facebookDoes It Make Sense for the Wealthy To Be So Wealthy?



Does It Make Sense for the Wealthy To Be So Wealthy?

profileMing Feng

Ever Wondered How Much Does It Cost To Be Iron Man or Batman?

Fun fact!

You can be your favourite childhood superhero as long as you are rich!

Source: giphy
You can be Iron Man or Batman with $10,086,485,000 and $682,450,750 respectively.
Here’s a breakdown of what is required to be Iron Man or Batman.
Source: MoneySupermarket.com
Source: MoneySupermarket.com

What seems like an unattainable dream for most people worldwide is actually possible for some of the top billionaires in the world.

In fact, the world’s richest man, Jeff Bezos can be both Iron Man and Batman, and still have about $181 billion in excess.

His net worth can single-handedly create 19 Iron Men around the world.

Define Wealth

” It is more than just Gucci and Rolex!”

Source: giphy

In modern society, “wealth” refers to ownership of assets, and many times equity of companies.

Most of the wealthy individuals have their net worth pegged to their ownership and stake in a company/companies.

Are The Wealthy Too Wealthy?

With wealth worldwide not equally distributed at all, we take a look at how wealthy are the top billionaires in the world.

We can summarise the inequality in global wealth in a few statements:

  • The world’s richest 1% own 44% of the world’s wealth.
  • Ultra-high net worth individuals (more than $30 million net worth), owns 7.2% of the world’s wealth.
    This population only represents 0.002% of the world.
  • The world’s top 10 richest billionaires have as much wealth as many countries.

    Source: IPS analysis of Forbes’ 2019 Billionaire list and IMF 2019 Gross Domestic Product Projections

Which leads us to the next question.

Does It Make Sense for a Single Individual To Own So Much Money?

Source: giphy

Taking a more objective view on this issue, we wonder if capitalism is the best system when someone manages to accumulate such an enormous amount of wealth.

This argument brings us back to the usual debate on how the rich get richer, and whether it is the system that allows such behaviour to occur.

Understanding The System – Mixed Capitalism

Capitalism is an economic system where private or businesses owns capital goods. The production of goods and services is based on supply and demand in the market.

While this model makes a lot of sense if

  • Capitalism allows a person to get rich when they serve others by creating or selling a useful product
  • That product is sold at a price which everyone is willing to pay

    (which is only possible in a perfect market condition. In reality, perfect market condition is impossible to achieve)
  • In a perfect scenario, the consumers are better off due to the perfect price point.
  • Assuming profits are shared based on employees contribution, employees benefit from capitalism too!

Realistically, we are in a mixed economic system where there is a certain degree of government regulation over the private sectors.

Source: giphy

In a perfect world, the moral basis of capitalism is great.

But, we live in a less than perfect world and that is where the argument kicks in.

There are times where individuals get wealthy in a manner that ends up with their consumers worse off. Some examples of these type of companies are tobacco companies or companies making military weapons.

There are also arguments about how much of the percentage of the company’s profit being passed down to the employees.

There are also instances where individuals with moral hazard end up getting indirectly rewarded for their failure, eg. bank bailout of 2008. Some will argue that these people are getting rich and they do not deserve it.

How, Now, Brown Cow?

This particular topic sparked a wave of discussions on the Seedly Personal Finance Community.

There are various options being thrown out, and each comes with a certain degree of cons.

Possible SolutionMore details
Put a cap on someone's wealthIt may not encourage someone to work hard resulting in a less effective economy
Encourage the wealthy to create more value or contribute more to society with their wealthIt is ultimately their choice
Progressive tax systemThis is the policy that most countries are on. Taxing the wealth more and providing more support for the lower income.

I think we can all agree that we do not live in a perfect world with perfect information. While we hope for a blanket solution for worldwide inequality in wealth, there is no perfect solution to it.

Some may argue that it does not make sense to have an individual having so much wealth while millions are suffering from poverty.

While we try to find the equilibrium and impose policies such as tax, assistance packages, or some people would suggest a minimum wage system, there will be a certain degree of inequality when humans are left to make their own choice.

Until we find a better solution, we can only hope that the wealthy ultimately have the best intention and create value for the public when they are in the position of power.


About Ming Feng
A stint in Bloomberg gifted me with a beer belly, which only grew larger when I moved on to become a Professional Trader. Now I turn caffeine into digestible finance-related content.
You can contribute your thoughts like Ming Feng here.

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