4 ms·

What is Wealth in America?

50 points by SanjeevSharma 15y ago

0x12 15y ago
If you still look at the prices of the stuff you intend to buy then you're not rich. Once you stop looking at prices you're rich, no matter how much actual money you've got.
- Lightbody 15y ago
  This. Thank you. This article is ridiculous. I sold my startup last year and I'm (barely) in one of those groups that he discusses. I know I'm "rich" (upper 98-99%) and extremely grateful for it. I still work, but I now have the luxury of not worrying about the price on the dinner menu or thinking twice about getting a new laptop. I don't desire boats or fancy cars (which I would have to look at the price tag). So my real source of wealth is not my Fidelity account balance, but because I like being at home watching movies with my wife and I prefer electronics and gadgets that I'll always be able to afford. This article is crazy, especially in this economy with the wealth gap between the rich and everyone else widening in the last few decades. A lot of people work until they die. $2M is unimaginable to them. It's a sick world we live in where $50M is scoffed at and $2M is considered "middle class".
- tomjen3 15y ago
  That is an interesting notion but I don't agree with it. You can not look at the price for stuff for a long time without having that much money as long as you stay away from cars, houses, etc. On the other hand even if you have $100 million (which would make you rich in most peoples books) you can waste that in a couple of years buying homes and planes. If you actually have so much money you can buy planes and houses without worrying about it for the rest of your live then you would be among the top of the fortune 100 list.
  - 0x12 15y ago
    You can get rid of any amount of money by wasting it. But if you live a normal life with normal desires then a couple of million will go a long long way towards realizing your every wish, except for the absurd. Your own plane = extravagance, multiple houses ditto.
corecirculator 15y ago
"A million dollars then would be about $20 million today, which is, interestingly, $1 million a year at a 5% aftertax return." 5%?? Does anyone know what investment is he talking about?
- Lightbody 15y ago
  5% is pretty conservative, especially if you're in it for the long haul. If you look at any 30 year average pretty much since 1920, it tends to be 9% or more: http://www.getrichslowly.org/blog/2008/12/16/how-much-does-the-stock-market-actually-return/ http://www.getrichslowly.org/blog/2008/12/16/how-much-does-t...
  - TDL 15y ago
    Please, please do not use 9% as your expected investment return. The numbers touted over the past decade & a half are mostly an artifact of the post WWII period. Furthermore, consider the demographic issue of boomers retiring. These boomers are forced sellers, in other words returns will be muted for the foreseeable future because of the larger class of people who will sell equities in order to fund their retirements. The equity risk premium is closer to 4% over cash, which in today's markets means your expected returns should be between 4.25% & 5%. Regards, TDL
    - 0x12 15y ago
      Zero effort investment return is typically a shade or two under inflation, so even if the absolute number increases your ability to buy stuff steadily decreases, as does your effective net worth.
      - Lightbody 15y ago
        Agree, but what is "zero effort"? My financial advisor is self-described "lazy" (he's an odd fellow, we're lucky to have him) but he does quite a bit more stuff than your regular Joe does when it comes to managing our money. That's why I believe that 9% or more is still reasonable to expect - even with inflation.
bediger 15y ago
Great snakes! That's because $100 million is really a 'tweener number: You can be Richie Rich among your upper-middle-class friends or a hanger-on in the superrich crowd. It takes tens of millions to be an upper-middle-class person? That would be news to most of us, and to the IRS, I bet. It appears that this whole article is skewed by the editorialist's particular place in the very rich of society. I think that everything else he writes should be examined carefully.
- cellis 15y ago
  Yeah, I think he meant that $100 million makes you richie rich among the HNWI set, just "one of the guys" in the UHNWI set, and downright poor in the billionaire set. I'm pretty sure being worth $100 million makes you a serious "What-are-you-doing-here?"/"superrich" among upper middle class (folks making < $250k/yr).
  - deleted 15y ago
    [deleted]
- byoung2 15y ago
  I think He means that to an upper middle class person, someone who is worth $100 million (say with 5-10% of that liquid) would be superrich. This might be someone who was a startup founder whose company was acquired for a large cash + stock deal. If he hangs out with Bill Gates, his money wouldn't be as impressive.
- sliverstorm 15y ago
  Well, I think it would be useful to make a distinction. There are a few kinds of wealthy. Moderate wealth requires maintaining and wisdom. However, there comes a point where you have so much money you could spend like a fool for the rest of your life and never run out of money. I could see $100 million teetering around that point.
smallegan 15y ago
It would be interesting to see Forbes 400 adjusted for local economy. For instance, Warren Buffett who spends most of his time in Omaha certainly gets more bang for his buck than the Billionaires that live in Silicon Valley.
- wan23 15y ago
  Once you're at that level, differences between local economies are such a small percentage of your net worth that it really doesn't matter.
  - cellis 15y ago
    Exactly. Billionaires are truly international citizens, shifting their wealth to the most amenable climates (often literally, e.g. Florida), so few of them will be truly invested enough in a certain locale for cost of living to matter. And if they are, well then they own the entire town, so they definitely don't care.
rhymeswithcycle 15y ago
Two million bucks is the great dividing line between middle-class comfort and worry in America right now. Is this irony or just staggering cluelessness? A family net worth of $2 million puts you in the top few percent. (From http://www.federalreserve.gov/econresdata/scf/scf_2009p.htm http://www.federalreserve.gov/econresdata/scf/scf_2009p.htm, it's somewhere above the 95th percentile of family wealth in 2009)
- sliverstorm 15y ago
  Someone just has a very different relationship with "worry". As someone who's net worth is currently a tiny fraction $2mil, I will observe that the only times I have ever worried about my finances were when my net worth was negative AND I was unemployed.
- dspeyer 15y ago
  I think this is assuming you don't work. If you exert any effort to support yourself, you are by definition working class.
