between man and pigs is 1%. Between man and other primates, the genetic difference is even less. We didn’t evolve the capability to earn a billion dollars since money has only been around a few thousand years while the modern human brain is roughly 2.5 million years old. Money and property are concepts that were developed rather late in our evolution. So I don’t think it’s physically possible to earn $1 billion dollars by physical means.
Since it’s not physically possible for one man to earn $1 billion even in a lifetime, there must be some other factor at work here. I think it’s fair to say that in a truly free market, there would be so much competition that it would not be possible for one man to accumulate $1 billion dollars. But the market is not free. Someone sets the rules. And that someone is not most of us, or more of us would have more money.
There has been considerable agitation over the existence of billionaires. There have been calls to tax their income since the accumulated income of billionaires means less income than the rest of us. But still, these billionaires and their proxies perpetuate the myth that the market is free and that this is how economics works.
This isn’t to say that the rich lack talent. They do have talents. But $1 billion is a bit rich for me. The compensation of CEO’s has been tracked for decades now. In the 1970s, CEOs earned roughly 10–11 times what the average worker earns. Now, that same CEO earns 300–400 times what the average worker makes.
Did CEO’s somehow evolve a new talent that we didn’t know about before? I think not. What changed then? I’d say it was the rules that changed. In Japan that CEO to worker pay ratio has remained roughly the same for the last 4 decades. A similar story can be told of Europe, too. But here, in America, greed is good. Except for the part about how high CEO pay increases the pay of everyone else in the c-suite. And that means less money for the workers who really make it all happen.
If the workers don't have money, dependent billionaires and millionaires don’t have income. That’s kind of where we are now. We saw things go in slow-mo all last year. The economy of the world shrunk in a big way. Yet somehow, billionaire wealth went up by 27% in last year alone, during a very severe recession. I don’t know anyone who’s wealth went up like that, without government intervention. That’s not about ability, that’s about policy. I can’t think of a better way to explain that jump in billionaire wealth during a recession.
To the progressives who want to tax that income, you’re too late. To the conservatives who want to tell us that’s just how free markets work, the market is not free. You can’t have a giant corporation without a giant government to protect that wealth. To the progressives who want to fix it, there is a way.
That way is to stop accepting the idea that conservatives want a free market while they call you a “socialist”. Conservatives don’t really want a free market. They want to drive income upwards to concentrate power, then they want you to believe you too could be lucky enough to walk into all that wealth. But that’s a fantasy, and right now, that fantasy is getting to be really ugly. People are dying, starving, losing their jobs, their homes, and their livelihoods.
The “free market” that we have now is unsustainable. Conservatives bleat about “free money” for the masses and how it might add to the deficit but say nothing about how the market has been rigged to support our dependent class of millionaires and billionaires. Conservatives have squat to say about the political influence of all that money concentrated into the hands of a very few people while fawning at the feet of the billionaires, beseeching them for more campaign money.
Trump is a billionaire. He has a lot to say about the socialists in the Democratic party. What he won’t say is that he doesn’t mind the socialism for the rich in the form of a legal landscape that is generous for the rich and brutal for the poor. If progressives want to win the debate about economics, they must insist that conservatives want government intervention in the economy just as much as the liberals do, it’s just that conservatives want to drive income upwards. That’s how they build billionaires.