What’s the difference between a Million and a Billion?
About a BillionPractically a rounding error.
Came here to post this.
I have a theory about this: We group money in magnitudes of tens up to a million but then jump up from 10x to 1,000x:
1
10
100
1,000
10,000
100,000
1,000,000
1,000,000,000
That’s a huge increase but our minds like patterns so we instinctively feel that a billion must be about 10x a million and not the 1,000x it really is, thus leading to huge inaccuracies.
Much of our perception is logarithmic, which is predictable, since patterns occur from proportion of quantities. Absolute quantities are meaningless in themselves. Even ten dollars as a quantity is meaningless except through prior experience understanding the value of a single dollar. Every value except the smallest is tenfold greater than some other value of at least some consequence.
I don’t really understand your initial assumption. What if someone has 10 million dollars? Would you say he has 0.01 billion?
I think that your theory has some merit, but I believe it’s more apparent when we describe the people who own the money, as opposed to the money itself: A millionaire will stay a (multi)millionaire until they become a billionaire.
I think the idea is that we still think of someone who has >1 million but <1 billion as having some number of millions of dollars, rather than subdividing “millions” into “millions,” “tens of millions,” and “hundreds of millions.” Of course we do subdivide that when we’re being particular about how incredibly rich some actor is or something, but generally they all fall on the same order of magnitude in our minds.
Correct
That’s my point. We (those of us that aren’t at least millionaires) don’t really differentiate in society between someone that has a million dollars and someone that has 10 million dollars; they’re both stuck in the “millionaires” tier.
So say you are making $50,000 a year, well it’s easy to see how you or someone like you could (theoretically) get to $100,000; that’s just the next tier up. And then it’s easy to imagine someone going from $100,000 to a million because that’s the next tier up again. But once you get there, people don’t tend to think of ten million as a tier and usually not a hundred million either. The next tier in our zeitgeist after million is billion.
So people tend to think of billion being kind of the same as going from $100,000 to $1,000,000. Hence the common disconnect about just how much more money a billionaire has than the common man.
People don’t have a strong intuitive sense of how much bigger one thousand is than one.
One second is one second.
One thousand seconds is like 15 minutes idk it’s not very intuitive.
Anyway, it’s about a thousand times bigger.
Hope this helps.
I should find some better hobbies.
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I like to think of $1 billion in terms of how much money you need to spend. Let’s say you’re given $1 billion at birth, never earn another cent in your life, and live for exactly 75 years. To spend all of that money, you’d need to spend $36,500 per day, every day, for your entire life. Even then, you’d have nearly a million dollars left to pass down to your children.
If you only spent 36,500 a day, you’d probably die far far richer (like, 10s of billions) than you were born assuming you have it invested. You could spend more like 100k a day (adjusting up for inflation) and you’d probably almost certainly die a billionaire.
that’s exactly why I have to add that you never earn another cent. The easiest way to spend money is to increase personal wealth.
Billionaires never earn their wealth. Doesn’t stop them from accumulating it anyways.
It feels elusive how anyone could spend so much, but controlling the content of mass media has been of great service for the interests of the Kochs and the Wilkses.
The difference between one million and one billion is almost exactly one billion.
Within a margin of error of 0.1%
Its so crazy our highest tax bracket is at low 6 figures when we have people at 10 figures.
why is it in brackets why not just a percentage
Percentages don’t scale well into the billions, you will still need brackets.
A billionaire can give away 98% of their wealth and still comfortably be a multi millionare.
A full time cashier on the minimum wage can barely even survive on 100% of their wage. When it comes to living a healthy fulfilling life, If they contribute just 5% of their wage to tax they are sacrificing far more a billionaire paying 98% tax would be.
well then there should be a continuous way to make the percentage increase, like a sigmoid or so
There is – the income bracket isn’t what all your money is taxed at. It’s a graduated scale. I’m going to make up numbers here just for an example.
I make $125,000. The first $5000 has no tax on it. The next $20000 are taxed at 5%. The next $25,000 are 10%. The next $30,000 is taxed at 15%. The next $30000 is taxed at 20%. And the last $15,000 are taxed at 35%.
So my total tax is 20000(0.05) + 25000(0.1) + 30000(0.15) + 30000(0.2) + 15000(0.35) = $19,250. My effective tax is 15.4%, even though I’m taxed higher than that on $45000 of my $125000.
It’s a piecewise function basically. And it works really well here because you start getting into very discretionary spending when it gets high, you’re not buying the essentials. You could have a bracket that has 75% tax on everything above a million for instance, and poorer people would be completely unaffected. This is why the myth of “if I get a raise I’ll be in a higher bracket and pay more in taxes” is incorrect.
Yeah so everyone is saying that the issue is that this system stops at the last bracket at 35%. If there was some continuous way to calculate the percentage, this pattern would be able to keep going.
When you say continuous, do you mean the tax rates? I assume so, because those are discrete numbers. You’re basically saying then what whatever the last bracket is, it needs to scale from 35% (in this example) to 100% at a certain income?
