Episode 5: Mag Money

[0.7s] Saul: Hello, and welcome to Mag World, where we like to ask big questions, make wild guesstimates, and quantify literally everything on a magnitude scale. If you’re new here, you should know that on a magnitude scale, every mag 1 means times 10. So 100 is mag 2 and 1,000 is mag 3. To multiply mag numbers, you add them together. So 100 times 1,000 is mag 2 times mag 3, which is mag 5, or… [Mike: 100,000.] And that’s all the math you need to know to start learning about Mag World. Just remember that every order of magnitude is a big deal, because as we say in Mag World, quantity has a quality all of its own. If you wanna learn more about Mag World, come visit our website at magworld.pw. I’m Saul Pwanson, your guide to Mag World, and I’m here with my friend, Mike, who is a curious fellow in both senses of the word. [Mike: Hello.] Today’s episode is Mag Money. So Mike, I have been thinking about money from a mag perspective for several years. [Mike: Mm-hmm.] And in fact, this is the origins of Mag World. There is something about moving up the mag scale of wealth that changes your relationship to money, much more so than linear- linearly moving up the mag scale.

[83.8s] Mike: Mm-hmm. I would agree and my, my initial reaction is that money doesn’t buy happiness, but as you increase your wealth, your problems are different and smaller.

[96.7s] Saul: Mm-hmm. Until you go over a certain line and then they get bigger, uh, different, but bigger.

[01:43.0] Mike: I, I imagine th- that to be the case, but I have not yet encountered it.

[01:47.7] Saul: Well, so you’ve had… You haven’t been at the same mag wealth level your entire life-

[01:53.1] Mike: Oh, gosh, no.

[01:53.5] Saul: … I imagine, right? So you’ve managed to, uh, well, it’s changed anyway, since you were a, a kid. [Mike: Mm-hmm.] For myself, I started out as mag 0. I think most people do. I got, like, a $5 a week allowance.

[02:06.1] Mike: What do you mean when you say mag 0?

[02:08.8] Saul: Well, so in Mag World, mag 0 is one thing or a few things. The real world measures money in dollars, so mag 0 money would be, like, a buck or two. And when I talk about mag wealth, I don’t mean, like, net worth, as though how much money you have determines your worth as a human being. Uh, wealth is how much money you can summon to your own aims and goals and problems. So if you had an emergency, how much money could you bring to bear on a problem to overcome it? Now, I use these mag levels based on a general cultural sense of money that’s from the 1980s, back when a millionaire was considered rich. Nowadays, if you have a million dollars, you’re certainly doing well, but you’re not quite there. You can’t quite retire. And it seems like the factor is about three. If you have $3 million, you can pretty much retire most places in the US, which makes sense because inflation since the 1980s has been about three times, which is a half mag. [Mike: Mm-hmm.] So when I say mag 6 wealth, I kind of mean $3 million to $30 million. Like, tri-millionaires are the new millionaires. Anyway, regardless of the exact amount, I think we can say that mag 2 and below is poor, mag 3 to 5 is middle class, mag 6 to 9 are rich, and mag 9 and up are unbelievably rich. And then actually, because of my, my parents, where they were at, uh, at some point, they wound up giving me my allowance into a virtual checking account. They had, like, an old checkbook that they had from, uh, uh, a close bank account.

[03:31.8] Mike: So it was a bank of Dad.

[03:33.1] Saul: So it was a bank of Dad, exactly. They actually couldn’t afford to give us the literal cash and have us blow it on whatever, so it was twofold. It was, one, they got to make money on the float. And then secondly, they could audit all of our transactions. [Mike: Yeah.] We weren’t gonna… We had to write a check out for the money we wanted to withdraw from bank of Dad, right? [Mike: Mm-hmm.] And that’s because my parents had an interesting relationship with money. They started out pretty, um, you know, not, like, destitute, but, uh, certainly not wealthy when they were growing up. And so when they met, they had, they couldn’t afford much at all. And then over the, the years, my parents dated for, like, ten years before they got married, and in their 20s, my dad proposed to my mom saying that he had ha- had enough money saved up to buy a house, and that floored her. So he had gotten to… I, I call this mag 4, right? When you have enough money in a down payment to buy a house, that’s about mag 4. Like, you don’t own a house outright and you’re not living just, you know, mouth… uh, paycheck to paycheck, but be able to buy a house so you could get a mortgage gets you to mag 4. And then after some years of that, not even that many, they had bought some apartment buildings. They were at… They got, had gotten themself up to mag 5. Mag5 is, of course, hundreds of thousands of dollars in wealth. That’s what I, I think of it as, mag 5 wealth. And then my father, in the late ’70s, was watching silver go through the roof and decided to invest in silver.

[05:00.6] Mike: As it was rising.

[05:02.3] Saul: As it was rising, he invested everything-

[05:04.5] Mike: I- Do I need to predict what happens? ’Cause this sounds like a story I’ve heard before.

