How to spend $30 million a week

That's the challenge presented to Oracle founder and occasional Malibu resident Larry Ellison. You see $30 million is what Ellison would have to spend each week in order to keep from accumulating more money than he already has. (Austan Goolsbee, a professor of economics at the University of Chicago Graduate School of Business, arrives at that number in a NYT essay by assuming Ellison's net worth is $16 billion and his rate of return is 10 percent. The richer you are, the more opportunities you have for high returns. ) So how exactly does he do it? Well, he spent around $100 million on a mansion in Woodside, but that's only a little over three weeks worth of interest - and besides, it's not really spending down his net worth because the house is an asset that will be resold one day.

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. While somebody might be able to spend like that — Paris Hilton, maybe — it certainly wouldn’t be easy, and it can’t explain why the super-rich accumulate.

That's one of the points of Goolsbee's piece - that one of the reasons the very, very rich keep accumulating their wealth is because it literally grows faster than they can come up with ways to spend it. The more charitable - and efficient - alternative is to just give it all away, as Warren Buffett plans to do. The problem with that idea is, well, who in their right mind would give away all those billions?

If it isn’t to spend, to give to their children, or to give to charity, then why do the rich save so much? [Johns Hopkins economist Christopher] Carroll says maybe they love money, not for what it can buy but just for its own sake. Perhaps they 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.



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Mark Lacter
Mark Lacter created the LA Biz Observed blog in 2006. He posted until the day before his death on Nov. 13, 2013.
 
Mark Lacter, business writer and editor was 59
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