an extended meditation on presence (we also have chickens)
I have one of Those Uncles. You know. The kind who smugly inform you at every Thanksgiving that “if you’re not a conservative by age 40, you don’t have a brain.”
Said Uncle has been consternated for decades that law school, a brief career in insurance litigation, and then starting my own business failed to turn me any more conservative. He looked genuinely gleeful when he found out I’d recently subscribed to the Wall Street Journal.
Indeed, reading the WSJ daily for a month has changed my view of economic classes. But not the way he thinks.
Currently, I’m thinking about economic class in the United States in three broad categories – which overlap, but are not coterminous with, the ways most of us discuss “poverty,” the “working class,” the “middle class,” and the “rich.” It looks like this.
Poverty = income < survival expenses.
That’s it.
“Survival expenses” are, as the name implies, the bare minimum humans need to live, long-term. The infrastructure and human capital constraints of the US being what they are, I see “survival expenses” as having five categories: shelter/protection from the elements (including clothes), food, healthcare, transportation, and basic education.
If your total income cannot cover all five of these categories – at the bare minimum required to function for eight or so decades – you’re in poverty.
“Financial literacy” doesn’t help the poor, because the problem isn’t a failure to manage income – it’s a fundamental lack of income. Poverty is not a moral or educational failing. Poverty is a math problem.
Once income exceeds survival expenses, one enters what I’m calling the “hazard” class. It’s called the “hazard” class because you have to do something with that excess income. You have to hazard it in some way. This is where “financial literacy” becomes useful. Financial literacy deals with how to manage income in excess of survival needs.
It’s called the hazard class because there are zero guarantees regarding what you do with spare income. The stock market could wipe it out. Stuffing it in your mattress may cause it to lose real value versus inflation. Buying a fancy car or a jet ski means facing depreciation and various related expenses, like gas and insurance. Even buying items humans have typically prized, like gold, isn’t a sure thing; the price of gold fluctuates.
But because income > survival expenses, you have to do something with that excess. Doing something requires some level of weighing risk and reward. It also involves gathering (or at least being exposed to) information about potential places to put that income, which means running a gauntlet of people who benefit greatly from you handing your money to them and who have little or no incentive to tell you why that might not be a great idea.
(Notice this is where income exceeds *survival* expenses. Lots of Americans in this category – possibly the majority – manage to make their income fail to exceed their *actual* expenses. We are really, really good at conflating needs and wants, such that we end up living in larger houses than we need, driving fancier or newer cars than we require, paying Netflix over and over again for access to stuff we could buy once or not at all, and so on.)
If your total income exceeds your survival expenses, you control excess income. Controlling excess income comes with the responsibility of managing that income. Some people use it to build wealth; some spend on conspicuous consumption; some shove it in a savings account and forget about it; some give it away; etc. (More on this in a bit.)
As income increases, so does our approach to the event horizon of the third class:
You stop being a member of the hazard class and start being a member of the 2 Damn High class when the amount of wealth you, individually, control exceeds the amount of wealth the individual human mind can reasonably comprehend or control. This is where hiring an accountant, an attorney, and a financial advisor aren’t merely advisable but *required.* This is “family office” wealth.
(If you’re not familiar with the concept of a family office, you’re definitely not in this category, even if you consider yourself financially illiterate.)
The 2 damn high category is, as the name implies, where one person’s income is 2 damn high for any one person to manage effectively. It’s where an individual can no longer control or manage their individual wealth for maximum social or economic efficiency. They have to hire someone else to do it, which means they have to pay that person, which erodes the total power of that wealth to generate economic value for society.
Unlike the line between poverty and hazard (where income = survival expenses), there is no clear, single mathematical line between hazard and 2 damn high. (More on this below as well.)
I am not an economist. Working out these categories raises more questions than answers for me. Yet a few moral and policy implications (heavily biased by personal preference, as all moral and policy implications are) become apparent:
As noted above, experiencing poverty is not a personal moral failing. Poverty is a math problem. Poverty is when “the number of U.S. dollars I control is insufficient to cover the costs of my survival needs.”
On an individual level, poverty is not a moral failing. On a societal level, however, poverty is a massive moral failing. Any society that can solve this math problem yet fails to do so is morally bankrupt.
Yes, even if it means the overall economy grows more slowly for the rest of us. The rest of us have excess income. We’re fine.