[05:11.4] Saul: This is a story many people have heard before. It’s very sad. And so the problem, of course, is that he invested everything in silver, and one of the classic things you don’t do is invest everything in any one place. You always diversify so that if anything goes wrong, which it sometimes does, you haven’t lost everything. But he didn’t. He was so sure that silver was a winning proposition that he invested everything and then he lost everything. Now, when I say everything, that’s not actually strictly true, because he didn’t lose his house. He was at mag 5, doing quite well. He invested most of that and lost most of that, but it knocked him down eventually, actually not that, not that far off, to mag 4. And so in my childhood, we actually grew up at mag 4, down a level from where they had gotten themselves. And that’s very stressful to have lost that, to have seen yourself in a certain position, to see yourself rising like that and then to lose it. And again, it’s not losing everything, it’s just losing that one mag level. And then the rest of my childhood is k- kind of defined by them trying not to fall further…. right? [Mike: Mm-hmm.] To shuffle credit cards around to keep the house. Hold on, holding on to a house was, uh, a, it’s a ticket to Mag 5. Just, if you, if you can just buy a house at some point in your young adulthood and hold on to it and pay off the mortgage in 30 years, well, you’re gonna own a house that’s worth a couple hundred thousand dollars. That’s like retirement. That’s like the, that’s like the American, uh, half the American dream anyway. [Mike: Mm-hmm.] Right?

[06:41.4] Mike: First of all, uh, it’s interesting that you said, as a child I was Mag 1. [Saul: Mm-hmm.] Because I don’t think of my s- I don’t think of myself having a wealth level until- [Saul: Hmm.] … I fully left… Like, I, I had some support through college and then I don’t, I don’t think of myself as an independent economic- [Saul: Uh-huh.] … entity until I was, until I walked essentially.

[07:08.3] Saul: Because your parents are funding your existence and- [Mike: Mm-hmm.] … their mag- their mag wealth level matters more for what your life is like than your mag wealth level, right? [Mike: Mm-hmm.] Yeah, totally. That makes total sense, right? If you were, as a child, even if your parents could afford a jet ski, you’d have to ask them for it and they’d have to approve it. Whereas there was some amount of money that you had as a kid that you could just spend as, as you wanted, right?

[07:29.7] Mike: Mm-hmm. Yeah. And well, and then the other question I have is about debt.

[07:34.8] Saul: Hmm. Mm-hmm.

[07:35.4] Mike: Because thinking about the example of a house. [Saul: Mm-hmm.] First of all, I don’t know if you’ve shopped for a house recently, but Mag 4 is not a down payment in this area.

[07:44.9] Saul: Anymore, no.

[07:47.2] Mike: But you buy a house, you have lots of debt, but you also have an asset. So- [Saul: Mm-hmm.] … you’re still net positive. [Saul: Mm-hmm.] But student loans are completely different, where you have, uh, a Mag 4, Mag 5 debt. [Saul: Mm-hmm.] Um, but you’re not f- necessarily feeling it. Like, you’re- [Saul: Mm-hmm.] You’re living a lifestyle of someone who has-

[08:13.2] Saul: While you’re in college.

[08:14.3] Mike: Uh, well, after college. [Saul: Okay.] Like, even, because you have a d- you have a job, some money’s going to debt payment, but you still have enough to ideally pay rent- [Saul: Mm-hmm.] … pay living expenses- [Saul: Mm-hmm.] … pay entertainment. Like, you can be my law school colleagues. You know, it’s an expensive degree. You come out with lots of debt, but- [Saul: Mm-hmm.] … you often come out with a decent job. And so you’re not living the life of someone at Mag 0 or below.

[08:43.9] Saul: Hmm. Mm-hmm.

[08:44.0] Mike: Because at that point, you really are negative wealth.

[08:48.2] Saul: So I don’t call this mag net worth, even… I don’t kinda like the- [Mike: Mm-hmm.] … term net worth, because it’s not about taking your assets minus your liabilities. It’s about how much money you can raise if you, if you had to, right?

[09:01.5] Mike: Okay. Well, uh, explain that. What do you mean by…

[09:03.7] Saul: So if you’re a billion dollars up and a billion dollars down- [Mike: Mm-hmm.] … and your net worth is effectively zero, you can still raise about a billion dollars ’cause that’s what level you’re operating at, right? [Mike: Mm-hmm.] And if you, um, are in college or, uh, I’m sorry, if you’ve gotten your student loans, you once got a loan for Mag 4 but you can’t get a loan for Mag 4 for anything else unless you’ve got something else to back it up with, right? That was, that’s a one-time thing based on educational priorities and, um, it’s specifically for college and stuff like that. So you’re not actually Mag 4 even though you have Mag 4 of debt, but you’re also not Mag 0 because you have Mag 4 of debt. If you’ve got Mag 4 debt and Mag 4 assets, I would say you’re at Mag 4. You can still use- [Mike: Hmm.] … that money to pay for what you, what you wanna, what you need to get- [Mike: Hmm.] … if you had to.

[09:50.8] Mike: So when we’re talking about Mag money- [Saul: Mm-hmm.] … your magnitude level is the amount of money you have accessible to you at the moment. So if I didn’t have a job, didn’t have a house, all I had was what’s in my pocket-

[10:08.9] Saul: Hmm. Mm-hmm.

[10:09.6] Mike: … I would be Mag 1.

[10:11.5] Saul: Mag 1, yep. So this was the origin of Mag World, like I was saying. [Mike: Mm-hmm.] And one of the first articles that I wrote was on mag wealth and all it was an explanation of this and a breakdown of the mag wealth levels, you know, from Mag negative 1 even, like if you only can scrape up a change, for instance, between your couch cushions, all the way up to Mag, oh, 11 now some individual people have. [Mike: Bang.] That’s a lo- that’s a lot of-

[10:42.5] Mike: That’s a lot of zeros.

