100 years from now your $4,000 a month budget will be about $256,000. A MONTH. In the last century incomes doubled 6 times or, otherwise stated, an increase of 64 times (2^6=64 for all the geeks out there). Today you are going to have to imagine — how are you going to spend it all? But, before we even get to the future, let’s talk about today.
I’m sure you just read my title and laughed. You probably had visions of butlers, mansions, and super expensive cheese or something. “I’m not rich” you said. Here is the thing – you are. You are a billionaire. Yes, YOU – are a billionaire. Right now. How could that be possible though? I’m just your average Joe or Jane reading this on my laptop, with my lightning fast internet connected phone in my pocket, sitting in my 72 degree temperature controlled room, waiting for my food to be delivered to me potentially – even though I have a vehicle of my own that I can use to go anywhere at anytime. As you read that you hopefully got the point that you have a lot. “BUT EVERYONE has that stuff,” you hear yourself muttering. Sorry Richie Rich – you are freaking rich – deal with it.
So how are you a billionaire? Let’s travel back in time to the 1900’s. I’d ask you to close your eyes and think about being there – but this is a Blog and vision is important to reading. So, just do that thing you do when your boss is talking to you and you are pretending to listen — but you’re thinking of something else.
Boss:” So I’m going to need the XJT report tomorrow, and if we could do an analysis of the Madison deal by Friday that would be great”
Me: *Thinking* What do they call a group of Monkeys? A Meese? A Murd? I need to Google that.
Looking at department of labor statistics for the time, the average income in 1900 was actually $438.00/yr. The average household 100 years later was around 30-35k dollars more, which is about 64 to 70 times more money. Of course there is that pesky thing called inflation. So maybe you did some math adjusting your income to inflation (I know you didn’t actually). So let me do that for you, let’s say you make $50,000 a year. So for someone in 1900 to have the equivalent of 50k/yr we need to adjust for around 2.5% inflation per year for 120 years. So in 1900 a yearly income of $2,582 is equal to 50K today. However we already said above the average person made just 438 dollars.
Or just skip all that math, and look at a chart.
Okay, so that’s a little different. The “average person now-a-days” makes about 5-8 times more than the “average” person back then even after adjusting for inflation (because 2582 is about 5x more than 438 if you weren’t following along). So pretty much everyone is living like someone making a quarter of a million a year, even after inflation!
However, we aren’t talking about being measly quarter millionaires. I mean that only sounds rich because you are being a douche and putting your income in terms of millions when you aren’t even halfway there.
Douche: “Yeah, i had a good year last year. I made about a fifth of a quarter of one-half a Mil. I don’t even have time to say million anymore honestly, except for just then.”
Me: “oh cool.”
So let’s take a look at some of the wealthiest Americans at the time (Andrew Carnegie, John Rockefeller, and Henry Vanderbilt). Did they have lots of land and giant houses – yes. However if you owned 500 acres today in the middle of Wyoming, even with a gigantic house without modern amenities would you feel rich? Does building a 50,000 square foot blanket fort make you wealthy? Actually that’s pretty kick-ass so bad example..
Douche (Todd): “Want to come over to my 50,000 square foot blanket fort I built?”
Me: “I GET IT, YOU MAKE LIKE 1/50th OF A “MIL, TODD!”
Me: “But yeah, that sounds awesome.”
The Biltmore Estate, built in 1901 – was one of the first houses to have electricity, which was mostly because of their friendship with Thomas Edison. Electricity was dangerous enough at the time that they had to have massive fire proof walls. The switchboard alone was 16 feet wide, and the total power of the generator used (no power plants at the time) was 40 Kw. Eventually, they also installed another 100 Kw generator to help heat their pool and the house. Today the average American uses 867Kw per month! Essentially the richest man on the planet spent millions in 1900s money, to have the same kind of power you have when you decide you are going to be smart and remember to turn your AC up before you leave the house.
