The rich. They're just not like you and me -- they're so very much richer:
Mr. Ellison's net worth last year was around $16 billion. And it will probably be much bigger when the list comes out in a few weeks. With $16 billion and a 10 percent rate of return, Mr. Ellison would need to spend more than $30 million a week simply to keep from accumulating more money than he already has, to say nothing of trying to spend down the $16 billion itself.
He spent something like $100 million on his Japanese-style mansion in Woodside, Calif., making it among the more expensive private residences ever built. But that is only about three weeks worth of the interest he earns on his wealth. And a house doesn’t actually spend down his net worth because it is an asset that can be resold. At least part of the $100 million is just a different way of saving.
Mr. Ellison would have to spend that $30 million a week — $183,000 an hour — on things that can't be resold, like parties or meals, just to avoid increasing his wealth.
That comes from Austan Gollsbee's exploration of why the rich horde their wealth. It's actually a fairly surprising outcome. There's no reason billionaires actually need multiple billions, or that those with nine figures of wealth couldn't slim down to eight. Their lifestyles wouldn't change at all, and their children would be lavishly cared for. But even the largest philanthropists, political participants, and spenders channel relatively small fractions of their bank accounts to their causes and indulgences. And "only 4 percent of the richest Americans said that providing an inheritance ranked in their top five reasons for saving." Weirder yet, "the data shows that elderly super-rich people who do not have children save just as much as the ones who do."
So what gives? Some economists have dived into the question, and their hypotheses basically boil down to greed. "[The superrich] get something different from having money — clout, power, the ability to dominate an industry. Or perhaps these are just competitive people who care about their position compared with other people on the list." Maybe so. Or maybe this is just humankind's innate loss aversion -- our tendency to irrationally avoid loss even more than we court gain -- at work.