[10:43.4] Saul: … levels. That’s a lot of zeros, yeah. And anyway, I’m bringing this up because while making this podcast, we actually hadn’t released it yet, but while making it, one of the ar- actually, this mag wealth article made it to the front page of a website that I visit often called Hacker News. [Mike: Mm-hmm.] And it’s a b- very tech industry, um, website that, uh, has a lot of n- um, interesting topics on it. And somebody, not me, submitted this mag wealth article to it and it got a lot of traction. It was on the front page there for about a day and it got like 150 comments and yeah, I think it was generally pretty well received. People were like l- debating a little bit my, uh, my definition or at least explained to each other what my defini- definition was and, um, kind of agreeing that yeah, there’s these qualitative differences between m- these mag wealth levels. [Mike: Mm-hmm.] I was taken to task for not mentioning Karl Marx in this article, in the, in the comments, which I think is kinda fair. How can you talk about wealth magnitudes without mentioning Marxism and things like that? But Marx made the division between labor and capital. There are people who- [Mike: Mm-hmm.] … own the means of production and people who work at those entities that have the means of production. And that’s a very simple binary divide, right? [Mike: Mm-hmm.] But I think there’s a lot more levels than that because there’s levels of, well, there’s levels of labor and there’s levels of capital on the same thing. Like you can be… Well, first of all- [Mike: Absolutely.] … if you go down far enough, Mag 0, you’re probably not even labor, right? You’re not even, you’re not even capable of being labor. You don’t even have access necessarily to a shower or a permanent address. It’s difficult to get paid. Like you can’t even work if you’re down low enough. [Mike: Mm-hmm.] And then, um, when you’re capital, so maybe you have a few million dollars and you s- typically, you actually count, I think, as capital, but that’s a far cry from having hundreds of millions of dollars or billions of dollars. [Mike: Mm-hmm.] That’s…… a whole other level. Anyway, I think that the line between labor and capital is mag 5 versus mag 6. [Mike: Mm-hmm.] And I say this because the difference for me anyway is that at mag 6, you, you have enough money that the money makes enough money for you to live on. You, your, your capital, there’s no drawdown, you’re just making, your money makes money. That’s kind of the, it’s what capitalism means. [Mike: Mm-hmm.] Money makes money, right? And so you’re self-sustaining and you don’t have to work. [Mike: Mm-hmm.] And I think that’s kind of true the world over. At least if you have a couple million dollars of US wealth, you’re fine anywhere not having to work. And maybe if you’ve got a, a gaggle of kids, then they’ll have to work eventually but that’s not your life, right? Whereas mag 5, it’s very difficult to retire, I think, at mag 5 unless you’re significantly older and may only be, uh, have 10 or 20 years left that you can- [Mike: Mm-hmm.] … draw down your, your assets. So like I said, that’s the line for me between labor and capital. mag 5 versus mag 6.

[13:44.4] Mike: Mm-hmm. That sounds right to me.

[13:46.7] Saul: Okay. So then though now there’s mag 6, which, like we said, we ha- we have some kind of experience with. We know people who have. Your father got there. I have friends who got there. There are five more levels of individual wealth beyond that.

[14:02.8] Mike: And each one is 10 times more than the one below.

[14:05.6] Saul: Right. They are all different. And so if you have mag 6 wealth, why do you want mag 7 wealth? Like, what would you get for that?

[14:14.0] Mike: I, I sometimes wonder if you just don’t know what the next mag level brings you- [Saul: Sure.] … until you’re one below.

[14:23.6] Saul: That’s true. There’s a, an interesting, some interesting factoids that I wanna share here. So first of all, how much wealth, Mike, do you think there is in the entire world?

[14:35.6] Mike: Worldwide. So…

[14:37.3] Saul: So initially I was asking this question, how much money is there in the world, but there turns out there are multiple definitions of money. [Mike: Mm-hmm.] You know, there’s how much literal cash is floating around, how much derivatives, um, uh, how large the derivative markets are. But I mean, when you talk about wealth, you know, you own a house, you own some things, Elon Musk owns some things, there’s stock markets. But all told, how much wealth is there in the world, the sum total of everything?

[15:00.2] Mike: Uh, well, let’s do the math. [Saul: Okay.] Because right now we have the richest person in the world is mag 11 wealth. [Saul: Okay.] And they’re a fraction of a fraction of the people in the world. And so there’s no more than 10 people with that amount of wealth. That’s mag 12 wealth. [Saul: Yep.] Yeah. So the wealthiest people altogether own somewhere in the range of between 12, 12 to 13. And the world, that includes nation states, not just individuals, is going to be another order of magnitude beyond that. So 13. [Saul: Oh.] Like 13.

[15:49.9] Saul: Oh, okay. So the actual answer is mag 14 and a half, mag 14.7. [Mike: Hmm.] Um-

[15:56.2] Mike: Oh, so a lot less is in private hands-

[15:59.1] Saul: Well, I think-

[15:59.5] Mike: … presumably.