iamdev 15y ago
Keep in mind that Forbes (and this author) live in a world where people make money almost exclusively via cash investments. Given THAT world-view, the article makes more sense, and $2M is indeed a dividing line between classes.
dspeyer 15y ago
> the chief technology officer ... of a tech startup ... might own a golf membership or two at fancy clubs, costing $300,000 each Really? This strikes me as rather implausible, and makes me doubt a lot of the other claims.
- mseebach 15y ago
  You missed the bit where the startup was sold to Google for $2 billion.
Hitchhiker 15y ago
http://1.bp.blogspot.com/_bTbM8lbUTLU/S8dg-BMfi_I/AAAAAAAAADU/kuY2v3az_Ws/s400/osc.JPG http://1.bp.blogspot.com/_bTbM8lbUTLU/S8dg-BMfi_I/AAAAAAAAAD... source : http://samroweis1972-2010.blogspot.com http://samroweis1972-2010.blogspot.com
- Hitchhiker 15y ago
  Perhaps, the down-votes have a point.. I insulted Sam's memory by connecting an incisive picture to this link from Forbes. Perhaps, I should have just left the picture unattributed. Sorry about that.. it was induced by strange inexplicable feelings of sadness combined with sincere revulsion. Interesting guidelines here ( that often seem to be ignored ) : " Off-Topic: Most stories about politics, or crime, or sports, unless they're evidence of some interesting new phenomenon. Videos of pratfalls or disasters, or cute animal pictures. If they'd cover it on TV news, it's probably off-topic. " http://ycombinator.com/newsguidelines.html http://ycombinator.com/newsguidelines.html I guess, there is no cure for Eternal September.
tedsuo 15y ago
I like how in the end the whole article boils down to a potshot at police and firefighters for wanting pensions. You stay classy, forbes.
- scarmig 15y ago
  The beginning shot at "Ben Bernanke dollars" really turned me off, as inflation is at a historical nadir now (to the detriment of the country). Interesting article, though, if you can look past Forbes' political Tourette's.
Gravityloss 15y ago
I was expecting a socio-philosophical analysis of why schools are being closed down, the government and people are becoming indebted, yet supposedly the wealth has multiplied in the recent decades etc etc. But instead you get counting of money, like kids do when they're maybe ten: how much money everyone's daddy and mommy have. What is wealth in America? Having more money than others.
ThisIBereave 15y ago
You really have to be a member of the clueless aristocrat club to write for Forbes. "Two million bucks is the great dividing line between middle-class comfort and worry in America right now. That $2 million is $100,000 in income, if you base it on an aftertax 5%." Obviously everyone in the middle class is sitting on $2 million in wealth.
- nfriedly 15y ago
  It took me a second to understand what he was saying: $2 million invested at a 5% return after tax means that you get ~$100,000 per year income from the investment. That should be enough to live a middle-class lifestyle without having to work.
- orangecat 15y ago
  I interpreted that to mean that you need $2M+ to not be concerned that a feasible series of negative events could wipe you out. For example, thanks to the idiotic linkage of health insurance and employment, most Americans would be financially destroyed by the combination of an expensive illness and losing their job, the former making the latter much more likely.
juxta 15y ago
I always had this discussion with friends. Let's say you had Bill Gates money - it would be very very very hard for him to use up all his money even if he kept buying up things (Mind you - giving it all away is not included). Imagine how hard it would be to use up $50 billion?
michaelochurch 15y ago
Someone preserve this so that when TSHTF, Paris 1793 style, we can see what conditions led to it. That's because $100 million is really a 'tweener number: You can be Richie Rich among your upper-middle-class friends or a hanger-on in the superrich crowd. Ok, this is stupid on so many levels. First among them is that the difference between upper-middle-class and upper class is not, in reality, based on an income threshold. Steve Jobs was a billionaire and solidly middle-class. He worked too hard. Bill Gates is possibly lower-upper but he had to push himself into the right circles to get there. The upper class (the real one) is a well-connected, socially closed set of parasitic people who peddle social connections and influence as a means of sustaining their insanely expensive lifestyles. They generally have the resources to accrue $1-2 million per year without really working, just by selling and exploiting their social connections, but they aren't all in the $50m+ net worth crowd. Just like us, some of them negative net worth. In their cases, it's usually a consequence of doing seriously stupid shit. You can separate the lower class from the middle class based on education, income, and job prestige because the middle class's values are defined based on an ethic of production and these are taken as evidence of a productive life. The middle-class line corresponds to an income around $100,000 per year per adult at age 40, adjusted for cost of living and job prestige. (Yes, this means that 50th-percentile is not "middle class"; society is pyramidal.) The upper class, by contrast, defines itself based on an ethic of consumption-- materially speaking and in terms of social access (the ability to consume the attention of important people). Different things entirely.
SanjeevSharma 15y ago
Very interesting, all the comments this post has received. I posted this link on HN because I guessed that several readers here are entrepreneurs like myself, who would one day like to be amongst the 'rich' (or according to the articles author 'upper middle class') and would like to know how that segment of society lives. I had no intention of starting a discourse on class warfare ;) On the other hand, personally I found this article to be extremely instructive on the relationship between 'net worth' and 'income'. As someone who has worked a job all my life, till date, I have always looked as my salary as my measure of how well I was doing financially. This article made me take an alternative perspective and look at 'net worth'. If and when I decide to stop working for money (side note - someone said Steve Jobs worked so he was middle class. He worked, yes, but I am sure it was not for money! He was Rich.) I would like to still have cash flow coming in from my investments and other passive sources. I believe that is what the author is getting to. If that amount at which I can stop working for money is $100,000 per year, I need to have $2 million in net worth; for an income of $1 million (whew!), I need to have $20 million, and so forth...

