Friday, August 19, 2011
A Quick Lesson In Statistics
Did you hear about the guy that drowned in a river which is, on average, 8 inches deep?
I’ve been taking a look at some taxable income statistics from the IRS.
I studied statistics at both an undergraduate and graduate level. In fact, the single hardest course I took at the University of Missouri was Nonparametric Statistics. As I was also doing my graduate tax studies at the law school, that is saying something.
Let’s go through a little exercise.
Say that you and 199 of your friends live in a splendid closed-gate community which we will call Hamiltonville. Your community is especially prosperous, and every adult makes exactly $200,000 a year. You each have a net worth of $2 million. You are - by all reckoning - successful, and you feel and act that way. Congratulations.
Now, something happens…
Steve Jobs moves into your neighborhood. You know Steve Jobs: chairman of Apple, ridiculously successful businessman, widely considered as a technology visionary and the driving force behind Apple.
And also worth approximately $6 billion.
There are now 201 people in your neighborhood. Prior to Jobs moving in, the average net worth was $2 million. Everybody was affluent.
After Jobs moved in, the numbers are different. The average net worth is now approximately $32 million. Your paltry $2 million is WAY below average. In fact, you are approximately 93% below average. Why, you have been virtually impoverished overnight!
One could see severe wealth inequality in this picture.
Question: are you any poorer?