Forbes' Matt Durot recently wrote about Elon Musk's monster December paydays which, given their scale, almost doesn't feel like real money. Early in December, SpaceX launched a tender offer for insider shares that valued the satellite maker at around $800 billion, up from $400 billion in August (private markets be wild!). This new valuation made Elon's 42% stake in the company worth $336 billion and made him the first person ever worth $600 billion. It also meant SpaceX, not Telsa, was the biggest source of his wealth...Challenged accepted. Four days later the Delaware Supreme Court overturned a lower court ruling that in 2018 voided a Tesla options pay package worth $56 billion. That verdict was source of great consternation for Musk; so much so, he re-domiciled both Telsa and SpaceX in Texas which promised him more favorable treatment. So now, a chastened Delaware (possibly fearing other business may do the same) made things 'right.' That options package is now worth $139 billion after gains in Tesla stock, bringing the total value of Elon's holdings in Tesla to $338 billion and restoring balance to the Musk empire. It also made Elon the first person ever worth to be worth $700 billion (at least on an unadjusted basis).
So, what does that even mean? People have tried to make sense of this outrageous number by making comparisons. Here's one attempt by CNN: weighing Elon's estimated net worth against the economies of entire nations. It shows that (as of December 21) Elon's wealth exceeded the annual GDP of more than 170 countries (there officially 195 countries in the world, including Palestine and Vatican City).
Does this help to put Elon's wealth in context? Perhaps. Or do such comparisons just serve to further glorify and gamify staggering concentrations of wealth in society? Moreover, comparing an individual's wealth to a country's economic production is not exactly apples to apples for several reasons. First when it comes to wealth, there's cash and then there's paper valuation. Elon doesn't exactly have $749 billion of cash lying around in banks; what he does have is lots of shares of Tesla and SpaceX which are valued principally by investors based on what they see is the present value ("PV") of the future earnings of each company into perpetuity. Based on investors' sentiment of future growth that 'value' can fluctuate day-to-day; e.g., if investors wake up tomorrow and start to value Telsa more 'rationally' then Telsa's market valuation could drop from approximately $1.5 trillion to $200 billion (or, for the sake of argument, rise to $3.0 trillion) without any meaningful change in the company's actual operations. It really comes down to the story investors want to believe and Elon is an inspiring narrator. What is doesn't mean is that Elon is 'richer' than any of the 170 countries. Let's take the case of Belgium, one of the countries whose GDP lags Elon's net worth. Belgium's annual (nominal) GDP of $717 billion represents the sum total of all of its actual economic output (domestically) for the past 12 months (and not the PV of the country's expected economic growth forever into the future). It also doesn't mean Elon can pay for everyone in Belgium to take a year-long holiday. He just doesn't have that much money available; sure, Tesla is publicly traded...and he could probably sell billions worth of shares before its market price (and his wealth) starts to precipitously drop, but it would be a drop in the bucket. So, the country comparison doesn't tell us much. So, Elon's not that wealthy? No, no...he's incredibly wealthy, just not (yet) 'richer' than entire nations based on how we are calculating value.
Is there a better way to depict Elon's staggering wealth and put it into context? Yes, there is, and it was posted by Senator Bernie recently when he railed against billionaires (as he is wont to do). It's compares wealth against (shocking) wealth. Based on analyses by economists at Realtime Inequality Sanders' chart shows that the bottom 50% of Americans aged above 20 years (roughly 125 million people) hold approximately $1.2 trillion in total wealth (savings, stock, real estate, etc. which can fluctuate in value, particularly if more of it is in financial assets rather hard cash). That comes to an average wealth of about $9,600 per working American. I another words, on paper, one person--Elon--holds more wealth than 78+ million Americans!
Wealth inequality is a natural part of society and may even be
inevitable...but
Elon level of inequality can be both dangerous both socially and financially. Studies show the concentration of wealth today is the
highest since the 1920, right before the Great Depression. There are no easy solutions (and that's a whole new post); particularly when society's/civilization's (?)
definition of success is so closely intertwined wealth accumulation. So, we all play the game and wait in anticipation for when Elon's net wealth crosses the $1 trillion mark, like casually moving to the next level in the Legend of Zelda. And we may not have to wait long. As Durrot notes--in centi-billionaire speak--Elon is "roughly one Larry Page away from achieving that milestone."
