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Paul Levy: The game of wealth



For the Monitor
Sunday, December 31, 2017

Happy New Year, and may 2018 be as prosperous for you as 2017!

We just had a banner year for wealth. In our land of equal opportunity, everyone shares in the bounty so long as they worked hard and smart – as I’m sure you did. To help you appreciate your gain, I’ve created a board game called “MIDAS.”

It’s simple. Its starting line is right here in Concord at the corner of Main and Pleasant streets. Its “board” is America itself, or more specifically the road between here and the Golden Gate Bridge, 3,000 miles away. The objective is to see how close to San Francisco you can get by buying miles with the amount of wealth you gained in 2017. MIDAS follows traditional American rules; that is, we all start equally at the same place, at the same time and with the same opportunity to advance.

Here are some FAQs that help clarify MIDAS.

FAQ No. 1: What does MIDAS consider as wealth? There are many types of wealth, and you get to count your 2017 gains in any and all of them: the added value of your home(s), the added value of your savings and retirement accounts, the added value of your stock portfolio and the added value of your business(es).

FAQ No. 2: How much does a MIDAS mile cost? Each mile costs $1 million. This round number reflects the MIDAS slogan to “just keep it simple” and is very helpful to those of us who depend heavily on our fingers and toes when counting. Each digit simply represents “1 million” rather than “1,” and if you happen to exceed $20 million and run out of digits, you’ll have enough money by then to hire a CPA or, if you’re a cheapskate, to adopt a centipede.

Here’s a MIDAS example.

I have a friend Joe who has $40,000 in stock (some owned directly and some in a retirement account). Half of American families own stock, and, within that half, the median (middle) stockholding family has $40,000 – just like Joe. Since stock prices rose an average of 25 percent in 2017, Joe made about $10,000. In MIDAS, that amount is one-hundredth of a million dollars, so Joe gets to move one-hundredth of a mile – about 52 feet or 20 steps west on Pleasant Street toward San Francisco. If the value of his house or other non-stock assets went up a bit, Joe may get a few more steps toward the Golden Gate.

While you’re limbering up your fingers and toes in anticipation of playing MIDAS, I’ll share some interesting information I learned from interviewing Elite MIDAS players. I asked them whether it was more important to work hard or work smart in 2017, and, without exception, they said, “Smart trumped hard.” Then I asked what the smartest way was, in 2017, to work smart and gain wealth. All had the same tip: own a lot of stock.

On average billionaires invest about 30 percent of their wealth in stock (much of it often in their own companies). If we apply this figure to the wealth of elite competitors like Bill Gates, Jeff Bezos, Warren Buffett, Mark Zuckerberg, Charles Koch and David Koch, and assume their stock gained the national average in 2017 of 25 percent, we can anticipate how they will do in the upcoming MIDAS race just based on their stock gains.

Gates, for example, with $80 billion of wealth at the start of 2017, had an estimated $24 billion in stock that gained 25 percent or $6 billion. He’ll buy 6,000 miles with that gain and be able to get 3,000 miles past San Francisco. The others will also get well beyond San Francisco. If the two Koch brothers join as one family, they’ll get beyond Gates.

Obviously my friend Joe with a paltry gain of $10,000 won’t be very competitive in the race this year. I gave him some advice. Since he’s a little star-struck, I suggested he get his picture taken with Bill or Jeff or the Kochs at the starting line because they won’t be around long after the gun goes off. I also gave him a health tip. Since he won’t get his usual 10,000 daily steps while playing MIDAS, he should do a lot of stretching and deep knee bends in that block between Main and State.

Hopefully you will do much better than Joe and will at least be able to keep the Elites in sight. But the great thing about America and MIDAS is that we always keep the lamp of hope burning and know that there’s always next year when we can work harder and smarter.

My pre-race research also showed that some artificial people, in particular large transnational corporations, would do well in the race if they were allowed to compete, and everyone I spoke with expects the Supreme Court to order their eligibility soon. Had the Bank of America, for example, been able to compete this year, it would have done well. In 2017, its value increased 32 percent, a rise of $54 billion (from $177 billion to $231 billion). It could have bought 54,000 miles and gone almost twice around the world with that gain. Goldman Sachs had a modest 10 percent increase in its $99 billion value in 2017, but it had just had a big 2016 gain. In the single month and a half following Donald Trump’s election as president, its value rose 30 percent! Its investors apparently didn’t foresee how many managers would quit their GS jobs and take high-level Cabinet positions in the new administration. (Incidentally, by size, BOA and GS are only 11th and 56th respectively among the S&P 500.)

I learned one other interesting thing from my pre-race research. All Elites agreed on it but asked that I not quote them by name. They said that, by far, the most lucrative investment a person can make is in politicians, and they all cited 2017 as a perfect example of that value. When I mentioned the Tax Cuts and Jobs Act of 2017 to a pair of brothers whose names I’ll keep anonymous, they said simultaneously that it doesn’t get any sweeter than this.

Just a few days ago at their board meeting, MIDAS directors decided to hold two separate races this year, one for Elite runners (the MIDAS Elite) and one for the rest of us (the MIDAS Hopeful). In the MIDAS Elite, competitors will try get as far around the world as they can. The top three winners will be awarded gold, silver and copper mines, and all other Elites will be deemed honorable mentions. In the MIDAS Hopeful, competitors will try to get as close as they can to Hopkinton. The winner will be awarded a cake which she or he is expected to share with all other competitors. Those other competitors will be deemed honorable munchkins.

MIDAS, like America itself, recognizes that there would not be Hopefuls without Elites. For, not only do Elites volunteer as race directors and offer the opportunity to compete, but they also donate the award cake. They also make sure that MIDAS ethics are prominent all along the race route from the starting line with the engraved words on its gates, “Work Will Set You Far Down the Road” to its inscription on the lemon cake: “God helps those who help themselves – so please feel free to help yourself.”

Enjoy the upcoming race, the opportunity to run in it and your bite of cake. Good luck and Happy New Year.

(Paul A. Levy lives in Concord.)