[16:00.1] Saul: … I think you’re discounting, uh, how many people there are in the world. [Mike: Hmm.] There’s only about 2,500 billionaires who actually do own a huge amount of money. Uh, actually, they own on the order of mag 13 wealth, those 25- 2,500 billionaires. [Mike: Mm-hmm.] But again, those are only 2,500 people. There’s a lot of people who are just like me and you, millions of us. Anyway, the total-

[16:23.6] Mike: Hmm. Mm-hmm.

[16:24.4] Saul: … uh, wealth in the world is about $500 trillion. And that’s mag 14.7 as I was saying. [Mike: Mm-hmm.] So I remember when Bill Gates became the richest person in the world in 1995 or so- [Mike: Mm-hmm.] … out of, of Microsoft stock. And he was worth $15 billion then. That was the richest person in the world then, right? Now we’ve had some inflation since the ’90s, as we were talking about, but actually it’s only about three times. And so if you take that 15 billion, if he just, if the inflation matched that, he’d have about 45 billion now. But he, he has a lot more than that and other people have even more than that. [Mike: Mm-hmm.] On the order of 10 or 20 times that amount. And so there’s been, actually been a whole other mag level that’s been introduced since the ’90s and, you know, it hearkens back to the capitalists in the 19th century, Carnegie and Rockefeller, two of the richest people, richest private individuals ever on the planet with an estimate in today’s wealth of about $300 billion.

[17:26.6] Mike: Hmm. Mm-hmm.

[17:27.3] Saul: And so people today are actually on the same order of magnitude of wealth as those guys. But the big open question in I think a lot of people’s minds is what i- is there, should there be a lower limit to wealth? Should we allow people to basically have absolutely nothing and not even, uh, you know, a shingle over their head or a place to use the bathroom? And is there an, is there a, a amount of money that’s the maximum, uh, too much, uh, for people to have? I think that if one person had all of the world’s wealth, mag 14.7, that would be too much for one person to have. [Mike: Mm-hmm.] Right? And I even think that if somebody had mag 14 wealth, you know, only $100 trillion, a fifth of the world’s wealth, that would be too much for a person to have. I think we can say there is a level that’s too much and there’s a level that’s too little. And we can say, “Well, maybe we should support the people on the bottom end.” Interestingly, I don’t know if you know this, but Medicaid is meant for people who are mag 2 and below. Specifically, you are not allowed to have more than, I think it’s, $2,000 in your bank account of assets- [Mike: Mm-hmm.] … or you get taken off of Medicaid. So literally- [Mike: It’s-] … it’s for mag 2 and below.

[18:43.5] Mike: Well, so if we’re going to talk about should we have floors, should we have ceilings, why don’t you run me through, uh, some examples of what you… how you would qualitatively describe different mag levels starting from zero up. mag 2, someone who can pull together $100, couple hundred dollars- [Saul: Yep.] … if their tire blows out- [Saul: Yep.] … they need a tire, or they have a medical expense.

[19:14.7] Saul: A small one.

[19:15.4] Mike: A small. Yeah, they need- [Saul: Mm-hmm.] … a tooth extracted and they can pay it off over a couple months. [Saul: Yep.] That’s a mag 2 level.

[19:24.7] Saul: So, uh, qualitatively, I think what happens at mag 2 is kind of interesting. I think it’s characterized by either living with somebody or an unstable housing situation. [Mike: Mm-hmm.] Like, y- you’re… It’s hard to find a place that you can afford at mag 2 unless somebody else is subsidizing your life, and if you do find a place, either it’s kind of trashy and you don’t want to be there very long, or it’s a good place but y- you didn’t stay there for very long because… Yeah.

[19:51.5] Mike: Yeah. mag 2 is your rotating roommate situation- [Saul: Yep.] … or your, you know, romantic partnership that really you hope holds out through the end of the lease.

[20:01.4] Saul: Yeah. Right. Exactly. And if you go down from there, I feel like mag 1is probably begging on the street, or may- or at least day laborer. And mag 0really is, uh, you know, you don’t know where your next meal is coming from. You can’t even get 10 bucks together. So yeah- [Mike: Mm-hmm.] … you have to really worry about that, and I think whether it’s mag 0or mag neg- There’s even a mag-1 where it’s, like, good luck even getting a dollar together. And, um, I… We see some evidence here of this even in Seattle here, where people have a hard time finding a place to poop. [Mike: Mm-hmm.] And that’s down there at negative… mag-1 or mag0. And so those are radically different levels. You know, if you’re at mag 2, it’s like, well, you, you have a… you have some kind of place. You may have a car that you even can use, although I think that one of the characteristics of mag 2 is if you do have a car, it’s kind of a junker and it never has a full tank of gas. And then I feel like, you know, there’s mag 3, characterized by credit card debt.

[21:05.0] Mike: I was just about to- [Saul: Mm-hmm.] … mention cost of debt. [Saul: Mm-hmm.] Because in my mind, mag 2 is characterized by fees and costs associated with low balances, whether that’s- [Saul: Yes.] … either… You know, if, if you had the money, you wouldn’t fill your tank. [Saul: Yep.] You would make sure you don’t pay an overdraft fee- [Saul: Yep.] … or you wouldn’t pay your late rent fee, or you wouldn’t take a payday loan.

