American Wealth Update Plus Global Gini Statistics

 Earlier this week, I put up a post on CEO Compensation. The mail was muted in size but quite passionate. Some said it was an interesting read, others said it made them think, and a few wrote that it made them angry. Others said that is the way of the world, so why mention it? One was a real gem, and I have permission to repeat it here. The tart comments were: “Cole, I always thought you were a free market guy. Now I realize that you are a Bolshevik bomb-thrower.”

Well. Anyone who knows me even a little realizes that I would never toss a Molotov cocktail into the trading room of a hedge fund or the partner’s dining room of an investment banking firm. 

Inequality has always been around and likely always will be to an extent in any capitalist society. In this post, I will address the issue with data in two ways:

1) Recent Federal Reserve figures on Levels of Wealth-by-Wealth Percentile Groups (the clumsy title is theirs, not mine!).

2) Gini Coefficients estimated levels of inequality across the globe. 

1) Let us start in the USA with data released earlier this year from the St. Louis Federal Reserve Bank. I will use percentages as the endless zeros of billions and trillions may confuse some readers.

Here goes:

The top .1% (or one 10th of one percent controls 27.6% of total US assets (wealth).

The top 1% which, of course, includes the top .1%, has 44.3% of the wealth.

The top 10% has 62.3% of the wealth.

The 50-90% percentile (often referred to as the middle or upper middle class near the 80-90 range) has slightly less than a third weighing in at 32.1%.

Finally, the bottom 50% have 5.6%.

Source: St. Louis Federal Reserve Bank, 2024

All these figures may bounce a bit depending on equity and real estate markets month to month ups and downs. The trend is clear that a small group, including many of you MR readers, are doing very well while most Americans are treading water, and some are losing ground. Consider that 34% of Americans are renters and approximately half have no equity holdings either directly or in a 401k, Roth, or mutual fund. 

Some say that the next bear market in stocks or real estate will right the ship quite a bit. Yes, if you have a $1 billion and you take a 30% haircut, you have lost on a relative basis, but you are still firmly placed in the .1%. And when markets rebound (as they always tend to do), you benefit while people not in the game are still leading a largely hand to mouth existence. 

2) Okay, how does the good old USA compare to other nations? Well, the data is difficult to compare but I have found that the best RELATIVE yardstick to use is the Gini Coefficient. 

What is the Gini Coefficient? Way back in 1912 Italian statistician Corrado Gini came up with a way of measuring income distribution within a society. It is a fairly simple concept. If one person (family) earned all the money in a country and all others earned nothing, the Gini coefficient would be 1. Conversely, if there were perfect distribution, the statistic would be zero. It is a useful but not perfect measure of income but not asset wealth as the Federal Reserve data is. A couple of problems with using it is that GDP and income data is difficult to ferret out in developing countries. Also, some analysts state that it understates inequality as wealthy folks in unstable countries often have assets hidden in offshore tax havens.

Still, here are some stats from the World Bank.

The least egalitarian places on earth (highest Gini Coefficient) include:

Nation Gini Score

South Africa 63.0

Namibia 59.1

Suriname 57.9

Zambia 55.9

Belize 53.3

Brazil 52.9

Columbia 51.5

Angola 51.3

A score over 50 is looked upon as a danger zone with extreme inequality.

Those with the lowest Gini Coefficient are all in Europe. Some examples are:

Nation Gini Score

Norway      22.7

Slovakia      23.2

Slovenia      24.0

Moldova      25.7

Netherlands      26.0

Belgium      26.0

Iceland      26.1

Several years back, the Scandinavian countries topped the list. Now, only Norway is a clear leader. They put much of their North Sea oil riches in a permanent fund that covers all medical and educational expenses. Income and sales taxes are high, but people live quite well. 

What about the NAFTA countries? The United States weighs in at 40, Canada 32, and Mexico 45. 

