BurnOutBrighter6 t1_j2cq1ag wrote on December 31, 2022 at 7:11 AM

Reply to comment by ChickenEnthusiast in ELI5: Tech billionaires lost $400 billion this year. Where does it go? Does anyone gain? by ChickenEnthusiast

Yes, this. It's like if you had a trading card and one day someone offered to buy it from you for $100. Nice! You don't sell though, maybe you'll get an even higher offer some later time.

The next day someone finds a whole sheet of that same card, and now the most anyone would pay for your card is $5. The value of your card has decreased by $95. In a sense, you lost $95 of value (because you could have sold it in the past for $100). But you didn't actually lose money. No cash has changed hands. It's just the agreed-upon worth of something that has changed.

That's what's happening when billionaires "lose millions". No money is changing hands, it's just the agreed-upon (aka "market") value of their assets changing.

ChickenEnthusiast OP t1_j2cqdyb wrote on December 31, 2022 at 7:16 AM

So it's like we should stop talking about "the richest/wealthiest person" and start talking about "the person with the highest valued assets as dictated by the market", lol.

Is there ever a metric/list of the biggest hoarders of cash or gold in the world - something that is a bit more consistently and constantly valued with fewer fluctuations? Like a real-life Smaug? I always hear talk of Apple having ridiculous cash reserves, but never a particular person... maybe a sheikh or the Saudi king...

BurnOutBrighter6 t1_j2crbq1 wrote on December 31, 2022 at 7:27 AM

>level 4ChickenEnthusiastOp · 4 min. agoSo it's like we should stop talking about "the richest/wealthiest person" and start talking about "the person with the highest valued assets

Exactly! For a recent example, see Bernard Arnault (owner of Louis Vuitton) passing Elon Musk this year for "world's richest" person - not because LV sold a bunch of merchandise, but because the things Elon owns became less valuable to potential buyers due to his damaging of them. In the earlier analogy it's like he dropped his own trading cards in the mud and "lost money" because their value decreased.

As for your second point, no I'm not aware of such a metric, but I agree that it would be useful and intriguing to see. Maybe someone else here can inform us. I imagine the problem would be where to draw the line re: "consistently valued". If gold is included, what about silver? Copper? Bonds? It could get complicated.

Economics_Troll t1_j2dq7qc wrote on December 31, 2022 at 2:29 PM

Rich people (in general) rarely hold substantial sums of cash.

Cash gains you nothing, and actually loses value year to year due to inflation.

Even investing in bonds gets you 5% + annual returns right now, and if you're using leverage in new businesses you can see returns substantially above that with more risk.

This is where the "rich gets richer" theme comes from. If you've got $10 million, you can earn $500k per year (5% return) in a very low risk way. Once you have enough money, you can fund your lifestyle without touching your original money or working.