[21:38.0] Saul: Well, so payday loans, interestingly, I think are only a mag 2 thing. [Mike: Mm-hmm.] But how many get to mag 3? You have a credit card and your credit card charges you 20% a year, but it’s only 20% a year, whereas a payday loan is 20% maybe for even only a couple weeks, right? [Mike: Mm-hmm.] And if you’re below mag 2, you don’t even have a job, you can’t even get a payday loan. [Mike: Mm-hmm.] And so yeah, very specifically, payday loans are a mag 2 concept. Like you said, the cost of debt goes down as you climb, climb this ladder. At mag 3, I think that’s characterized by credit card debt. [Mike: Mm-hmm.] And whether you have, uh, some because you’re at low mag 3 or y- you have some and you’re, you’re shuffling credit cards around. I’ve… I’m not sure if you’ve ever played that game where you’re using one credit card to pay off another credit card or you kind of have full balance on a lot of things.

[22:23.7] Mike: Mm-hmm. And you get the little checks where you can pay off one with the other-

[22:26.9] Saul: Oh my gosh.

[22:26.9] Mike: … with the 0% for a little, “Ooh.”

[22:28.7] Saul: Yep. Six months, 0%. Great. [Mike: Uh-huh.] Yep. Just got to get through there. And then I think at the top end of mag 3, you’re like-

[22:35.5] Mike: Oh, did you know that landlords don’t like taking those checks?

[22:38.0] Saul: Really? I d- I guess, I guess you do know that. Well, sometimes you gotta do what you gotta do. And so yeah, so credit card debt is the thing. If you’ve got credit card debt you can’t pay off, I would say you virtually are mag 3, that category. [Mike: Mm-hmm.] Because, because if you’re at mag 2, you might have a credit card, but it’s a secured credit card. Like, they won’t give you a credit card. They were like, “Well, here, give us your money, and then we’ll let you charge to our credit card to pay that money to build your credit.”

[23:03.2] Mike: We’re gonna hold your money for you.

[23:05.2] Saul: It’s like the bank of debt.

[23:06.6] Mike: Mm-hmm. Paternalistic in a sense.

[23:10.2] Saul: Yeah, totally, right? And so yeah. So then we talked about mag 4 and 5. You know, there’s a down payment, which maybe isn’t enough anymore, and then I think if you own a house or have owned a house for any amount of time, you’re mag 5 at least. And then mag 6 is being a millionaire and not having to work, right? [Mike: Mm-hmm.] And then climbing up the scale further, I mean, l- we’ve already talked about the tens of millions of dollars. Actually, there’s these… there’s distinct categories. The… There’s high net worth individuals, which is a million dollars or more aside from your primary residence. That’s a high net worth. And then there’s very high net worth, which I think is like five million and up, and then there’s ultra-high net worth, which is like 30 million and up. And so you make these kind of almost arbitrary categories. They’re not arbitrary. They’re, they’re based on these qualitative differences, but they actually kind of track on a mag scale. I kind of wish they were exactly on a mag scale. It’s 1 to 10, 10 to 100, et cetera. [Mike: Mm-hmm.] But… Yeah. And so okay, so that’s how the, uh, I think the scale- [Mike: Yeah.] … works. Then, of course, like we said, mag 15- [Mike: Mm-hmm.] … is all of the wealth in the entire world.

[24:06.2] Mike: Yeah, and I think it’s kind of informative to be… think about at any mag level you can afford, the most expensive thing you own is a mag level below you- [Saul: Yeah.] … excepting a house.

[24:19.7] Saul: I want to get back to Bill Gates being the richest person in the world in 1995. [Mike: Yes.] So, he topped the Forbes list in that year, right? The Forbes list of billionaires.

[24:30.9] Mike: Did that list start about then?

[24:33.2] Saul: No, it started about 10 years earlier. [Mike: Oh.] Before the early ’80s though, there wasn’t a list. They just had like, I don’t know, profiles of rich people every now and again. There was a show in the ’80s, Lifestyles of the Rich and Famous. They just had-

[24:45.8] Mike: Oh God, I remember that.

[24:47.4] Saul: … this guy, yeah, just going to rich people’s houses and, “Oh my God, it’s so rich, it’s so big.” Whatever. But they didn’t, like, track it on like a scoreboard. [Mike: Mm-hmm.] It was just these people are really, really rich.And I, I, I even looked at the first issue of Forbes that had something like this and it wasn’t like broken down, it was like, “Here’s a, here’s a category. It’s like the 100 million to 500 million range. There’s like three people, profiles of those three people in there. And then there’s one that’s, you know, 500 to a billion and there’s one person who’s got a, more than a billion dollars and it was some sheik of some, o- of something.” And yeah, so they did that and then they started the list, I think it was ’82 or ’83, and then it became an actual list and now we have the list and it’s like, this list is, is fairly recent. But one of the questions that they, that I’ve had recently is would you rather have $10 million- [Mike: Yes.] … or a billion dollars?

[25:40.5] Mike: Also yes.

[25:41.3] Saul: But the twist is that if you have $10 million you can keep it private, but if you have a billion dollars it has to be public. Everybody has to know.

[25:50.7] Mike: I get on the list?

[25:52.0] Saul: You get on the list if you wanna be on the list. Do you wanna be on the list, Mike?

[25:55.9] Mike: Hmm. In any context that sounds bad.

