Why So Many Rich People Don’t Feel Very Rich • Hacker News Board

Re: Why So Many Rich People Don’t Feel Very Rich

#111

Post by demallien » Tue, Jan 11, 2011, 5:39 PM UTC

jeremymims wrote: post #38

This article wonders why the rich are getting richer and the answer is compound interest. Having $1 million in the bank will reliably generate between $25k and $50k per year. Having $2 million in the bank will reliably generate between $50k and $100k per year. Having $3 million in the bank will reliably generate between $100k and $150k per year. So someone with $3 million in savings and still working their 200k job w…

Nooooo. When they talk about the rich getting richer, they aren't talking about a particular person getting richer. In that respect, we are nearly all (well at least those with good middle-class jobs) getting richer - we get pay rises, we save, we make investments etc.

But that phrase is actually talking about the type of comparison where you have a look at, say, the top 1% of earners, and compare their income to the bottom 50%. We see that the ratio of the average earnings of the two groups is swaying to in favour of the top 1%. That is not nearly such an obvious result. Rich people die, they split up their fortune to give to their children, which should help level things out, but no, we still see that segment of society getting steadily richer faster than anyone else.

Another way of looking at it would be to compare velocity to acceleration. You are talking about the rich having a bigger velocity increase for the same acceleration increase, which is true. But the phrase "the rich are getting richer" is actually talking about the fact that the acceleration is actually higher for the rich - they can get a 10% increase in wealth per year, were as a middle-class person might only get 3% for their tiny investment.

Re: Why So Many Rich People Don’t Feel Very Rich

#112

Post by rapind » Tue, Jan 11, 2011, 5:43 PM UTC

edw519 wrote: post #8

Every time I read an article like this, I think of all the people I know who are well off, yet appear to be miserable. Then I want to share with them this old wisdom from "The Ethics of the Fathers": "Who is wise? One who learns from every man." "Who is strong? One who overpowers his inclinations." "Who is honorable? One who honors his fellows." "Who is rich? One who is satisfied with his lot."

Agreed. It's all relative.

Happiness = Success / Expectations

Re: Why So Many Rich People Don’t Feel Very Rich

#113

Post by kmfrk » Tue, Jan 11, 2011, 5:44 PM UTC

tomjen3 wrote: post #78

kmfrk wrote: post #41

Earlier quoted context omitted.

I think it has to do with a lack of a broader education and spiritualism that most people are devoid of. Because they don't know any better, money becomes a hammer, and every problem looks like a nail.

I doubt that - the potus press secretary has have a pretty broad understanding.

I'm not including him in that group; I'm not convinced that he left for financial reasons.

Re: Why So Many Rich People Don’t Feel Very Rich

#114

Post by andrewparker » Tue, Jan 11, 2011, 5:45 PM UTC

narrator wrote: post #28

The reality of this phenomenon is that people who have done everything "perfectly" in their life and academic career feel a bit cheated when their income tops out in between 100k and 200k. They might be senior engineers or doctors or lawyers but they've hit this brick wall as far as income, sometimes in their 30s and yet there are all these people out there that make more than 10x or even 100x their annual income. No…

The theme of all four of those methods of breaking from the 200-300K/yr income level is: leverage other people to work on your behalf. The most direct way to do that is to start a business. A slightly less direct way is to invest in existing businesses.

Re: Why So Many Rich People Don’t Feel Very Rich

#115

Post by dean » Tue, Jan 11, 2011, 5:53 PM UTC

bgentry wrote: post #52

narrator wrote: post #28

The reality of this phenomenon is that people who have done everything "perfectly" in their life and academic career feel a bit cheated when their income tops out in between 100k and 200k. They might be senior engineers or doctors or lawyers but they've hit this brick wall as far as income, sometimes in their 30s and yet there are all these people out there that make more than 10x or even 100x their annual income. No…

5. Become a high-level executive of a large or extremely profitable company. Obviously there's a small number of people for whom this will happen but I'm pretty sure most corporate execs make >$200k

CEOs are a good example.

I like that you made a distinction between large and extremely profitable companies, because large companies often still pay their CEOs extreme salaries even when performance falters.

Case in point, Robert Nardelli at Home Depot made $123.7 million, excluding stock option grants, over 5 years from 2002 to 2007, while the company's stock price faltered. He was essentially fired and still got a severance package of $210 million. (http://en.wikipedia.org/wiki/The_Home_Depot)

Dick Grasso is another that comes to mind.

Re: Why So Many Rich People Don’t Feel Very Rich

#116

Post by yummyfajitas » Tue, Jan 11, 2011, 5:55 PM UTC

LiveTheDream wrote: post #90

yummyfajitas wrote: post #61

Earlier quoted context omitted.

5. Become a top developer at a big software company. (A variation on 3. You probably won't earn $100 million, but you could definitely earn $1 million. ) 6. Become a top performer in entertainment (music, sports, movies). A fun fact ignored by most people: it isn't just CEO pay that has skyrocketed over the years. Alex Rodrieguez gets $33 million/year, at his peak Babe Ruth got (inflation adjusted) $1.1 million.

5. Become a top developer at a big software company. (A variation on 3. You probably won't earn $100 million, but you could definitely earn $1 million. ) Do you mean $1 million/year as a software developer? Details, please! 6. Become a top performer in entertainment (music, sports, movies). A fun fact ignored by most people: it isn't just CEO pay that has skyrocketed over the years. Alex Rodrieguez gets $33 million/y…

Do you mean $1 million/year as a software developer? Details, please!

http://www.businessinsider.com/google-engineer-gets-6-millio...

I seriously doubt Google is paying him 30x his yearly salary not to jump ship for Facebook.

I also happen to know a few cases of million dollar quants being poached from financial companies to software companies (specifically IBM, MS, and a couple of smaller companies I'd probably do better not to mention by name).

Re: Why So Many Rich People Don’t Feel Very Rich

#117

Post by larrywright » Tue, Jan 11, 2011, 5:59 PM UTC

anthonycerra wrote: post #56

It must be tough to have a smaller yacht than your friends.

$172,000 per year is not a yacht level income. It's a good salary (some might say great), but you're not going to have a mansion and a yacht.

Re: Why So Many Rich People Don’t Feel Very Rich

#118

Post by callmeed » Tue, Jan 11, 2011, 6:01 PM UTC

narrator wrote: post #28

The reality of this phenomenon is that people who have done everything "perfectly" in their life and academic career feel a bit cheated when their income tops out in between 100k and 200k. They might be senior engineers or doctors or lawyers but they've hit this brick wall as far as income, sometimes in their 30s and yet there are all these people out there that make more than 10x or even 100x their annual income. No…

Yes, I think you probably missed a lot. I suspect there is a long tail of jobs with > $200k salaries. For example:

"The median income for public-university presidents in the 2007-08 academic year was $427,400. The average head of a private university* took home about $100,000 more." [1]

And that's old data.

[1] http://images.businessweek.com/ss/09/02/0216_college_pres/1....

Re: Why So Many Rich People Don’t Feel Very Rich

#119

Post by kscaldef » Tue, Jan 11, 2011, 6:17 PM UTC

dev_jim wrote: post #84

roc wrote: post #49

Earlier quoted context omitted.

> "someone making 300,000 probably doesn't have much more disposable income than someone making 80,000" I don't think that's borne out by the stats. As I recall fixed costs essentially flat-line as a percentage of income somewhere south of 200k, up until you reach the "don't look at prices anymore" brackets. Also, I note that it really doesn't take much more disposable income to add flashy consumption. Five thousand…

> Five thousand dollars is easily two annual trips to Hawaii Have to nitpick here. $5k is one average Hawaii vacation for a couple. It costs almost $2k just to fly out there.

Right now it would cost me about $400 roundtrip to Hawaii. The flights are a lot cheaper than they used to be.

Re: Why So Many Rich People Don’t Feel Very Rich

#120

Post by jhamburger » Tue, Jan 11, 2011, 6:20 PM UTC

kahawe wrote: post #44

I think you are only really "rich" when you are making a decent (e.g. middle/upper middle-class) monthly salary without even (theoretically) setting a foot out of bed, ever. Given the complete freedom to do a lot of things in your life without ever HAVING to participate in the rat race of daily work has got to be the ultimate freedom and should be the bar for "rich" for me. Everyone below that is more or less well of…

You are confusing 'rich' with 'idle rich'.