Who Will Be The World's First Trillionaire?

We've all thought about it- will, at some point, an individual's wealth surpass $1,000,000,000,000?

Needless to say, the first trillionaire on Earth will be MASSIVELY wealthy. A trillion dollars means 1,000 x billion dollars- or a million x million dollars. If their cash was stacked in hypothetical $1000 bills, it would extend over 63 miles vertically. An 80 year old trillionaire will have earned, on average, more than $34 million every day of his life. So yeah, it's a massive amount of money (you can read more fascinating trillion dollar facts here).


But, it is such a massive figure that some are sceptical that a single individual worth over a trillion dollars will ever walk the face of the earth. The wealthiest man in the world right now, Bill Gates, would have to multiply his current net wealth around 14 times to reach such a trillion dollars.

Despite the daunting mass of such a figure, it is very reasonable to think that we may have a trillionaire within the next 100 years or so.

Rockefeller's net worth (in today's terms)
was over $350bn- over 4 times that of Bill Gates.

Let's look at the past. The first ever millionaire was John Jacob Astor, a 19th century fellow who profited massively off his monopoly of the fur trade, and later his ventures into real estate. Then came John Davison Rockefeller Sr., the world's first billionaire and on record the wealthiest man to ever have lived, with a wealth today that would be over 4 times that of Bill Gates. Rockefeller was an oil man- like Astor, a monopolist who at his peak controlled 90% of the oil in the USA.

So a common theme between these past juggernauts is monopoly- almost total domination, and complete control over their respective markets. This theme continues today (Bill Gates created the (ex?) monopolist Microsoft), and is very likely to continue when it comes to the first trillionaire. But what will he/she monopolise?

Astor created a monopoly of fur coats in a USA in its infancy of independence, Rockefeller capitalised on the oil boom of the late 19th and 20th centuries, and Gates played a key roll in bringing the personal computer to the mass market. These people did not become massively wealthy by following other businesses of the time, but by taking charge and carving out their own markets, and the first trillionaire will have to do this on an even larger scale. They will need to be a complete game-changer.

The trillionaire could produce key developments in the technology arena. Revolutionise key areas of our infrastructure- like transport (think autonomous technology), or education. But it's very difficult to speculate what particular area they will profit from- their vision will have to be such that they produce something we may not even think about right now.

Asteroids such as this have been estimated by some to be
home to raw materials worth up to $5.4 trillion.

An interesting proposition is that the first trillionaire will be the first to effectively capitalise on something we've always lived with, but been unable to grasp fully- space. In his 1997 book Mining the Sky, Professor of Planetary Science John Lewis makes the claim that "we can relieve Earth of its energy problem, make astronomical amounts of raw materials available, and raise the living standard of people worldwide" by effectively taking advantage of the wealth of materials that can be found in space, whether on planets or bodies like asteroids. Just like Rockefeller worked to capitalise on a growing but young oil industry in the US to revolutionise energy consumption, the first trillionaire could be the person who leads the revolution of our own energy consumption by venturing into space.

A far less thrilling but arguably more realistic prospect, however, is that the first trillionaire is just a current billionaire who becomes a trillionaire as his wealth accumulates and expands, thanks to investments or just ordinary inflation. The wealthiest individuals around the world are already becoming exponentially richer, and for people like Bill Gates it could just be a waiting game- albeit one with the constraint of lifespan.

Let's assume Gates lives until he's 100 (40 more years). From his current wealth of just under $80bn, he would require a 6.5% annual interest rate to become a trillionaire by his 100th year. So it is possible that he will become a trillionaire- but unlikely, considering recent US interest rates have barely been exceeding 1%.

Facebook CEO Mark Zuckerberg-
could he be one of the first trillionaires?

However, keeping money in financial institutions could enable younger billionaires, the likes of Mark Zuckerberg, to become trillionaires by the time they reach old age- especially considering the extra time allowed for interest rates to increase. Again, assuming a life of 100 years, Zuckerberg would require a 4.9% rate for his $36bn wealth to grow to a trillion.

Gates and co. could make a faster journey to the top by investing all of his $80bn correctly- but again, for a man who plans to give most of his money to charity, this is unlikely to happen. Investing such a large proportion of their wealth would probably be an unlikely move for Gates' fellow billionaires to take.

