The Wealth of Bill Gates and Warren Buffet – 2010

Bill Gates and Warren Buffet are two of the richest men in the world. Does the concept of scarcity apply to them?

Wealth of Bill Gates

In 2011, the wealth of Bill Gates is estimated at $56 billion. This comes from a variety of sources, but his 6% share in Microsoft provides the bulk of his wealth.

Wealth of Warren Buffet

The wealth of Warren Buffet is estimated at $47 billion in 2011. In 2009, after donating billions to charity, he was ranked as second richest person in the world.

 

I think that it is fair to say that Bill Gates receives money quicker than he can spend it. For many consumer goods, Gates is sufficiently rich to avoid having any feeling of scarcity. If we wants a bigger house, more cars, private aeroplanes, his own island he can buy them.

There is a theoretical point when he wouldn’t be able to afford to buy any more cars, but this number would be so high, that in practical terms it is meaningless. Using indifference analysis we could also assume that Bill Gates would be indifferent between having 2,000 cars and 3,000 cars. The marginal utility of owning an extra 1,000 cars is zero (unless you get joy from collecting cars or something). Therefore, in practical terms he can buy as many cars as he wants to maximise his own welfare.

By the way, it is interesting to note that Bill Gates, even when rich, used to travel second class as he didn’t think first class was ‘worth the money’ This is an interesting insight into the mind of the world’s richest person.

Bill Gates was said to be unexpectedly spendthrift, e.g. he didn’t like paying a car parking charge so used to walk. However, his wife has been encouraging him to spend his money.

Also, Bill Gates has pledged his fortune will be given to charity rather than his children. Giving his fortune to charity, suggests he has more than he personally needs. (Daily Mail link)

Scarcity and Bill Gates and Warren Buffet

These are examples of how scarcity could come into play.

  • Supposing someone kidnapped his wife and as a ransom they demanded 99.5% of his wealth in return for his wife. Would he pay it? He would soon be exposed to the issue of scarcity.
  • Time. We could argue time is an economic good, therefore, this does apply to Bill Gates. In fact his time has a higher opportunity cost. If working gives Bill Gates an hourly wage of $10 million per hour there is a high opportunity cost of leisure.
  • Charity. The Bill Gates charitable foundation gives money to worthy causes, there is always more his foundation could do.
  • Undermine an Economy. Maybe an international investor like Warren Buffet would like the dollar to appreciate by 10% (for political reasons) he could spend all his wealth on the dollar, but, even this is unlikely to be sufficient to overcome the market forces bringing the dollar down. Warren Buffet’s wealth is vast, but, it is not unlimited. He would face the issue of scarcity.

8 thoughts on “The Wealth of Bill Gates and Warren Buffet – 2010”

  1. I knew, you want to spend all of your money by the perpose of human development.I only say you are great great and great.

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