Hierarchy of billionaires, how valid is it

Great Debates
1

I saw this interesting video today which discussed how billionaires are not all the same and net worth alone can’t be used to determine who is the most powerful.

It breaks billionaires into four categories

  • lower class. Billionaires who own companies that they can’t liquidate or that aren’t publicly traded. They are worth a billion plus dollars on paper, but they can’t really translate that wealth into liquid cash. The Koch brothers for example. They/he owns a huge company, but they may have trouble selling it for liquid assets. Also if that one company goes under not only do they lose everything, they also have a lot of debt they used to fund their lifestyle that used their business as collateral.

  • middle class. Billionaires who own a company that has had an IPO and can then liquidate their shares, but most/all of their wealth is tied into a single company. Jeff Bezos, he can sell stock but he can’t liquidate all of it w/o crashing the market value of his stock. If Amazon goes bankrupt, so does he (or at least he will lose most of his wealth).

  • upper middle class. Billionaires whose wealth is diversified into a wide range of investments that can be liquidates. Bill Gates. His assets are much more liquid and he can’t lose everything if one company goes under.

  • Upper class. Old money (the Rockefellers) and dictators (Putin).

It uses values like net worth, liquidity, political power and wealth security to determine where you’d fall.

It was an interesting video and I agree with the first 3 categories. But I don’t know if ‘old money’ really makes you powerful. The Rockefellers have liquid assets, but I wouldn’t say they really have meaningful power compared to the Koch brothers. Just because your wealth is a few generations old doesn’t mean its more powerful. Maybe a handful of scions become politicians, but for the most part they’re more society page people than influential ones.

Also I don’t think I’d include dictators in the ranks of billionaires. Most billionaires become rich because they founded or inherited a major company. Dictators become rich because they use their political clout to extract wealth from their nations.

Gadaffi, sultan of bruneai, Saddam Hussein, Kim Jong Un, Al Assad, Putin, Mubarak, Saudi royal family, etc. all either are or were billionaires supposedly. Thats believable but I’d put them in a different category than people who got rich from businesses.

I think how liquid your assets are plays a role I guess in how you’d rank as a billionaire. Someone who has 10 billion in liquid assets could arguably be richer than someone who has 20 billion in a single private company that they can’t actually sell or liquidate.

But I don’t think old money really means much. Maybe your assets are liquid, but you have no real power or influence.

Being a dictator comes with multiple perks, becoming a billionaire is one, but its a precarious situation. Hussein, Gadaffi, Mubarak, etc. were removed from power and died, losing all their assets in the process. Having 60 billion as a dictator in an unstable nation isn’t the same as having 20 billion in a western nation with rule of law and stable government where nobody is going to steal it all.

A dictator may have a lot of wealth, but it may not be liquid and they really don’t have wealth security. Tons of political power though. The Koch brothers (at least the living ones) have a lot of political power but very little liquidity.

I’m not really sure what the debate is. I’m wondering if other people feel the factors to determine where you fall on the billionaire hierarchy are accurate (liquidity, security, political power, net worth). Usually billionaires are ranked on net worth alone. I once read a book about Kim Jong Il where one of his bodyguards said he was in many ways the richest person on earth. His net worth didn’t begin to approach that of Bezos or Gates, but he was above the law in his nation.

Also when a dictator becomes a billionaire its common to view it as them stealing from their nation. But when a business owner becomes a billionaire its not nearly as common to see it as them stealing from their workers.

2

I feel that was the point the video was making. Above a certain level, people stop making money via economics and start making money via politics. Instead of extracting wealth from their customers or their investors, they extract wealth from their citizens. And the pool of wealth in a country - even a poor country - is higher than the pool of wealth in a successful major business.

3

The video mentioned a point I’ve heard in other places; that the mentality of having an IPO has significantly changed. The traditional idea was that the owners of a private company would “go public” in order to bring in investment capital so they could build up the company. This is often no longer the case. Nowadays it’s equally likely that the owners will build up the company to its full potential and then use an IPO to cash out. In other words, an IPO can now be the end of a business success story as often as it’s the beginning of one.

4

Being dictator of North Korea is about as close to living as an actual divine being as one can get. The guy is like a living God there in many ways. Putin could probably have Jeff Bezos assassinated if he wanted to, now that’s power money can’t buy.

5

It’s power Bezos can buy, he just doesn’t need too.