In Europe, some prominent names are Germany 31.7, United Kingdom 32.6, and Ireland 29.2. Surprisingly, two small but wealthy countries, Luxembourg and Switzerland are almost tied at 32.7 and 33.1 respectively.

Also, Bulgaria is at 40.5 edging out the 40.0 score of the United States. So, a nation’s size is not a big factor here. 

Nations with low Gini coefficients tend to either offer cradle to grave security with their provider state or are eastern European countries coming in to their own and massive fortunes are rising but are not long standing given former USSR rule.

How to resolve it? Sharply higher taxes that are enforced. This is difficult politically and economically would likely stifle entrepreneurship and growth.

If you read economic history as closely as I have (yes, I am a bore) you will see that other than the period after World War II up to the 80’s, there has always been high levels of inequality.

In 19th century America, the Carnegies, Vanderbilts, Morgans and railroad barons had a sharply disproportionate share of the nation’s wealth. The same was true in Britain during the Industrial Revolution. Go back 100-200 more years and you see that the nobility lived well while the peasantry had a hard knock life. So, today’s skew is not outside of historical parameters. The immediate post 1945 decades were.

Politicians will discuss this a great deal this year across the globe. My hope is to give you some facts to weigh their comments. 

If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com or leave a message on the blog.

 

CEO COMPENSATON

 You see and hear a great deal about inequality these days. It has become a hot political issue to some, but many seem to take the “I’m doing okay” attitude and ignore what has been going on in recent decades. 

Every year or so, a stream of articles are released across the media about how Chief Executive Officer (CEO) compensation is outrageously high. The statistic that is used most often is that the average CEO of a Fortune 500 company has a compensation package that is 360 times greater (some say 320 times) than the average employee of that firm.

Eye popping numbers such as that certainly get people’s attention and make for good copy. The question few people ask is how did this happen over the past several decades? I have a few theories that I will share with you. Sadly, I do not see a workable solution to the issue. 

If you study annual reports of leading companies, they often give detailed information on the different committees that outside members of the board of directors serve on in the organization. Look closely and two things pop out. First, the CEO of the company often serves on the board of directors of a member or two of his or her own board. Interlocking directorates are a real thing. Dig a bit deeper and you sometimes find that their “friend” who has the CEO as a director in his or her firm is surprisingly often on the compensation committee to determine the salary, bonus and perks of those in the executive suite of the corporation. Or perhaps a CFO or Vice Chairman is on the friend’s board.

So, if you have a buddy or two on the compensation committee, who is also the CEO or senior executive of a company of which you are a director, your compensation will likely not be “light” when it comes time for the group’s recommendation for your next year’s salary or bonus.

If you speak with many people about this apparent conflict of interest, they smile and often say that the problem can be alleviated by hiring an executive pay compensation firm. This, to me, is laugh out loud funny. Think about this for a moment. If a compensation firm continually low balls (translates provides realistic) compensation package for a CEO word gets out and the firm suddenly has fewer clients. They often provide recommendations by “benchmarking” what leadership is getting in companies of similar size or competitive category. So, recommendations of these non-partisan experts often maintain the status quo. The compensation committee on the corporate board do not often enough buck the compensation firm’s recommendations.

An argument that some people use is in defense of lush compensation is that today more is expected of a large company CEO. Yes, the world is more complicated. A CEO must have a better grasp of economics, world events (most huge companies operate globally), and public relations than leaders in the past. They also have need to be media savvy. With the growth of CNBC and Bloomberg, CEO’s have become celebrities and cannot behave in public as some 19th century robber barons did. While this is all true, they have teams of experts around them, and they are better educated than most leaders a generation or two ago. 

For a few decades now, Warren Buffett has told us that when you buy shares in a company take the attitude that you are an owner of the firm (because you are!). As is often the case, I agree with the great Buffett. So, as an owner, read the annual report and spend some on the compensation of those in the executive suite. If the company had a poor or mediocre year, should the CEO receive a lusty bonus? Was compensation tied to stock market valuation of the company and you noticed that the company bought back many millions in shares even though the stock was trading at an all-time high? Does the employment agreement contain an enormous golden parachute that kicks in even if the CEO was fired for poor performance?

