The billionaire dream

As we propel forward into this latest business cycle, it is natural for new record highs to continue to be made in wealth accumulation. For example, Jeff Bezos has become the world’s wealthiest at over $150 billion. Apple becomes the first U.S. company to surpass $1 trillion. And for a few days, Mark Zuckerberg was wealthier than Warren Buffett.  It wasn’t long ago during the great financial crisis that voters were bewailing a system of inequality.  Ideas that are more muted now, as unemployment is at a generational low, yet the concept still remains of a rigged system or plain luck to account for much of the wealth disparity. We’ve covered many of these ideas previously in our probability articles.  But in recognition of recent wealth milestones we see in the news, here we’ll explore some of the ideas regarding how much weight we should give to various explanatory factors regarding differences in human wealth. 

We start by stating that there is no excuse to (daily) not try your best to achieve your maximum human potential.  Regardless of (and particularly in spite of) what is happening to people around you, it is ultimately up to you to rise and take advantage of whatever prospects you are presented.  Much can be resolved at that level.  And sure, you can vote and try to change the laws around you, but ultimately that won't be the largest driver.  Mathematically, it’s impossible to force all to be equal at the top of the curve.

Now see this wealth pyramid below for an illustrative discussion.  We’ve already well documented that there are large distributions in wealth and inequality, which is partially a function of randomness.

Say we see three people: A, B, and C.  Located at the top, average, and bottom of this pyramid, respectively.  One might falsely assume or overly emphasize that person A overly benefitted from some factors such as luck, a rigged system, randomness, etc.  This is both mathematically incorrect and unproductive since it undervalues the skill and ongoing effort person A has that would cause that person to be above average regardless.

Let’s discuss the other factors however, one at a time.  Starting with randomness.  Randomness means different things to different people. An example of randomness for person B is getting arbitrarily bumped from a business flight (could be a proportionately bigger deal for person B than person A in their job).  An example of randomness for person A is Donald Trump getting elected in 2016 and passing tax reform (person A would get more from this than person B but would be particularly successful regardless).

Now there is the concept of luck.  When most people use this term, they are really thinking about ideas that are a hybrid between luck and skill. Non-linear, yet not completely haphazard.  Say Will Smith’s character Chris Gardener from “The Pursuit of Happiness”.  From sharing a taxi with the financier in order to seek a job, to abruptly leaving a medical sales job to pursue a free and risky internship.  

These ideas are worthy nonetheless, yet fall under the category of “manufactured luck”.  Or stacking the deck in your favor.  Ultimately though, it is not a straightforward recipe for success, but it isn’t neither free nor purely random either.  It’s something bland and in-between.  Having limited traction at the beginning of your career (and certainly less useful as your career develops).  Billionaires don't live out of subway bathrooms in a foreign country, in order to learn about a new market for their business products.  

And while there are "many" seemingly smart and hardworking people, when push comes to shove for the most elite levels of wealth creation, there are still some large differences among people.  It also shows at every stage along the way.

Last, we have the over-used concept of a rigged system.  Kylie Jenner is about to be the youngest self-made billionaire ever.  Of course, she started with family money in the millions.  You may be like most people: starting with 0.  Still, Kylie had to work extraordinarily hard to get from millionaire, to billionaire.  That's how the capitalism curve works on the margin.

She had to work as tirelessly hard and for as long as you would need to work to get to be a millionaire to begin with.  The key is you still need to exhibit skill wherever you are on the wealth pyramid.  You may not go from nothing to billionaire.  But getting to millionaire is better than being poor and having wasted your life’s energy misplacing your blame on an unfair system.

Incidentally look at the poll below. Most voted incorrectly.  the average age for some famous billionaires is 50.  After having first reached millionaire by age 30.  The billionaire dream is not an overnight success story about some one-hit wonder, but rather a story of 20 years or more of hard work.

Take the following individuals:
Richard Branson, Sara Blakely, Elon Musk, Warren Buffett, George Lucas.

What is the average age they first became a millionaire versus the average age they first became a billionaire? Select closest answer.

— Statistical Ideas (@salilstatistics) July 23, 2018

Some last words for people A and C. God gives us some of the necessary skills that allow for differences among A and C.  We are also in a broader community where people in the C part of the pyramid could be any of us through no fault of his/her own.  And whose children could just as easily be our future care takers.  Many of them want just a little more wealth too and struggle to get there.  We should be compassionate and recognize that being a person A also means taking care of the people C around us.