6

As with all people there is a trade off in the super rich between risk and reward. Most people start selling off their stock in what made them rich in order to diversify and protect themselves from risk. That comes with a huge cost. Bill Gates would be over 6 times as wealthy if he had not diversified from Microsoft stock.

7

In the 1970s the Rockefellers held the governorship of three different states and controlled Chase Bank, which has enough assets to buy and sell everything in the Koch name 20 times over. The Koches may be the boogeymen of the moment but they are basically well-known because they directly fund political activism, not because they are particularly big players in the oil industry (they make most of their money from selling paper towels) or wield any direct power. There’s no comparison to a group that has the kind of connections that the Rockefellers do. The surviving Koch brother can’t send the National Guard after you, and the family’s usefulness to Republicans is limited by how much they are willing to spend on issues where they ideologically align for the time being. The Rockefellers have been part of the system for long enough to be intextricable from it.

8

There is a LOT of over-generalization with limited facts in the video.

For example, the claim that the Gates has donated over $40 billion to charity. The majority of that donation was to the Bill and Melinda Gates Foundation, which they control and has it’s funds invested in a variety of for-profit investments, the earnings from which are not subject to income tax…because they are owned by a charity. Yes, to maintain their non-taxable foundation status, the foundation must make distributions for charitable purposes on a regular basis.

Also, while a large portion of the Koch Family’s (no longer the Koch Brothers, as their is only one member of the 2nd generation involved with the family business) is tied to the company, no one except insiders know how much the company is truly worth, as their worth is estimated by magazine writers. Also, know one knows how much they have in liquid investments outside of the stock in the company they own.

9

The OP seems to jump glibly between “power” and “wealth” as if they’re almost synonymous.

Besides “Watch a 16 minute video and critique it” I don’t see an discussable question here.

10

I didn’t watch the video, but from the OP’s description, the distinctions they make are nearly meaningless.

Does anyone believe that the Koch Family members are cash poor? Last year Investopedia estimated their combined wealth as $99B. No debt was mentioned, except as a ploy to buy more companies. It’s true that their wealth comes mainly from their privately held companies. So what? What are the odds of all of them going bankrupt simultaneously? Nor do they need $99B to be influential. A few tens of millions here and there give them enormous political power.

The same logic applies to the middle class category. Amazon will not go bankrupt tomorrow. Bezos has so much wealth that everything in the world becomes spare change. He can buy the Washington Post. He can fund Blue Marble. He can give his ex-wife 25% of his Amazon stock in a divorce settlement and still have the loss of $38B meaningless. If someone can lose $38B and not be phased, then they are beyond any rational notions of richness.

As for the Rockefellers, type the name into Google News and see if you can even one politically meaningful story among the results. The wealth is spend among too many people and foundations for any individual to dominate. I’m sure there are minor Rockefellers all over the upper echelons but they no longer can affect the world, by design.

I’d need a huge amount more evidence that this is more than simple-minded blathering to take it seriously.

11

I feel the video did make some valid points. Their main one if that there is a distinction between net worth and liquidity. They also discussed the issue of diversification.

12

Well I’m glad there was some value to it. But surely the distinction between net worth and liquidity is elementary and rarely an issue for billionaires. Is there more to it than that?

13

This is true, but the Rockefellers did that in the 60s and 70s when they had 3 governorships and a vice presidency as well as some smaller offices. The Koch network has a lot of influence now and seems to control the entire republican party at this point. Their network raises close to a billion dollars in election years and roughly half that in midterms, making them a group that can act as a bottleneck for the GOP.

14

It may be an elementary point but this video was about explaining some basic economic concepts.

One of the points they discussed was how surprisingly illiquid some billionaires are. Let’s say I’m a software developer who owns the private company, NemoTech, which makes the amazing new software product, NemoWare. Everyone agrees NemoWare is a great product and has huge potential. NemoTech is already valued at five billion dollars and it’s expected to be worth a hundred billion within ten years. So I’m a rich man, right?

Well, I don’t feel rich. I’m working on building up the company so I’m plowing my profits back into the company. I’m only receiving a token salary of a dollar a year. And while I own assets worth five billion dollars, it’s all tied up in my ownership of a single company. So how do I pay for my groceries?

I don’t want to sell away my ownership. The company’s going to be worth twenty times its current value and I’d be a fool to cash out now. Even going public and selling stock would cost me tens of billions of dollars. And those potential co-owners might not share my vision of the future of NemoWare and NemoTech.

This isn’t a hypothetical situation. The video points out many real world billionaires are in this situation; they own a really valuable company but they have a hard time getting ready cash out of it.