I don’t dislike the idea necessarily, but I think the problem with the wealthy not paying enough in taxes isn’t the highest rate, but what is taxed and how. Selling stock for instance is taxed at a lower rate than income, so we’d need to add a stipulation that if you make more than X, it’s taxed as if it’s normal income. (You’d have to make some exceptions for retiring people but that’s easy enough)
The Inflation Reduction Act had an idea that I think is worth pursuing, or at least calculating how it would go for the rich. Companies making a certain amount of profit in a tax year have to pay some % (maybe 20?) if that’ll be higher than their taxes calculated normally. It stops the loophole that lets corporations get away with paying no taxes. If we did that for rich people, I wonder how it would go. My gut instinct is that it would actually help a lot.
Edit: I just described Alternate Minimum Tax, which is a thing already. We’d just need to close loopholes around it by not letting anyone claim a deduction on it.
Probably not to 100% (because then the net income would go down) but yeah something like that. And yes you’re right, there are still many loopholes for rich people to avoid taxes so those issues should probably be fixed first. But to be fair I don’t know much about taxes or economics, it’s just an idea I had.
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brackets aren’t continuous
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because then paupers would pay the same rate as billionaires. At the same time brackets make sure eveyone pays the same for the set amount. So even if more brackets were introduced billionaires would pay the same rate on their first 100k as millionaires. People of wealth only pay higher on the actualy high level. Whats crazy is we have several brackets that basically run through the 5 figure range and just into the 6 but none higher were 5 figures should just have one lowest rate.
It usually is a percentage, just set in brackets.
It’s a percentage that nominally increases as wealth goes up.
Poor people need to spend a higher percentage of their income meeting basic needs, so having them pay the same percentage as the wealthy puts a higher burden on the poor.
In top of that, the wealthy are able to put a higher percentage of their income in things like investments, which are taxed at a lower rate (to encourage investing in the economy over hoarding wealth), so a flat rate tax would be effectively a regressive tax.
I vote we implement Pinata Economics
No no, you vote by implementing Pinata Economics.
The problem is investments vs income. It’s not a super straightforward problem to solve. Having said that other countries have implemented a wealth tax, so it can be done
I don’t see why there is any difference between taxing income from work and investment.
At a modest average annual dividend yield of 4%, $1 million in investments will generate $40,000 in income. $1 billion will generate $40,000,000.
For real. Once you are a billionaire, with even the most basic investments, you have to try REAL hard to become broke again. Spare money begets money. Spare dragon hoards begets dragon hoards. Any bitch baby billionaire whining about taxes can kiss every single asshole of single working parents, people struggling to cover student loan debts, people who perpetually rent because they can’t afford a home with a lower mortgage payment than there rent is, and every person who got ill and lost there job and home as a result. They don’t need more dragon hoards. They’ll be just fine.
Hot damn that is a good way to contextualize it.
This is the best way to explain it I’ve seen. Tell me those billionaires are struggling 🙄
That’s how multiplication by 1000 works
What’s funny is millionaires arguing against tax increases on the right when they are much closer to the pleb than they are from the billionaires that are the ones who would really pay the price.
Once you reach a certain point of greed, nothing is ever enough money. That’s why they need to be made illegal. They are literaly economic cancer.
I had a dream this week that I won 2 billions somehow in a lottery. I had so many headaches thinking about all the friends etc… and how to give the millions away to all of them and family. And these guys are storing them like a dragon and it’s gold.
TIL I’m 1 billion seconds old
If second were money, I’d be worth a hell of a lot more than a billion. And I’d be richer than a lot of tech bros.
If you had invested your time at the gray men but you didn’t
A bank account with one million dollars can be completely wiped at any time. This could happen by American healthcare cost due to illness or an accident, or a lawsuit from something like a handyman slipping on your property. A billion dollars wouldn’t even feel it.
By some measures, Musk’s decisions managing Twitter/X should earn him one million lifetimes of homelessness.
I know no one personally who would remain secure after losing billions of dollars, yet I keep hearing that owners take all the risks and workers are always protected from hardship.
With all the layoffs we see, that is fucking bullshit. The workers get shafted even when they are doing a good job because of dumb fucks c-suite gambling the company on bullshit technology, or simple cutting costs for the shareholders.
Arguably, housing should be accessible without toiling to make a rich person less unhappy and more wealthy.
This helped me a lot https://mkorostoff.github.io/1-pixel-wealth/
There’s a Tom Scott video where he illustrates the difference between a million USD and a billion USD, expressed as the size of a stack of 1 dollar bills.
A million was about the size of a football field and a less than two minute walk.
A billion took him from somewhere near London all the way to the east coast, and had him drive for over an hour.
One million years ago some of our more advanced ancestors walked the earth
One billion years ago multicellular life having evolved yet is debated
In terms of wealth, neither one will ever be achievable by me, so one might as well be the other.
You are probably not vastly different from a millionaire, just someone with less pomp and perhaps pretentiousness than some millionaires may have.
You may even know someone who secretly holds such wealth but feels too embarrassed to make it known.
A billionaire is someone who has the social role of controlling a vast section of society, through private ownership of resources and assets that are needed by others for use.