[26:00.6] Saul: It’s, pretty much, yeah. So I think that having too much money ruins people’s lives just from a purely individual, like it, it makes it so you are having a worse experience of it. You have more stuff, you have more power, but like I said, if you can’t trust anybody and all of your marr- your marriage falls apart and your kids are… Literally, you’re, you are at a, at a much higher risk of being murdered if you are, have hundreds of millions of dollars or more.

[26:26.1] Mike: I think it probably comes down to values, doesn’t it?

[26:31.5] Saul: I would s- I would suppose, yeah.

[26:33.1] Mike: And I certainly agree with you. I think the difference between $10 million and a billion dollars is two levels of magnitude. [Saul: Mm-hmm.] That’s a hundred times more. [Saul: Mm-hmm.] There, there can be a hundred people with $10 million- [Saul: Yeah.] … in secret. Versus one person with a billion dollars. [Saul: Mm-hmm.] Oh yeah, I would absolutely take the smaller amount, I think. It’s plenty to not have to think and I don’t need to deal with the hassle of people knowing my business. Again, maybe a failure of imagination, but I think I can make do with a mere Mag 7.

[27:14.9] Saul: And I, I think honestly, I think there’s a humility there too, right? That if you want to do big things, you actually still can, you just have to wrangle people together and be like, “Okay, you have to be some kind of a, of a leader, organizer, right?” And instead of just throwing money at people to get them to do things, you actually convince them to do things and now you’ve got a movement and you’re making a much bigger political progress than just having the money to influence something one time.

[27:43.3] Mike: Mm-hmm. So, I like this question of the day. [Saul: Okay.] How many people have you asked it to and what is the range of responses?

[27:52.2] Saul: I’ve asked it of many people and strangers and friends alike, and it seems like there are people who instantly answer a billion dollars. It’s like that’s just, “Well of course I want more, more, more, more.” And then there are people who have kind of like already thought about it or have already had like this that comes down to their values and they’re like, “Oh no, 10 million’s fine. I don’t wanna, I don’t wanna deal with that.” Like, there actually is like a certain kind of like, “I don’t want the hassle,” like you’re saying, right? And then there’s another class of person, I’ve heard this, th- they seem like they’re women and they’re somewhat emotionally intelligent and I think of as fairly, uh, as decent people who say they would take the billion and it’s, like you were saying, it’s, um, personal responsibility. “Just think what I could do with that. And not like even update South Lake Union but like I could make a difference in many, many people’s lives with that,” and that’s where they’re coming from. I don’t know if they’re right. And to be honest, I actually think Mackenzie Bezos is a, is a great example of this, right? Where she’s trying to spend her Mag 10, Mag $10 spend, uh, give away Mag $10, right? And is having a little bit of a problem with it because it’s a sig- it’s significant. It’s a really big challenge to give that kind of money away. First of all, who do you give it to? I mean, thousands of people are applying all the time to get the money that she’s got and you can’t just give it to, in large lump sums. Like, there are very few organizations that can handle an inflow of even $100 million. Like, we’ve got like a local theater here that, uh, is always asking me for money and like, and like I’m sure they can handle my 50 bucks no problem, but if Mackenzie Bezos was to give them $100 million, they wouldn’t know what to do with it. They can’t… That’s going up like actually probably two Mag levels from their current budget. [Mike: Mm-hmm.] Like, that’s, that is incomprehensible. They’d ha- their whole mission would have to change if that was the case. So then like, so you have to now you find the right level of organizations and the right number. It’s a f- more than a full-time job to be able to, to have to give away that level of money. So, even if people think, “What could I do with this? It’d be so great.” … and now they’ve got a different job. Now they have to go to work. Well, either they have to go to work and do this and spend all their time dealing with businessmen and lawyers and accountants and having to make all this stuff go, or they sit back and don’t do that but then their money makes more money and now they’re not the, they’re the exact person they didn’t want to be in the first place. So, I don’t know. Uh, like I said, like, there’s about those three groups of, of people. Ones who are instantly, “Well, duh, I’ll take the most.” Some who are like, “Ah, I don’t know. I’m a little skeptical of that. I’m gonna be smart and wise. I think I can do fine with $10 million.” And then there are the ones who are like, who like g- all starry-eyed with how much they could help the world with it.

[30:35.0] Mike: Mm-hmm. Good. Uh, I think that’s like a nice range.

[30:39.4] Saul: Yeah. I kinda wanna give one of those, uh, people who thinks they could help the world a billion dollars and play the Brewster’s Billions game- [Mike: Uh-huh.] … with them and see how it works out. Yeah. That’d be fun. I, I, if I had a billion dollars, that’s what I would do.

[30:55.7] Mike: I’d be rich. You, you know that song?

[31:00.4] Saul: No, I don’t. What is this?

[31:01.5] Mike: Oh, if it, well, it’s-

[31:02.5] Saul: Oh, if I were a rich man?

[31:03.4] Mike: No. If I had a million dollars.

[31:06.6] Saul: Oh. Oh.

[31:08.0] Mike: If I had-

[31:08.1] Saul: Barenaked Ladies, yeah.

[31:09.1] Mike: Yes. Uh-huh.