Reasonable minds can differ, of course, as to the best way to balance the equation. I haven’t worked out any details I personally prefer, other than a nebulous “Guaranteed Basics” system. Whether it would involve a guaranteed basic cash income, public housing a la Vienna, universal free breakfast and lunch a la the public school in which I currently work, Medicare for All, robust free public transportation a la Mamdani’s vision, additional taxpayer-funded education, or some combination of all of the above is more detail than I care to do – especially as I don’t think there is one right answer or one perfect system.
I do think, however, that poverty – the existence in our midst of people who cannot access the bottom-line basics of continued survival – is simply too costly to society as a whole. It’s too dangerous for too many people. It should not be allowed to exist.
Perhaps this is just me being an American who thinks “freedom” means “no one tells me how I spend my money” talking, but: Except for a few rules to manage the most harmful behaviors, I’m cool with letting the hazard class do pretty much whatever it wants with its money.
I’m not down for complete lawlessness here. Some things people can do with excess income are just too harmful to society to be allowed. I support laws that prevent us from hiring hit men, for example. Or contributing in any way to a market for child pornography. Or committing outright fraud. I do support policies that introduce financial literacy to everyone as part of a basic education. But there are as many ways to maximize utility from one’s excess income as there are people, and as a member of the world’s most “yay individualist” society, I say let’s (nearly) explore ‘em all.
No, the real problem with the hazard class is the current US economic system.
Specifically: the hazard class, currently, is both larger and smaller than we think, for two reasons. One, we tend to mistake conspicuous consumption for actual wealth. Two, easy access to consumer debt allows Americans to maintain the day to day appearance of income > survival expenses when, in reality…things are not that great.
I don’t know how to decouple existence in this group from the mass engine of consumer debt. I especially don’t know how to do it when Americans’ debt powers the private banks that print the world’s reserve currency. I don’t even know where to start.
I do know that any meaningful reorganization of Americans’ individual relationships to actual income, expenses, assets, liabilities, and wealth will require us to reckon with the extent to which debt drives this country’s “prosperity.” But no – I don’t actually know where to begin here.
I came to the 2 damn high conclusion while reading annual reports, actually. Specifically, I read back to back – for the lolz – the 2024 annual reports of Tesla and Toyota.
Reading Tesla’s frank admittance that Elon Musk is a major risk to the company’s future stock prices, followed by looking at Toyota’s financials by geographic region, made me realize:
It’s possible there is no amount of money (at least not currently existing) that cannot be handled by an organization. A government, a multinational corporation, or some other group of people could get its collective head around vast sums of money. As long as an organization can adequately comprehend and effectively manage a sum, it should reasonably be allowed to do so (barring other factors, like crime).
But there is definitely a limit to the numbers one *individual* can wrap their head around. Allowing an individual to control more wealth than an individual can reasonably understand will lead to inefficiencies and bad decision-making. It’s simply too costly to society as a whole. It’s too dangerous for too many people. It should not be allowed to exist.
As I noted above, there is likely no bright line here. While I’m sure neurology/psychology/etc. researchers smarter than I am at those things could devise a way to study something like “how big is a number before humans can’t relate to it in an individual meaningful way?”, I doubt they could come up with a single number. No matter how many experts we throw at the question, they’re not going to come back with “Humans can handle a total fortune of $145,226,326.38 and not a penny more.”
That said, I do think a consensus of society, aided by research, could come up with a range. Wealth “2 damn high” for one person to comprehend and manage isn’t $1 million, for instance. Lots of people manage total wealth of $1 million on their own. It’s probably not $10 million. I don’t know if it’s $100 million – I’d need someone in this category to show me their personal numbers and personally explain them to me without a single reference to any document not personally prepared by themselves.
2 damn high is definitely $1 billion.
At best, I can provide a shorthand rule: If “too much money” is a problem you have – if your money people keep calling you to say you need to find somewhere else to invest all this money – then your income is 2 damn high.
A society willing to tackle the 2 damn high problem would also need a way to prevent individuals from ostensibly handing control to an organization while retaining “final say” over the placement of the excess income. (Another risk Tesla identifies in its annual report is that the structure of its board and bylaws prevent it from firing certain people, no matter how much of a liability they become – thus giving these people de facto individual control over wealth that on paper is held by a corporation.)
I do.
Again, perhaps I am biased, having always (except for one brief period in 2009 about which we shall not speak again) been a member of the hazard class. But the hazard class is where I see the most income used to maximize utility in the most efficient way.
As long as we leave people in poverty, we leave utility on the table. As long as we leave people 2 damn high, we leave efficiency on the table.
My uncle is not going to enjoy Thanksgiving this year.
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