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Inside the deal that made Bill Gates $350M (1986) [pdf]

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Re: Inside the deal that made Bill Gates $350M (1986) [pdf]

#21

Post by bpodgursky »

adpirz wrote: post #17
seanmcdirmid wrote: post #13

Earlier quoted context omitted.

Wealth disparity is a lot worse now than it was in 1986. So you have to take that into account also.

I think that's exactly what that shows. Real median income (2014 dollars) was 51,000 in 1986. Today, it's 53,000[0]. Wealth in the middle hasn't changed much, and all that GDP growth is being gobbled by the very top. [0] https://research.stlouisfed.org/fred2/series/MEHOINUSA672N

Or you know... Bill Gates et al created a segment of the economy that didn't exist. Inflammatory language like "gobbled up" really annoys me.

It's not like all that Microsoft stock would be evenly distributed among the middle class if he had never come along.

Re: Inside the deal that made Bill Gates $350M (1986) [pdf]

#22

Post by InclinedPlane »

dragonwriter wrote: post #18
InclinedPlane wrote: post #10

Earlier quoted context omitted.

Even that's not right, you need to compare to per capita GDP. $350 million in 1986 is $750 million in today's dollar, but per capita GDP was just $19.1k in 1986. So $750 million corresponded to 39.2k times the per capita GDP. Today per capita GDP is $54.6k, so $5 billion is 91.5k times that. Which means that the degree to which the 100th richest person is richer than the average is about 2.3x more than it was 30 year…

GDP per capita isn't per capita wealth (or even PR capita personal income), so your conclusion doesn't follow from the statistics you offer to support it.

Per capita GDP is a population scaled measurement of the size of the economy. Scaling wealth relative to that gives an indication of relative wealth, though it's by no means a perfect measure (but better than merely scaling relative to inflation).

Re: Inside the deal that made Bill Gates $350M (1986) [pdf]

#23

Post by baudehlo »

InclinedPlane wrote: post #19
baudehlo wrote: post #15

Earlier quoted context omitted.

Why does GDP matter if you're calculating individual wealth and thus purchasing power? (Genuine question btw - not disagreeing just interested)

It's a comparison of how relatively rich people are. Adjusting for inflation ignores economic growth.

Still confused (I got a D in economics so help me out). Can you elaborate more?

Re: Inside the deal that made Bill Gates $350M (1986) [pdf]

#24

Post by ryandrake »

bpodgursky wrote: post #21
adpirz wrote: post #17

Earlier quoted context omitted.

I think that's exactly what that shows. Real median income (2014 dollars) was 51,000 in 1986. Today, it's 53,000[0]. Wealth in the middle hasn't changed much, and all that GDP growth is being gobbled by the very top. [0] https://research.stlouisfed.org/fred2/series/MEHOINUSA672N

Or you know... Bill Gates et al created a segment of the economy that didn't exist. Inflammatory language like "gobbled up" really annoys me. It's not like all that Microsoft stock would be evenly distributed among the middle class if he had never come along.

OK, so entrepreneurs "grow the pie" while gobbling up most of the newly created pie.

Re: Inside the deal that made Bill Gates $350M (1986) [pdf]

#25

Post by seanmcdirmid »

bpodgursky wrote: post #21
adpirz wrote: post #17

Earlier quoted context omitted.

I think that's exactly what that shows. Real median income (2014 dollars) was 51,000 in 1986. Today, it's 53,000[0]. Wealth in the middle hasn't changed much, and all that GDP growth is being gobbled by the very top. [0] https://research.stlouisfed.org/fred2/series/MEHOINUSA672N

Or you know... Bill Gates et al created a segment of the economy that didn't exist. Inflammatory language like "gobbled up" really annoys me. It's not like all that Microsoft stock would be evenly distributed among the middle class if he had never come along.

This is true and false. Software is great for creating value: a few smart people can change the world. But the distribution of that profit is greatly uneven (a "few smart people").

As automation kicks in, we will see more value created by fewer and fewer people, leaving everyone else behind. So even if the middle class doesn't go technically backwards, they still have to compete with Microsoft and Google millionaires for assets like housing. We are seeing that already in markets with lots of high tech employees.

Re: Inside the deal that made Bill Gates $350M (1986) [pdf]

#26

Post by a3voices »

pmelendez wrote: post #3
unreal37 wrote: post #2

How quaint that $300 Million put you in the "top 100 richest Americans" in 1986. Today, #100 has $5 billion.

You'd need to adjust the numbers by inflation to make a fair comparison though.

