Saturday, March 3, 2007

What is Money For? Billionaires Don't Have a Clue

In a very interesting column in yesterday's NYTimes, Austan Goolsbee spells out statistics about the richest people in the world, and the largest philanthropists' gifts. Only Warren Buffet is on both lists. There are a lot of bazillionaires who don't seem to have any particular vision of what their money is for - they can't spend it all in their lifetimes, and neither can their heirs.

"... the super-rich can’t be accumulating the money with the intention of spending it, either, because no one could spend that much.To see his point, take Oracle’s founder, Lawrence J. Ellison. 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. While somebody might be able to spend like that — Paris Hilton, maybe — it certainly wouldn’t be easy, and it can’t explain why the super-rich accumulate."

Indeed, what is the point? He offers various explanations, but I have an additional one. Just because you're good at making money doesn't give you vision. I suspect many of them are lacking in imagination of what could be done with their money, and lose track of its potential impact. Many of us do this on a much smaller scale, so why should they be any different?

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