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by kristjansson·5y ago·view on hn ↗
The conflation of change in mark-to-market net worth with income has got a whole lot to do with the constant breathless reporting of "Bezos/Gates/Buffet/... made/lost x BILLION dollars today" every time the market moves by more than a point.

Sure, I get they want to beat the drum on wealth inequality, and perhaps that's a drum worth beating. But its a disingenuous disservice to pretend that these people are sitting on a massive pile of 'hoarded' liquid cash that could be redistributed in a meaningful without incurring massive losses. Might as well pretend that we could seize and sell all of the latest $100bn shitcoin and get $100bn USD to distribute.

6 comments
I never followed this chain of logic. The whole point behind the stock market is to treat any commonly traded stock as a liquid asset. Why do you think that this fails with respect to Bezos and Gates?
Bill Gates started selling off his microsoft stake in the late 90s. It took him more than two decades to get from 49% ownership down to the 1.9% he has today. It's hard for figure heads to divest without crashing the stock because it carries substantial signal risk.

The stock market is only liquid at smaller scales, bigger transactions will have dramatic effects on the price.

You're assuming Gates was trying to divest from MSFT. There's no evidence he was in a hurry.

You are right that insiders selling can be a signal. That's why we have laws that govern their actions. But that's because it is assumed Gates knows more than the average MSFT investor.

Yes, if Bezos woke up tomorrow and wanted to crash AMZN by selling his shares, he could. But he routinely liquidates over a billion dollars worth a quarter.

No assumptions are needed. He created a public divestment plan and sold 20 million shares per quarter since. While it’s normal for insiders to declare trades well in advance doing so decades prior is a bit notable. He was pretty upfront about wanting to diversify after Ballmer took over.
Sorry, yes he wanted to diversify as he was no longer in charge. I meant to write something about assuming he cared about diversifying quickly (lost faith in MSFT) as opposed to so he could reduce his risk and think less about his asset distribution.
By definition a stock is not a liquid asset. It needs to be sold first. In order to be sold, you need a buyer. You don't always have a buyer.
> By definition a stock is not a liquid asset.

"By definition"? Which definition are you using?

Liquidity exists on a spectrum and is not binary:

> In business, economics or investment, market liquidity is a market's feature whereby an individual or firm can quickly purchase or sell an asset without causing a drastic change in the asset's price. Liquidity involves the trade-off between the price at which an asset can be sold, and how quickly it can be sold. In a liquid market, the trade-off is mild: one can sell quickly without having to accept a significantly lower price. In a relatively illiquid market, an asset must be discounted in order to sell quickly.[1][2]

* https://en.wikipedia.org/wiki/Market_liquidity

The stock market converts stock into a (more) liquid asset. The value of GOOG may vary day to day, but no one thinks that it's difficult to turn shares into cash.
Turning oodles of shares into cash at the prevailing price, without pushing the price adversely, is quite a trick. "Slippage" is how to research this concept.
Who suddenly needs $3 billion out of the blue? Because Bezos regularly cashes in over a billion each quarter. Is that not enough to maintain a lifestyle?

But if he wants to buy a sports team, he can probably pay directly in AMZN stock as a private transaction (well, except for possible SEC regulations.)

And yet I had to pay tax for exercising stock options from a startup I left, stocks I was never allowed to sell since the company was private.
Everything is different when you start dealing with billions vs a few dollars. If Gates decided to liquidate his stock and use the money to buy real estate in Seattle he would decimate the stock, wreck the housing market, and get sued by shareholders. You can't just move money around and have actual goods and services appear out of thin air. That's why it's dumb when people say things like: "Those fighter jets costs 50,000 college educations".
I think the market is more to treat the stake in a company as a liquid asset. Such that you can transfer stake to someone else for an agreed value.

But, it is not the value that is liquid, necessarily. It is just the stake. In theory, there is intrinsic value to this. In practice? Much more complicated.

Lol if i have a paint which value fluctuate every year i should pay taxes or receive credits according to this article.. same for car , house.. incredibly ingenuous article ... Why stop here.. My qi could have a potential value if i do a test and get a high score i should pay taxes ? Stocks or growing company shares should not pay taxes until you sold them because you didn't benefit from those until you sell them, if you decide to give your shares to your employees when you die.. and you die poor because your annual income was low and you never sold more shares than you needed why you should pay billion in taxes if the company is worth billions (or was worth billions at certain point in time ) ? This kind of tax system proposed may cause company fail because shares owners may be forced to sell shares to pay taxes on shares just because those.. shares exists .. absurd.. when the company pay taxes and you pay taxes on what you take and also pay vat and other taxes on what you spend ? Very ingenuous article imo taxes should not be avoided and should be equal, but should be on money you receive it spend not on some assets that grown in value ( btw note that indeed something like houses and cars often have some kind of taxes already recalculated on current value ) but this is a different type of tax based on usage and owning something that require maintenance (ie: city, roads,...) But why limit at public companies if i have a company which is losing money and have 10k shares and i sell one share to you at 1k because you believe in it , this same year i should pay money on 10mil$ because iphotetical value of the company based on recent sale was 10mil ? And my net worth is now 10mil?
I will go further..let me be hypothetical.. in a closed and transparent system imho even income should not be taxed.. only spending.. if i earn 10bil and spend 0 why should I pay ? If i donate those 10b to my children and he spend 0 and grow it to 100b or leave it in bank.. all spending 0 .. what is the difference of taxation here ? We both died homeless and hungry... We are doing the equivalent of buyback\ reverse printing on dollars...decreasing liquidity ....Until i spend what is the problem ?.. btw this is not a closed and transparent system so taxing liquid assets is ok.. it's when I spend that I'm going to use or abuse the system or the ecosystem depending on what I'm buying . So let me pay 9000% taxes on a dodo steak and 1% on tofu burger this way with ethic taxing policies i would be also incentivated to spend better and improve the world ..
one way to put it, if amazon stock lost 98% of its value, Bezos would still have over 1 billion dollars worth of it.

The day to day fluctuations may be relatively meaningless, but the amount of wealth controlled via it is very real.

Yes. Most people dont think about it that way. I am wondering if there are any simple free bitcoin / cryptocurrency making services? Get people to apply one crypto of their own, make 1 billion coins. I buy one for one coin for $1. Now that person is instantly a billionaire.
If they didn't want to incur loss Bezos could just gift me his shares in Amazon
Yes, it's a bummer common discourse does this. While making the billionaires wealth seem more liquid would seem to overstate their power, I think the real issue is quite opposite.

The popular understanding of capitalism is accurate prices and liquid goods, and only a few things (as contested in culture wars) are genuine separate axis. The reality is the real power of the billionaires isn't in their "net worth" (however good the accounting is), but in their power over the institutions they control. Look at the size of the flow in and out of those institutions, their capacity for investment. Realize also that even as we collectively have the wealth for much simultaneous investment, earlier investment has a profound and non-erotic effect on future history (e.g. car vs public transit, Unix being entrenched for 50+ years, etc.) This is the real travesty of billionaire power, not the ability of Bezos to buy big yachts or whatever.