Actually you'd have to adjust the numbers by money supply increase, which grows faster than inflation.

Re: Inside the deal that made Bill Gates $350M (1986) [pdf]

#27

Post by InclinedPlane »

baudehlo wrote: post #23
InclinedPlane wrote: post #19

Earlier quoted context omitted.

It's a comparison of how relatively rich people are. Adjusting for inflation ignores economic growth.

Still confused (I got a D in economics so help me out). Can you elaborate more?

Taking inflation into account offsets the fact that dollars in 1986 didn't have the same value as dollars today. That allows you to compare, roughly, how rich different people are in different years.

So you can compare the 100th richest person in the US in 1986 to the 100th richest person in the US today in terms of what they could buy. But the interesting thing, which is how this whole sub-thread started, is asking whether or not the rich are getting much richer even beyond economic growth. So the 100th richest person in the US is richer today than the 100th richest person from 1986, but overall, on average, people in the US are richer today than folks were in 1986, so that direct comparison tells you little.

So how do you account for that? The easiest way is to just compare to GDP, but you need to account for the population difference, so you can just use per capita GDP. Basically you're asking: how much is this amount of wealth relative to the average single person slice of the "economic pie" in a given year.

In 1986 that figure was roughly forty thousand "pie slices" for the 100th richest person, today that figure is ninety thousand "pie slices".

Re: Inside the deal that made Bill Gates $350M (1986) [pdf]

#28

Post by adventured »

ryandrake wrote: post #24
bpodgursky wrote: post #21

Earlier quoted context omitted.

Or you know... Bill Gates et al created a segment of the economy that didn't exist. Inflammatory language like "gobbled up" really annoys me. It's not like all that Microsoft stock would be evenly distributed among the middle class if he had never come along.

OK, so entrepreneurs "grow the pie" while gobbling up most of the newly created pie.

That's definitely not true at all. Entrepreneurs typically take a small fraction of the pie they started.

Show me how much of the pie Bill Gates has kept from the total value Microsoft has created over nearly 40 years, including for public investors, the software industry, hardware industry, all global productivity gains related to Microsoft software, Microsoft employees, and so on (including all salaries paid out over 40 years by Microsoft).

Now let's do the same math for Elon Musk, Larry Page, Steve Jobs / Wozniak, Mark Zuckerberg, Larry Ellison, and so on.

Don't forget to quantify the benefits to consumers, including quality of life gains. What's Google's search engine worth to consumers? How much time does it save them? What kind of quality of life boost - even if small in per capita terms - has it provided to over a billion people?

Re: Inside the deal that made Bill Gates $350M (1986) [pdf]

#29

Post by pcurve »

dragonwriter wrote: post #6
pmelendez wrote: post #3

Earlier quoted context omitted.

You'd need to adjust the numbers by inflation to make a fair comparison though.

$350 million (the amount referenced in the article) in 1986 dollars is $760 million in 2015 dollars. [0] Still quite a bit less than $5 billion. [0] http://data.bls.gov/cgi-bin/cpicalc.pl?cost1=350.00&year1=19...

Something isn't adding up. There is no way $350 million 30 years ago is only worth a little more than x2 30 years later. I've never trusted CPI due to its skewed critera.

$350 mil in 1986 is probably a good x5-x10 in today's money if not more. You also need to take money supply into consideration.

Re: Inside the deal that made Bill Gates $350M (1986) [pdf]

#30

Post by dragonwriter »

pcurve wrote: post #29
dragonwriter wrote: post #6

Earlier quoted context omitted.

$350 million (the amount referenced in the article) in 1986 dollars is $760 million in 2015 dollars. [0] Still quite a bit less than $5 billion. [0] http://data.bls.gov/cgi-bin/cpicalc.pl?cost1=350.00&year1=19...

Something isn't adding up. There is no way $350 million 30 years ago is only worth a little more than x2 30 years later. I've never trusted CPI due to its skewed critera. $350 mil in 1986 is probably a good x5-x10 in today's money if not more. You also need to take money supply into consideration.

> Something isn't adding up. There is no way $350 million 30 years ago is only worth a little more than x2 30 years later.

Well, for things that people in that range it doesn't, because the way the vastly wealthy have gotten wealthier faster than the median and lower means that the amount of money chasing the thing that segment spends money on has expanded much faster than is the case for the rest of society.

> You also need to take money supply into consideration.

Price inflation indexes already take money supply into consideration, since increases in the supply of money decrease the relative value of money vs. the goods and services it is chasing. So, no, you don't have to take it into account in addition to price inflation. Its simply one of the significant inputs in determining price inflation.

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