Why there shouldn't be billionaires

Actually, a billion dollars isn't the point. The problem is when some people have such an enormous amount of wealth that it vastly exceeds what "regular people" have. In North America the median person has a net worth of just north of 100 000 dollars (UBS Global Wealth Databook 2023). A single person with just north of a billion dollars has as much as ten thousand people. If they gave away 99% they would still have over ten million dollars.

That's still way too much for a single person to ever have but let's use that number since a billion is completely incomprehensible. In the USA, less than one percent, about one third of a percent of adults have 10 million or more.

To be clear, I certainly think some people should make, and therefor have, more money than others because they provide a greater value, like a doctor for instance. But there's a point where the difference is simply too large. As they say, the dose makes the poison. Here I'll give the four major arguments for why such a large difference shouldn't exist.

Economically unfair

To me the single most obvious problem with some people having a lot of money is that they can live luxuriously for the rest of their life without needing to contribute to society ever again even without ever spending their money. Society is built on the premise that we all chip in and provide value, and in exchange we get access to all the value provided by everyone else. We trade this value with each other using money as a medium of exchange.

But if you have ten million dollars, you can simply put it in a global index fund and you're set for life. This doesn't require any special skill or knowledge whatsoever. You are pretty much guaranteed to earn at least 5% above inflation per year on average even with somewhat safe investments. That's half a million dollars. Yes that's correct, when you have this much money, you can have a yearly passive income of 500 000 without ever getting out of bed.

And anyone can do it. It doesn't take any financial skill, it's not some secret strategy known only to a few. You don't have to take any big risks, or figure out a convoluted scheme. Just put the money in the market with diversity and low fees. That's it. But you can of course easily afford good financial advice with a minuscule fraction of your wealth. They'll tell you the same thing though. You can't beat the market, but you can make as much money as the market does.

Democracy

A lot of people, when they go to school, learn that they live in a democracy and that that's good, because in a dictatorship you can't live your life freely. They'll also learn that what makes a nation a democracy is having free elections every four years or so.

In a lot of ways this common message often misses the point. First of all, it's not as simple as being a democracy or not -- it's a spectrum -- one democracy can be more democratic than an other. And secondly, it's not about voting -- it's about power. Specifically, it's about the power being distributed as widely as possible among the citizens.

Buy politicians

Well, money is power. Ever wonder why politicians don't do what "the people" seem to want? While people can call their representatives, their concerns will only end up as a statistic. Generally speaking, people can technically talk to them in person by taking a day off work and physically visiting them, but that costs money.

If you're wealthy you can pay to have someone do this every day, which is called lobbying. And if you can afford lobbying you can afford donations which will make the representative much more attentive. Unfortunately, a lot of people will vote for politicians simply based on what they say. However, politicians know that wealthy people will stop donating if they don't often actually do what they want.

Buy the media

Ever wonder why a lot of people have opinions that are actually against their self-interest? If you tell a lie often enough, people will believe it and if you have enough money you can pay to have exactly whatever you want people to hear be told again and again. This is why businesses pay for advertising -- it works. But it's even more effective to buy a news outlet or similar organization, because now the very content itself can be your marketing.

If you only have ten million dollars you might not wield a lot of influence over the media and politics in the national debate, but it's certainly enough for local influence. At the same time, the multimillionaires have a lot in common which means that they can collectively buy a very large amount of influence on the things they agree on. While regular people, even when they band together, don't have a lot of disposable income for such actions.

Bribery and worse

Just because something is illegal doesn't mean you can't do it. It only means that the government might impose consequences. Many crimes, especially those done through a corporation, only have a financial consequence. Since the size of these consequences rarely scales with the wealth of the perpetrators then if you have enough money you can in fact afford to break the law all the time.

Additionally, money buys you lawyers who can advice you on strategies on how to not get caught, or how to insulate yourself from the consequences. Thanks to money, you can also enact these schemes with the help of many other people. If you get caught anyway, you can afford a legal team which will minimize the consequences, maybe even eliminate them.

Bribery is one of the most simple ways of getting what you want when you're rich and it might be the purest example of how money is power, but it does come in an amazing number of varieties only limited by the imagination. You can pay inconvenient people to go away, or for politicians to do what you want. It doesn't have to be a direct paycheck, it can be a job offer "after retirement from politics", a favor or even an invitation to "elite" social circles.

Enough money also lets you straight up have people murdered by accidents. This is of course much less common than many conspiracy theorists would try to convince you, but it would also be grossly naive to believe it never happens. Given the tendency for power to corrupt, one should not underestimate what people are willing to do to maintain power once they have it.

Luck and exploitation

Wealthy and successful people believe they are so because they deserve it, even when it's 100% due to random chance. They believe they worked hard or made smart decisions, and maybe they did. The problem is that so did a vast number of other people, but they did not become obscenely rich.

