This post will be a nice little break from some of the more heady, high-level concepts I’ve been tackling of late.
This is all hypothetical. It’s just for fun.
It’s not something aspirational for me. So don’t take it too seriously.
The question is simple.
Could I become a billionaire before I die?
Let’s investigate that.
Before we get started, I guess what led me to writing this piece is, I was trying to imagine the most crazy and direct way to show the extreme possibilities of combining the powers of both compounding and geographic arbitrage.
If you can get both compounding and geographic arbitrage working for you at a young age, you’re looking at some pretty incredible potential there.
But I was wondering if that potential might include, without even really trying too hard, becoming a billionaire.
One of my personal heroes, who I aim to emulate in some respects, is Warren Buffett.
I admire his character, teachings, philanthropy, and philosophical musings far more than anything he’s done with investing.
That said, he’s obviously done extremely well with the investing, too.
He’s a billionaire many times over.
I never thought I’d join him in that elusive billionaire club, nor did I ever aspire to. I mean, I quit my job and retired in my early 30s, giving up millions of dollars in the process.
Yet there’s an outside chance that I, too, could one day become a billionaire.
I’ll show you how that might happen with some very quick math.
The Assumptions
I’m going to make some very quick assumptions that are realistic, but some of this is admittedly on the optimistic side of things. Not unrealistic. Just optimistic. And I’m also stretching the definition of a billionaire, at least by US conventions.
I’m first going to build in the expectation of a 10% compound annual rate of return on the FIRE Fund moving forward. This is right in line with the S&P 500’s long-term rate of return, so we’re basically just supposing that the future will look a lot like the past has. I’m not building in any outperformance on my part. This is assuming market-like return moving forward.
I’m then going to assume that I’ll live until 86 years old. That’s 50 years from now. That’s pretty close to Buffett’s age right now, so we’ll see how much I can emulate him. For perspective, this is about nine years longer than the average life expectancy for a US male. Considering my health and lifestyle choices, I don’t think this is too much of a stretch.
I’m modeling in $0 in annual investment of fresh capital. I’ll likely end up investing almost $12,000 for the whole of 2018, but I’m factoring all of that out because you could just as well argue that’s akin to dividend reinvestment. I believe this is actually a conservative number, but I also plan to scale philanthropy over time (which will probably offset any active income increases).
I’m not factoring in taxes or inflation for the sake of brevity and simplicity. Again, this is just a fun, hypothetical piece. I’m not performing rocket science here.
I’m assuming the exchange rate between the dollar and the baht remains constant. $1 currently equals 33.06 Thai baht. This is because I live indefinitely in Thailand as an early retiree and spend in Thai baht.
Let’s now run the numbers…
The Math
The FIRE Fund shows a market value of $368,459.47 as of the last update.
If we use a simple compounding calculator to compound that $368,459.47 at a 10% annual rate for 50 years, with annual additions of $0, we end up with a future value of $43,253,771.43.
Multiplying that $43,253,771.43 by 33.06 (the current exchange rate between the US dollar and Thai baht) gives us a final tally of 1,429,969,683.48.
Becoming A Billionaire
So the math shows that there’s a chance I’ll have almost 1.5 billion at my disposal down the road.
That’s insane!
Of course, it’s in Thai baht. So that’s a pretty big technicality I’m using to enforce my point.
However, it doesn’t make too much of a difference in reality.
If you were to tell the average Thai person that you’re worth more than a billion baht, the reaction you’re going to get, formed by their own connotations about that kind of extreme wealth relative to the average person, would be much the same as what you’d get if one American told a fellow American they’re worth more than $1 billion. A billion baht is a lot of money when you consider that minimum wage over here is a bit over 300 baht per day.
It’s such a ridiculous amount of money, it’s well past the point of superfluousness.
Indeed, more than a billion baht buys you just about anything, in Thailand, you could imagine a billionaire going after. You could basically live to the limit of your own imagination. There would be no practical limits to your lifestyle.
For example, you could live in the nicest accommodation in the entire country. Renting out a private island and flying in a private jet would be more than accessible at this level of wealth over here. There’s no restaurant you couldn’t eat at. No event you couldn’t attend. No clothing you couldn’t wear.
