The Recent Growth in the Average Worth of US Billionaires (09-13)

A Curious Limits to Growth Revealed Again

Average Net Worth, y/x [$, billions]

12 10 8 6 4 2 0 0

Asymptotic limit y/x = h = 9.98 billions per billionaire

y = 9.984x 2601.4 y/x = 9.98 2601.4/x r2 = 0.8265

100 200 300 400 500 600 700 800 900 1000

Number of billionaires, x
Figure 1: The nonlinear increase in the average net worth of US billionaires, from 2009-2013 (see the data compiled in Table 1), is plotted here and can be modeled using the rising hyperbola with the general equation y/x = A + (B/x). As the number of billionaires x increases, the average net worth, the ratio y/x (where y is the combined net worth of all the US billionaires in a given year) also increases. This hyperbolic curve is the simplest mathematical curve that can be used to describe all of the available data and is a consequence of the linear relation y = Ax + B that follows from the x-y graph. The numerical value of the
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constant A and B are deduced by first preparing a x-y graph of the combined net worth x versus number of billionaires y, see Figure 2.

Combined Net Worth, y [$, trillions]

3000 2500 2000 1500 1000 500 0 0 100 200 300 400 500 600

y = 9.984x 2601.4 y/x = 9.98 2601.4/x r2 = 0.8265

Number of billionaires, x
Figure 2: The nonlinear increase in the average net worth of US billionaires, from 2009-2013, following the hyperbolic law (see Figure 1), is a consequence of the remarkably linear relation revealed here between the combined net worth y of all US billionaires (in a given year) and the number of billionaires x counted for that year. Since this combined net worth data for the US is not readily available for the present author, only data for the immediate past five year period (2009-2013) is considered here. Recall also that after the financial crisis of 2008 (in the summer and early fall of 2008 just before the US Presidential election), the number of billionaires decreased worldwide (from 1125 in 2008 to 793 in 2009) and also in the US (from 469 in 2008 to 359 in 2009). The number of US billionaires in 2013, 442 according to the 2013 Forbes Billionaires List, is still less than the 2008 peak of 469, although the worldwide number (1426 in 2013) is greater than the 2008
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peak value. Hence, the focus is on the 2009-2013 data. The constants A and B in the linear relation y = Ax + B can be deduced using linear regression analysis (or the method of least squares, see references cited). This, in turn, implies that the hyperbolic law, y/x = A + (B/x). Since A = 9.984 > 0 and B = -2601.4 < 0, as the number of billionaires x increases, both the combined net worth and the average net worth increase.

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With the above brief summary of the key findings to be reported here, let us discus the data.

Table 1: Total and average net worth of US billionaires

Billionaires Combined Average net Comments Year N=x net worth, worth, U = UN/N (Source of data) y = UN = y/x (Billions) 2009 359 1056 2.94 44% of world, Ref. [1] 2010 403 1368 3.39 38% of world, Ref. [2] 2011 413 1300 3.15 UN given in Ref. [3-5] 2012 425 1785 4.2 U given in Ref. [6] 2013 442 1870 4.23 UN given in Ref. [7] Additionally, Bhuma Shrivastav, Ref. [8], has provided the multi-year data in her regional analysis of the net worth of billionaires from 2007 to 2011. The 2011 net worth is given as $1.3 trillion, and also as $1.5 trillion, by different sources cited at the end of this article. The combined net worth of all the billionaires in a country, UN, where subscript N denotes the number of billionaires, and their average net worth, U = UN/N, can be readily computed from the net worth data for the individual billionaires published in the annual Forbes billionaires list. For example, I was able to compute the average net worth of billionaires, for 2013, for several small countries, see Table 2, by sorting the 2013 billionaires list by country of citizenship and adding up the net worth of the relatively few billionaires (maximum 20 in the list below) for Israel, Sweden, Singapore,
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Malaysia, Spain, Mexico, and Chile. Israel, which ranks very high in the billionaires per capita was of prime interest. The data for these countries was then sorted, as indicated in Table 2, by the number of billionaires and their average net worth. Exactly, the same procedure could be used to determine the combined and average net worth for USA but would obviously much more cumbersome given that the US has 442 billionaires.