[31:09.8] Saul: Mm-hmm. I had an idea actually for a website for a while called if I had a billion dollars, and it’s basically all the things I would buy, basically like let’s spend a billion dollars. [Mike: Uh-huh.] And you just like buy as many big things as you can buy and the whole point is that no matter what you buy you can’t possibly spend a billion dollars. Like, I’ll buy a jet. Great. You bought a jet. $100 million. That’s, okay, that’s, that’s a jet. But you can’t bu- I mean, you could buy 10 jets? Like you’re g- that won’t fit in your garage.

[31:40.0] Mike: Buy Southwest.

[31:41.2] Saul: You could buy Southwest, exactly. Anyway, so one of the discussions in popular culture right now is, is there an amount of money that’s too much? That, you know, honestly, maybe a billion dollars is okay for one person to have and they can do good things with a billion dollars. But then you get up to the $10 billion range and the $100 billion range and again the, uh, 10 times and 100 times that amount of money, and the level of power that, it’s not even about other people not having that money, although it is a little bit. It’s also the level of power that person, those people have compared to everybody else. It’s kind of unimaginable and maybe not even right. So, there is this concept of a wealth tax that’s been floated around. There’s one going on in California right now. [Mike: Mm-hmm.] I think Elizabeth Warren has floated the idea for one. [Mike: Mm-hmm.] And I kinda wanna talk about that for a little bit. And again, I don’t, I, I don’t wanna say it should be this way or it should be that way, but if you think about the problem being that some people have too much wealth on an a- on a mag scale, and therefore too much power, then the goal of a wealth tax would be to take them down a mag level, right? It’s oh, you, we, you got up to mag 11? Well, that’s robber baron territory. Mag nine is where we wanna cap it, right? [Mike: Mm-hmm.] And so, Elizabeth Warren’s, uh, proposal is a 3% tax on billionaire, a 3% wealth tax on billionaires annually. [Mike: Mm-hmm.] So, I decided to go whole hog. I’m like, I, we don’t deal with small percentages like that in mag world. Let’s talk 10%. A 10% wealth tax annually on billionaires, right? How long would it take an annual 10% wealth tax to knock a, someone down a whole mag level?

[33:30.3] Mike: So, the easy answer is 10 years because- [Saul: Hmm.] … 10 years times 10%- [Saul: Okay.] … is taking you down. But I also would expect there to be growth during that intervening time.

[33:49.8] Saul: So, there’s two things. So one thing is, as you’re taking 10% off, the amount you would pay the next time is less. [Mike: Mm-hmm.] And so it’s more than 10 years if there’s no growth.

[33:59.8] Mike: The, the reverse of compound interest. [Saul: Yes.] Each time you’re taking, the 10% is less.

[34:04.1] Saul: Exactly. And so, uh, the actual answer if no growth happens at all is 20 years to go down a whole mag level exactly 10, or m- yeah, 10 times.

[34:14.5] Mike: So, 20 years to reduce your wealth to 10% of what it was.

[34:20.7] Saul: Yep, at being taxed 10% of all of your wealth every year. Yeah. [Mike: Mm-hmm.] And so this is a, this is a generational thing. Like you, this is not gonna happen overnight. Like you can’t cut people down to size but with a 10% tax, and certainly not with a 3% tax. It would take 100 years to knock somebody down an order of magnitude- [Mike: Mm-hmm.] … with, at 3%. So, the, um, other side of this I wanna ask is how much money could that give every single person in the US if every billionaire was ta- was, had a wealth tax of 10%?

[35:01.5] Mike: Well, okay, so let’s say mag 13, wealth held by US billionaires if we apply this tax to them. [Saul: Okay.] So each year, 10% of that. [Saul: Mm-hmm.] So mag 12- [Saul: Mm-hmm.] … is going to be going to all the citizens of the US. [Saul: Yep.] And the US has mag 8.7. Half a billion people?

[35:28.8] Saul: Uh, 350 million people. [Mike: Okay.] So, it’s basically mag-

[35:33.8] Mike: Mag eight and a half.

[35:34.6] Saul: Eight and a half, yep.

[35:37.0] Mike: Okay, so, we have mag 12- [Saul: Mm-hmm.] … taxed wealth from billionaires- [Saul: Mm-hmm.] … going to mag 8.5 people. [Saul: Mm-hmm.] So, 12 minus 8.5 is 3.5.

[35:52.8] Saul: Mag three and a half.

[35:53.6] Mike: So mag three and a half distributed to every single person in the US. [Saul: Yep.] Mag three and a half is about-… $3,000 per person?

[36:06.9] Saul: $3,000 per person per year, yeah.

[36:08.9] Mike: Per year, yeah. [Saul: Uh-huh.] Mm-hmm.

[36:10.2] Saul: Yeah. ’Cause this wealth tax would, would fund. The, the, the 10% wealth tax would fund, anyway. [Mike: Yeah.] Anyway, so I wanna talk about a couple other things here- [Mike: Mm-hmm.] … as long as we’re on the topic of money. So, Bitcoin is-

[36:22.2] Mike: I thought we were talking about money.