Working hard and smart does usually lead to a reasonably comfortable life, although you will have to keep working for most of it. When we're talking about gaining at least 10 million dollars, then working hard or smart might even be detrimental.

Working smart

A smart person isn't going to win the lottery -- smart people don't play the lottery since they did the math and they know it's a bad risk. And even when it comes to a highly risky but good investment, like a 2% chance to win 100 times your money, a smart person will never put all their eggs in one basket, because there's 98% chance of being left with nothing.

If the median person has 100 000 dollars, then according to the Kelly criterion a smart person would invest only one percent or about a thousand bucks into such an investment. If you could find a hundred such opportunities you would end up with approximately double your money. Good investment, but you're not rich.

Becoming a multimillionaire requires you to put all your savings, all one hundred thousand dollars of it, into this one thing, and 98 out of a 100 people will lose everything. It's a ludicrous idea, but two of those hundred people will end up set for life! However, you will hardly ever hear about all the unlucky ones, despite all hundred people making the exact same stupid decision.

Investing, starting a business, playing the lottery, or any other scheme. It's governed by the same principle. Smart people will almost never win big, but they'll always win something because they'll only take good bets and will always diversify. Stupid people will almost always bankrupt themselves, both from bad bets and from good bets without enough diversification. But yes, a few will get lucky, sometimes extremely lucky.

Working hard

The harder you work, the more you gain, but how much? If you work two jobs you could make twice as much money, but could you work three jobs? There's simply not enough time in a day. If you're better at your job than your peers you could get paid more, but how good can you really be?

An amateur sprinter runs 100 meters in 15 - 18 seconds while the best sprinter in the entire world isn't even twice as fast. This is a well known phenomenon called diminishing returns, and it means that while something might continue to get better, it will get less better every time. At some point the improvement will be close to zero.

In order to produce a hundred times as much value (to become a multimillionaire) you'll need leverage, something to not just augment but multiply your abilities. You need machines. If we're talking about running, a machine can easily move ten times as fast. For lifting, or applying any force, they're thousands of times stronger. Machines can also remember vast amounts of information perfectly and complete millions of calculations in a fraction of a second.

The best thing about machines is that you can have lots of them. In a factory you can have multiple machines working at the same time -- if you need to be more productive, just get more machines, there's no diminishing marginal productivity. But machines are expensive, you need to have enough money to buy them in the first place.

Of course, machines might not work completely autonomously. Well, humans are essentially machines, except you rent them. You can pay humans to produce value for you, and you will always pay them less than the value that they produce -- otherwise you wouldn't profit.

So why don't the humans just work for themselves and take that profit? Because once you have machines then humans are not productive enough on their own, and if the humans don't already have enough money to buy the machines then they have no choice but to work for someone who does.

As the machines become larger and more powerful (and a business organization is also a kind of machine) non-wealthy humans lose bargaining power, as they become almost worthless without the leverage of the machinery. And whoever owns the machines will naturally exploit this fact to become obscenely rich.

The value of money

Having twice as much money must be twice as good, right? However, it's not that simple. When you have no money at all, finding a dollar on the street makes you happy. But once you have a lot, is it even worth picking up?

On average people who make more money are happier, even at high levels of income. It is, however, only a correlation. We don't know how much "already having a good life" causes higher income, if they're happy because of the status and respect their work brings, or because we've come to define "success in life" as literally "making a lot of money".

In either case, diminishing returns strikes again -- when you're making a lot of money, an increase in income seems to correlate with a smaller and smaller increase in happiness which is why researchers plot the income on the x-axis using a logarithmic scale. It's also worth considering that happiness is to a significant degree relative, especially once you've secured the necessities of life. Comparing yourself to people who are wealthier has a strong negative effect on happiness. That is, the money doesn't matter -- only where you're ranked in society matters.

What this all means is that if you took half the wealth of a person with ten million dollars, they would only be slightly less happy -- because they would still be rich. If you then gave 100 000 each to 50 poor people their individual happiness would increase by a lot, and it would happen 50 times.

Also, if you took half the wealth of all rich people their happiness would suffer even less because they would still have the same rank. Even without redistributing the money, regular people (and even the medium rich) would become happier because they would now be closer in wealth to the richest.

Finally, plenty of research has shown that economic inequality is linked to social instability, democratic breakdown, and macroeconomic instability and it hinders economic growth. Meaning that the existence of extremely rich people is simply a generally bad thing for the whole of society.

In conclusion

It's unfair that rich people can live luxurious lives by simply investing their wealth and never contributing to society. Money is power and if some people have a lot more than others, then it's no longer a democracy. Extreme wealth can only be acquired through luck and exploitation. And hording societies resources gives very little real value to the wealthy few, while those resources could make many regular peoples lives significantly better.