50 points by SanjeevSharma 15y ago

0x12 15y ago

If you still look at the prices of the stuff you intend to buy then you're not rich. Once you stop looking at prices you're rich, no matter how much actual money you've got.

Lightbody 15y ago
This. Thank you. This article is ridiculous. I sold my startup last year and I'm (barely) in one of those groups that he discusses. I know I'm "rich" (upper 98-99%) and extremely grateful for it. I still work, but I now have the luxury of not worrying about the price on the dinner menu or thinking twice about getting a new laptop. I don't desire boats or fancy cars (which I would have to look at the price tag). So my real source of wealth is not my Fidelity account balance, but because I like being at home watching movies with my wife and I prefer electronics and gadgets that I'll always be able to afford. This article is crazy, especially in this economy with the wealth gap between the rich and everyone else widening in the last few decades. A lot of people work until they die. $2M is unimaginable to them. It's a sick world we live in where $50M is scoffed at and $2M is considered "middle class".
tomjen3 15y ago
That is an interesting notion but I don't agree with it. You can not look at the price for stuff for a long time without having that much money as long as you stay away from cars, houses, etc. On the other hand even if you have $100 million (which would make you rich in most peoples books) you can waste that in a couple of years buying homes and planes. If you actually have so much money you can buy planes and houses without worrying about it for the rest of your live then you would be among the top of the fortune 100 list.
- 0x12 15y ago
  You can get rid of any amount of money by wasting it. But if you live a normal life with normal desires then a couple of million will go a long long way towards realizing your every wish, except for the absurd. Your own plane = extravagance, multiple houses ditto.

corecirculator 15y ago

"A million dollars then would be about $20 million today, which is, interestingly, $1 million a year at a 5% aftertax return." 5%?? Does anyone know what investment is he talking about?

