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Jeff Bezos’ Wealth Isn’t Equivalent To That Of 2.3 Million Americans, This Is Economic Ignorance

This is where we have a little rant about the ignorance of the mainstream media. In this case it’s USA Today which has completely misunderstood one of the more basic distinctions, between a stock and a flow, and thus ended up making an entire pig’s ear of their article. This really is not good reporting you know. It’s the economic equivalent of a music critic insisting that the blues is best done in pink, of the home decorator musing on whether the living room would look best in E – you know, because blue is vaguely associated with that key?

But then given that it’s the arts graduates which tend to write the newspapers this shouldn’t come as all that much of a surprise:

Just how wealthy is Jeff Bezos?

It would take the combined wealth of 2.3 million Americans to equal the $127 billion that the Amazon co-founder is now estimated to be worth.

Well, that is an interesting question, certainly. The answer only really being possible if we consider which Americans. For many of them, perhaps 30% or so, certainly more than 20%, have negative net wealth. This absolutely isn’t the answer though:

A new report produced by the digital marketing firm Aira for industrial components distributor RS Components tries to visualize that wealth, comparing $100 billion to the gross domestic product of the world’s richest nations.

“Bezos has seen his wealth remain in excess of $100 billion, and with the likes of Bill Gates, Warren Buffett and Mark Zuckerberg also tipped to reach that eye-watering milestone, it seems we’re entering the era of the centi-billionaire,” Vishal Chhatralia, vice president digital operations for RS Components said in a statement.

In the U.S., where a population of about 320 million contributed to gross domestic product of $19 trillion last year, the median wealth of an American was $55,876, according to the 2017 Credit Suisse’s Global Wealth Report.

That means it would take the combined wealth of 1.8 million Americansto equal the $100 billion of a centi-billionaire and 2.3 million to hit the $127 billion of Jeff Bezos.

In the world’s second-largest economy, it would take the combined wealth of 19 million Chinese adults with a median wealth of $6,689 to reach $127 billion. Here is how it breaks down for the top five countries based on GDP:

Nope, that’s idiot stupidity. It’s a category error. Flat out wrong is another way to put it.

Wealth is a stock, is the capital that Bezos has. Other Americans also have some amount of wealth, the amount varying rather hugely. OK. But GDP is a flow, it’s an annual amount. A useful way to think of it is that it’s the income from that stock of wealth – not wholly accurate but pretty close. But look what they’ve done. They’ve compared that flow to that stock. Nonsense.

We can usefully compare Bezos’ stock, his wealth, to that of Americans. US household wealth is around $90 trillion these days – from memory, without looking up the most recent number. That gives us some $300,000 per American (no, let’s not try to be more accurate than that). We could add in the true wealth of America, including government and all that and that’s around $200 trillion by reasonable estimates. So, $600,000 per Yankee say.

But GDP is the amount produced in the American economy this year, not the wealth or stock. It’s the difference between the value of a railroad and the profits made from it, the value of a stock certificate and the dividend it pays this year, the price of a house and the rent it commands. We just comparing entirely and wholly different concepts, let alone things.

It’s a common enough observation that all of us out here don’t know all that much about economics. Which isn’t all that much of a surprise when the newspapers supposedly informing us don’t know much either.


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So Much For Subtlety
So Much For Subtlety
6 years ago

Wow. Spam. You’re nobody until you get spammed by a business start up. The correct answer to the question of how much Bezos is worth is a punch in the nose. Or at least a “sod off swampie!”. Even answering the question is to dignify it. Bezos did not inherit his money. He did not steal it. He provides a service that millions of people use, enjoy, are grateful for – and are willing to pay to use. I am one of them. If he was not providing a service that no one else could that we were willing to… Read more »

6 years ago

Did Oxfam get the by-line?! USA Today is willing to engage in such sloppiness because it is a small next step for the reader to conclude that Bezos got what he has at the expense of the rest of us. (The reader being someone who selects a newspaper on the grounds that most articles don’t exceed 6 paragraphs, and whom Bezos’ enterprise saves a week of shopping and driving every year.)

6 years ago

Additionally, $127 billion is bogus. The simple math of what the stock is trading for, and how many shares he has, doesn’t work. He can’t sell his stock and get $127 billion. He might get $30 billion.

Should he start to sell large amounts, the stock price will plummet.

6 years ago
Reply to  Gamecock

True. That’s also a good counter argument to those who say the government should seize a chunk of individuals’ wealth in order to spend in some manner deemed appropriate by those who would do the seizing. If seized such wealth would be worth much less.

However, should Bezos wish to borrow heavily, his shares would certainly provide more than $30B of collateral from the bank’s perspective.

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