Me: Turns the AC up 4 degrees before I leave the house
Me: “Look at me, saving the planet”
Speaking of which, actual electric COOLING was not invented for any house until 1914. It was not until a multimillionaire of the time hired Willis Carrier (one of the fathers of modern AC) to install Air Conditioning in the very first private residence. FYI – these air conditioners used ammonia to generate cooling – which is toxic to humans. The Biltmore also spent millions to have something called “in-door plumbing”. Allowing people to use a now archaic system to shower and use a toilet indoors. The wealthiest of all the wealthiest had access to cars, invented by Karl Benz in 1885, that could travel a whopping 10 MPH.
(Picture of First car)
That shitty tricycle you see above cost about the same as an average person’s house in 1885. Of course there are no TV’s, computers of any kind, freezers/fridges, dishwashers, laundry machines, airplane travel, or birthday cards that sing to you when you open them .
Debbie: “You are such a good friend, I spent double the money on a card that has a dog singing Celebrate good times c’mon!. Isn’t that amazing!”
Me: “The best part of your gift is knowing to not ask you for financial advice in the future Debbie.”
Not only do we have cars now,but you have a personal driver that you can call anywhere, AT ANYTIME (Thanks Uber/Lyft). The thing is, you can’t just look at what income was today vs. then. People often do not think about what their money can actually DO. Items and goods get exponentially cheaper over time. For $2,500 in just 1992 – you could buy an Apple Powerbook that the top of the line version had just enough total hard drive space to store only Taylor Swift’s “1989” album (about 120MB).
Wait so the most expensive laptop in 1992, can’t even hold an album Taylor Swift titled “1989”? That’s messed up T. Swift. Uncalled for.
The processing power was worse than almost every single calculator that you could buy today. This isn’t even 30 years ago. Looking at the basic math compared to a $500 laptop today, all of the computer’s specs are about 1000 times worse. Thus, if you bought that same computer today it would be 50 cents.
*At the grocery store checkout*
Me: Hmm, Tic Tacs or an Apple Powerbook.. not sure what to get..
Me: Well, the Tic Tacs are on sale for 75 cents – I think I’ll splurge.
Almost every technology has had this same trajectory. Even things you don’t consider technology have changed drastically. In the 1700’s a pineapple cost about $8,000 in today’s dollars. Now we can grow them so efficiently, without people, almost anywhere in the world.
So here you are in 2019, living a life that Rockefeller himself would envy.. and no he doesn’t just envy you because of the depression caused by ammonia released air-conditioning. Although it’s probably a big part of it.
Rockefeller: “Dang that dude is putting $8,000 pineapples on Pizza – and throwing half of it away… and i thought I was rich = (
Here is the thing though – this progress – as we have been talking about. IT IS NOT GOING TO STOP. In fact this growth is likely accelerating. There is a good chance that a billionaire today – will seem poor to someone in 2070. For most of you readers, that’s literally in your lifetime. So however you think Bill Gates is living right now, he’s essentially in poverty to your future self.
Your future self might be putting the most expensive things we know of today on their pizza. Caviar? Fried Gucci buttons? Hey, they would have thought we were crazy for the whole pineapple on pizza thing..
So what does this tell us. One – in the future people are going to make more money, and sadly for us, that’s after inflation. This means you really need to save money now. Also “retiring early” without making any more money, starts to sound like a really dumb move. More than likely your expenses will go up – A LOT. 100 years ago your budget didn’t have electricity, phones, car – literally EVERYTHING you spend money on today.
How much will it cost to do your gene therapy. I heard Virtual Rental prices for apartments have really skyrocketed! If you lived in 1990 right now – it would seem really dumb buying that 5K laptop knowing what you know now. It’s obvious to have a truly awesome tomorrow, you need to not waste too much money on technology today. BUT at the same time, really cool stuff is coming out you want to experience (like the way the 1992 Macbook guy felt then.. although macs were even less cool then). In the next post we are going to talk about how to budget your money like a Breakthrough Boss. That way you can kick ass today, and then live it up even better tomorrow as we exponentially grow.
References:
https://panam1901.org/visiting/salaries.htm
Click to access 100-years-of-u-s-consumer-spending.pdf
https://magazine.ieee-pes.org/january-february-2012/ashevilles-biltmore-estate/
https://www.livescience.com/45268-who-invented-air-conditioning.html
The Breakthrough 