Lightbody 15y ago
5% is pretty conservative, especially if you're in it for the long haul. If you look at any 30 year average pretty much since 1920, it tends to be 9% or more: http://www.getrichslowly.org/blog/2008/12/16/how-much-does-the-stock-market-actually-return/ http://www.getrichslowly.org/blog/2008/12/16/how-much-does-t...
- TDL 15y ago
  Please, please do not use 9% as your expected investment return. The numbers touted over the past decade & a half are mostly an artifact of the post WWII period. Furthermore, consider the demographic issue of boomers retiring. These boomers are forced sellers, in other words returns will be muted for the foreseeable future because of the larger class of people who will sell equities in order to fund their retirements. The equity risk premium is closer to 4% over cash, which in today's markets means your expected returns should be between 4.25% & 5%. Regards, TDL
  - 0x12 15y ago
    Zero effort investment return is typically a shade or two under inflation, so even if the absolute number increases your ability to buy stuff steadily decreases, as does your effective net worth.
    - Lightbody 15y ago
      Agree, but what is "zero effort"? My financial advisor is self-described "lazy" (he's an odd fellow, we're lucky to have him) but he does quite a bit more stuff than your regular Joe does when it comes to managing our money. That's why I believe that 9% or more is still reasonable to expect - even with inflation.

bediger 15y ago

Great snakes! That's because $100 million is really a 'tweener number: You can be Richie Rich among your upper-middle-class friends or a hanger-on in the superrich crowd. It takes tens of millions to be an upper-middle-class person? That would be news to most of us, and to the IRS, I bet. It appears that this whole article is skewed by the editorialist's particular place in the very rich of society. I think that everything else he writes should be examined carefully.

cellis 15y ago
Yeah, I think he meant that $100 million makes you richie rich among the HNWI set, just "one of the guys" in the UHNWI set, and downright poor in the billionaire set. I'm pretty sure being worth $100 million makes you a serious "What-are-you-doing-here?"/"superrich" among upper middle class (folks making < $250k/yr).
- deleted 15y ago
  [deleted]
byoung2 15y ago
I think He means that to an upper middle class person, someone who is worth $100 million (say with 5-10% of that liquid) would be superrich. This might be someone who was a startup founder whose company was acquired for a large cash + stock deal. If he hangs out with Bill Gates, his money wouldn't be as impressive.
sliverstorm 15y ago
Well, I think it would be useful to make a distinction. There are a few kinds of wealthy. Moderate wealth requires maintaining and wisdom. However, there comes a point where you have so much money you could spend like a fool for the rest of your life and never run out of money. I could see $100 million teetering around that point.

smallegan 15y ago

It would be interesting to see Forbes 400 adjusted for local economy. For instance, Warren Buffett who spends most of his time in Omaha certainly gets more bang for his buck than the Billionaires that live in Silicon Valley.

wan23 15y ago
Once you're at that level, differences between local economies are such a small percentage of your net worth that it really doesn't matter.
- cellis 15y ago
  Exactly. Billionaires are truly international citizens, shifting their wealth to the most amenable climates (often literally, e.g. Florida), so few of them will be truly invested enough in a certain locale for cost of living to matter. And if they are, well then they own the entire town, so they definitely don't care.

rhymeswithcycle 15y ago

Two million bucks is the great dividing line between middle-class comfort and worry in America right now. Is this irony or just staggering cluelessness? A family net worth of $2 million puts you in the top few percent. (From http://www.federalreserve.gov/econresdata/scf/scf_2009p.htm http://www.federalreserve.gov/econresdata/scf/scf_2009p.htm, it's somewhere above the 95th percentile of family wealth in 2009)

sliverstorm 15y ago
Someone just has a very different relationship with "worry". As someone who's net worth is currently a tiny fraction $2mil, I will observe that the only times I have ever worried about my finances were when my net worth was negative AND I was unemployed.
dspeyer 15y ago
I think this is assuming you don't work. If you exert any effort to support yourself, you are by definition working class.

iamdev 15y ago

Keep in mind that Forbes (and this author) live in a world where people make money almost exclusively via cash investments. Given THAT world-view, the article makes more sense, and $2M is indeed a dividing line between classes.

dspeyer 15y ago

> the chief technology officer ... of a tech startup ... might own a golf membership or two at fancy clubs, costing $300,000 each Really? This strikes me as rather implausible, and makes me doubt a lot of the other claims.

mseebach 15y ago
You missed the bit where the startup was sold to Google for $2 billion.

