Day: March 13, 2025

I keep seeing reports that Elon Musk is the wealthies man on earth. Typically such reports use net worth – a fairly simple calculation that takes assets minus debts. As he’s considered in his current role in government – a private citizen – his actual bank account balances are unavailable but his stock ownership is publicly reported as part of his compensation package of the publically traded companies he owns.

The problem with wealth calculation is it assumes that assets are fully liquid and accessible, and that if Elon Musk wanted to fill up his bank account tomorrow, he could sell all his stocks and have a $234 or so billion dollar balance. Of course, that is not a realistic calculation – as many of shares may be restricted by his contract on how quickly he can sell them to avoid depressing the value of stock he owns, not to mention if he were to sell of a big block of stock, it would trigger a reduction of value to stock as the market became flooded with shares. The tax man would also take a large portion of proceeds as Capital Gains taxes when such stock was sold off.

Wealth is werid in that way. Many people who have net assets of significance don’t actually have access to that much case. An extreme example might be farmers and especially dairy men, who might have multi-million dollar holdings when you consider land, cows, equipment and crops. But they struggle to feed their own family off that limited milk check they get, with necessities of supporting the business like repairing and replacing broken farming equipment and paying property taxes on land taking a fair greater priority then their own needs, if they want to their business and ultimately their farm operation and income to continue.

Net assets is a valuable comparison in sense it gives some kind of estimate between groups of people about wealth. People can sell off illiquid assets, even if it comes at a steep cost compared to on paper value. But does it provide the great ability of comparison that people often give it? Assuming Elon Musk doesn’t want to canabalize his assets, how much money does he really have? How much money is actually in his bank account that he can draw upon today, without selling assets? We really do not know.