Does It Matter?
Of course, I’d never want or do any of this – regardless of how much money I have.
Instead, I’ll most likely still be living in a fairly nice but simple apartment, walking everywhere, and eating my street food – even if I do have a billion or two at my disposal.
It’s not like Warren Buffett lives in his dated Omaha home and eats at McDonald’s every day because he can’t afford more. It’s simply about valuing value itself and staying authentic to oneself. To each their own, but I don’t see the point of lighting money on fire just because I can.
Indeed, I already live a life much like Buffett’s life now – our lives are almost at parity, which is something Buffett himself will tell you. We both sleep on mattresses at night, have ready access to basic goods/services, and eat similar food. This makes the idea of expending needless and unwanted energy going after a lot more money not terribly worthwhile.
As such, my actual lifestyle won’t change too much over the course of the rest of my life. I’ll probably travel a bit more as I execute my ideal snowbird solution. I’ll end up giving away more money down the road as I ramp up philanthropic efforts. And I honestly wouldn’t mind eating sushi more often. That’s about it, really.
So would becoming (or not becoming) a billionaire (or even a millionaire) actually matter?
No.
Again, this is just for funsies. Just to show the power of these concepts I’m sharing with you guys.
Conclusion
I thought this was a neat idea to explore. It’s a quick break from some of the bigger concepts I’ve enjoyed exploring recently.
To answer the question posed at the beginning of this article, the answer is: yes.
Yes, I could become a billionaire before I die.
It’s not something I’m actively chasing after (an accidental billionaire?), but it is kind of fun to extrapolate out the combined effects of compounding and geographic arbitrage to see what’s possible.
Meanwhile, however, I’ll continue to enjoy the ride and live out my early retirement dreams.
Keep in mind, this was only a thought experiment to show the combined power of compounding and geographic arbitrage. But even if you don’t have any designs on ever moving abroad, you can still see what the result above was in dollars. That result was more than $40 million – and it didn’t even require adding any more capital. There’s nothing herculean about letting compounding do its magic.
This just goes to prove that a compounding snowball simply requires starting early, having a little bit of snow, staying consistent, and having a long hill in front of you. Take advantage of that ASAP!
What do you think? Was this fun? Have you ever, just for fun, extrapolated out some numbers for your own situation?
Thanks for reading.
Image courtesy of: iosphere at FreeDigitalPhotos.net.
P.S. If you’re interested in FIRE, and even perhaps one day becoming superfluously rich, check out some fantastic tools and services I’ve personally used on my way to becoming financially free at 33!
How about moving to Venezuela and becoming a trillionaire 🙂
Andrew,
Sure. I might be able to afford a loaf of bread then! 🙂
Cheers.
That’s not bad at all. It’s somewhat possible. Being a billionaire in Thailand would be pretty awesome. I don’t see it for us, though. In the past, it took around 7 years to double our net worth. It’s slowing down as we get older, so probably 10 years realistically. That’s not going to get us to a billion even in Thailand. That’s all right. I’m fine with it. 🙂
Joe,
It’s neat to see the calculations laid out like that, but it’s all way too much money. I plan to scale philanthropic giving over time, so the numbers will surely start to reverse at some point down the road. This is more for fun than anything else. It’s cool to see what some of these concepts can do when they’re supercharged.
Regardless of how things go, I think I’ll still be able to afford a bowl of Khao Soi for you when you end up making it over to CM. I don’t need to be a billionaire for that. 🙂
Best wishes!
Nice little read Jason. I always liked reading about your new investments and the annual dividend it supplied to you or any dividend increase you received. Then you calculate the amount of money you would have had to invest to get that same return.
This, and your explanations of compounding never cease to impress me… no matter how many times I hear / see it 😀
Keep it coming baby!!
Gerard,
Thanks a lot. Glad you enjoyed it! 🙂
Yeah, it’s always fun for me to try and explain or show the power of compounding in a slightly different light. Being able to layer geo arb on top of that made it even more exciting this time around. I obviously have no idea how much wealth I’ll end up with (especially seeing as how I’ll end up giving a lot away when I’m older), but I sure do hope that my projection for living into my mid-80s holds up!