Hitchhiker 15y ago

http://1.bp.blogspot.com/_bTbM8lbUTLU/S8dg-BMfi_I/AAAAAAAAADU/kuY2v3az_Ws/s400/osc.JPG http://1.bp.blogspot.com/_bTbM8lbUTLU/S8dg-BMfi_I/AAAAAAAAAD... source : http://samroweis1972-2010.blogspot.com http://samroweis1972-2010.blogspot.com

Hitchhiker 15y ago
Perhaps, the down-votes have a point.. I insulted Sam's memory by connecting an incisive picture to this link from Forbes. Perhaps, I should have just left the picture unattributed. Sorry about that.. it was induced by strange inexplicable feelings of sadness combined with sincere revulsion. Interesting guidelines here ( that often seem to be ignored ) : " Off-Topic: Most stories about politics, or crime, or sports, unless they're evidence of some interesting new phenomenon. Videos of pratfalls or disasters, or cute animal pictures. If they'd cover it on TV news, it's probably off-topic. " http://ycombinator.com/newsguidelines.html http://ycombinator.com/newsguidelines.html I guess, there is no cure for Eternal September.

tedsuo 15y ago

I like how in the end the whole article boils down to a potshot at police and firefighters for wanting pensions. You stay classy, forbes.

scarmig 15y ago
The beginning shot at "Ben Bernanke dollars" really turned me off, as inflation is at a historical nadir now (to the detriment of the country). Interesting article, though, if you can look past Forbes' political Tourette's.

Gravityloss 15y ago

I was expecting a socio-philosophical analysis of why schools are being closed down, the government and people are becoming indebted, yet supposedly the wealth has multiplied in the recent decades etc etc. But instead you get counting of money, like kids do when they're maybe ten: how much money everyone's daddy and mommy have. What is wealth in America? Having more money than others.

ThisIBereave 15y ago

You really have to be a member of the clueless aristocrat club to write for Forbes. "Two million bucks is the great dividing line between middle-class comfort and worry in America right now. That $2 million is $100,000 in income, if you base it on an aftertax 5%." Obviously everyone in the middle class is sitting on $2 million in wealth.

nfriedly 15y ago
It took me a second to understand what he was saying: $2 million invested at a 5% return after tax means that you get ~$100,000 per year income from the investment. That should be enough to live a middle-class lifestyle without having to work.
orangecat 15y ago
I interpreted that to mean that you need $2M+ to not be concerned that a feasible series of negative events could wipe you out. For example, thanks to the idiotic linkage of health insurance and employment, most Americans would be financially destroyed by the combination of an expensive illness and losing their job, the former making the latter much more likely.

juxta 15y ago

I always had this discussion with friends. Let's say you had Bill Gates money - it would be very very very hard for him to use up all his money even if he kept buying up things (Mind you - giving it all away is not included). Imagine how hard it would be to use up $50 billion?

michaelochurch 15y ago

Someone preserve this so that when TSHTF, Paris 1793 style, we can see what conditions led to it. That's because $100 million is really a 'tweener number: You can be Richie Rich among your upper-middle-class friends or a hanger-on in the superrich crowd. Ok, this is stupid on so many levels. First among them is that the difference between upper-middle-class and upper class is not, in reality, based on an income threshold. Steve Jobs was a billionaire and solidly middle-class. He worked too hard. Bill Gates is possibly lower-upper but he had to push himself into the right circles to get there. The upper class (the real one) is a well-connected, socially closed set of parasitic people who peddle social connections and influence as a means of sustaining their insanely expensive lifestyles. They generally have the resources to accrue $1-2 million per year without really working, just by selling and exploiting their social connections, but they aren't all in the $50m+ net worth crowd. Just like us, some of them negative net worth. In their cases, it's usually a consequence of doing seriously stupid shit. You can separate the lower class from the middle class based on education, income, and job prestige because the middle class's values are defined based on an ethic of production and these are taken as evidence of a productive life. The middle-class line corresponds to an income around $100,000 per year per adult at age 40, adjusted for cost of living and job prestige. (Yes, this means that 50th-percentile is not "middle class"; society is pyramidal.) The upper class, by contrast, defines itself based on an ethic of consumption-- materially speaking and in terms of social access (the ability to consume the attention of important people). Different things entirely.

SanjeevSharma 15y ago

Very interesting, all the comments this post has received. I posted this link on HN because I guessed that several readers here are entrepreneurs like myself, who would one day like to be amongst the 'rich' (or according to the articles author 'upper middle class') and would like to know how that segment of society lives. I had no intention of starting a discourse on class warfare ;) On the other hand, personally I found this article to be extremely instructive on the relationship between 'net worth' and 'income'. As someone who has worked a job all my life, till date, I have always looked as my salary as my measure of how well I was doing financially. This article made me take an alternative perspective and look at 'net worth'. If and when I decide to stop working for money (side note - someone said Steve Jobs worked so he was middle class. He worked, yes, but I am sure it was not for money! He was Rich.) I would like to still have cash flow coming in from my investments and other passive sources. I believe that is what the author is getting to. If that amount at which I can stop working for money is $100,000 per year, I need to have $2 million in net worth; for an income of $1 million (whew!), I need to have $20 million, and so forth...