If you are an “owner”, read up on your company. People tell me that they only own 100, 500, or 1,000 shares. What can they do? Write a strongly worded letter to the board. Vote against what you deem to be exorbitant pay packages. After all, it is your money.

Some counter that the company has made them rich or comfortable. This is especially true in highly successful tech companies. They do not begrudge the founder or current leader eye popping salaries, bonuses or sweetheart stock options. I get that. Yet all 500 companies have not made their shareholders financially comfortable.

My long-term fear is that if the present trend continues more people will want Congress to set income caps for senior executives in publicly traded companies. Do you really want Senator Elizabeth Warren writing that legislation? I greatly admire how she took down some financial executives after the 2008 debacle. At the same time, I do not want her and fellow travelers interfering with the policies of US companies operating in a somewhat free market. Let the owners decide!

So, if you are a shareholder of any size, study how YOUR company is operating. You may be surprised at what you find.

If you would like to contact Don Cole directly, you may reach him at doncolem

What Is An Entrepreneur, Really?

 Let us begin today with a quick quiz? Name some entrepreneurs. The odds are the top-of-mind names will be some mix of Bezos, Jobs, Musk, Zuckerberg, and Gates. All such answers would be true but, despite what you see and hear from the media, they are only the tiniest sliver of entrepreneurs in both the United States and globally.

The 18th century economist/banker Richard Cantillon** appears to have been the first person who defined what an entrepreneur is. His definition is logical and deceptively simple and hinges on only two facts:

1) They work for themselves

2) They were willing to accept financial uncertainty that is a given in self-employment.

So, an entrepreneur does not have to be a Silicon Valley whiz kid who cashes out for a billion +dollars when his company goes public. A farmer, an owner of a car repair shop, a coffee shop operator are all entrepreneurs even if the media and population at large do not see it. They often live a precarious financial existence and most of their business ventures fail. Some make it but on the third or fourth try.

Today, most colleges and universities have a course or two in some form of entrepreneurship. The bigger universities and some MBA programs have a major or concentration allocated to the discipline. Some, with huge endowments and proximity to large Venture Capital pools, can get students introduced to deep pocketed players in tech. They have a smooth pitch deck at the ready and can last for a long time waiting for a break due to their parent’s affluence. On the other hand, the young dreamer from the hinterlands sleeps on someone’s couch (for a few thousand a month), showers at the gym and tries to have coffee with someone whom he thinks is a “player” in this exciting tech world. Very few of these unconnected people every breakthrough and launch their dream.

Millions of self-employed people do live their dreams. To me, they have always been the backbone of America. They pay their taxes, are involved with their communities and have their feet on the ground. 

They do not fair get coverage in the media. What is a hired worker? They get a regular salary, report to a boss, and operate within clearly and oftentimes carefully defined rules. The bootstrap entrepreneur just “has to be their own boss” and accepts the financial roller coaster ride that they are on in their small business.

I once exchanged e-mails with a professor at a VERY prominent university and told him how much I enjoyed his article about venture capital (VC). He thanked me but annoyed me by dismissing the smaller players when I asked him about the role of the smaller entrepreneurs. Then, he really annoyed me. He expressed open disdain for “lifestyle entrepreneurs” who are not dedicated to their business.

Okay, a lifestyle entrepreneur is an entrepreneur but on their own terms. The business is important to them but is not an all-consuming passion and is generally not how they define themselves. Let me give you a great example. Some years back, I was stuck in a small city working on a major project for a big client. Each day, I would get a morning coffee or a lunchtime sandwich at a small shop near my client’s headquarters. On my last day, I arrived around 2:15 pm as a client meeting ran really late. The lady who owned the shop was leaving. I said something to the effect that it was nice she could leave early. She laughed and said “I leave every day at this time. When I opened this business, I promised myself that I would always be there to pick up my children from school.” She went on to tell me that she work in corporate America for 15 years and hated it and was worried about her health. Now, she rises early and meets her baker to open the shop. Her husband gets the kids up, makes breakfast, packs their lunches and takes them to school. She says that she has a “normal” family life these days and loves it. Her business will never be franchised but she is happy. My distinguished professor does not see that her life is a success yet she is still very much an entrepreneur. There are many thousands such as she and they have my admiration and respect. The pompous professor does not get it.

