THATCHER I happened to see your consolidated statement yesterday, Charles. Could I not suggest to you that it is unwise for you to continue this philanthropic enterprise - (sneeringly) this Enquirer - that is costing you one million dollars a year? KANE You're right. We did lose a million dollars last year. Thatcher thinks maybe the point has registered. KANE We expect to lost a million next year, too. You know, Mr. Thatcher - (starts tapping quietly) at the rate of a million a year - we'll have to close this place in sixty years.
Citizen Kane, discussing the financial losses in his media empire.
In 537, under the Emperor Justinian I, the Hagia Sophia was completed after 5 years of work. Notre Dame du Paris was completed in 1260, after 97 years under construction. Two gigantic churches, each pushing the envelope of the construction techniques of their times. One took 5 years to build, the other almost a century. While I’m sure other factors were at play, the most obvious reason for this difference in construction time is that Hagia Sophia was built with the resources of an Empire under the direction of one man, while Notre Dame was not. Further, if Justinian had wanted another Hagia Sophia or 10, he had merely to say so, and within a few years, he would have had them. The 6th century Byzantine empire had the resources to do it. Unfortunately, we get to see what happens when Notre Dame gets destroyed, but had it been destroyed in 1261, at best it would have taken a couple of decades to rebuild, based on the construction timelines typical of Gothic cathedrals. And funding would have been a real issue.
There are costs, and then there are costs. For a subsistence farmer, having wasted effort over a day or two is likely to have real costs, measured in terms of reduced food supply for him and his family. For middle class 21st century Americans, having to replace a $40K car carelessly destroyed is generally an annoyance – chagrin, insurance, shopping, such a pain! To a billionaire, its a shame if one of his pet companies loses millions. To Justinian, a billion-dollar construction project is just one among several, and all in a day’s work.
John D. Rockefeller is said to have become the modern world’s first billionaire in 1916. Excluding heads of state, Forbes says that there are about 2,700 billionaires in the world. Forbes’ list is generated from public sources and reasonable guesses. Maybe there are 3,000 billionaire-level fortunes, once you add in the heads of state/royal family types? Your guess is as good as mine.
Now add in the wiley old coots with ‘only’ 500 million or so – are they materially less rich and influential than some punk tech billionaire? Now you’re up to – WAG, of course – 10,000 super-rich people? 100,000? Who knows? Why not use $100M as the floor? It’s all guesswork at this point.
These thoughts were generated by viewing Jon Del Arroz’s latest little video. Netflix has been hemorrhaging cash for a while now, and just recently announced that it laid off a bunch of people. While I agree with Del Arroz that these are good things, I doubt it means even as much as the million dollars a year loss did to
William Randolph Hearst Charles Foster Kane. What Kane fails to mention: if he’s making as little as 2% a year on the remainder of his money, he can keep on losing a million a year forever. (Really, if he’s making anything at all, say 1%, his loses will be sustainable for centuries.)
One other consideration: while the man on the back of a horse has only a small fraction of the strength of the horse, as long as he keeps reins in hand, he’s effectively as strong as the horse and himself combined. There are some limitations that need skill to work around, but a skilled horseman and his horse act as one – and that one is the horseman. In the same way, a billionaire who has large interests in companies may control them without having their assets show up on his Forbes wealth calculations. A skillful billionaire can even manipulate things such that others agree to lose money – as long as the cost of the losses doesn’t exceed the financial and personal costs of crossing the billionaire.
In this context, keep in mind that the hands at the reins of almost all giant corporations are not playing with their own money. The CEO or Chairman is likely a millionaire or even a billionaire, but his fortune is likely worth a tiny fraction of the corporate money he manages, and only partially tied to the fortunes of the company. Let’s say a billionaire with 10% ownership of the company wants something to happen – say, he’s in favor of the diversity programming over at Netflix. Now you, as a member of the board or CEO, have got to ask yourself: how long will I have a job if I defy the billionaire? It’s not my money, after all. Sure, theoretically, I’m beholden to the shareholders – but that billionaire is the largest shareholder! Far better to do what he wants (and quietly divest myself of my shares in the company, as much as possible).
Then, if worst comes to worst and the company folds or is bought by somebody who wants to make money, the billionaire and I will share a nice Just So story about how evil white supremacists in their evilness ruined our efforts to enlighten the masses and Move Forward on the Right Side of History ™.
And he’ll give me another job.
And that’s just one layer of the onion. Wealthy people either play by the rules of the Athenians in Melos, or they stop being wealthy people. There’s a lot of jockeying going on, pecking orders and loyalties to establish, and backs to stab. I don’t imagine the tech billionaire’s fortunes will long outlive them – these callow youths from hippy boomer households are not winning long-term against modern Medicis and Rothchilds.
Henry Ford is estimated to have been worth about $35B in his heyday. Less than a century later, and the entire Ford family is said to worth about a $1B. Give it another couple generations, and a Ford is as likely to be washing your car as selling you one. Very few fortunes in America last more than a generation or two; very few children of billionaires have whatever gifts it took to make that first billion. Money to them is like water to a fish – it is just the medium they live in, hardly ever noticed. Most children of the rich start right off burning through the family fortune and leave dregs to the grandkids.
There are exceptions, of course. The Medici fortune reached its peak within the first century of the Medici bank in the 13th century, but persisted for about 500 years before finally vanishing. (Another wildcard that some real historian should enlighten us all on: when the fortunes of others depend on or at least benefit from your fortune, you may be propped up indefinitely. The Medici married into many prominent and noble families – how much did this contribute to their riding out some incompetent and occasionally literally insane heirs? Were the family to fail, however, political turmoil would result. How often over those 5 centuries did other players decide they would rather that didn’t happen? But in the end, it did, but only through lack of male heirs.)
But in the meantime, they ape Kane. They all can throw around a billion here, a billion there, without feeling any pain; they can have the companies they control burn billions on idiot programs and policies and propaganda, and hardly notice except to blame others.
So rejoice when the mighty are brough low. But right now, these superficial loses are not hurting the real money. They can afford to keep up the idiocy indefinitely, if the want.