Monthly Archives: May 2021

Absolute wealth, relative wealth, taxes, and staying rich

how to get rich and stay rich

Above a certain amount of assets, wealth is extremely relative.

The goods that most people consume have fairly fixed prices. Some go up 1-10% per year. Some go down 1-10% per year. The prices of the goods and the basket of those goods are fairly predictable.

For most people, wealth is absolute. It is not really about keeping up with the Joneses … it is about keeping your head above water and doing everything possible for your family to have a normal life.

But once your assets cross a certain threshold, almost all your spending is relative to the Joneses. The amount of absolute wealth no longer matters — what matters is the amount of wealth relative to your peers.

Most goods that cater to the wealthy (high-end real estate, charitable giving naming rights, art, buying 10% of a YC company, etc.) are extremely relative. And most really wealthy people are trying to protect their status — their biggest worry is a new class of people getting richer than them fast.

For the super wealthy, the easiest way for them to protect their wealth is to raise taxes. The higher the taxes, the easier it is for wealthy people to maintain their status and to stop pesky outsiders from usurping them.

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