Noted economist Joseph Schumpeter stated that much progress in a market economy came from a term he popularized dubbed “Creative Destruction.” Innovation crowds out the status quo and old habits are dropped as new ways to do business and make things emerge. 

I have no argument with the reality that Bezos, Jobs, Zuckerberg  and Gates have changed our lives in largely positive ways. Please do not forget (even though most media have) the millions of gutsy people who have gone out on their own and changed their little corner of the world. They, too, are entrepreneurs.

If you want to contact Don Cole directly, you may reach him at doncolemedia@gmail.com or leave a message on the blog.

**Richard Cantillon was a fascinating character. Irish born, he was a successful speculator and banker in Paris. Then he got in involved with world class swindler John Law. He left Paris and moved to London. Angry people who said that he owed them money burned his house down. He was said to perish in the house. Others claim, a man looking very much like Cantillon popped up in remote Suriname sometime later calling himself Chevalier de Louvigny!

THE STEALTH MEDIA PLAYER—ANTENNAS

 Some 50 + years ago, I was a graduate student. One day, I received a call from my father. He asked when I was coming home and I said that weekend, for sure. He responded, “Great. We are having trouble with reception on the Boston stations (my parents lived in Rhode Island) and we need you to go up on the roof to adjust the antenna.” I said sure thing but when I hung up the phone, I thought about it. The last time I was on the roof he was with me, and we got the job done quickly. This time I would be alone as he was too ill to make the climb. I got it done and he only had me shift the antenna twice before all Providence and Boston stations had significant clarity. My big problem was dealing with getting off the roof, but I made it without incident. After I descended, I vowed never to climb the roof when I owned my own home. Rabbit ears would have to suffice.

Well, over the years, I have cleaned many a gutter but have stayed off the roof. When cable came to my jurisdiction, I eagerly signed up and let the provider scale the roof.  Antennas tended to be a bit passe as cable hit 70% of US households and satellite covering as much as 10% of (mostly rural) households.

Now, to the surprise of many, antennas have somewhat quietly been making a strong comeback in US TV households. Relax, young people. Your parents will not be asking you to take a precarious perch on their rooftops. Close to 70% of antennas sold in the states today are indoor units. They are fairly compact, square discs that are attached to a wall in reasonable proximity to the TV. You will not get cable channels but these little dynamos will deliver over the air (OTA) broadcast signals. You will receive ABC, CBS, NBC, and Fox. In many cases you will also obtain a fistful of “diginets.”

Why do people get the antenna? I asked my panel members and some acquaintances and here are some verbatim responses:

“I am not a huge sports fan, but I like golf and tennis and can see the major events on over the air tv. The antenna is great for me. I am currently watching the French Open Tennis Tournament. NBC’s coverage is enough for me.”

“I like NFL football and can get my fill on CBS, NBC, Fox and ABC. The Super Bowl also, of course.”

“As you know I live in a tiny media market (ranked between 180-200 according to Nielsen). I am on the city council, so I need to watch the local news all the time and the antenna allows me to do that.”

A few people said they liked it for local weather, but you can get that online almost everywhere.

The other big plus is savings. One MR loyalist wrote to me and said, “I used to spend $185 per month for cable and streaming. With my antenna, I have cut my bill to roughly $50 per month! My kids have taught me how to cancel Netflix and then get it back a few months later. Amazon TV comes with my Amazon Prime subscription. I also get Acorn and Britbox as I love the British fare and much of it goes back decades. I was paying for over 200 cable channels each month but only watched 7-8 at best.” It appears that this person is not unusual.

