Do you think that everyone who starts a business or invests in companies is guaranteed to make a profit? I don’t think so, but I have no idea what percent end up profitable. It seems like a big gamble to me, so I can’t help but wonder if the ones that we see and pay attention to just so happened to be the ones that either chose really well or got really lucky. I have no idea which is more common.
There are no guarantees in life. There’s no guarantee that working for a company gets you paid either, the company could go bankrupt and all you have is a claim for unpaid work. And in that sense anyone who starts a business isn’t likely to make a profit. Anyone investing, there are very safe investments that are essentially guaranteed to make money. If you want an easy example I’m sure your bank is happy to take your money, invest it, take the risk, and guarantee you something like a 2% payout on your money. My rainy day fund is currently invested by bank on a guaranteed 4% return to combat the inflation. Unless you’re investing irresponsibly or with a very high risk it’s as close to a guarantee to make money.
I do know that there are a shitton of trust fund kids that don’t end up as billionaires. If it really was just as simple as having “lots” of money automatically gets you way more money, then it seems like there would be a runaway affect where there would just have to be more and more money created at a faster and faster rate in order to keep paying off all these rich people and their black boxes. There is something about that that doesn’t seem quite right to me, like just on a mathematical level, doesn’t it seem like the amount of money in existence would have to be going up exponentially in order for this story to be true?
It’s not about becoming a billionaire. Billionaire is a blanket term some people use to refer to the ultrawealthy. They don’t need to be billionaires, they just need to be wealthy enough live off of investment returns. If I had 10 mil at hand I’d consider myself ultrawealthy, because I’ve done the math and if I invested that much money into a relatively safe investment I could spend the rest of my life living off the investment returns. I’d be set for life. And remember, 10 million is still more than 900 million away from a billionaire. At about 20 mil I’d be getting more from my investment returns than I do at my actual job, but I live in a relatively cheap area.
don’t know where you’re from so I’ll use America as an example. 20 million at a 4% return in a year (which is what my bank gives me) is 80k a year. The average annual wage in the US in 2022 was 77k. Minus taxes at 20 mil on a 4% return you’ll make just below what the average american makes, without doing anything. You can do a similar calculation for your country. Find out what’s the safest maximum rate your bank provides (that will be the floor of how much you’d make investing), find out what’s the annual average wage in your country (or better yet, use your own wage), find the tax rate, throw them all together and see how many millions you’d need to live the rest of your life without ever needing to work. From there you get a relatively good idea how much money you’d need for that runaway effect, where you can do pretty much whatever and you’ll just keep getting richer. And if you to the calculation, maybe for you that number is 100 million. That’s still 900 million away from a billionaire, just to remind you of how obsenely wealthy billionaires are.
That’s really interesting. Thanks for taking the time to lay it all out like that. In the US, inflation is currently at 3.36% according to a quick search. Doesn’t that mean that in order to actually be profiting 4% in terms of actual wealth gained, I would need to find a reliable investment that is paying out 7.36%? Or am I making some sort of error here?
I guess that’s up to you how accurate you want to go with your calculations. If you also want to account for inflation go for it. I didn’t account for inflation because I originally did the calculation out of interest to see if I was just safe investing at 4% how much money I’d need to cover my current expenses. Once I got the number I wasn’t interest in going more specific because I instantly realized it would be effectively impossible for me to make that much money. For me that number was enough to get the ballpark of what it would mean to be the ultrawealthy, I wasn’t looking for a specific threshold.
There are no guarantees in life. There’s no guarantee that working for a company gets you paid either, the company could go bankrupt and all you have is a claim for unpaid work. And in that sense anyone who starts a business isn’t likely to make a profit. Anyone investing, there are very safe investments that are essentially guaranteed to make money. If you want an easy example I’m sure your bank is happy to take your money, invest it, take the risk, and guarantee you something like a 2% payout on your money. My rainy day fund is currently invested by bank on a guaranteed 4% return to combat the inflation. Unless you’re investing irresponsibly or with a very high risk it’s as close to a guarantee to make money.
It’s not about becoming a billionaire. Billionaire is a blanket term some people use to refer to the ultrawealthy. They don’t need to be billionaires, they just need to be wealthy enough live off of investment returns. If I had 10 mil at hand I’d consider myself ultrawealthy, because I’ve done the math and if I invested that much money into a relatively safe investment I could spend the rest of my life living off the investment returns. I’d be set for life. And remember, 10 million is still more than 900 million away from a billionaire. At about 20 mil I’d be getting more from my investment returns than I do at my actual job, but I live in a relatively cheap area.
don’t know where you’re from so I’ll use America as an example. 20 million at a 4% return in a year (which is what my bank gives me) is 80k a year. The average annual wage in the US in 2022 was 77k. Minus taxes at 20 mil on a 4% return you’ll make just below what the average american makes, without doing anything. You can do a similar calculation for your country. Find out what’s the safest maximum rate your bank provides (that will be the floor of how much you’d make investing), find out what’s the annual average wage in your country (or better yet, use your own wage), find the tax rate, throw them all together and see how many millions you’d need to live the rest of your life without ever needing to work. From there you get a relatively good idea how much money you’d need for that runaway effect, where you can do pretty much whatever and you’ll just keep getting richer. And if you to the calculation, maybe for you that number is 100 million. That’s still 900 million away from a billionaire, just to remind you of how obsenely wealthy billionaires are.
That’s really interesting. Thanks for taking the time to lay it all out like that. In the US, inflation is currently at 3.36% according to a quick search. Doesn’t that mean that in order to actually be profiting 4% in terms of actual wealth gained, I would need to find a reliable investment that is paying out 7.36%? Or am I making some sort of error here?
I guess that’s up to you how accurate you want to go with your calculations. If you also want to account for inflation go for it. I didn’t account for inflation because I originally did the calculation out of interest to see if I was just safe investing at 4% how much money I’d need to cover my current expenses. Once I got the number I wasn’t interest in going more specific because I instantly realized it would be effectively impossible for me to make that much money. For me that number was enough to get the ballpark of what it would mean to be the ultrawealthy, I wasn’t looking for a specific threshold.