Table 2: The Combined and Average Net Worth of Billionaires in 2013 for several countries
Combined net Average net Country Billionaires, N worth, UN worth, U = UN/N ($, billions) ($, billions) New Zealand 3 9.15 3.05 Singapore 10 31.6 3.16 Chile 14 61.35 4.38 Spain 20 99.95 5.00 Average net worth is increasing with increasing billionaires N Malaysia 10 48.75 4.88 Sweden 14 88.3 5.19 Mexico 15 148.5 9.9 Average net worth is increasing with increasing billionaires N Israel 17 46.25 2.72 United States 442 ? ? Unfortunately, the country-by-country combined and average net worth of all the billionaires is NOT being reported, at this time, at least formally, by Forbes. Furthermore, if one wishes to investigate how the combined and average net worth has changed over the years, for different countries, there seems to be no easy method available at this time. Perhaps, such a country by country list could be compiled and made available for analysis in preparing the future Forbes lists. Thus, the data compiled in Table 1, the combined and the average net worth of US billionaires for the period 2009-2013, was obtained, after a considerable amount of effort (several hours of Google searches) from the various sources
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cited at the end of this article. The table can be constructed based on the comments made by the authors in various articles that I have cited here.

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Whats a billion? And whats a trillion?

Whats a billion? 1,000,000,000 One thousand million Whats a trillion? 1,000,000,000,000 One million million
If you spend $1000 a day, in a million days you will have spent $1 billion. Now, one year has an average of 365.25 days (including the leap years) and one million days is therefore equal to 2738 years. You live obviously not live long enough to spend $1 billion if you only spend a miserly $1000 a day. If you increase your spending to $10,000 a day, you will spend $1 billion in 273.8 years and if you spend $20,000 a day, you will spend $1 billion in about 137 years. The average life-expectancy is only about 70 to 80 years. Now, you can get an idea of the wealth of a billionaire. Or, 1000 people can live comfortably, spending about $20,000 a day and never have to work for a single day, if they had a combined total of $1 trillion. Or, look at it another way. The world population is now more than 7 billion and fast approaching 8 billion. If you want everyone on this planet to live comfortably like a billionaire (spending about $20,000 every day), even a million trillions is not enough money. That should tell you something about how much wealth there really is, even the trillions that we now associate with the worlds billionaires. In 2013, the worlds 1426 billionaires only had a combined net worth of $5.4 trillion. B. C. Forbes, the founder of Forbes magazine makes the following observation about John D Rockefellers (JDR) wealth, back in 1918. If all of Mr. Rockefellers wealth could be turned into cash, Forbes say, it would give every person in the USA $1 each. JDR was the richest man in America in 1918 and the first billionaire.

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Notice that, in general, as the number of billionaires N increases, their combined net worth, UN, increases and the average net worth, U = UN/N also increases. The subscript N used with the combined, or total, net worth is meant to highlight that this will depend on the number of billionaires N. The ten billionaires in Singapore (or Malaysia), have a greater combined net worth than the three billionaires of New Zealand. The 14 billionaires of Chile (or Sweden) have a higher net worth than the 10 billionaires of Singapore (or Malaysia) and the 20 billionaires of Spain have a higher net worth than the 14 billionaires of Chile (or Sweden). While the data in Table 2, for different countries, represents a snapshot at a fixed point in time (the year 2013) and the effect of increasing population (and hence the number of billionaires), we see the same general pattern with the US data, over a period of several years. The combined net worth in 2013, with 442 billionaires, is higher than the combined net worth in 2009, with 359 billionaires. The average net worth has also increased between 2009 and 2013. However, the nonlinear rise (following the hyperbolic law) in the average net worth also implies an asymptotic limiting value of about $10 billion. The present average net worth is $3.787 billion, still far removed from the asymptotic limit deduced here. However, it should also be noted that exactly similar conclusions were also reported earlier for the worldwide data, click here or see link given below. Other articles discussing my analysis of the 2013 Forbes Billionaires List and related data are listed separately for review by the interested reader. The significance of the asymptotic limiting value to the average net worth, about $10 billion, and its business and policy implications, must be investigated.

Growth of the Combined Net Worth of Billionaires from (2000-2013):

An interesting limits to growth revealed, Published March 15, 2013 http://www.scribd.com/doc/130517722/Growth-in-the-Combined-NetWorth-of-Billionaires-From-2000-2013-An-Interesting-Limit-to-Growthis-Revealed

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Related Articles on the Forbes Billionaires List