Over the last few years, estimates are that some 8 million US households have added antennas in both 2022 and 2023. This will not save over the air TV over the long pull as an advertising medium but will definitely wound cable.  Projections are that some 20 % of US TV households now have an antenna.

Finally, some of you are sure to be asking “what the hell are diginets?

There are 35-40 of these channels that are ad supported. Entries include Court TV, Bounce MeTV, Cozi TV, TDB, Dabl. They are positioned to advertisers as low-cost classic TV. They are actually old and sometimes very old reruns.

Americans are often good shoppers. In an inflationary environment, the humble antenna is saving money for millions and enhancing viewer satisfaction.

If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com or leave a message on the blog.

It Is Unsustainable

 About 10 years ago, I was speaking to a very erudite man whose firm had dealings with Saudi Arabia. I asked him about their welfare state which covered tuitions, healthcare, and other forms of governmental support. He said that if a barrel of oil exceeded $80, they could continue to fund all of their societal needs easily (I have seen estimates of $75-88 per barrel from several sources). Long term, he said as we move to a world using far fewer fossil fuels, the Saudi “nanny” state was not sustainable.

Since then, I have seen the term “unsustainable” used to describe the provider state that most of Western Europe covers for their citizens. The problem in Europe is that birthrates are at an all-time low. Simply to maintain population, you need a birthrate of 2.1, often referred to as zero population growth (ZPG). Right now, in Europe, only the Faroe Islands have a birthrate above ZPG at 2.71. Among larger countries, Germany is at 1.53, Italy 1.3, and Spain 1.29. Without a significant increase in immigration, there is no way they can provide healthcare, free university education (in many countries) and excellent retirement benefits. Among major European nations, France has the highest birthrate at 1.79. Keep in mind that in recent years, France has offered bounties to couples having multiple children.

Something must give but cutting benefits does not seem viable as governments trying any kind of austerity program usually lose power at the next election.

What of the United States? Each year, I bristle when I see that our national debt has jumped and now sits at around $34 trillion. With the higher interest rates set by the Federal Reserve to bring us back to 2% inflation, we now have interest on the national debt playing tag with the size of the Pentagon’s budget (approximately $800 billion per year). To her credit, former governor and UN Ambassador Nikki Haley said, in her stump speech for the GOP nomination earlier this year, that, as an accountant, she saw real dangers in our escalating national debt. The comments were not well covered by the media and did not get much traction with the public.

Beyond the annual budget deficits there are our liabilities in Social Security and Medicare/Medicaid. Some estimates from Laurence Kitlikoff of Boston University are that our unfunded liabilities for those entitlements are over $200 trillion! To right the ship, you  would need to cut spending sharply and raise taxes by over 60 percent. Try running for president on that platform.

The ignoring of the Medicare/Medicaid issue is something so outrageous to me that it would make former Enron accountants blush. Social Security can be fixed or extended in its present state by raising the age of first-time beneficiaries and perhaps taxing away some benefits of the very well to do.

By the way, the United States birth rate hit an all-time low in 2023 of 1.6. So, to function as we now do, we are going to need an influx of millions of immigrants over the next 10-15 years. This will be a hot button issue for sure but it has to happen.

If you look at the facts, we are an unsustainable path. Not as bad as almost all of Western Europe but still serious. Will political leaders stand up and call for real fiscal responsibility and will the public support them? When I try to discuss this, people’s eyes glaze or tell me that I am a pessimist. No, just a tough-minded realist. 

It may not affect me in my life but my children and especially grandchildren will pay dearly for this lack of fiscal discipline. Our present track is truly unsustainable.

Why do people not seem to care? In high school, we had to read George Orwell’s ANIMAL FARM over the summer. We then read some Orwell essays in class. One line stuck with me—“to see what is in front of one’s nose needs a constant struggle.” These fiscal and entitlement issues are staring us in the face. We cannot ignore them forever.

If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com or leave a message on the blog.

The Great Migration to Come

 This year, in the United States, we have a presidential election. A great many comments are being made about border control in the Southwestern United States. There is no question that the situation is very messy. One issue that the media does not cover well is WHY people are wanting to come to the United States. If you look at the facts, you will see the major reason is why most of our ancestors came from Europe—economic opportunity. Also, some are coming as they live in dangerous places in Central America and want to remove their children from a bad environment. 

Okay, it is a difficult issue and I see no easy workable solution at present. Looking ahead a few decades or perhaps sooner, we and much of the Western world will face a far bigger issue—Climate Migration.

If we continue on our present track toward a 3–4-degree centigrade increase in temperature, our new hotter world will likely create a nightmare scenario. Our level of carbon monoxide in the air, as of year-end 2022, was higher than it has been for the past three million years.

I looked at various forecasts that ranged from moderately scary to total gloom and doom. It was interesting to see what would be affected. In no particular order I found: Rising ocean levels would take over some areas of the Florida coast. I have noticed that even a bad rainstorm causes some flooding in Miami. The Outer Banks of North Carolina are in a precarious spot. New York City will survive, and two pundits said that the financial world will build a huge barrier protecting Southern Manhattan and, of course, Wall Street.  Boston may be okay, and the Maine coast could become even more fashionable and expensive. There will be a northern movement if things heat up. Wisconsin and Minnesota have lots of lakes and people like to spend time near water. If the winters become milder there, the population might jump. A similar scenario has been forecast by some for Upstate New York and Northern New England.

Arizona and Texas already have some water issues which will only get worse as the population grows and the areas get even hotter. Agriculture will suffer as aquifers decline so food may become more expensive, and yields drop. The wheat crop should suffer as well, and government subsidies cannot help with lack of water.

Canada, along with Russia, has the world’s most abundant fresh water so, if the temperatures keep rising, Canada’s agriculture may be vibrant along with many wanting to migrate there.

Europe is already seeing many in drought stricken African countries trying to move to western countries. There are a few issues. Europe is full of senior citizens. Immigrants are needed to fill in many jobs, including caregiving to the elderly. Yet much of Western Europe is on an unsustainable path to maintain their provider state of education, healthcare, and old age pensions. How many immigrants can some countries take in?

Also, the humanitarian issue is huge. If many Africans cannot leave their parched homelands, millions may well die of disease and starvation.

South America has future climate issues although Patagonia and Southern Chile should be in better shape than the rest of the continent.

Australia is burning up these days. Some people will have to leave if climate change is not tamed. Southern New Zealand looks fine. India is in a bad spot with a huge population and no relief on the climate front. Many Pacific islands are likely to disappear.

Many politicians have lobbied hard for the use of more renewable energy. Some have said that by 2030 or 2035 all US vehicles and all electricity produced will be carbon free. They are well intentioned but hideously naïve. Right now, only a handful of U.S. utilities can meet the 2035 goal, and most have candidly told state regulators that they are pushing back their dates for a carbon free era. A big problem is with battery storage. Wind and solar technology have improved significantly in recent years, but their delivery is intermittent so a back up source such as natural gas is needed until battery development is stronger than what we have today. So, the use of fossil fuels (oil and natural gas), like it or not, is with us for some years to come. Also, electrical use will soar globally and the infrastructure is not ready to handle new demand via renewables.

Is it all hopeless? Not to me, but some hundreds of millions across the globe will need to move and what countries can/will take the migrants in? This will not be solely a political issue but a moral issue. In recent years, Canada has been very open to immigration, but they can be highly selective about whom they allow to enter their fair country. Will they take Americans who want to escape the southern heat?

So, if you think that discussing border security in the 2024 U.S. elections will be heated, may I suggest that you have not seen anything yet compared to what is to come?

For a slightly optimistic view on this issue, I recommend reading Gaia Vince’s NOMAD CENTURY (Allen Lane publishers, 2022).

If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com

Are you in a 50+ US Millionaire Household?

 Recently, a report was released from the federal Survey of Consumer Finances that stated that the average US household with adults around 50 years old had an average net worth of one million dollars.

Last week, the statistic was mentioned on Saturday Night Live and I began to get messages from people who were upset about it. We need to clear the air a bit on this topic. Hence this post.

By year end 2022, the median net worth of American households  was $192,900. Please note that figure was MEDIAN, not average. 

For households with people in their late 30’s, the average net worth figure was close to $500,000 and, those in their late 40’s, $750,000. And, for families with household heads in their fifties, it was resting at $1million.

Now, while being a millionaire was a dream for many it is really a psychological yardstick and a somewhat meaningless statistic in 2024. A Californian who once called on me as sales rep admitted that his house alone was valued at $1.5 million but he still worries about paying his car insurance and keeping his job. He is, on paper, a millionaire but hardly feels affluent.

The study also stated that approximately 18% of US households had a net worth of over $1millon. Using a back of the envelope calculation with record high stock and real estate prices as I type, I peg 23% as the working figure for  current US households with the million dollar plus net worth handle.

Think about it for a minute. What does a million dollars mean? It buys you a studio apartment in a decent neighborhood in Manhattan. Most Americans still have a high percentage of their net worth in their homes. They are not that liquid. If you had a million in cash you could put it in CD’s at current interest rates and earn $50-55k a year. Hardly enough to qualify for what for decades we have considered a millionaire lifestyle.

What irks me about this report is not that it is inaccurate. It is probably very close to reality. The problem gets back to my old pet peeve about how the press and most individuals continue to use median and average interchangeably. 

Let us repeat the lesson that I have mentioned now and then in previous posts. Here are two key points:

1) A person can drown in a river with an average depth of six inches. If you had a reasonably good statistics professor, the lecturer would have used this homely analogy to stress the weakness of average as a statistical benchmark.

2) Let us repeat one more time the popular but effective joke showing how averages do not reflect reality—Bill Gates walks into a rural bar with 29 people in it. Let us assume that Mr. Gates has a net worth of $100 billion. The AVERAGE net worth of the people in that bar now sits at 3.3 billion dollars (100 divided by 30). But the more meaningful number is the median net worth (the 50th percentile with approximately half you sample over and the other half below the median) is $80,000.

Is point #2 an exaggeration? Of course. Yet it is what is happening in America today where a relative handful of people of extreme wealth are pulling up average numbers. The wealthiest 1% now have more net worth than the entire American middle class. Wealth skews are getting so sharp that we are beginning to look like many developing countries in terms of net worth distributions.

Here are a few comments from people whom I heard from or polled:

--"I worked hard for 30 years and on paper I am a millionaire. But, I don’t feel financially secure. A replay of 2008 would cut me back quite a bit. I still worry about losing my job, getting my kids through college, and saving for retirement. As you wrote in a post a few months ago, a million bucks is not what it used to be.”

--"When my wife showed me the news headline, I felt as if I was a total failure. Finally, she has stopped telling me that we are below average.”

--“This looks good and feels good, but we are in a tech stock bubble and real estate bubble. When one or both burst someday, people will get their comeuppance. No, we are not millionaires.”

--“I guess it is a milestone of sorts. I just keep flailing away at work. As a young adult, a million was my goal. It feels hollow and is not at all soothing. We are nowhere near the 1%.”

My advice is do not let the average figure get you down. If you are worth more than a million, great, but depending on where you live, life could still be a struggle given high taxes or cost of living or perhaps the majority of your net worth is tied up in your primary residence so everyday expenses are still a burden. If you are below a million, remember that median net worth for people in their fifties was about $300,000 in this study ($272.8k for 50-54 and $320.7k for 55-59).

Schools do a rotten job of explaining the difference between average and median. The media does not help. Thanks for reading my rant.

If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com or leave a message on the blog.