So there are two scenarios- either a trillionaire rises fantastically from some groundbreaking innovation that they are able to quickly monopolise, or a trillionaire rises less glamourously thanks to favourable interest rates and/or long term investments.

The first scenario would indeed be a spectacular event, but dwelling on the second makes you realise that perhaps the first trillionaire will not be such an iconic figure. Inflation raises not just the nominal income of the wealthiest, but it raises everyone's incomes. That's why earning a 5-figure salary is not the big deal now that it was a century ago, and why earning a 6-figure salary in 2115 will probably not be as valued as earning it now in 2015. The first trillionaire could just arise from the wave of inflation that raises everyone's wealth on paper- $1,000,000,000,000, after all, is just a number, not a real wealth indicator.

So, at the end of the day, becoming a trillionaire on paper might not be as big as a deal as we think it is now.

Anyway, it could be argued that thousands of people have already become trillionaires- in a country called Zimbabwe, I've heard they even used to print bank notes in the trillions.

Scottish Independence: INFLATION INCOMING?

So today's the day- the final installation of our short series on Scottish Independence is here.
Oh, and it's the Scottish referendum today.

If Scotland are to become independent a great argument of the 'No' campaign is that Scottish consumers would be hit by increased prices, for everyday goods and luxury items alike.

This could have pretty bad consequences, and it is certainly possible that these increases will come in the event of independence. Recently the Chairman of the John Lewis Partnership (John Lewis and Waitrose) Charlie Mayfield claimed a Yes vote would have consequences because of the apparently higher cost of trading in some parts of Scotland, causing prices to rise in their stores.

Supermarkets Sainsbury's and Asda have also claimed they would raise their prices, citing potential increase in costs that would occur, as technically they would have to adjust to trading in a foreign country, without being at the cost of the rest of the UK. Morrisons have also stated similar claims; though apparently they have kept open the possibility of even lowering prices if possible.
Many supermarkets claim to already have lower profit margins in Scotland due to its more spread out, rural nature- transport costs are presumably higher due to how far Scottish cities such as Aberdeen are from distribution centres.

Tesco have remained impartial on any potential consequences of the referendum on prices; though perhaps this is partly due to their unwillingness to risk backlash after their recent profit troubles rather than a commitment to not increase prices.

This seems to be a clear warning from some major businesses to the Scottish 'Yes' party, but will they really follow through?

It is certainly a possibility that this is part of the large scare policy being used by the 'Better Together' campaign- rumours are abound that these statements have been made upon special request by PM David Cameron, whose job would be in huge jeopardy in the event of a Scottish Independence.

Nevertheless, could the aforementioned businesses really raise their prices after Independence?

Inflation from the major supermarkets could serve to the benefit
of the likes of Aldi and Lidl.

Take the supermarkets- already we have seen in recent years the rise of the value-driven Aldi and Lidl , and supermarket price inflation could really make a field day for the bosses of these countries.
Aldi has steadfastly refuted any claims that they would raise prices after Independence: they cited their existence in 18 markets and how they are already adaptive enough to adjust to an Independent Scotland with no price increases.
So what will happen if Sainsburys and Co. increase their prices? Well it seems natural that even better value would drive customers to the budget supermarkets Aldi and Lidl, certainly bad news for the big supermarkets.

So what we are hearing from the supermarkets could certainly be simple another scare tactic from the 'No' campaign. If they are to follow through on their claim to inflate prices, it could really cost them even more customers to the already threatening value-driven competitors such as Aldi and Lidl.

Sources for this article can be found linked within.

What Happened To Freddos Being 10p? Deflation; Part Two

So, in the previous article we looked through the negative effects of inflation- how it can spiral, leave people impoverished, and so on- and we also looked at a positive if you like borrowing.
However, let's talk deflation- the reduction of general prices in the economy.

What causes deflation? It's exactly the opposite of inflation. Inflation is caused by an oversupply of money in the economy- deflation is caused by an undersupply of money. Whereas inflation decreases the value of money, deflation increases it, causing things to become cheaper. Sounds good, right?

There are many consequences of deflation however that can be damaging- profit loss for businesses being the root of the major ones. Dropping prices to an extent are beneficial- it can grant more people access to essentials such as heating, which, as discussed in the previous article, can save lives.

