Because much of this wealth is tied up in stock, society benefits not via compulsory redistribution, but rather through discretionary benevolence (i.e., charity) or else via the extent to which billionaires and their businesses have improved everyone else’s quality of life.
Jeff Bezos has been keen to emphasize how crucial Amazon was during the pandemic. Elon Musk is trying to get us to Mars. Google acts a second (much smarter) brain for everyone. And so on.
But when one combines the exponential nature of wealth creation in a capitalist system with modern market structure and embeds that self-feeding loop in a world that’s becoming more dependent on technology every day, the read-through is that these fortunes will become so large, so fast, that the people associated with them will become gods.
— “Gods” August 29, 2020
Four months after I penned those passages, the world’s 20 richest people closed the books on a year defined by human suffering with a combined net wealth gain of more than a half-trillion dollars in the space of just 12 months.
Shortly thereafter, in February of 2021, Musk began to accumulate wealth at an even more astounding pace. In the six weeks to February 15, he made more than $25 billion on paper, leapfrogging Bezos to become the world’s richest person.
Subsequently, Musk’s SpaceX (which Morgan Stanley suggested this month will one day make him a trillionaire) put four civilians into orbit and Bezos launched himself into suborbital space.
On Monday, October 25, 2021, not even 14 months after I wrote “Gods,” Musk’s net worth grew by more than $36 billion in a single day (figure below).
Thanks to Tesla’s Monday rally, Musk is now worth well in excess of a quarter trillion dollars.
There was more than a little irony in Tesla’s shares getting a boost from Hertz. Both companies were caught up in 2020’s summer stock mania. Hertz was bankrupt, but that didn’t stop legions of day-traders armed with spare time and stimulus checks from pouring money into the company’s ostensibly worthless equity. Around the same time, shares of Tesla went parabolic, in part due to the same retail investor frenzy.
Hertz was just four months removed from bankruptcy when it ordered 100,000 Teslas this week, vaulting Tesla into the $1 trillion market cap club and ahead of Facebook on the list of world’s most valuable companies (figure below).
The Hertz order marked the biggest ever purchase of electric vehicles and translated to more than $4 billion in revenue for Tesla.
The media spent Monday conjuring superlative after superlative — factoid after factoid. Musk is now personally worth more than Exxon, for example. Insult to injury was a smattering of headlines about “major employee attrition” at Exxon for which 2020 was a year to forget.
But just as the media’s narrow mandate produced dozens of predictable articles about “The Facebook Papers” while leaving the real story to the subtext, so too did the financial media largely miss the mark this week with regard to Musk.
There are two crucial points, the first of which I outlined here on Tuesday morning. Modern market structure can accelerate the wealth accumulation process. And not just due to near-term accelerant flows tied to, for example, options hedging. More importantly, the “perpetual motion machine” dynamics described by Howard Marks in 2017 make this a self-fulfilling prophecy. Marks suggested it might all end in tears (as he’s wont to do), but like the financial media, he seemed unable to connect the final dot or to otherwise draw the conclusions that actually matter from a societal perspective.
That brings me to the second crucial point, and also brings us full circle. Musk is becoming a demigod. It wasn’t so long ago that he wasted time sparring spitefully with the likes of David Einhorn on Twitter. Maybe he still does. Despite obtaining semi-divine status, Musk is still as petty as the most petulant teenager. In a way, that’s apt. The Greek gods were a petty, jealous bunch too.
But of what consequence is a David Einhorn to Elon Musk at this juncture? Or a Jeff Gundlach? Or a Jamie Dimon? Or even an entire investment bank? Morgan Stanley made $14.8 billion in revenue in the third quarter. Musk’s net worth grew by twice that in a matter of six hours Monday.
The dynamics outlined briefly above (and discussed at length in “Gods” and countless other articles published here over the past several years) will perpetuate themselves until a smaller and smaller group of people control a larger and larger share of the wealth.
Within five years, the Bloomberg Billionaires list won’t make much sense because everyone below the top 25 spots will be relative paupers. Within twenty years, it’s likely that the richest handful of people will own (or control) virtually all of the world’s wealth.
Do note: I don’t mean that in a Bernie Sanders-style “Let me extrapolate from some statistics about wealth concentration to rile you up” kind of way. Rather, I mean it in a very literal sense. It’s likely that within two decades, less than 10 people will control almost all of the wealth on the planet.
Invariably, they’ll be the same 10 people who control virtually all of the world’s data. Indeed, eight of the top 10 spots on Bloomberg’s list of the world’s wealthiest belong to tech founders, CEOs or former executives.
The takeaway is as simple as it is unnerving. We’re all becoming irrelevant. That’s the lesson from Musk’s blockbuster Monday.
So, the next time you hear someone say something like “David Einhorn is no better than me!”, tell them they’re right. We’re all equally irrelevant in the eyes of our lords.