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How much is a billion dollars?

Warren Buffet’s recent challenge to billionaires and other Super Rich to pay their fair share of the tax burden got me thinking.  How much is a billion dollars?

I know, from simple math, that if I made $50,000 per year, a bit more than the average annual salary, then it would take me exactly 20,000 years to make a billion dollars.  I’m in very good health, but I’m not likely to live that long, I’m afraid.  Since the 90th percentile household in the US makes a bit more than $75,000 per year, so at that rate, the household that makes more than 90% of all families in the US would take about 13,000 years to make a cool billion. 

Only 2% of all households in the US earn more than $250,000 per year.  The family that makes more than 98% of all families in the US will only take 4,000 years to get to a billion dollars. 

Of course, this is all hypothetical.  It assumes that the people and families pay no taxes.  And, it assumes that they don’t make any investments, which can, of course, increase one’s earnings, particularly over a lifetime.

So I thought it would be interesting to look at some real figures.  if you were a big-shot CEO in America, you might earn millions of dollars per year.  That’s not chump change, and it’s not even counting other compensation, including share options.

The Top Earning CEOs:

  • Ray Irani, Occidental Petroleum: $52 million
  • Robert Iger, Disney: $21 million
  • Samuel Palmisano, IBM: $20 million
  • William Weldon, Johnson & Johnson: $20 million
  • Jay Fishman, Travelers: $20 million

So Mr Irani would get to a billion dollars in a little more than 19 years, while the others will take near 50.  Well within a lifetime for some of these gentlemen. 

But there is another group of high earners that makes these guys look like paupers.  Its the Hedge Fund Managers.  What is a hedge fund?  Google describes it as:

A limited partnership of investors that uses high risk methods, such as investing with borrowed money, in hopes of realizing large capital gains

These guys pool money from a bunch of rich guys and companies “hedging” their bets on the economy, and make huge risky investments.  These investments have been accused of many things, including destroying weaker currencies and nations.  Oh well, it’s all in the interest of money, right?

So how much money do the top hedge fund managers make?  If you thought, “At least a billion dollars,” you win the jackpot!

The Top Earning Hedge Fund Managers:

  • David Tepper, Appaloosa Management: $4 billion
  • George Soros, Soros Fund Management: $3.3 billion
  • James Simons, Renaissance Technologies: $2.5 billion
  • John Paulson, Paulson & Company: $2.3 billion
  • Steve Cohen, SAC Capital Advisors: $1.3 billion

So, if you’re like me, neither a hedge fund manager or a top CEO, and you earn less than what 98% of all Americans earn, then here is another way to look at this:

Billion_phd

Some very good news: If you and your family of 4 are all doctors, and you earn around the average income of all doctors in the United States, then you may, in the next 73 years earn a billion dollars! And you’d be in pretty select company – less than 1% of all households make more than you!

The shares of public companies in one state alone have taken a tumble of more than one billion dollars 3 days so far in August 2011.  That state: Iowa.  Staggering.  Who continues to reap huge profits during financial havoc?  You probably won another jackpot…

So, who deserves a billion dollars a year?…

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