Some people are really, really rich:
Take Oracle’s founder, Lawrence J. Ellison. Mr. Ellison’s net worth last year was around $16 billion. And it will probably be much bigger when the list comes out in a few weeks. With $16 billion and a 10 percent rate of return, Mr. Ellison would need to spend more than $30 million a week simply to keep from accumulating more money than he already has, to say nothing of trying to spend down the $16 billion itself.
He spent something like $100 million on his Japanese-style mansion in Woodside, Calif., making it among the more expensive private residences ever built. But that is only about three weeks worth of the interest he earns on his wealth. And a house doesn’t actually spend down his net worth because it is an asset that can be resold. At least part of the $100 million is just a different way of saving.
Mr. Ellison would have to spend that $30 million a week — $183,000 an hour — on things that can’t be resold, like parties or meals, just to avoid increasing his wealth.
Obviously, I can’t begin to comprehend that kind of wealth. But Austin Goolsbee, in the Times, goes on to wonder why the super-rich don’t give away more of their money, like Buffett. After all, there is no rational reason to have billions and billions of dollars. Nobody can spend that much money, and neither can your kids.
Goolsbee concludes that the answer is social status:
Perhaps they [the super-rich] get something different from having money — clout, power, the ability to dominate an industry. Or perhaps these are just competitive people who care about their position compared with other people on the list.
They accumulate more so they can lord it over the other families who have less — a bit like having enough nuclear weapons to blow up the world several times but making more to stay ahead of the other guy.
I’m sure that explanation is partially correct, although Buffett and Gates have gotten more “social-status” points for giving away their money than your average billionaire has gotten for being number 287 on the Forbes 400 list.
I think the simplest answer is that making money feels good. Economists assume that money is just a proxy for future utility, a fungible scrap of paper that we use to purchase pleasurable things. But money itself doesn’t, or shouldn’t, give us pleasure. The dopaminergic jolt of happiness comes from spending, not earning.
But money does make us happy. A dollar, or several billion dollars, is its own reward. That, at least, was the conclusion of a Neuron paper a few years back by Hans Breiter. He had people play simple gambles for cash inside an fMRI machine. If they won the gamble, they earned a few dollars. To Breiter’s surprise, he found that making money activated the same set of dopamine-rich brain regions as cocaine and other addictive drugs.* That’s why the filthy rich don’t give away more of the money that they can’t possibly spend: seeing all those zeroes in their bank account just feels too good.
*The good news is that giving away money is also rewarding. As Thoreau put it, “Goodness is the only investment that never fails.”