Net worth is the barometer by which the wealthy measure their financial success. They do not focus upon incomes, especially considering they have their compensation paid in ways other than straight salary.
Compare that with the average person who typically asks someone "how much money do you make"?
To the wealthy, this is not the priority. Since they have assets, it is the overall growth in their holdings that really matter. In other words, they are not dependent upon just on path of income.
That said, there are drawbacks to utilizing net worth as a barometer.
Of late, we hear about Elon Musk racing up the billionaires list. Tesla stock is on such a run that he passed Jeff Bezos as richest man in the world. Some are calling him the first "Trillion Dollar Man". Whether that is true, we will have to wait and see.
Here is the latest top 10 list of Richest People in the world as put up by Bloomberg.
As we can see, Elon jumped way a head of Bezos. Already this year, he "made" $39 billion, and it is only the 8th of January. That is a lot of dough for one person.
However, here is where it gets misleading.
What do you think would happen if Musk tried to claim his money? If Musk wasnt to sell, say 50% of his Tesla stock, do you think he would get near what it is worth right now?
The answer is obviously no. We all know that if Musk started to sell large quantities of Tesla, he would crash the stock price. It was crater before lunch as they say.
Jeff Bezos finds himself in a similar situation. While having a rough year so far, having lost almost $4 billion, Bezos has the majority of his wealth in Amazon. The rest of this list has some familiar names that are tied to companies such as Facebook, Microsoft, Google, and Oracle. Each individual has a significant holding on those companies.
Even Warren Buffett would crush Berkshire Hathaway's stock if he decided to sell a majority of his holding. Even thought he is listed as "diversified" his wealth is mostly in that one asset. Good thing he pledged to give most of it away.
This is something to be mindful of in the cryptocurrency world. With new projects starting, it is easy to amass a powerful position against the whole. However, if we do that, then we become like most of the men on this list, albeit with a much smaller net worth.
Having an overwhelming majority of the stake makes it very difficult to sell, especially if one is heavily involved in the project. Influencers can face a challenge when trying to get out of a position if they have too much ownership.
Certainly, for the world's top 10 billionaires, even at liquidation prices, they would be well off financially. Just their holdings in real estate alone would provide more resources than they could likely spend in a lifetime.
The same is not true for us. Being able to exit a position is often as important as the asset rising. After all, what good is the value if one cannot turn it into capital.
So, while on the screen Elon Musk has a net worth of $209 billion, it would be a significantly lower number if he tried to liquidate his position. Even doing it slowly would set off a wave of selling in Tesla.
I guess that is the price he has to pay for success.
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A video summery for anyone interested:
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Yeah, this kind of rankings is a little bit tricky. I'm sure there are more rich people out there that we don't know yet because their fortune is not public.
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Damn right, and not linked to a unique huge position like the ones there.
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Very true . In crypto world it is necessary to have balance , take for example LeoFinance itself , if you sell all the LEO you have other whales will most probably buy it but if you were the only whale around here then it would be a big problem .
When I was working as a moderator for a gambling site we had one huge gambler who was betting 1-2 BTC per bet but we didn't have a anyone to match his bets , so the site suffered some losses till we balanced by bringing another huge player . Now the site was getting its "edge" and the gamblers were loosing sometimes and winning sometimes but the site was safe . I hope you got what I meant.
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Currently my net worth in Hive ( with both accounts ) is laughable and on top of that it would take a long time to liquidate so I have both drawbacks instead of one :P
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can happen the same if our biggest whale on leo starts selling his holding, right? like theres not enough liquidity to sell all his participation at this actual rate. But would be cool to see if theres enough investors interested and they may take all the sellings xD like what happened with wleo hacking few months ago, a lot of people bought it really cheap and the price bounced.
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It would be hard at this point. The WLEO pool does add a great deal of liquidity but to put it in perspective, how long would it take @onealfa to sell all his LEO? What would it do to the market? Would other look at it like "he knows something I dont know".
Trying to sell $500K in LEO, not easy. Selling $500K in Ethereum, no problem.
It all comes down to liquidity.
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This is a huge factor why pros can't trade tiny alt coins. The trading is actually easier for beginners than for proffesionals as they need to invest at least a couple of millions in something.
If they would invest in leo the price would fly up with 1000%+ so they are limited to bigger companies with more competitive investors
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The little guy does have one advantage over the big funds: agility.
That means the market is much larger in terms of potential opportunities. Grayscale could never invest in Hive or Leo, not enough liquidity.
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exactly
@taskmaster4450le, There is a mountain sized bridge between Language Of Wealth and Language Of Income.
Who works for their wealth receives "INCOME". Stay blessed.
Normally we create a investment and growth portfolio based on the future cash flows or expected return and not consider the end effect when finally trying to sell off the portfolio and claim the benefits. I personally never considered the end effect so I found this article as quiet an eye opener.
I presume it is better to hold more liquid assets that don’t cause a shift in the markets like cash, but the Return on Investment would be compatibility less. Guess it’s all about the balance and trade off.
It all depends how much you hold. If you have a few shares, then no problem.
If you are holding 1 million shares of AAPL like some funds, then it is hard to get out of that position. That is why they have to sell slowly over time.
A test of that is try to go into the penny stock world and load up on a company. It might take one a year to sell the entire lot.
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This is Berkshire’s problem if they buy small or medium cap companies they become the market and can’t get out of the position. When you h e that much money you need to invest huge sums to move the needle so they stick to very liquid and large assets.
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Meaning liquidity becomes indirectly proportional to quantity when large amount of money are involved in any particular investment.
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That does make sense.
Thank you.
I really enjoyed reading this article.
Cheers.
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Yes that is a drawback but that is also the reason why Bezos was selling off as much as he could without affecting the stock price during 2020. I probably expect Elon to start doing so as well when he believes he can. I like Elon because he is the only one who will complain about the price being too high.
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Actually Bezos sells part of his Amazon holdings each month to fund Blue Origin. A lot of that comes out of his pocket.
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It just occurred to me from looking at your list that I've been in the same room with 4 of these guys and I'm still broke. I've never thought about their wealth before. Seems like some of it should have rubbed off though lol.
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Maybe you should have asked some different questions. LOL
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Well two were social and 2 were meetings about something else but now that I moved to florida I doubt the only one I'll see again is Elon Musk and he's a total dick. I don't think I'll be over at Facebook or Google much anymore. But I would love more facetime with Zuckerberg. He runs a really interesting ship. Lots of interesting things to do and see on that campus.
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BEER.Sadly this can be the richest man in the world But as you say if you start selling all the shares of tesla that occupy 20% first the company would go bankrupt and lose its value which would leave elon musk without 50% of its fortune and as I raise another part of the fortune depends on companies that are also associated with tesla would also be zero.
The same thing happens with a whale in hide when Leo can have more than three or four million Leo power, but if they start to liquidate it to sell it the price of Leo hiking a lot and it would be a big disaster is the same price that have to pay the whales and users who have a lot of Leo power.
With this situation I see how happy I am without having much voting power because I do liquid My voting power does not affect anyone and the system keeps working.
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