Oh I’m pretty different from a millionaire. My car is a lot older and less fancy, my house (which I’m lucky to have because I bought it when you could still get low-rate, fixed-rate mortgage) is a lot smaller, my hospital bills are a lot harder to cover, the food I buy isn’t as high-quality, my job is likely shittier, and they never have to worry if their paycheck is enough to get them through the month. I also probably pay more in taxes because I can’t afford an accountant to hide all of my money from the IRS.
And if they’re so embarrassed that they live a shittier life just to hide the fact that they’re a millionaire, I think that tells you something about millionaires.
Depends on which millionaires you’re talking about. If you just mean a couple who saved aggressively and are living off $35K/year, they’re spending much less than the median household. Not sure how much below the median you are, how many children you have, etc, but in day-to-day spending, ordinary millionaires are just working class people. Of course it gives you flexibility to deal with some emergencies like a car breaking down or a hospital bill without worrying about the cost, but those aren’t normal day-to-day events.
Multimillionaires are a different story.
I am not denying any of the differences, but the differences you both have with billionaires is even greater, as the billionaire occupies a role in society of power and domination, through control of resources and assets that are utilized socially, for the necessity that we produce our shared sustenance.
1 million dollars in net worth is achievable with investments early in life in a 401(k) or other tax deferred retirement fund. ~$300/month starting at age 20 gets you to $1,000,000 which is about 10% of the income of someone making $40k/year. That’s not completely out of reach.
It would take you a lifetime of saving 100% of that ($1,000,000 initial investment + $40k/year), a 10% interest rate (which is ridiculous), and daily compounding to reach $1bil. That is the difference between $1mil and $1bil.
Great. I’m 46. It’s not early in my life. I’m never going to be worth a million.
It’s not achievable for everyone for sure. The point is it’s achievable for a large portion of the middle class. Billionaire status is not.
For you, is it more significant that many may achieve such wealth, or that many more may not do so?
I think we should focus on raising the floor vs the ceiling. We should be taxing those who can afford it and using that revenue to help those that need it most. If that means someone like myself has to work a few more taxes to achieve my retirement goal, so be it, but I can’t bring up the low income people of this country on my own. The rich need to pay their fair share, and right now they aren’t and they’re getting tax breaks from Republicans.
Sure. Much of your observations speaks to the more conceptual differences between the millionaire and billionaire with respect to role in society. Workers generate plenty of wealth, more than enough for all to live well.
Billionaires generate no wealth, only hoard the wealth generated by workers.
No it absolutely is not achievable for a large portion of the middle class. That’s a ridiculous thing to say. Most people don’t even know how to invest their money early in life and are unlikely to be offered a 401(k) when they’re young either. $300 a month at age 20? How many 20-year-olds could afford to invest $300 a month even if they’re being paid a middle class wage?
Do you know how expensive rent and food are now? This sounds amazingly tone deaf.
https://www.cnbc.com/2023/01/02/middle-class-income-in-major-us-cities.html maybe you’re defining the middle class differently than I am. $300/month is 10% of the low end of that income level. 10% of total income is a generally considered a good target for retirement savings.
Again- how many 20-year-olds have $300 a month to invest? How many middle class people in 2023 have 10% of their income to spare? It may be a good target. That doesn’t make it achievable when 62% of Americans are living paycheck-to-paycheck. They don’t have 10%. They don’t have 1%.
As far as any spare income I have? It goes to paying down medical debt.
Yeah it’s unlikely. Saving 1-10% assumes you’re making a livable amount of money with a bit extra, versus living paycheck to paycheck even after cutting all but the most vital expenses. (Ed- and not in significant debt)
Things were a lot different when I was in my 20s compared to now. A single job at an hourly wage used to actually be almost doable.
I also fully admit I’m at the top end of the middle class and don’t know the struggles of low income earners.
How many 20-year-olds could afford to invest $300 a month even if they’re being paid a middle class wage?
If you’re making median income outside places like LA/NYC/SF and don’t have children, it should be pretty affordable.
The place I work at doesn’t offer a 401k either (technically I’m self-employed/contract worker, so I do offer myself a 401k), but even if it doesn’t and you’re not self-employed, IRAs have a $6500/year limit and that’s something you just open yourself. And you can just open a brokerage account if you want more. Unfortunately, most people don’t know these kinds of things, especially not at 20yo. There’s definitely a education gap, which is a serious problem. And few people in their early 20s make the median wage and even if they are making that much, many are still buying lots of basic durable goods like furniture and kitchenware. So using 20 as a starting point is probably a little too optimistic…
If you’re making median income outside places like LA/NYC/SF and don’t have children, it should be pretty affordable.
Did you ignore the fact that a large majority of Americans don’t have any money to invest because they’re living paycheck-to-paycheck? Do you think they all live in those sorts of cities? Wages have been stagnant for decades now. Housing prices, rent and food prices are through the roof everywhere in the country, as is the (always) variable-rate APR on things like car loans. American household debt is $16.9 trillion.
Most people simply do not have money to save or invest. They’re not getting paid enough, essentials are too expensive, and they’re drowning in debt.
