MILLIONAIRES
Statistically speaking, being a millionaire really isn’t all that special nowadays. In fact, having a million dollar net worth somehow doesn’t even get you into the top 10% of households within America and that was as of 2020.
Stocks have gone insane since then, and given that the wealthiest 10% of Americans own 89% of the market, they made a killing.
So, being a millionaire may only put you within the top 20% of Americans. In other words, nearly ⅕ Americans are from a million dollar household. So, join me as we take a look at the history of being a milllioniare and why modern day millionaires just don’t feel the same.
THE BIRTH OF MILLIONAIRES
Being a millionaire probably seems The Birth Of Millionaires like a super American capitalist ideology but the term dates back to the early 1700s to France though it did involve America. France was in a pretty sticky financial situation at the time as the probability of bankruptcy was becoming larger and larger with each passing day.
Instead of just cutting back on spending though, the Duke of Orleans decided that it would be a great idea to embrace a more modern solution: aka taking on a bunch of debt. Essentially, they would open a sort of national bank and transfer all of the country’s debt to the bank. And to pay back this debt, France was going to open up the Mississippi Valley for trade and mining.
On paper, this was a solid plan as the Mississippi Valley was not only in a prime location but it was apparently mineral rich. Not wanting to miss out, the French would begin buying shares of the Mississippi Company like there was no tomorrow, sending the stock soaring from 500 livres to 18,000 livres. As such, many of these investors would become extremely rich on paper, leading to the coining of the term "millionaire" in reference to people having millions of livres.
Unfortunately, though, this high didn’t last that long as the Mississippi Company’s profits never materialized and the stock would collapse soon after. Since then, we saw some references to the world millionaire here and there from people like Thomas Jefferson but the modern capitalist millionaire didn’t pop up till the late 1800s during the gilded age. The gilded age was one of the most prosperous times in US history, at least for the rich.
In fact, the rich were wealthier than ever, far wealthier than even the top billionaires today. These industrialists owned massive oil companies, steel companies, banks, and automotive companies. And these businesses were so dominant that they often controlled over 90% of their respective industries.
The owners of these mega monopolies were referred to as millionaires but they weren’t really millionaires. They weren’t really even billionaires. Their wealth was best described in the trillions. They controlled several percentage points of the entire American GDP, which translates to each of them boasting net worths of a quarter trillion or a half a trillion.
So, originally, the term millionaire wasn’t used to describe people with a million dollars per se. Rather, it was used to describe the Elon Musks and Jeff Bezos of the world. But the significance of the world millionaire has only gone downhill since then. It’s easy to just point at inflation and say that that’s what devalued millionaires, but that’s not really the case. A million 1880 dollars is only worth $30 million today, not hundreds of billions.
So, the culprit isn’t inflation. Rather, the real culprit is economic growth. Back in the late 1800s, the US didn’t measure GDP but it’s estimated to be somewhere between $10 and $20 billion. Today, American GDP stands at $26.5 trillion or 1000 to 2000 times more. So, really, whenever you see the word millionaire back in the late 1800s and early 1900s, you can just replace it with the world billionaire because that’s really what being a millionaire originally was.
THE GOLDEN PERIOD
Clearly, becoming a millionaire was completely The Golden Period was unreasonable for the average person during the gilded age and this only became worse during the great depression but things would bounce back stronger than anyone thought possible after World War 2. The 1960s brought with it likely the strongest economic period in US history from the average person’s perspective.
Unemployment was consistently in the 3 to 5% range and this is when the idea of the American dream really started to flourish. People could come to America, start a business, and become a millionaire not by the age of 25 or something but maybe throughout an entire lifetime. This was also likely the best time to aim to become a millionaire.
It wasn’t super out there like trying to become a billionaire or something. But it also wasn’t super common like the average price of a Californian house nowadays. It was akin to trying to make around $10 million today which sounds about right.
It's a hard and ambitious goal for sure, but it's also not too out there. But this golden age of millionaires didn’t last forever. In fact, it didn’t even last 10 years as the 1970s brought with it an extraordinary amount of pain.
