With his net worth receiving a rocket-powered boost from the recent floatation on the stock market of his SpaceX venture, Elon Musk has become the world’s first trillionaire. In fact, he’s already hundreds of billions of dollars better off than when he recently became the sole member of the club, thanks to a significant surge in SpaceX’s share price in the aftermath of the public offering. But just how rich does this make him? And is it actually possible to even spend that much? Chris Smith put in a call to the economist and author, Vicky Pryce…
Chris – Vicky, how many noughts are there after a trillion? Because this is going to be a new word on some people.
Vicky -Twelve, I’m afraid. So, loads and loads and loads of zeros afterwards. And you need to just make sure that it is just twelve and not more because then, of course, it just makes the whole calculation a little bit more confusing because it all moves in threes normally. So, if you try and calculate a billion, that’s a thousand million. Then when you calculate what a trillion is, that’s another thousand billion. That’s basically where you end up.
Chris – It’s an unthinkable amount of money, isn’t it? I mean, if you were to put that in context, how does that compare economically with, say, a country?
Vicky -Well, I’m speaking to you actually from Greece. So, a trillion is something like three times, if not more, the size of Greece in terms of GDP. And of course, for everyone who watched England versus Croatia and was so pleased about England winning, of course, Croatia is even smaller than Greece. And it’s something like four times a trillion of the country’s GDP, of Croatia’s GDP. So, it is huge.
Chris – And is the UK, our national debt, something like three trillion, isn’t it? So, Elon Musk could basically pay off a third of our mortgage.
Vicky -Well, he can do all sorts of wonderful things. He can pay all these things that we want, defence or welfare and so on, and not worry about it at all. The only thing, of course, to bear in mind is that he doesn’t actually necessarily have this money to hand. I mean, he’s rich because a lot of the shares that he owns in his company are valued at a certain amount. And therefore, it’s his wealth that’s there. It’s not that he gets that money every day, if you calculate what it would mean per month, that he can then use for other things. But of course, he can use that value of his company to borrow more money and then use that as income on which he pays no interest, if that is what he does, and then use that indeed to pay back our national debt. That would be nice.
Chris – Yes, indeed, because you can leverage assets to raise money against them. And you’ve effectively realised some real hard cash. But because you’ve made no sale to get that capital gain, I suppose there’s no tax in that, is there?
Vicky – Absolutely, there is no tax. And quite a lot of suggestions that are made to tackle the fact that we’ve had such a big increase in the number of billionaires before you get to the trillionaires, since we’ve only got one for the moment, has been this concern that the tax that they’re paying is not sufficient to represent, if you like, the incomes that they can get as a result of that wealth. And that’s one of those sorts of bone of contention, if you like, are those billionaires contributing sufficiently to the economy? And does it just lead to huge inequality?
Chris – Because this is something really the tax system isn’t set up to handle, is it? We’re into this regime now where people basically realise money by borrowing it against something tangible that’s grown in value for various reasons. And in this case, a company has grown in value. Elon Musk owns that and borrows against it. There are many people in this situation where they’ve got money that falls outside the framework of what we know how to tax.
Vicky – It does. But of course, whoever lends to them has to take into account that the value of the shares may indeed fall quite significantly. So, Elon Musk may not remain a trillionaire for very long, but on the other hand, he might become a whatever, a multi-trillionaire at some point if things go well. So, the real issue about being wealthy in terms of stocks and shares that you own or a percentage of a company, which is in fact what’s going on right now with all these tech bosses, is that it could all collapse.
Chris – So what sorts of conversations are economists and policymakers having around how we plan around that? Because I presume Elon Musk might be the first, but he’s certainly not going to be the last trillionaire.
Vicky – I’d just go back to what happened with the oil sector all those years ago when, of course, there was concentration of oil production in the US in one company, and the US government split them up into seven in order to get more competition going. And that’s the sort of thing which some people are saying we should do here as well, to stop the possibility of some of those sectors becoming oligopolies or even monopolies and really sort of reduce quite significantly the power of one particular company and even one particular individual if that is possible.
Chris – But you can’t split Elon Musk seven ways. Perish the thought.
Vicky – Well, he seems to split himself seven ways. I mean, SpaceX has all sorts of other interests in it that rather than just space, as it says, mostly on the tin. And of course, he’s very involved or was involved in politics and other stuff. So, there is a concern that at a certain wealth level, you can also influence quite significantly what happens politically, domestically and internationally. And you can move things in your favour. Because of that power. And that’s the concern. So, you can split the companies up. You could, I suppose. But also, I think it’s interesting to remember that going back to the valuations we were talking about before and whether this trillion will still be trillions in a little while, that some of the firms that have made their part owners so wealthy haven’t really been making any money yet. And that’s what I think all of us whose pensions depend on proper investment and doing the right thing, if you like, for these people who are getting old and will need some guarantee that they will be able to survive reasonably well in the future may be in for a shock at some point.
Chris – What could you actually do with a trillion quid, though? If I started, how long would it take me to spend it? What would have to be my spend profile in order to get through that in a human lifetime? Is it even possible?
Vicky – It’s been calculated because people rather like that question and like to find answers to that. You could spend one million a day if you wanted just like that. I mean, you know, buy a few football clubs for anyone who’s interested in that after a few days. Well, you may need to have a billion perhaps to do that. But, you know, it mounts up. But if you spend one million a day, it takes you 2740 years to spend your trillion.