1. The Recent Growth in the Average Worth of US Billionaires (09-13) A Curious Limits to Growth Revealed Again, Published March 18, 2013 http://www.scribd.com/doc/131005255/The-Recent-Growth-in-theAverage-Worth-of-US-Billionaires-%E2%80%9909-%E2%80%9813-ACurious-Limits-to-Growth-Revealed-Again 2. Quantitative Comparison of the Billionaires in the Forbes Hall of Fame, Published March 17, 2013, http://www.scribd.com/doc/130826078/Quantitative-Comparison-of-theBillionaires-in-the-Forbes-Hall-of-Fame 3. Growth in the Combined Net Worth of Billionaires from 2000-2013: An Interesting Limits to Growth is Revealed, Published March 15, 2013, http://www.scribd.com/doc/130517722/Growth-in-the-Combined-Net-Worthof-Billionaires-From-2000-2013-An-Interesting-Limit-to-Growth-is-Revealed 4. Growth of Billionaires Worldwide and in the USA: Analysis of the number of billionaires data since 1982, Published March 14, 2013, http://www.scribd.com/doc/130377891/The-Growth-of-BillionairesWorldwide-and-in-USA-Analysis-of-the-data-since-1982 5. Countries with the most billionaires in the 2013 Forbes Billionaire List, Published March 9, 2013, http://www.scribd.com/doc/129406030/Countrieswith-Most-Billionaires-in-the-Forbes-2013-Billionaires-List 6. Average worth of the Top 10 Billionaires in a Country, Published Mar 11, 2013, http://www.scribd.com/doc/129863162/Average-Worth-of-the-Top-10Billionaires-in-a-Country 7. Per Capita Trends for Ultra High Net Worth Residents in US Cities, Published March 11, 2013, http://www.scribd.com/doc/129722844/Per-CapitaTrends-for-the-Ultra-High-Net-Worth-UHNW-Residents-in-US-Cities 8. Europe and Asia-Pacific billionaires in the Forbes 2013 list: Whats the difference? Published March 10, 2013 http://www.scribd.com/doc/129634796/Europe-and-Asia-Pacific-Billionairesin-the-2013-Forbes-List-What-s-the-difference 9. The Rate of Creation of Billionaires: Analysis of the Forbes 2013 Billionaire List, Published March 6, 2013,
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http://www.scribd.com/doc/128944910/The-Rate-of-Creation-ofBillionaires-Analysis-of-the-2013-Forbes-Billionaire-s-List 10. Billionaires and Calculus: Ratio versus Rate of Change Is Einsteins Work Function Observed In this Problem? Published March 5, 2013. http://www.scribd.com/doc/128610494/The-Forbes-Billionaires-andCalculus-Is-Einstein-s-Work-Function-Observed-Here 11. Billionaires and the Population Law: Analysis of the 2013 Forbes Billionaires List, to be published shortly.

Reference List
1. The Worlds Billionaires, March 11, 2009, by Luisa Kroll, Matthew Miller, and Tatiana Serafin, Data for 2009 deduced from worldwide worth, http://www.forbes.com/2009/03/11/worlds-richest-peoplebillionaires-2009-billionaires_land.html This year the world's billionaires have an average net worth of $3 billion, down 23% in 12 months. The world now has 793 billionaires, down from 1,125 a year ago. After slipping in recent years, the U.S. is regaining its dominance as a repository of wealth. Americans account for 44% of the money and 45% of the list's slots, up seven and three percentage points from last year, respectively. Provides information needed for 2009 values. 2. Bill Gates no longer worlds richest man, Forbes, by Matthew Miller and Luisa Kroll, March 10, 2010, http://www.forbes.com/2010/03/09/worlds-richest-people-slimgates-buffett-billionaires-2010-intro_2.html U.S. billionaires still dominate the ranks--but their grip is slipping. Americans account for 40% of the world's billionaires, down from 45% a year ago. The U.S. commands 38% of the collective $3.6 trillion net worth of the world's richest, down from 44% a year ago. Provides information needed for 2010 values. 3. Forbes Billionaires and the Global Economy, Tatiana Serafin, http://www.tatianaserafin.com/?p=660 The following data for USA.
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Total 2011 Billionaires Net Worth: $1.3 trillion GDP 2011 forecast (World Bank): $15.3 trillion 8% of countrys GDP Total 2011 Billionaires: 412 Total Population: 315 million

4. Interesting numbers from the Forbes rich list, March 10, 2011, http://english.sina.com/business/2011/0310/363591.html American billionaires net worth for 2011 and 2010. 5. Three Senators Call for Billionaire Estate Surtax, by Janet Novack, June 24, 2010, http://www.forbes.com/2010/06/24/billionaires-estate-tax-duncanwalton-personal-finance-senate-sanders-harkin-whitehouse.html "According to Forbes Magazine, there are only 403 billionaires in the U.S. with a collective net worth of $1.3 trillion. Clearly, the heirs to these multibillion fortunes should be paying a higher estate tax rate than others," Provides value of UN for 2011. 6. The Forbes 400: The Richest People in America, Forbes Staff, September 9, 2012, http://www.forbes.com/forbes-400/ The Faces Of Wealth in America Two-thirds of the wealthiest people in the U.S. added to their fortunes, boosting their average net worth by $400 million to a record $4.2 billion. Data for 2012. 7. Mapping the Wealth of the Worlds Billionaires, by Luisa Kroll, March 9, 2013, http://www.forbes.com/sites/luisakroll/2013/03/09/mapping-thewealth-of-the-worlds-billionaires/ over time the percentage of billionaires from the U.S. has been relatively constant hovering just under one third. Americans represented 31% of the list entrants in 1987 and today that figure is the same. They are worth a combined $1.87 trillion, representing just over one-third of total billionaire wealth in 2013; see also http://nolet1.nolet.com/node/7124216/articles Data for 2013. 8. Multi-year analysis of Regional Billionaires, Forbes, April 12, 2011, by Bhuma Shrivastav, Provides net worth breakdown by region (including USA) for the years 2007 to 2011. The net worth figures for USA are (in $B) http://www.forbes.com/sites/bhumashrivastava/2011/04/12/multi-yearanalysis-of-regional-billionaires/ Year 2007 2008 2009 2010 2011 1358.5 1610.9 1061.7 1349.3 1530.2 USA ($B)
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9.

