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> Once you reach a certain level of wealth, your net worth increasing becomes a substitute for income because these people live of the debt backed by their illi
by bko 4y ago
> Once you reach a certain level of wealth, your net worth increasing becomes a substitute for income because these people live of the debt backed by their illiquid assets. That allows them to avoid a large tax bill.
Income is periodic. I get a salary every year. I can spend that amount every year as long as I'm employed at the same salary. Elon Musk can't spend 220 billion every year. If you want to compare net worth to income you should look at if he were to sell his shares and put it in a safe annuity earning 4% a year or so in perpetuity. So take his wealth, and multiply it by 4%. Also note that the annuity won't grow, unlike my income.
> Take out a $1b loan using $10b in assets as collateral. When that $1b loan comes due, your net worth has grown to $15b.
So you can expect his assets to grow at 50% a year? Here's a life hack: invest in Tesla if you think its going to grow 50% a year. Then even with $100,000 invested today would have you become a billionaire in 23 years!
- slg 4y agoNotice I said "your net worth increasing becomes a substitute for income" and not "your net worth becomes a substitute for income". These billionaires can get periodic influxes of cash through taking loans on their increased net worth. So I agree Elon's $220b net worth isn't directly comparable to my income, but the $121b increase in his net worth is pretty comparable to my income. The numbers I made up in that example are obviously made up. I included them to illustrate my point and not as a prediction that all billionaires see their net worth increase 50% every year. That said, Elon's net worth went up over 100% last year.
- deleted 4y ago[deleted]
- notahacker 4y agoThe page compares it with the $120bn growth in his net worth last year, which absolutely is a capital gain over a fixed period comparable with how much salary and capital gains you made last year. Admittedly that's an atypical return from the most hyped stocks in a bull market. But using a made up figure for Musk's earnings based on normies' annuities is just as unrepresentative of the typical annual return of being Elon Musk