Mobs, Messiahs, and Markets

How Much Is Rich?

There is another economic principle worth thinking about when it comes to money: the law of marginal utility. Put simply, an extra dollar of income means less to Bill Gates than it does to you. The more you have, the less more is worth to you. Additions to your wealth won't be as valuable, dollar for dollar, as what you already have. Logically, this suggests that most people would rather not lose a dollar than make one, since incremental income is worth less than existing wealth. It also suggests that if the odds of any gamble are only 50/50, no reasonable investor would take it.

Being rich is easier than you think. You just have to get away from Miami or Los Angeles. If you were to live in India or Burkina Faso, even an income of $5,000 a year would make you feel rich. In fact, a new study by the UN says that a net wealth of $2,200 will put you in the richer half of the world's people. If you can scrape together $61,000 in net assets, you are in the top 10 percent. What does it take to be in the top 1 percent? Just $500,000.³

The study found that the three richest people in the world—Bill Gates, Warren Buffett, and Carlos Slim Helú, the Mexican who owns his country's telephone system—have a combined net worth higher than the total assets of the 48 poorest countries on earth.

On the other hand, London publisher Felix Dennis recently estimated what he thought it took in total assets to be rich today:

Translating his terms into dollars, $2 million to $4 million ...