World's 85 richest people

[Jonrox]

The key to the claim that the 85 richest people have wealth equal to half the world's population is the definition of wealth and the combination of the wealth of the "poorest" people in the world. Contrary to what most people may initially think, this doesn't include most of the population of the world's poorest countries at the bottom of the list (they're closer to the middle). However, at the very bottom of the list it does include a lot of people from the richest countries in the world with big houses and fancy cars who find their debts far, far exceeding their assets.

Start with the definition of wealth. Wealth is typically defined as the value of all assets net of all liabilities owed. In a simple example, if you own a house worth $500,000 and have no mortgage, you have $500,000 in wealth. If you bought this house for $600,000 with a $500,000 mortgage and it's value is now, $500,000, you have zero wealth. You may be making all of your payments on time and living comfortably, but you have no wealth.

Now start thinking about all of the American families who have massive mortgages that are underwater. Starting combining all of that negative wealth. You're going to end up with a huge number. Now start including the people whose assets equal their liabilities. That's a lot of those people too. Then we need to start including people who have just a little bit of wealth to start offsetting the huge negative wealth that so many people have. You're going to have to include a lot of people before you even get back to zero.

Then let's find a homeless man who just found a $5 bill on the street who has no debt. He alone is wealthier than these millions of people combined. A starving family of nine in India who live in a shanty town who each earned $0.80 today now also has more wealth than all of these American families combined. See where this is heading? I'm sure this poor Indian family will tell you that the American family earning $150,000/year with the big house (with a big mortgage that's underwater), 2 cars (that they're making payments on), and 3 kids in college is living more comfortably. But in terms of wealth... the Indian family is potentially much, much wealthier with their $7.20.

Also don't forget that wealth is relative, but this study attempts to define it on a global scale. $10,000 worth of wealth in Canada isn't much at all. But if someone in some of the world's poorest developing countries has $10,000, they'd be considered extremely wealthy and living very comfortably.

I agree that income inequality is a problem. But stories and statistics like these hide the truth.

[Jonrox]

Wealth and income inequality are two very, very different topics. It's a shame this study skews the truth so badly. It's very easy to have income that far surpasses the average but have no wealth. One does not necessarily equal the other.

[Jonrox]

To anyone who saw this story and thought it was terrible, what are your thoughts on this headline?

Kelowna family of four has $300 billion dollars more wealth than 30 million Americans combined

This is a very real possibility (especially given the definitions I talked about above).

It's estimated that 6.4 million households in the USA have mortgages still underwater with a negative equity of $397 billion. That's likely well over 10 million people included in that number. We'll give them $97 billion in savings and other assets and take the next 20 million least wealthy people to get back to zero (it's probably more than this).

Is a Kelowna family of four renting a small apartment making $15/hour earning too much money (we'll assume they're being responsible about spending and not racking up debt, but not saving much either)? Their wealth equals that of 30 million Americans (most of which are living quite comfortably in big houses), so I'd suggest this family needs to spread their wealth around.

It's very easy to twist statistics into incredibly ridiculous statements that mean nothing.

[hobbyguy]

Interestingly enough, the folks at the World Economic Forum actually do think the wealth and income inequality issues are becoming problematic.

http://www.businessinsider.com/nouriel-roubini-mini-perfect-storm-2014-1

and to expand (warning for the storm troopers, viewing this may raise your blood pressure to stroke level): http://www.businessinsider.com/rich-tech-fears-2014-1