Worlds Billionaire 2011: A Record Year in Numbers, Money and Impact, http://www.forbes.com/2011/03/08/world-billionaires2011-intro.html Confirms number of billionaires for US but no data on combined net worth the US billionaires. 10. Sam Zell, Ken Griffin and a lot Prtizkers on Forbes list, Crains Blogs, Shia
Kapos Takes Names, Sep 9, 2012, Forbes says the combined wealth of America's richest is $1.7 trillion, up from $1.5 trillion in 2011, partly because of the rising stock market; a rebound in real estate values, mainly in cities such as Los Angeles and New York; and rising values for artworks. The average net worth of a Forbes 400 member is a staggering $4.2 billion, up from $3.8 billion last year, and the highest in at least a decade, as two-thirds of the individuals added to their fortunes in the past year. Net worth increased for 241 members, and decreased for 66 members. Cost of admission to the 2012 list is $1.1 billion, up from $1.05 billion a year ago. Read more: http://www.chicagobusiness.com/article/20120919/BLOGS03/120919733/sam-zellken-griffin-and-a-lot-of-pritzkers-on-forbes-billionaire-list#ixzz2NrUrKtdk Stay on top of Chicago business with our free daily e-newsletters

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About the author V. Laxmanan, Sc. D.

The author obtained his Bachelors degree (B. E.) in Mechanical Engineering from the University of Poona and his Masters degree (M. E.), also in Mechanical Engineering, from the Indian Institute of Science, Bangalore, followed by a Masters (S. M.) and Doctoral (Sc. D.) degrees in Materials Engineering from the Massachusetts Institute of Technology, Cambridge, MA, USA. He then spent his entire professional career at leading US research institutions (MIT, Allied Chemical Corporate R & D, now part of Honeywell, NASA, Case Western Reserve University (CWRU), and General Motors Research and Development Center in Warren, MI). He holds four patents in materials processing, has co-authored two books and published several scientific papers in leading peer-reviewed international journals. His expertise includes developing simple mathematical models to explain the behavior of complex systems. While at NASA and CWRU, he was responsible for developing material processing experiments to be performed aboard the space shuttle and developed a simple mathematical model to explain the growth Christmas-tree, or snowflake, like structures (called dendrites) widely observed in many types of liquid-to-solid phase transformations (e.g., freezing of all commercial metals and alloys, freezing of water, and, yes, production of snowflakes!). This led to a simple model to explain the growth of dendritic structures in both the groundbased experiments and in the space shuttle experiments. More recently, he has been interested in the analysis of the large volumes of data from financial and economic systems and has developed what may be called the Quantum Business Model (QBM). This extends (to financial and economic systems) the mathematical arguments used by Max Planck to develop quantum physics using the analogy Energy = Money, i.e., energy in physics is like money in economics. Einstein applied Plancks ideas to describe the photoelectric effect (by treating light as being composed of particles called photons, each with the fixed quantum of energy conceived by Planck). The mathematical law deduced
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by Planck, referred to here as the generalized power-exponential law, might actually have many applications far beyond blackbody radiation studies where it was first conceived. Einsteins photoelectric law is a simple linear law and was deduced from Plancks non-linear law for describing blackbody radiation. It appears that financial and economic systems can be modeled using a similar approach. Finance, business, economics and management sciences now essentially seem to operate like astronomy and physics before the advent of Kepler and Newton. Finally, during my professional career, I also twice had the opportunity and great honor to make presentations to two Nobel laureates: first at NASA to Prof. Robert Schrieffer (1972 Physics Nobel Prize), who was the Chairman of the Schrieffer Committee appointed to review NASAs space flight experiments (following the loss of the space shuttle Challenger on January 28, 1986) and second at GM Research Labs to Prof. Robert Solow (1987 Nobel Prize in economics), who was Chairman of Corporate Research Review Committee, appointed by GM corporate management.

Cover page of AirTran 2000 Annual Report

Can you see that plane flying above the tall tree tops that make a nearly perfect circle? It requires a great deal of imagination to see and to photograph it.

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