Ask HN: What would happen if we prevented the creation of billionaires?

12 points by Bodhisattya 5 years ago | 24 comments

What would be the fallout, under the hypothetical assumption that we manage to outlaw having a net worth above a billion minus one (or any scientifically determined stopping point for net worth)? I think the narrative of inequality is very much wealth driven, though there are other forms as well. Would it have a major impact on the way the world works? Would we instead have much more millionaires, with very little impact on the bottom of the pyramid?

The poorest section should have the maximum utility from additional income. However, is there any form of benefit the society can derive from individuals controlling wealth at scale?

ThrowawayR2 5 years ago |

Excepting a few philanthropists, they would leave whichever nation that passed such a law, bringing their influence and power to a nation that doesn't, and / or funnel all the excess wealth into overturning or subverting it, of course. I mean, wouldn't you?

Even if the ban were universal, money at that scale is power. Alternative social or economic constructs would form to allow the ex-billionaire to continue to wield that power, e.g. some form of trust or corporation that the ultra-wealthy don't own but does their bidding or some form of clan or dynastic structure where family members and trusted retainers each hold part of the wealth but coordinate their actions.

Bodhisattya 5 years ago | |

This. However, it should reduce power being wielded by people with money alone and incentivize wealth being spread more evenly. If some one has to spread their moolah to the their twice or thrice removed cousins, I would still consider an erosion of power and a better distribution of wealth than before.

giantg2 5 years ago | |

Seems similar to many politicians donating to each other's personal charities.

isabelc 5 years ago |

Some of the tools we use everyday were created by people after they made their first billion dollars. iPhone and Microsoft Office, for example.

People will always create things, but if you have more money than you know what to do with, and your mind is not worried about working to put a roof over your head, then your mind is free to imagine and build the next world-changing thing.

Capping the income would then also put a cap on innovation. This is not necessarily bad; many people think we could have enjoyed a few more decades before the creation of the smartphone.

senjindarashiva 5 years ago | |

Putting a cap high enough to allow people to reach financial independence would be something totally different, and I do agree that such measures would probably stem "innovation" or at least focus it on only solving immediate issues.

However putting the cap at a billion would probably have limited effect in this sense, it would probably stop quite a lot of billionaire vanity projects though.

Bodhisattya 5 years ago | |

I wonder whether the innovation will really be capped in a real sense. Lets say if Apple does not introduce the iPhone, would some one not eventually still come up with a similar product? I (personally) consider that opportunity is a rarer commodity than innovativeness, and that most innovations will come about, albeit a little later.

isabelc 5 years ago | | |

>I (personally) consider that opportunity is a rarer commodity than innovativeness

I agree. I think to create world-changing things, 3 things are needed:

1. Innovativeness or creativity.

2. Lack of neccessity to work to put a roof over your head, which frees the imagination.

3. Enough money to make it actually happen. This is the opportunity.

Many of us have #1, some also have #2. But 1 or 2 are not enough. You need all 3. Billionaires can have all 3.

1123581321 5 years ago |

It’s an interesting thought experiment. We would expect to see an increased market for financial hedging close to the limit. It would be worth paying a great deal of money to ensure that almost a billion remained available without endangering either cash or highly valued company ownership. Imagine spending $40 billion over your life to guarantee always having almost a billion. The financial industry would grow enormously.

There would be other second order effects preventing the law from functioning well, and preventing successful people from becoming trapped in such a capricious state, but I’m seeing those aside.

fiftyacorn 5 years ago |

I've a bigger issue with the inheritance of this money. You look at the news globally and so much is driven by those who have inherited it yet seen to think it's been achieved thru their own hard work

This is where the Carnegie's, Buffetts and Gates are right about being custodian of wealth. It also adds a generational reset on great fortunes

justcomments12 5 years ago |

Empirical evidence: They would denounce citizenship and move to other countries. This happened in France with a wealth tax, which caused high net worth individuals to move to other countries (like Gérard Depardieu). You can see the same thing in other places of Europe, where citizens flock into Monaco, Jersey etc. The US is no different, plenty moved to Singapore, Cambodia, Monaco, Jersey and other places. The same is true for Chinese nationals and others.

Wealth can be used to influence political power, which can be used for good or bad (In the past billionaire Pablo Escobar was overthrowing the Colombian government, funding terror group FARC etc.). So it depends on what the billionaire wants, not democratic process.

patatino 5 years ago |

I don't understand this obsession with billionaires lately. Why exactly stop there? Why not millionaires? Or people with 100k? You are still in the top x% of the world. Or does that hit too close at home?

LatteLazy 5 years ago |

Yes.

The US\UK model of capitalism has 2 properties that combine to make Billionaires both necessary and sustainable: they are very capital intensive AND they are consumer based societies.

Modern economies need big piles of capital. Somehow you have to get (say) 50bn USD together every time you want a new semiconductor fab facility or Facebook. Someone has to pay for that.

Historically, that money was raised from the middle class: if 20m people have $2500 each in the bank, the bank can pool that and a $50bn pile and lend it to make new businesses.

Those days started to end with consumerism: instead of sitting on a small bank balance, the average American\Brit(\Aussie) is in debt. So that means there were loads of opportunities out there going unfunded. So people who did have piles of cash could now reliably get big returns from lending. They could lend to capital intensive new businesses AND to companies like credit card providers for average Americans to use to fund pure consumption.

