rgvdh (03/07/83)
Reprinted from Coevolution Quarterly, who reprinted it from the Rising
Sun Neighborhood Newsletter, who found it stuck on a bulletin board:
What's in a Billion?
A billion dollars is a very elusive concept. Look at it this way. Suppose
that every day, seven days a week, you got a thousand dollars. In a year,
you'd have roughly a third of a million and in roughly three years, a million.
Since a billion is a thousand million, it would take you three thousand years
to earn a billion dollars at a rate of a thousand a day. (We're assuming no
interest and no taxes.) Now, if at the time of Christ someone started laying
aside a thousand dollars a day to your account, now, two thousand years
later, you'd still be shy almost one third of the amount. Reflect a moment
on this, and then realize that the Rockefeller family is worth between two
and twelve billion dollars, and that there are perhaps up to a dozen families
in or near the billion dollar mark. Then ask yourself how could they
possibly have *earned* that money in any realistic sense of *earn*. And if
they didn't earn it, who did, and how did they come to get hold of it?
Don't get me wrong. I'm not sure about the author's intent, but I don't mean
to say that Capitalism doesn't handle many situations quite well. But
there are some bugs, and some regimes where it just doesn't work. In what
sense is it *fair* that someone should get that much wealth and the resulting
political power by picking the right father?jfh (03/13/83)
This article is in response to mitccc430, submitted by Robert van der Heide. The gist of that article was "How much is a billion dollars?". The article stated, quite correctly, that if you made one thousand dollars a day it would take you more than 2000 years to accumulate a billion. The actual figure is 2738 years (give or take a week or two). The article went on to state that the Rockefellers have about 12 billion dollars. Unlike Mr. van der Heide, I have no doubt about the intentions of those who originated the article. It seems clear that the implication is that there is no way any person or family could make this much money in a moral way. However, there is a flaw in the analysis, which is mentioned in the article. The offending premise is "neglecting interest". Few people seem to realize just how amazing compound interest really is. If you assume that your thousand dollars a day is put into an account paying just 8% per annum compounded daily (annual yield less than 8.5%) then the time to accumulate a billion dollars is reduced from 2738 years to only 67.5 years!!! Although few of us are fortunate (?) enough to make $1000 per day, the accumulation of large amounts of money seems much more reasonable when viewed in this manner. Also, don't forget that the Rockefeller fortune and much other "old money" was largely made in the days before income taxes, which in this country are of relatively recent vintage (mid teens of this century, if my memory is correct). The current average tax rate (at all levels) of about 40%, plus the double taxation of corporate profits makes it MUCH harder to accumulate money today. The reason for the ? in the above paragraph is to remind you that there are two sides to every coin. Making and having lots of money must be counterbalanced against the responsibility and headaches of maintaining a fortune. Don't forget that the Hunt brothers lost 980 million dollars (nearly a billion) in less than a month during their attempt to corner the silver market. Easy come, easy go? (Headache or not, it sure would be fun to try for awhile.) Just trying to make you think, Fran Heidlage duke!phs!jfh