I’ve just finished reading “All the Money in the World” by Peter Bernstein and Annalyn Swan chronicling the lives and fortunes of the “Forbes 400” (the wealthiest people in the world) over the ages.

There are a lot of different ways to spend your money – especially if you have a lot of it – but the members of the list who are most championed are those who came from modest backgrounds, became fabulously wealthy and then gave all of their money away before they died (or plan to, if they’re still living). This seems, to me, to be a very noble life – but it begs the question: if the life goal of these storied millionaires and billionaires is to help other people – could they have done better?

Certainly you could say that the Bill and Melinda Gates foundation is a remarkable force for good in the world (donating money to world health organizations and other such charities) – but who could say whether or not the ~$38 billion that comprises the fund would not have been better spent by those who contributed to it (mostly Microsoft’s customers)? It’s impossible to calculate, but perhaps Microsoft’s customers may have been able to collectively donate a larger sum than $38 billion had they each been charged less for Microsoft’s products and allowed to keep more of their own money. An interesting angle, no?

I’ve been kicking this idea around for a while, as the argument has some significant holes, but I do think there is something remarkably inefficient (in an economic sense) about one person controlling such a large pool of money.

One part of the book that I particularly liked was how it highlighted the ephemeral nature of wealth. Whether these wealthy people chose to spend their money on themselves, their businesses, or their wives, they all eventually faced the same conundrum. After all, the real problem with incredible wealth is that you can’t take it with you when you die.

Wealth
Tagged on:         
  • Alex

    Two counter-arguments:

    Regarding the ability of the masses to do good with small amounts of money: I don’t think there is any precedent for this as a successful model. There are many, many examples of individuals doing good with large sums. It takes much less time and has a more profound impact for one individual to control large amounts of charity. Additionally, there is no way that you can keep individuals from making money, so large amounts will accumulate regardless.

    Second, regarding “you can’t take it with you when you die”, I think most wealthy individuals are more than happy to leave large amounts to their descendants (Carnegie was a notable counter-example).

  • I like it – From one perspective I definitely agree that large donations are the ones that drive the most change. But perhaps a wider range of interests would have been served by charging customers only part of the original price – and requiring them to donate the balance of the price to a charity? That would certainly be an interesting pricing model.

    Regarding your second point – I think this is true. But it is somewhat disappointing to see generations of heirs squabble over bygone riches – whilst losing every ounce of production capacity of their own.

    One interesting counter-example is Paris Hilton. Despite seeming like a total failure – she actually pulls in hundreds of thousands of dollars per appearance – just to show up and endorse a night club.

  • Two counter-arguments:

    Regarding the ability of the masses to do good with small amounts of money: I don’t think there is any precedent for this as a successful model. There are many, many examples of individuals doing good with large sums. It takes much less time and has a more profound impact for one individual to control large amounts of charity. Additionally, there is no way that you can keep individuals from making money, so large amounts will accumulate regardless.

    Second, regarding “you can’t take it with you when you die”, I think most wealthy individuals are more than happy to leave large amounts to their descendants (Carnegie was a notable counter-example).