An Observation on the 1%

On more than one occasion recently I have run across news stories claiming that the richest 1% of people alive today control something like 50% of the world’s wealth. This story has come in several forms, sometimes expressed as the richest 20 people in the world have more wealth than the 200 million poorest people, or some such thing. I am not here to dispute the truth of these assertions. Matter of fact, I’m absolutely sure that it’s true. What I highly doubt, however, is the contention that this is something new in human history. I’m very suspicious. Unfortunately, since world wide wealth statistics are a relatively new science, getting a grasp of how much wealth there was in the world in say, the 1600’s, is a dicey proposition, that features a lot of guessing. But, here’s what my trick knee tells me...throughout all of recorded history, there have always been and there always will be a small, elite subset of human beings who rise to the top of the heap and consequently gobble up a disproportionate share of the world’s wealth. To “prove” the accuracy of my trick knee, I’ve been doing some digging. Here’s what I’ve found.

Scholars have published lists of the richest men in the history of the world based on available data and best estimates using inflation adjusted numbers. They have not included heads of state since their wealth would have been considered public. (so, Genghis Khan and Joseph Stalin didn’t make the list) No, these are the 20 wealthiest private citizens of all time. The list contains 11 Americans. Only three of the men on this list are alive today. ( Warren Buffett, Carlos Slim, and Bill Gates ) 12 of the 20 lived prior to the Industrial Revolution, 2 of them during the Middle Ages (Rufus the Red, William the Conqueror ). 

But, I decided to drill deeper on this question of wealth concentration at the top of the pyramid. The assumption is that today with the advent of powerful technologies and the dot.com explosion, that mega wealth is somehow newly unprecedented. So, I decided to look at  this a different way. How do the modern high tech billionaires compare to their old school predecessors? Ok, here’s what I found...

There is a list out there of the 20 richest Americans of all time, inflation adjusted to 2015 dollars since that was the year that the list was complied. Exactly one of them made his fortune in tech...Bill Gates, with a net worth of 86 billion, which places him at number 4. The other three living American Billionaires on this list? Warren Buffet at number 10, the dreaded Koch bothers at numbers 17 and 18.

Now, how about the top three richest Americans of all time? 

#3. Cornelius Vanderbilt. Died in 1877, after making a boat load of money in the shipping and railroad business. His fortune comes in at 185 billion dollars.

#2. Andrew Carnegie. Passed away in 1919 after amassing a fortune of a staggering 310 billion dollars in the steel business. To his great credit, he gave virtually all of it away at or near his death, endowing an endless list of public libraries, etc...

#1. John D. Rockefeller. When this dude finally kicked the bucket, it was made out of solid gold. His dominance of the oil business resulted in a fortune that makes modern day tech titans look like pikers. 340 billion dollars...that’s billion with a “B”.

In other words, the top three guys on this list, all long dead, were worth more than the next 12 guys on this list...combined.

All of us, every single one of us suffer from recency bias, that is, whatever we actually experience and know always feels like the best, worst of all time. The most dominating idea in our heads most of the time is simply the most recent idea we have been exposed to. I try to fight this instinct all the time with varying degrees of success. In the arena of income inequality, do I believe that policy makers should try to come up with initiatives that increase incomes at the lowest end of the economic ladder? Of course. Minimum wage laws have sought to effect changes in this area. Discussions of a living wage seek to address this issue as well. Death taxes and estate levies, and the progressive income tax have been enacted to chip away at the other end of the ladder with very limited success, since generally speaking, rich people got rich because they are smarter and more resourceful than policy makers. Still, I am in favor of any remedy that will actually work to narrow the income gap. But, we better disabuse ourselves of the notion that we have the power to do away with the accumulation of wealth at the very top of the pyramid by a small cadre of thieves and achievers. Until we can figure out a way to alter human nature, it’s never going to happen.

There is nothing new under the sun....