Thursday, March 01, 2007

$183,000 an hour

That's how much money Larry Ellison, the founder of Oracle, would have to spend to avoid increasing his net worth, according to an article in today's New York Times:
Why Do the Richest People Rarely Intend to Give It All Away? by Austan Goolsbee
Instead of wondering why Warren Buffett would want to give away $42 billion, Goolsbee says, we should be wondering why all the other multi-billionaires in the world don't give away more:

The rational economic argument for accumulating wealth says that people want to use it for something: to spend, to give to their families to enhance their future standard of living or to do something philanthropic.

But when you compare the Slate 60 list of the year's biggest philanthropic gifts to the wealth of the Fortune 500 list, it turns out "people are accumulating money much faster than they are giving it away." Take Ellison, for example: with his net worth of around $16 billion and a 10 percent rate of return, Ellison would have to spend $183,000 an hour just to stay even. And that $183,000 an hour has to be spent only on things like parties and meals and travel that have no resale value, i.e. that aren't becoming assets that would be counted towards his net worth, as would cars, houses, art, etc.

So is this lack of charitable giving because billionaires want to pass their wealth on to their children? No, Goolsbee says, since their wealth is growing so much faster than their number of heirs that the children will have a hard time spending all the money too! And surveys show billionaries don't cite children as a prime reason for wanting to accumulate wealth. And those with children save money at the same rate as those without.

So then why do the rich like accumulating wealth if it's not to spend, not for charity, and not for their children? Because they like money, and they like to win the game of who has the most. That's why I think we should give the super-wealthy a little extra challenge to make that game more fun for them: raise their taxes!


Anonymous said...

I hope you're kidding because raising taxes is never much of an answer to our country's economic ills - it's just a nice way to drive capital offshore.

And don't confuse wealth with taxable income.

Dawn said...

Up Up and Away!
There are sooo many low-income areas that could use 183,000 an hour to help rebuild. But it doesn't get fed to them!!

Wendy said...

That's obscene!

If I'm not mistaken, I think Larry Ellison was the one who refused to honor his promised contribution to Harvard. I may be wrong, but I don't think so. I forgot the reason he gave for not honoring his pledge.