Right at the beginning of the decade, President Richard Nixon would put an end to the Bretton Woods System aka the Gold Standard. This meant that the US dollar would no longer be backed by gold, which led to much of the general public losing trust in the dollar. And as trust plummeted, inflation skyrocketed and this was much worse than what we saw over the past few years.
Back in the 1970s, inflation would peak above 10% on two separate occasions. To make things worse, the Middle Eastern Countries would ban together and launch an oil strike against America leading to one of the worst energy crises of all time. To put things in perspective, within just these 10 years, the value of the dollar would over halve while the median price of a home nearly tripled. Things were getting pretty bad and Americans were in desperate need of a change: enter Ronald Reagan.
The landmark of Reagan’s presidency was no doubt Reagonomics. Now, you can get into weeds of all of the specifics and intracises but in a broad sense, Reagonomics was pretty simple. Essentially, the idea was to make it easier for rich people to grow their wealth by cutting taxes and decreasing regulation. As the rich got richer, some of their wealth should naturally trickle down to people of all classes or at least that was the theory. In practice, this turned out to be completely false.
On one hand, this definitely reignited the American dream. It’s obviously a lot easier to make a million dollars when you have to pay less in taxes and deal with less regulation. So, the rich did indeed get richer pulling along the American economy with them.
The problem, though, was that not much wealth made its way to the average American as the rich naturally just tended to keep the extra money they made. If a business made an extra $100 in profit, $90 would just go straight to the owner and maybe $10 would make it’s way back to the people.
Combine this with the fact that Reagan had to cut down on a bunch of social programs to make this work and suddenly the average person was worse off than before. But there was a select group of average people that were doing better than ever before.
TECH MILLIONAIRES
It may seem like tech bros making Tech Millionaires millions is a new phenomenon thanks to companies like Google, Facebook, and Apple. But, this trend can be traced back to the 1990s. Take Dell for example. Following Dell’s IPO in 1988, a whopping 2,700 millionaires would be minted over the next 20 years.
In fact, Dell millionaires were so common that people just referred to them as dellionaires and this marked the first step of the normalization of millionaires. While 2,700 millionaires was definitely a massive amount for a single company back in the 90s and 2000s, compared to the overall population, it was still an extremely small amount. But, this was just the beginning.
Keep in mind, many of the tech companies that dominate the Fortune 500 today were yet to even be created. Over the next 20 years, these companies would grow to unimaginable scales, reaching hundreds of billions if not trillions in market cap.
I know we talk about such numbers all the time, but let’s take a second to recognize just how massive a trillion dollars is. A trillion dollars is literally a million millions. In other words, a trillion dollar company can make a million people millionaires.
Apple, with its $3 trillion market cap, can produce 3 million millionaires. Microsoft, 2.7 million millionaires. Google, 1.5 million millionaires, Amazon, 1.3 million millionaires. Nvidia, 1.1 million millionaires. And that’s just the top 5 companies.
Of course, none of these companies have actually created a million millionaires yet, but what they have done is create hundreds of thousands of employee and investor millionaires each.
Think about this. 8 out of the top 10 richest people in the world made all of their money in tech. At this point, you could even classify Warren Buffett as a tech billionaire given that he owns a $150 billion worth of Apple stock. And I imagine that this is the same case with most millionaires as well.
The US currently boasts a total of 22 million millionaires, most of whom made their money in tech and live in tech cities like San Francisco, Seattle, and Austin. In San Francisco, for example, you need to almost be a multi millionaire to even feel financially comfortable. And that’s not my opinion. Charles Schwab conducted a full-on study on this.
They found that to be financially comfortable in San Francisco, you need a net worth of $1.7 million. To be considered wealthy, you need a net worth of $4.7 million. So, our friend from the beginning really wasn’t exaggerating when he said that being a multi millionaire very much felt like being in the middle class atleast in a Californian tech city. But really, it’s only a matter of time until it becomes the same case for the rest of America thanks to inflation, economic growth, and tech’s increasing omnipresense.
What started off as a way to describe the richest people on the planet has since fallen to be a generic term to describe the upper middle class atleast within America and other western countries. Of course, a million dollars is still an extraordinary amount of money outside these countries. But, that’s why millionaires just don’t feel like millionaires anymore.