Best regards.
Lol, I doubt you’ll be walking everywhere at age 86.
Someday I’d like to see you post your expanded thoughts on philanthropy. I’ve known people who give till it hurts. I’ve known others that maintain that they’ve never taken charity, so they don’t give it. Many, many others who give because they feel its an imposed obligation. Some are giving from the heart, others give thoughtlessly, others give for show. I give a small amount to established charities. I give more to people I see struggling. A woman with a bad foot and 2 jobs will always get more from me than a fat guy with a sign.
I feel its a complicated subject worthy of reflection. I enjoy your reflections on everything.
Fred,
Ha. You might be right about that one. I just hope I’m still alive at 86! 🙂
I’ve written about philanthropy a couple times. It’s not something I like to harp on. It’s up to an individual to give (or not give). One of the articles I’ve penned is linked to above. I might expand on it even more in the future, but that’ll depend on how long I continue to write. I’d be surprised if I’m still writing at the same time that philanthropy becomes a very large part of my life.
Cheers!
Funny coincidence how I just realized this week my portfolio passed 200K in value – in dollars! As a finn I think in euros, but still pretty nice. Like yourself, I don’t care that much about my portfolio size, only dividends. However, when I reach that 200K in euros, commissions go down a little bit, and that’ll be cool. It’s one of my goals for 2019 🙂
Mika,
Congrats on the milestone! 🙂
Although the portfolio value doesn’t matter, those lower commissions will definitely be nice. I’m only able to buy small lots because I don’t pay fees any longer. I didn’t have that luxury back when I first started.
Best regards.
Hey Jason,
Fun article. It’s always great seeing the effect of compounding over long stretches of time. Even more impressive when you assumed no active contributions to the portfolio over that period.
I’m with you on the desire to eat more sushi. I could go for that every day.
Take care,
Ryan
GRB,
Definitely fun. The eyeballs start to pop out of the head a little bit when you see the numbers extrapolated way out. It’s more for funsies than anything based in reality. 🙂
Yeah, if I’m being completely honest about lifestyle sacrifices, I don’t eat sushi quite as much as I would if I had some crazy amount of money. I love the stuff, but you have to justify the value there. It’s a bit of a stretch for me when I know I can get a tasty Thai dish for 80% less money.
Cheers!
Average people usually underestimate the power of compounding. You’ve shown the end result using a simple calculation.
$43,253,771.43 will be a heck lot of money anywhere in the world, even after 50 years. You don’t need to be in Thailand to enjoy the life you wanted to.
If you make a right move (like what Warrant Buffet & Charlie Munger did), then you could easily become a Billionaire because you have the knowledge and skills set to do that.
Best Regards,
S Arun,
Absolutely. Even if you factor out geo arb, we’re still talking about over $40 million here. Compounding is really wonderful. It might be supercharged with the geo arb layered on top, but there’s nowhere in the world where that’s not more money than you’d ever need.
Best wishes!
Hi Jason This is a great topic 🙂 I did this “fun with numbers” exercise a few months back. My great grand children will reap those benefits LOL but it was a great rainy day project on excel 🙂
I didnt add in any future assumptions that I should have, like I plan to take my SSI at 62 ( uggggh in 5 years ) and plan to invest ALL of it so even if I make it into my 80’s thats decades of added monthly investments. I should plug that in and see what happens 🙂
I am also looking at wasted time / money things for the new year and the one big item that keeps coming up is cable tv !!!! $195 per month to watch tv ! I need to convince my wife that has to go… I read an article the other day the author used JNJ as an example if you had invested $250 per mo into JNJ and reinvested the dividends your $90,000 investment would be over $1.4 million even better is the quarterly dividends would be over $17,000 or over $68,000 per year. So the actual cost to watch wasted tv is roughly a Million dollars that is very wasteful !
