https://applieddivinitystudies.com/billionaire/index.html About Archives Subscribe Applied Divinity Studies 2021-07-07 Life Advice: Become a Billionaire In a certain view, billionaires are not merely wealthy, they are nearly god-like in their influence. As the New York Times op-ed Abolish Billionaires reads: Billionaires should not exist -- at least not in their present numbers, with their current globe-swallowing power. One practical upshot of this view is that we ought to increase the marginal tax rate, break up tech monopolies, sharpen the pitchforks and so forth. Yet an equally valid interpretation is this: if you truly see billionaires as all-powerful oligarchs who exert enormous control over world affairs, you should try very hard to become one of them. How should you go about it? Conveniently, the NYT provides helpful-if Straussian-advice: A few superstar corporations, many in tech, account for the bulk of American corporate profits... Artificial intelligence is creating prosperous new industries that don't employ very many workers; left unchecked, technology is creating a world where a few billionaires control an unprecedented share of global wealth. So there you have it. Work in tech, preferably artificial intelligence, and you're well on your way to control an "unprecedented share of global wealth". From there, the world is your sandbox. --------------------------------------------------------------------- At this point, a host of objections spring forth. I'll eagerly greet them head on. Is becoming a billionaire even worth it? Doesn't wealth stop contributing to happiness after a fairly low threshold? In a variety of landmark empirical results, happiness is shown to correlate with log(income). So the scaling is poor, but that's very different from plateauing completely. Khaneman and Deaton 2010 find that some measures of wellbeing plateau entirely, but Cantril's Ladder, a measure of life satisfaction, does not. [VcxT54NIot] Even more optimistically, a recent study by Killingsworth finds that both satisfaction and well-being continue to improve well past $75,000. [1] [7sr7fpAVNw] This seems to bear out across countries as well. Per Stevenson and Wolfers (2008) via Dan Luu: [HbYTP1Paiy] Note that all of these charts use log scales for income, so there are diminishing returns. Okay, but even if it doesn't plateau entirely, log scaling is really poor. What's the point? Log scaling is really poor, but as the NYT reminds us, we're talking about really extreme levels of wealth here. Sure, you only gain a few more points of happiness between an income $75,000 and $160,000, but Jeff Bezos is sitting comfortably at a net worth of $211,000,000,000. Our intuitions just don't apply very well here. It's hard to know how happiness scales at this extraordinary level of wealth, but we can at least make a rough estimate. The Khaneman/ Deaton chart shows happiness increasing around 0.45 points (on a 10 point scale) each time income doubles. Naively extrapolating, we get that a $1,000,000,000 income would be 13 more doublings, putting you at around 13.35. Again, it's a 10 point scale, so that's incoherent, but the point is you still stand to gain a substantial amount of wellbeing. Fine, maybe there are real benefits, but what about the cost? If you're living below the poverty line, there's plenty of low hanging fruit you can pick to increase your happiness. Find stable shelter, consume enough calories, avoid illness, etc. But what if you're already an upper-middle class yuppie? Say your income is already at $160,000. How much are you sacrificing by striving for billionaire status? Again, we'll focus on the NYT's suggestion that the financially ambitious pursue AI-driven tech companies. In that case, you might get paid below market for a few years while your startup gets off the ground, but the degree of financial risk is really not that great. Let's say your income drops down to $80,000. That's a halving, which loses you 0.45 points, but it's only a momentary occurrence. Though the data only reports effects on income, we can expect there to be a substantial contribution from stored wealth as well. So if you've been making $160,000 for a few years and have some savings, going a year without income while you pitch VCs doesn't actually drop your quality of life by that much. The golden handcuffs were inside of you the whole time. Even if the cost is much lower than the potential benefit, the odds are really bad. Isn't it exceptionally difficult to become a billionaire? Commensurate, or even over-commensurate with the rewards? Given that capitalism functions as a finely tuned engine precisely to push people into the creation of market value, is getting another ideological shove ever needed or justifiable? Again, I think this gets the Marxist critique precisely wrong. It's not that capitalism--taken broadly as a set of socioeconomic and political devices--pushes people to be as wealthy as possible; it's that it pushes people to become laborers renting their time to generate profits for others. Or to continue abusing the Marxist jargon: We live in an unprecedented time where more people than ever have access to the means of production. What does it really take to start an AI startup? A laptop, free wifi, access to some open coursewhere and some AWS credits? That's still some barrier to entry, but it's easier than owning a factory or being lucky enough to inherit generational wealth. In practice, we can easily generate a reasonable lower bound for the probability. Just take the number of billionaires and divide by a count of the total human population. You end up with a small number, but one considerably larger than 0. But that's unreasonably pessimistic. We can do much better. Surveying the top Y Combinator companies, I find that around the top 50 are valued at over $1,000,000,000. They won't all exit successfully, and the founders won't all own enough equity to emerge with tres commas to their net worth, but this already gets us to a much more practical and optimistic heuristic to life: 1. Try very hard to get into YC 2. Conditional on acceptance, try very hard to become a billionaire Y Combinator has funded around 2000 companies ever, so at rough estimate, your odds are 1 in 40. Still low, but not unreasonably so. But still, we can do better. Remember that many of the Y Combinator companies were very recently funded, and since batch size has increased over time, the total distribution skews young. Instead, let's look only at companies funded before 2010. Of the top 50 companies, only 4 were founded after 2017. According to the YC Database, there were around 1400 companies founded before 2017. So that gets our odds up to 1 in 30. You could object that there were other startup accelerators, and we wouldn't have known at the time that YC was the right one to join. Or more broadly, that there were other viable career paths to become a billionaire, and startup founding was not as obviously among the surest paths to extreme wealth. That's all fair, and you should accordingly adjust the odds downwards, but even diluted by a factor of 10, the expected value looks pretty good. What expected value? Is it even that good to become a billionaire? Maybe you get a few more points of "life satisfaction" or whatever, but it's still a steep cliff. Again, it's true that wealth generates diminishing returns to happiness, but that's not the whole story. Notably, wealth generates exponential returns to itself! As the NYT helpfully explains, wealth "serves primarily to perpetuate ever-greater wealth". The upshot is, despite what you've seen for a single moment in time, it's not at all clear what wealth-happiness scaling looks like in the long run. Per the NYT as well, consider that "tech instills a winner-take-all dynamic across much of the economy". That means power law returns, which convey exponential returns from startup rank to wealth: