Who wants to be a billionaire?

Some are born rich, some achieve riches, others have riches thrust upon them.  Last week, the owner of a lottery ticket purchased in Illinois won a prize worth up to $1.34bn.  The ticket holder will have to decide whether to take an immediate cash prize of $780.5m, or to take the full amount in instalments over a period of 29 years.  Making this choice will, I assume, depend in part on the life expectancy of the winner, and in part on the way they would respond to Walter Mischel’s marshmallow test.

Before I think about what I would do with a billion dollars, I feel the need for a short digression.  When I was a child, the pound was worth roughly two-and-a-half dollars. The rate varied, month-by-month and year-by-year, but the simple rule of conversion was that one dollar was worth about 40p.  In those days, winning $1.34bn in a US lottery would equate to around £536m, which is a very healthy sum for sure, but only just over halfway to a billion pounds.  Nowadays, the pound is trading at around 1.20 to the dollar, which means that the lucky lottery ticket holder from Illinois is a billionaire in both dollars and pounds. In my lifetime, the pound has lost half its value against the dollar, which makes UK assets – houses, land, companies, and leading football teams – more vulnerable to foreign takeover, and which makes it increasingly hard for British citizens to move to the US without a significant short-term reduction in living standards.  The dollar benefits from the privilège exorbitant of being the leading global reserve currency, but its comparative strength relative to the pound over the past fifty years also reflects the higher calibre of economic policy making in the US.  If there were a marshmallow test for nations, I think we all know that today the UK would make no attempt to defer gratification.

Back to my main theme, which is how to go about spending a billion dollars (or pounds) assuming I had purchased that lottery ticket.  For most of human history, the very rich have tended to believe that wealth should be conspicuously displayed.  I presume that this satisfies two rather different needs, namely competition with one’s peers to show-off, which helps to foster elite network relationships; and impressing upon those with much less wealth the fact that one does not belong to their class.  F. Scott Fitzgerald once wrote, “Let me tell you about the very rich. They are different from you and me”, to which Ernest Hemingway is alleged to have replied, “Yes, they have more money.”  The difficult question is whether this definitional difference implies any other important differences, aside from higher insurance costs.  I suspect that the only real change is that when people become very rich, they quickly start to think of themselves as deserving of their wealth, which is always untrue but nonetheless an appealing story to tell oneself. 

How might a billionaire display their wealth today?  In the past, fancy clothes and jewellery were very popular, but nowadays even mid-ranking film stars can afford top designer outfits, and the prestige attached to diamonds seems to be slowing fading.  Building a mansion and driving around in an expensive car has become passé – although still popular with Premiership football players – whereas buying an island and travelling the oceans on a luxury yacht seems too discreet: only fish know quite how much money you have.  Private jets are not so exclusive anymore, even though they are appropriately indulgent when used for short trips; nowadays it seems that only space flights will do to catch the attention of one’s fellow plutocrats.  Buying a news or publishing business remains attractive, particularly if you want the world to benefit from hearing your very interesting opinions on every subject.  Once it was newspapers (Maxwell), then television channels (Murdoch), and now social media platforms (Musk, maybe): each in their own time have proven a great way to let everyone else know how rich and clever you are (or at least until you are dead, and no longer able to sue for defamation).

Expensive ‘trophy goods’ remain an excellent option for the very rich, particularly when supply is strictly limited.  During the Renaissance, the Florentine elite and the Roman popes competed for the services of the best artists and more recently several billionaires have been pushing up the prices of van Gogh, Warhol, and (dubiously attributed) da Vinci paintings.  But even though owning great art works is a sure sign of excess wealth there is the problem of how best to display them, such that everybody knows they belong to you.  And then there is the risk of theft, a problem which the ingenious Italians solved by asking Giotto and Michelangelo to paint directly onto the walls and ceiling.  I confess that I would be tempted to spend some of my imaginary billion on artwork, but the painters whose work I want to look at every day tend not to sell for ridiculously high prices.  And I also resent paying huge sums to dealers, auction houses, and other intermediaries, which seems as foolish as paying excess fees to investment management firms for poorly disguised index-tracker funds.

Another option would be to seek some longer-lasting fame, to ensure that not only my contemporaries but also those from future generations will know how rich I truly was.  Donating some money to have a gallery, a museum, or a university department named after me seems conveniently ostentatious especially if it is an elite institution in an already wealthy city.  Alternatively, I might set up a foundation in my name, rent some expensive office space, and hire a team of people – including a well-staffed department of media and communications – to disperse philanthropic gifts and investments in perpetuity. If my foundation were set up with the right legal structure, no doubt I could avoid paying taxes on my endowment, leaving me with even more resource to donate to my preferred beneficiaries.  I should probably establish a trustee appointment process to ensure that my friends and family retain power to direct the foundation long into the future.  Oh yes, and let’s not forget a large statue of me to be displayed somewhere prominent.    

It seems obvious that the billionaire lifestyle will quickly become tiresome.   Hanging out with other very wealthy people seems rather boring compared to my friends who appear to have richer lives despite their smaller bank balances.  Perhaps a better option would be to keep a little money for myself – just enough to support my Barolo habit and to finance a few foreign holidays – and give the rest away, to people who have greater need of it that I do.  By that, I do not mean charitable gifts to individuals, but investments in businesses that are trying to do some good.  The great lesson of European history over the past five hundred years has been that the well-being or the many depends primarily on the volume of money in circulation, and not its accumulation in the bank vaults and block chains of the elites.  Where there is plentiful investment, production of goods and services, and trade and exchange, then there are opportunities for work, consumption, savings, and improved well-being for all.  These are not the only things in life, for sure, but the other things that matter – friendship, family, and philosophy – are always easier to secure when there is prosperity in the land.  

Providing investment to businesses that make good products and services for their customers, that treat their staff well, that run themselves sustainably, and that care about their impact on the communities in their value chain, would be an excellent way to spend a billion pounds.  That said, my experience suggests that there are many great small companies that could usefully absorb a few million pounds of investment, without growing too big too quickly such that they lose touch with their values, and that there are only very few large companies for which this is true.  The problem of ‘scaling up’ is that beneficial impact is easily diluted and sometimes lost altogether.  This suggests that the disbursement process would be slow and time consuming: if I could make around twelve responsible investments each year, of around £8m, it would take me a decade of hard work to deploy all my money. Ten years is a big commitment of my time and mental energy: think of all the books I would not have time to read, all the galleries I would never visit, all the cities that would I fail to explore.

Throwing money away in public displays of egotism takes a great deal less time and effort than investing it responsibly in good businesses.  And that is why I never buy lottery tickets.