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Comment by metacritic12 | Hacker News Reader

Grievous is absolutely the right word -- stocks, flows, and dimensions are cherry picked to have maximum verbal impact without looking at whether the underlying measure even makes sense.

One of my favorites is something like "the richest 10 people have more net worth than the bottom 40% of Americans SUMMED". Well the bottom 40% of Americans are in debt, so if you have $1, the above statement is true for you too!

The sleight-of-hand happens with the word "net worth" which usually means financial or in-bank net worth. For most of the population, their actual worth is stored in their human capital. If you account for that, I assure you the top 10 or even 100 richest Americans do not have greater worth than 150 million bottom Americans (to proxy this, look at income).

A easier way to visualize this is to consider the statement "Joe Biden owns more cars (3) than the bottom 30% of the US SUMMED (0)". Cars is such a weird dimension of inequality.

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> the bottom 40% of Americans are in debt

It's not clear how that makes inequality sound any better.

> For most of the population, their actual worth is stored in their human capital.

What does that even mean?

> Cars is such a weird dimension of inequality.

How so? Cars are freedom. Almost everything in life is more difficult without a car. It's difficult to shop. Difficult to find a good job and commute to that job. Difficult to move to a better city with more jobs and/or housing.

If it makes you feel better, its credit and debt all the way down. Your money can only be created through the creation of a corresponding debt, for which the money for interest was never created. Its not only the bottom 40% in debt, it's the entirety of human civilization.

The bottom 40% of Americans have consumed goods and services in excess of their current resources. There was a time early in my career when I was in debt (school loans, mostly). Someone had lent me money that my family and I didn't have and I was able to use that money to attend college. I was able to use that college degree to help me start my career.

I was able to buy my first car before saving up the full amount for it. I was able to buy my first house (and later our current house) without saving the full amount.

Debt, used properly, can be a very useful and productive tool. Banning debt doesn't help all poor people and surely hurts many of them.

> Banning debt doesn't help all poor people and surely hurts many of them.

Nobody mentioned or suggested banning debt.

The problem for the bottom 40% isn't that they're spending too much; the problem is "their current resources", which are negligible.

I was going to write a post on this, but this one nails it succinctly. The Dave Ramsey view of the world that says that all debt is bad is probably too simplistic.

If you're borrowing to buy a car you could never afford to impress your neighbor, that's probably not a good idea. If you've just had a kid and can't afford to pay cash for a car that has room for a seat and you have the choice of saving up for three years to buy one, or taking a 36 month loan now, then that interest is probably excellent value for money.

We start our lives in debt to the bank, and the bank ends up in debt to us - the "zero" point is actually not that interesting.

>> For most of the population, their actual worth is stored in their human capital.

> What does that even mean?

for a person with no savings, i.e. no investments, it means that income from their wages is all the income they have.

if you have $500,000 invested in the stock market, you would expect income on average to be 7% of that per year, or $35,000. It's a nice boost to your income, but probably not enough to quit your job. If you job also paid you $35,000 a year, we could say that 50% of your worth is in your human capital because your wages are half of your income stream so it's pointing out an equivalency between an investment that returns $35K a year and a job that returns $35K a year. Other than literally being a value judgement, it's not a value judgement.

> it means that income from their wages is all the income they have.

That's clear enough, but income, regardless of source, is already figured into net worth.

Whereas the OP seems to be talking about net worth being a bad measure, and instead there's some amorphous "actual worth" that's "stored" somewhere (obviously not in a bank account or other investment).

> the bottom 40% of Americans are in debt

That this somehow reads to you as totally normal and not at all anything to worry about tells me a lot about your perspective.

edit (addendum):

> "Joe Biden owns more cars (3) than the bottom 30% of the US SUMMED (0)"

Fairly certain the bottom 30% owns more than 0 cars in total.

This would logically be read as "bottom 30% of Americans, ranked by car ownership [rather than net worth or income]". I suspect that there are in fact more than 30% of Americans who own zero cars.

18% of Americans are 14 years old or younger [and presumably almost none of them own a car], so if 15% of those 15 years old or older don't own a car, the total is over 30%.

Fair point. Even solving for age, I would assume this holds as cities with metros mean roughly 80% of people don't even need a car.

It's still an absurd comparison, as 0% of people don't need money.

> One of my favorites is something like "the richest 10 people have more net worth than the bottom 40% of Americans SUMMED". Well the bottom 40% of Americans are in debt, so if you have $1, the above statement is true for you too!

That interpretation is even more shocking than "the rich are so rich". Like, a very significant part of your population have to resort to borrowing money in a death spiral to bankruptcy, just to survive. While 40% just barely surviving paycheck to paycheck is bad enough, 40% in debt is even worse because the people who barely make do come on top of that.

The lower class minority struggles day to day, and the fat cats at the top make bank despite the world being embroiled into a multitude of parallel crises.

>That interpretation is even more shocking than "the rich are so rich". Like, a very significant part of your population have to resort to borrowing money in a death spiral to bankruptcy

What. No, look, for example: assessed from a "net worth" perspective, almost every single college student is in the "debtor" column, because the net present value of a college education isn't something that shows up in the calculation.

If I borrow money to buy a car, but have no substantial savings, then I'm a debtor - but if I can easily afford the payment then there's no problem, is there?

You're making one of the exact same semantic errors as the OP was talking about.

> the net present value of a college education isn't something that shows up in the calculation.

Sometimes it never shows up. Mine never did. And I still have student loan debt.

When you're calculating values, consider that different students have very different levels of student debt despite receiving the same education. Rich kids with the bank of mommy and daddy don't need to borrow at all.

> If I borrow money to buy a car, but have no substantial savings, then I'm a debtor - but if I can easily afford the payment then there's no problem, is there?

No, because your net worth is not negative.

>No, because your net worth is not negative.

If I borrow money to buy a car, and I have no substantial savings, then for sure my net worth is negative because a car is a depreciating asset.

It really depends on what "substantial" and "easily" mean.

If you're truly living paycheck to paycheck, then you are actually in danger, because paychecks can easily stop, e.g., layoffs, and then you won't be able to "easily" afford your car payment.

This is not even mentioning other unexpected expenses that can arise and suddenly make your easy car payments not so easy.

> What. No, look, for example: assessed from a "net worth" perspective, almost every single college student is in the "debtor" column, because the net present value of a college education isn't something that shows up in the calculation.

And that's completely correct, given that there is an absurd amount of garbage colleges/degrees out there, that there's a massive oversupply of people with degrees, and that companies nowadays require degrees even for underpaid paper pusher jobs because it allows them to legally discriminate against otherwise protected classes. It's fundamentally impossible to assign any positive value to a college degree unless the person is actually employed.

The original quote sounds like it's saying

> The richest 10 people are so rich that they have more than...

When, in reality,

> The poorest 40% are so poor that they have less than a normal poor person that only has $1 to their name

The fact that the richest 10 people ALSO have more than those 40% doesn't really add anything to it.

> The fact that the richest 10 people ALSO have more than those 40% doesn't really add anything to it.

Oh yes, socially this point definitely adds to the discussion. Cap everyone's maximum wealth at 1 billion $ - that is more than enough for anyone and their descendants to never have to work a single day in life again - and tax and distribute the rest towards the poor.

You'd lift a massive amount of people out of utter poverty that way, while not even inconveniencing the fat cats riding on the backs of their employees - and you'd get a nice economic boost on top, like with the covid stimulus funds.

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