On having a billion dollars

I can’t tell you how many times I’ve heard a friend say “I wish I had a billion dollars” and thought to myself “That’s a terrible idea.” Let me explain.

I’m not proposing that wealth leads to unhappiness, but rather that extreme wealth (like a billion dollars) is suboptimal compared to wealth in the more ‘modest’ range of say, tens of millions. The reason is that extreme wealth brings with it a level of responsibility that most people wouldn’t enjoy, while not affording any better lifestyle than more modest wealth.

Think about how much a billion dollars is. Invested halfway decently, it will generate $50M/year in cash flow (5% of principal) which is about $137,000 every day. There aren’t a lot of ways to consume $137,000 a day without being an asshole. You could throw lavish parties, buy jets and yachts, etc. but that would only serve to call attention to your wealth and attract all the wrong kinds of people. So I think pure consumption is out of the question.

What about saving or investing it? Remember that money is like energy — it can’t be created or destroyed, only concentrated, dissipated or transformed. So if you save it, it’s still there, and when you die it has to go somewhere. If you invest it then it compounds, which only amplifies these various issues.

What about leaving it all to your kids? At best this is passing the buck to the next generation (pun intended) and at worst, you’d be preventing them from developing the skills and passions necessary for a fulfilling life. I think it makes sense to leave enough to your kids for some financial security, but not enough to turn them into what’s commonly envisioned as a ‘trust fund baby’.

How about just giving it all away? I think is the only rational option and many prominent billionaires agree. This still takes work though, and it’s not the kind of work that can simply be delegated, because one’s philanthropy must reflect their values. Philanthropy provides a wonderful sense of impact and fulfillment, but this isn’t what most people have in mind when they say “I wish I had a billion dollars”

I’ve had the privilege of meeting and sometimes working with several billionaires over the years, and the impression I get from them is a sense of great responsibility, not celebration. A billion dollars is a very sobering thing, and often causes more problems than it solves, so be careful what you wish for.