That's why you've seen these historically high rates of return on capital for the last 40 years. That's what caused billionaires in the first place AND what sustains their existence. That's why the US\UK have so many, while countries with strong savings cultures (Germany or Japan) have so few. It is also why you "need" billionaires: someone has to fund the average person spending more than they earn and fund new businesses (and to a lesser extent government debt). We could kill all the billionaires tomorrow, spend their cash for the new few months, then suddenly your credit card company would cancel your card as there was no one to fund you buying things and not paying for them, your employer would have to restructure as the interest on it's debt shot up as no one was lending etc.

A billionaire is just someone with a 100m AND 30 years of 8% RoI. They're the natural consequence of under supply of capital and high demand for products.

Wealth inequality is very much a function of individual over-consumption on a mass scale. If you want fewer billionaires, spend less than you earn and put the rest of the money into investments (a bank account or a shares\bond account). Vote for higher taxes and less spending to get the government doing the same thing. Billionaires are flourishing because they basically they hold a monopoly on the capital supply and the rest of us demand ever more capital.

muzani 5 years ago |

A lot of the billionaires do spend it on worthwhile things. Elon works on transportation and energy. Bill Gates tackles climate change, wiping out polio, sanitation, revolutionizing nuclear energy. These guys take huge risks on multi-million dollar projects that no other people would do.

Then you have Warren Buffett, who buys stocks that plummet from hype, probably preventing or dampening recessions.

On the other end you do have the monopolists who use their wealth to choke competitors, and Trump, who got lucky a couple times, but otherwise make the world a worse place.

For the most part, billionaires rarely do nothing with their money. They get there by being willing to take big risks, being good at taking risks, and they do things that no billion-dollar CEO would be willing to do. I'd say a huge reason USA is so rich is because of the spirit of taking risks. If you get rid of billionaires, you lose that.

From a practical angle, how would you outlaw that? It's not like a billion dollars in gold or cash lying around somewhere. Much of it is in stocks that go up and down.

What if they put $100 million into a failcoin, which drives up the value of that failcoin? What if they put half a billion into buying ancient Roman busts? What if they invest $1 million into a startup, and then "donate" $100 million into it?

I doubt a FAANG founder would just sell his shares if there was such a legal reason, because it's still a cash cow. It's easier for them to just milk it to hit a quota then throw away the milk.

aebtebeten 5 years ago |

Andrew Carnegie's thoughts (1889):

https://www.carnegie.org/about/our-history/gospelofwealth/

TL;DR keep billionaires, but since they've obviously beat the easy-mode personal accumulation game, they ought to play the harder-mode societal benefit game.

meiraleal 5 years ago |

No need to prevent, just tax more. Then what would happen is that the government would have more money to offer life quality to the people that worked for that billionaire get that rich.

muzani 5 years ago | |

A wealth tax would be nice, instead of income or expenses taxation. Tax those who hoard. If a billionaire is spending $800m on things, he's doing a lot of good for the economy, probably more than taxing him $10m would.

Bodhisattya 5 years ago | |

Would taxing be more efficient from a wealth redistribution standpoint than a hard cap? Not a rhetorical question.

meiraleal 5 years ago | | |

I think it is more fair to equalize power and avoid people being capable of manipulate too much of the society with their money. If the tax is progressive at some point you will have a hard cap of 100% tax.

Trias11 5 years ago |

Obviously in today's world people with potential to earn more would move away to jurisdiction that has no restrictions.

Vote with your feet.

advocateone 5 years ago |

In response to your question, about exactly where to come down on billionaires, I'm not sure but there are some great points on here, and for the folks questioning why so many techies question having billionaires and lean more toward socialism, here are my views. And I’d love to hear yours, pro or against.

If you’re in the US or Europe, you live in countries that are capitalist, but that have a huge helping of socialism so that we can take care of our citizens.

At the turn of the 20th century, we had more “real” capitalism with the social safety net. The result is that J.P. Morgan literally worked his starving employees to death, which was called “morganization.” Andrew Carnegie was able to get away with having union demonstrators shot to death by the Pinkerton police, and there certainly weren’t criminal charges filed against him. Rockefeller found his oil deposits had an explosive component called gasoline, and he had no idea what to do with it; so his company’s scientists created the internal combustion engine we still drive today.

From FDR’s reforms including 'social' security to the FDIC to protect our bank deposits, we enjoy the benefits of the socialist aspect, and it is not a dirty word here.

We used to not have the socialism of free public education for our children, and the addition vastly improved society including economic mobility. Today, one doesn't have to be a land owner enjoying hand-me-down wealth to have economic opportunities. Even law had to deal with this, with the passage of negligence laws, and preventing inter-generational wealth. (See the rule against perpetutities https://www.law.cornell.edu/wex/rule_against_perpetuities, the question you're always told to skip on the Bar exam.)

Unbridled capitalism without the social component is not a place most people would want to dwell in. On the other hand, the socialist component, yang to the ying of capitalism, and I am a capitalist myself, has been an enormous feature of civil society.

In short, if you like the life that you have, and you live in the democracies, you live in and enjoy socialism as much as capitalism.

As someone older than I guess the average age of most hackers, the fact that these techy folks have these views, question whether we should even have billionaires, and 'socialism' is not a dirty word for them, makes me think makes we will have a brighter future.

whb07 5 years ago |

Ask yourself why most of the world is poor and bad at creating things, and what that correlation is to where the billionaires live.

What’s with the anti-capitalism and socialist mentality of techy people? In theory this board is generally “smarter” and yet they lack original thinking and common sense.

advocateone 5 years ago | |

Respectfully, I have the opposite view and left my comment at the top.