[36:24.0] Saul: Well, Bitcoin is worth money, I guess because people are willing to pay money for it. I had a Bitcoin in 2011 or so, and I lost it. I lost the key to it. I, I mean, it’s just, I, honestly, I’ve forgotten now. I think it may have been part of the Mt. Gox thing. So I had that Bitcoin. But I don’t feel bad about losing it because I know if I had paid, I think, $10 for it, that I would’ve sold it at $100. And I certainly would’ve sold it at $1,000. And when it was worth $10,000, oh my, if I hadn’t sold it by the time it was worth $1,000, I definitely would’ve sold it by the time it was worth $10,000. So there is no chance that I would have a Bitcoin now regardless of what happened. [Mike: Mm-hmm.] But yeah, so it’s worth significant money now. It’s worth, e- every Bitcoin is worth mag 5 US dollars, basically. [Mike: Wow.] Yeah. So I don’t know if you know this, but Bitcoin is divisible down to, I think it, it’s, actually it’s the 100 millionth. You can, you can separate, that’s like their, their- [Mike: Hmm.] … their pennies, right? [Mike: Mm-hmm.] And they’re called Satoshis. Satoshi is the famous inventor of- [Mike: Mm-hmm.] … original inventor of Bitcoin. And so the smallest unit of a Bitcoin is a 100 millionth of a Bitcoin, and that’s a Satoshi. And so, okay, how much is a Satoshi worth?

[37:43.0] Mike: 100 millionth?

[37:44.6] Saul: 100 millionth.

[37:46.1] Mike: So 100 millionth is a mag negative eight. [Saul: Yep.] And you said that Bitcoin, one Bitcoin is worth mag 5. [Saul: Mm-hmm.] So mag 5- [Saul: Uh-huh.] … minus mag eight is mag negative three. [Saul: Okay.] So mag negative $3, that’s a tenth of a cent.

[38:10.7] Saul: Tenth of a cent. Yeah. So every Satoshi, and it used to be that, that a Satoshi was, um-

[38:17.5] Mike: A bare fraction of a cent.

[38:18.9] Saul: Right, like a meaningless, oh, I don’t know, what, what is, it’s, it’s nothing, right? [Mike: Mm-hmm.] And now it’s a tenth of a cent. That’s a coupon. I don’t- I don’t think people still clip coupons at all, but if you do clip coupons, it says-

[38:29.2] Mike: Cash value.

[38:29.8] Saul: … one coupon is a Satoshi, basically, in cash value, anyway. [Mike: Mm-hmm.] So okay, let’s go the other way. So about 20 million Bitcoins in existence. [Mike: Mm-hmm.] So how much is the total value of all Bitcoins? I mean, you know, assuming that…

[38:43.2] Mike: So there’s about mag seven Bitcoin. [Saul: Mm-hmm.] And current value is mag 5. [Saul: Mm-hmm.] So mag 5 plus mag seven is mag 12- [Saul: Mm-hmm.] … total value of Bitcoin.

[38:57.8] Saul: Yeah, there’s about a trillion dollars market value of Bitcoin. Yeah, which is a substantial fraction of the world’s wealth, interestingly. I mean, it’s only- [Mike: Uh-huh.] … 0.2%, but it’s still 0.2% of all the wealth in the world. Yeah. The other thing I wanted to talk about is the market capitalization of some big companies, the biggest companies. [Mike: Oh.] Right? [Mike: Mm-hmm.] So in the last couple of years, anyway, Apple, Microsoft, NVIDIA, and I, there are others too, have all become trillion-dollar companies, right?

[39:30.7] Mike: Mag nine.

[39:31.3] Saul: Mag ni- no, no, mag 12.

[39:33.7] Mike: Mag 12. Oh, mag nine’s a billion, right? [Saul: Yeah.] Mag 12 companies.

[39:37.5] Saul: Mag 12 companies. And so yeah, so Apple’s like worth like some $5 trillion in market capitalization, right? [Mike: Mm-hmm.] That’s 1% of all of the wealth in the world is in Apple stock. [Mike: Incredible.] Well, okay, Mike, thank you so much for being here with me today and talking with me about money, the long green. [Mike: Mm-hmm.] I wanted to give a shout-out to a person, a listener, Judd Dagnall, who wrote a post about Mag World. He was inspired by Mag World to write about it, and- [Mike: Wonderful.] … it’s already affected his, uh, the way he views the world. He made the realization that he, he was thinking that the trillions, mag 12, is kind of outside of, like he has no way to relate to it, and that was a, kind of an assumption that he has had that he didn’t realize he had. But after listening to Mag World, he’s like, “Oh, there actually are things that have a trillion things in them.” And he realized that a hole that you dig in the beach has about a trillion grains of sand in it. And-

[40:43.5] Mike: Wow, you, you’re digging some big holes, Judd.

[40:46.2] Saul: But they’re not, though. They’re just grains of sand that are really, really small. And that’s, yeah, it’s a huge number, but like, I mean, you can’t count them all. But you can move a trillion things one shovel load at a time, right? [Mike: Mm-hmm.] Anyway, I wanted to say thanks, Judd, for, uh, for your post. I read that and I really enjoyed it. So next episode will be, I think, mag population- [Mike: Ooh.] … talking about the number of, well, humans are, is a population for sure, but there are other things besides humans on the planet. You mentioned a couple episodes ago that there are mag, I think, 16, mag 16 ants- [Mike: Mm-hmm.] … on the world, and mag 9.9 humans.

[41:24.2] Mike: All right. Well, I can’t wait till next time. Let’s talk.

[41:27.3] Saul: Thanks, Mike. And thank you all for listening. [Mike: Great.] See you next time.

[41:29.9] Mike: We’ll do the math.