The Billionaire Puzzles

Some questions about concentrated wealth

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In this week’s Stack the Week, we looked at two numbers: nearly half of American households say their finances got worse over the past year, and the world’s billionaires now hold $20.1 trillion. The entry was long, so I promised I’d address some questions those two facts raise in a future post.

These questions are just some that came to mind. It’s not everything.

Can one person be too rich for democracy to work?

Democracy runs on a promise: everyone counts the same. One person, one vote. But a person with $200 billion doesn’t have one voice — he can buy a social media platform, fund a movement, bankroll every primary challenger in the country, and outspend a state government. At what point does one citizen become so large that everyone else’s citizenship shrinks? And can a country honestly call itself self-governing when a few thousand people can outbid the public on any question they care about? These are not academic questions. They can be asked of lawmakers at public events and on interview shows.

Who decides the future?

The biggest decisions about what the world will look like in thirty years — whether AI replaces your kid’s job, whether we go to Mars, what you’re allowed to say online — are being made by maybe a dozen people, none of whom you can vote out. Larry Ellison, Elon Musk, Rupert Murdoch, Sam Altman. We didn’t decide to give them that power. It came bundled with the money, like grapes and a half bottle of champagne with the honeymoon suite. Is there any amount of wealth that should come with that much say over everyone else’s life?

Is it still a country if the rich can leave it?

When a billionaire doesn’t like the taxes, he moves — his money moves faster. The rest of us are stuck with the schools, the roads, the consequences. What holds a country together when its richest members can opt out of it?

Does the ladder still reach?

The American deal was never “everyone ends up equal.” It was “everyone can climb.” But when the top pulls this far away, the rungs between the bottom and the top get longer than a human life. A kid born this year in the bottom half will likely never touch what a billionaire’s kid inherits at birth.

The Harvard economist Raj Chetty and his colleagues measured this. What fraction of American kids grow up to earn more than their parents did? For kids born in 1940, about 90 percent out-earned their parents. For kids born in the early 1980s, it’s roughly half. A coin flip. The American deal — you’ll do better than your folks — went from a near-certainty to 50/50 in one generation.

The cause wasn’t mainly slower growth. Chetty ran the counterfactual: spread the economy’s gains the way they were spread in the 1950s, and more than 70 percent of the decline disappears. The ladder didn’t break because the economy stopped growing. It broke because the growth went to the top.

When growth is concentrated, society loses what comes with the basic fact of more human participation: inventors and entrepreneurs who never get the chance because capital never reaches them, communities that lose the local businesses and tax revenue that fund everything else, and the political engagement that tends to follow when people feel they have a stake. Chetty’s research puts a face on the first loss. He and his colleagues identified what they call “lost Einsteins” — kids from lower-income families who showed every sign of becoming inventors and innovators, but never did, because they never got the exposure or the resources. The patents they didn’t file, the companies they didn’t start, the problems they didn’t solve: that’s not just their loss. It’s everyone’s.

There’s a pattern economists call the Great Gatsby curve: across countries, the more unequal the society, the more your adult income is predicted by your parents’. Inequality and stuck-ness travel together. America now has more of both than almost any rich country.

One qualification, because we get fussy about claim size around here. There are two ways to measure mobility, and they tell different stories.

The first is absolute mobility — whether your paycheck is bigger than your parents’ was. That one has fallen sharply, from 90 percent who do to only 50 percent who do. The second measurement is relative mobility — your odds of climbing from the bottom fifth of earners to the top fifth. That one hasn’t fallen much. It’s been lousy and stable for decades, around 8 percent.

Here’s why the second number matters even when the first is moving in your favor. Your position relative to everyone else — your rank in the distribution — determines what your life actually contains. Not in an envious sense, but in a concrete one. It determines whether you can afford the neighborhood with the good school, whether you can absorb a medical bill, whether you have the collateral to start a business, whether you can weather a layoff. Those things aren’t absolute. They’re priced relative to what everyone else has. When the top pulls away, the cost of a decent life in a decent place rises with it — even if your income rose too.

Relative mobility matters because it measures whether the society is actually open — whether effort and talent from anywhere in the distribution can reach the places where decisions get made. For decades, the answer has been: not really. So the precise claim isn’t “people can’t climb anymore.” It’s that the climb pays less than it used to, and the top has moved so far up that climbing no longer gets you anywhere near it. A kid can still beat her parents’ rank. She just can’t touch the people the economy is actually rewarding. The climb is real. The destination moved.

What do people do with despair?

There’s a practical consequence to half a country concluding the deal is dead. People who believe the game is rigged stop playing by its rules — not just the economic rules, but the civic ones. They stop voting, or they vote for whoever promises to burn it down. They stop trusting institutions, and start resenting them instead. They stop believing that the “American Dream” is a description of how the country works and start believing it’s a story told to make the losing feel voluntary.

The gap between what was promised and what arrived is legible. People can see it in the cost of rent, in the school their kid attends, in whether they can absorb a bad month. A country can survive unfairness. It has a harder time surviving the conclusion that the unfairness was the point.

Can the winners fix the game they won?

Any remedy — tax law, antitrust, campaign finance — has to pass through institutions the wealth has already captured. The people who’d write the rules take money from the people the rules would bind. So the deepest puzzle of all: how does a society reform a system using only the tools that system controls?

Every previous American generation that faced this question found an answer it didn’t expect to find — the trustbusters, the New Dealers, the postwar tax code that the people it taxed somehow tolerated. None of them found it by asking nicely. And none of them could have told you, beforehand, what would finally move the people who needed to be moved.

Who decides what the winners owe?

The question isn’t whether the winners feel generous. Most of them do, in their way. Carnegie built libraries. Gates wants to end malaria. Musk wants to save the species by moving it. These are not nothing. But they’re chosen by the people who won, aimed at problems they find interesting, accountable to no one. That’s philanthropy. It’s not a social contract.

The social contract version — taxation, regulation, antitrust — doesn’t ask the winners what they feel like giving. It tells them what they owe. Previous generations settled this not because the wealthy agreed but because the alternative was visible in the streets. The New Deal didn’t happen because FDR was persuasive. It happened because the people who might have burned things down were in food lines, shanty towns, and gathering in the square.

So the last question isn’t what obligation the winners have. It’s who gets to answer that question — the winners, the government, or everyone else.