However if deflation gets out of control, falling prices will mean profits of businesses will fall- and thus most businesses will cut down on costs, leading to people being made redundant, factories and offices shutting down, work being outsourced, and so on.
Unemployment would increase, and even those fortunate enough to keep their jobs would see their pay decrease.
Unemployment can be devastating- it would lead many to default on any loans or mortgages taken out, it can cause people to lose their homes (though this is more likely in the USA than the UK).

You may be thinking, why have we heard so much more about inflation in the news than deflation? Well deflation can often be more easily controlled by governing authorities. In the USA, the Fed (the central bank) prevents deflation by flooding the market with money, thus increasing prices. The UK follows a similar protocol- we mentioned previously the idea of Quantitative Easing.

So should we be happy that the price of a Freddo has increased over the past two decades? Not really- but perhaps the fact that it didn't drastically fall in price is something we should also be well aware of.

What Happened To Freddos Being 10p? (Part One).

The humble Freddo. Once the posterchild of the consumer chocolate boom, the first word in affordable sugary snacks, one of the only things you could actually buy with a 10p coin. Almost every British child has fond memories of the little sugary frog-shaped friend.
But fewer such memories are being gifted to the youth of today. No, the Freddo has been attacked viciously in recent years.

Since the introduction of the Freddo as we know it in 1994, the price has risen from a humble 10p to a more maverick 15p, to a dangerously inconvenient 17p (who carries around exactly 17p change) to its frankly outrageous current retail price of 20p. That's a 100% increase- a double in price!
There's been an outrage over this price change- a quick glance at the numerous facebook pages on the subject would confirm this.

But why has the price increased? One might say the greed of Cadbury itself- perhaps rightly so, however considering the presumably low profit margins on such a low-priced chocolate, it would be a questionable business decision to increase the price for no reason other than hope for more profits.

The answer in fact is one that you will have heard of- it affects all of us, and not just products like the Freddo- INFLATION.

Charting the scandalous Fredd-flation.

Inflation, simply put, is the increase in price of products or services.
A decade ago, 10p in your pocket could buy you a tasty little Freddo- but today, 10p cannot buy you the Freddo. So, because of inflation, your purchasing power, the possibilities of what your money can do, has decreased. You're worse off- you have to pay more than you did before, but you're not getting a larger, tastier Freddo; it's the same thing.

But inflation is not all that bad, especially if you're of the borrowing type. Let's have a theoretical (simplified) example. Say you buy a house in a period of low inflation. You pay with a fixed interest rate mortgage you've taken out from the bank. If a period of high inflation follows, your house price will rise (theoretically, as inflation=higher money supply=more money to spend, HOWEVER often other minor factors affect house price), and while you have the option available to profit from this increase (you can sell your house and make a profit), the total amount you have to pay the bank is still the pre-inflation price.
So, by the end of the mortgage payments, if inflation is still up, you've paid less than the market value of your home. So inflation has helped you!

But of course, inflation can lead to terrible consequences. Inflation is gas and energy prices has been reported to have fatal consequences on the poorer members of society (according to the Office for National Statistics, unaffordable energy bills contributed to 24,000 deaths in the UK in the winter of 2011), and that an inflationary spiral can occur- due to higher prices in the market, usually profits of companies will increase- meaning they can hire more staff- meaning more people will have income to buy products/services- meaning prices will continue to inflate as demand rises.

Inflation can also be caused by the government. You may have heard of the programme of quantitative easing- essentially money is pumped artificially into the economy to try to stimulate spending. One of the strong arguments against QE is that pumping more money into the economy causes inflation.
To understand this, think of money as a commodity- think gold. The more abundant gold there is, the less its value- and the less abundant it is, the more the value.

Money was easy to come by in Weimar Germany.
Too easy.

Of course a balance must be struck- but QE decreases the value of money, and historically some extreme QE-style programs have led to hyperinflation (think wheelbarrows of money in 1920s Germany), where money became so abundant due to printing of cash that it became worth more in paper than actual purchasing power.

So excess inflation does not sound too appetising- but neither does its opposite, deflation.
But take a nice rest. Have a nap, a little reflection and come back on Tuesday for part two, where we'll expand on deflation and more good stuff. 

SOURCES
24,000 'died because of cold homes' last winter http://www.dailymail.co.uk/news/article-2240716/24-000-died-cold-homes-winter-Fears-grow-figure-higher-year-spiralling-bills.html

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