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.
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.
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 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.
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.
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?
Again, this is just for funsies. Just to show the power of these concepts I’m sharing with you guys.
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!