As far as philanthropy goes, I got an first print of JD Rockefeller book Reminiscence of men and events ( very good reading if you can find it). He dedicates a whole chapter ( about 1/4 of the book in pages ) on the art of giving. Most people dont realize that JD gave away what in todays money would equal to the top 4 or 5 richest people today, the equiv of 100’s of billions of dollars.
Giving back is important to me and I always do it on the quiet no need for thanks and the receiver has no need to feel they owe me anything in return 🙂
Bob,
Compounding is pretty amazing. The farther out you can extrapolate the numbers, the bigger they’ll be. Once the numbers get big in absolute terms, that’s when the compounding becomes explosive and exponential. This is why it’s so important to start young. I got a late start. If you can get going at 18 or 20, you’re in an incredible position. It can’t be overstated.
I haven’t paid for TV in a very long time. Internet, on the other hand, is vital. But I don’t really get the point of paying for television. It’s capital that could be put to better uses, in my opinion. Then again, I rarely watch TV.
I’ll have to check out that book. I’ve pretty much solidified my views on philanthropy in a way that makes sense for me, but it sounds like a very interesting read.
Cheers!
Great article as always, Jason!
How much money was it in your FIRE-fund when you took advantage of geoarbritage and moved to Thailand?
Route2fi,
Thanks a lot. Glad you enjoyed it. Just wanted to put out a lighthearted, fun piece. 🙂
I can’t recall exactly what the FIRE Fund was worth when I left, because I honestly don’t track it. If it weren’t for the updates here on the blog, I’d be mostly oblivious to it. But I’ve invested about $12,000 in capital over the period of time since I left the US, so that gives you a pretty good idea. The Fund hasn’t changed much, but the passive income is up nicely thanks to regular dividend increases and the second book I wrote.
Best regards.
Hi Jason,
Afterall, it’s just a number. The important things are to focus on things one likes and do them on own terms. This is the luxury of being free to do so on our own term. The numbers are secondary.
My two cents worth of views.
WTK
firewtk,
Definitely agree. It’s all meaningless conjecture. How much money I do or do not end up with will likely have zero impact on my day-to-day life. If you build your life around the right things, you’ll find that money matters almost nil. 🙂
Still, it was neat to go through the calculations. Pretty crazy stuff!
Cheers.
Hi Jason, money is just a tool to enable us to to do the things which we like. I agree with you that the money and the involved figure means nothing in enriching our life. However, it frees us from the obstacles which prevents us from enriching our life.
firewtk,
Right. That’s why I mentioned “building your life around the right things”. Structure life in a way that prioritizes autonomy and flexibility, and you’ll find more money beyond that point becomes superfluous.
Cheers!
Jason, I like your word of autonomy. This is precisely the way in which I will like my life to be included. The “superfluous” gives me a new prespective of knowing “what is enough”. This is the reason why I have yet to pull a trigger on the full-time corporate life with the fear of the safe figure of “what is enough”. I note that you mentioned the topic of “the math is moot” which is precisely the answer which I am looking for. This is indeed the true perspective which is in line with my desired values. Thks.
There is a hypothetical subtopic that should be mentioned for more enjoyment, the difference of total wealth versus passive income rate. A billion in Thai or multi million in US$ is a great amount of net worth in cash, but wouldn’t increasing passive incomes to say $700,000/year at 4% from assets be better than $18 million in the bank in cash?
You should run a breakdown of hypothetical extra spending on greater amounts of passive income, and play a game of “How to spend it all per year” in Thailand and in America.
For example:
$15k Normal expenses
$250k on accomplishing a yearly dream/impacting the world such as renting a yacht around the Mediterranean with 12 friends for a month? Or buying 1,000 acres to donate to a national park.
$100k to donate to friends/homeless you see face to face
Etc.
fyc,
You could definitely look at the passive income, but I wouldn’t need to write a whole post on it. My portfolio yield has stayed roughly in a 3.5% range as it’s grown, and I don’t see that really changing much over the long run. It’d be very easy to take this final result and assume you’d be earning something like $1.5 million per year in dividend income. Of course, it’s all well past the point of superfluous wealth and passive income, and I mentioned that philanthropy will be a serious drag on my eventual real-life outcome.
Cheers!