What It Takes to Be in the 1% Around the World

[GordMay]

If You’re So Smart, Why Aren’t You Rich? Turns Out It’s Just Chance.
The most successful people are not the most talented, just the luckiest, a new computer model [1] of wealth creation confirms.
More about ➥ https://www.technologyreview.com/201...s-just-chance/

Or ➥ https://getpocket.com/explore/item/i...=pocket-newtab

[1] “Talent vs. Luck: The Role of Randomness in Success and Failure” ~ by A. Pluchino, A. E. Biondo, & A. Rapisarda

”The largely dominant meritocratic paradigm of highly competitive Western cultures is rooted on the belief that success is due mainly, if not exclusively, to personal qualities such as talent, intelligence, skills, efforts or risk taking. Sometimes, we are willing to admit that a certain degree of luck could also play a role in achieving significant material success. But, as a matter of fact, it is rather common to underestimate the importance of external forces in individual successful stories ...”

Abstract ➥ https://www.worldscientific.com/doi/...19525918500145

Full Paper ➥ https://www.worldscientific.com/doi/...19525918500145

[valhalla360]

Originally Posted by GordMay

If You’re So Smart, Why Aren’t You Rich? Turns Out It’s Just Chance.
The most successful people are not the most talented, just the luckiest, a new computer model [1] of wealth creation confirms.
.............

I don't doubt that luck does play a role.
- Simply being born in a rural 3rd world country is going to make it many times harder to become 1st world wealthy.
- Likewise, when you talk about billionaires, they are outliers who almost always have a major luck factor. Typically it's luck early on followed by tried and true wealth building measures.
- Look at your average sports/music/movie stars, once the fame runs out, a huge percentage quickly burn thru the money due to their financial "talent" (or lack there of). Same with "lucky" lottery winners. An amazing percentage wind up broke in just a few years.

Likewise, you could argue it's lucky to have a good role model who teaches you how to build wealth. Essentially "nature vs nurture" comes into play.

But what exactly is "talent" and what is "luck"?

I'm in engineering and I find, it's not the technical talent that drives people to the top of the field but people with reasonably good technical talent who also have good people skills, you see move up in management...a misplaced measure of "talent" can distort the analysis.
- Top tier technical talent often has minimal impact on the companies bottom line. They often wind up in the back room crunching numbers and the client never sees them.
- A great communicator who has poor technical talent likely will fail because even though they come across well, the failure to get the technical aspects right eventually comes back to bite them.
- A moderately talented individual with good communication skills, knows enough of the technical details to speak intelligently about the technical side but also sell to clients.

More on the financial side, you have "apparent" financial tellent. They will go on about "day trade", "leverage", "arbitrage" , and go on about a host of fancy high end technical terms/talents (and many actually do understand the terms and what they mean) but the ones who generally wind up retiring with 7 figure nest eggs are the slow and steady folks who invest simply and for the long term without getting fancy about it.

I suspect a lot of the issue with these studies is differentiating the old idea of "book smart" vs "street smart". They also are simply comparing an "assumed" normal distribution of talent and point that the results don't follow a normal distribution. Of course it doesn't because that's not how compound interest works.

[letsgetsailing3]

Originally Posted by GordMay

If You’re So Smart, Why Aren’t You Rich? Turns Out It’s Just Chance.
The most successful people are not the most talented, just the luckiest, a new computer model [1] of wealth creation confirms.
More about ➥ https://www.technologyreview.com/201...s-just-chance/

Or ➥ https://getpocket.com/explore/item/i...=pocket-newtab

[1] “Talent vs. Luck: The Role of Randomness in Success and Failure” ~ by A. Pluchino, A. E. Biondo, & A. Rapisarda
Abstract ➥ https://www.worldscientific.com/doi/...19525918500145

Full Paper ➥ https://www.worldscientific.com/doi/...19525918500145

Yes, and it turns out the harder people work, and the smarter they are, and the more ambitious they are, and the better their EQ is, the luckier they get.

There aren't a lot of lazy, dumb, self-made billionaires.

Have a look at any speech by Charlie Munger, or Warren Buffett. Did they have to be billionaires? No. But they were going to be ridiculously successful at anything they ever did.

Many successful people have an 'it' factor that scientists may have trouble defining.

But sure, if you're trying to bet on the right researcher for scientific discovery (which is the focus of the article), it sure would sense to bet on more than one of the promising ones, as there's a big difference between first and second place.

[GordMay]

Originally Posted by letsgetsailing3

Yes, and it turns out the harder people work, and the smarter they are, and the more ambitious they are, and the better their EQ is, the luckier they get.
There aren't a lot of lazy, dumb, self-made billionaires...

Indeed.

[danstanford]

Originally Posted by GordMay

If You’re So Smart, Why Aren’t You Rich? Turns Out It’s Just Chance.
The most successful people are not the most talented, just the luckiest, a new computer model [1] of wealth creation confirms.
More about ➥ https://www.technologyreview.com/201...s-just-chance/

Or ➥ https://getpocket.com/explore/item/i...=pocket-newtab

[1] “Talent vs. Luck: The Role of Randomness in Success and Failure” ~ by A. Pluchino, A. E. Biondo, & A. Rapisarda
Abstract ➥ https://www.worldscientific.com/doi/...19525918500145

Full Paper ➥ https://www.worldscientific.com/doi/...19525918500145

I expect those nodding their heads at this study will be encouraging the folks in charge of their pension funds to invest in a less targeted manner.

[danstanford]

Originally Posted by Mike OReilly

Here are the Canadian tax brackets for 2022:

• 15% on the first $50,197 of taxable income, plus
• 20.5% on the next $50,195 of taxable income (on the portion of taxable income over 50,197 up to $100,392), plus
• 26% on the next $55,233 of taxable income (on the portion of taxable income over $100,392 up to $155,625), plus
• 29% on the next $66,083 of taxable income (on the portion of taxable income over 155,625 up to $221,708), plus
• 33% of taxable income over $221,708
• In addition, Ontarians paid a tax rate of 5.05% on the first $45,142 and 13.16% on all portions above $220,000 in 2021.

No one is paying 50%.

Mike, you are correct and I was exaggerating. To be fair, I take a high 5 figure salary and then have income I don't see which goes to pay down the principal on my commercial mortgage, and then more money to pay for the taxes on that money so that when I ask my accountant for money to buy a boat the number is around 47% of any money taken out going to taxes.

[Mike OReilly]

Originally Posted by danstanford

Mike, you are correct and I was exaggerating. To be fair, I take a high 5 figure salary and then have income I don't see which goes to pay down the principal on my commercial mortgage, and then more money to pay for the taxes on that money so that when I ask my accountant for money to buy a boat the number is around 47% of any money taken out going to taxes.

All good . Thanks.

[valhalla360]

Originally Posted by danstanford

Mike, you are correct and I was exaggerating. To be fair, I take a high 5 figure salary and then have income I don't see which goes to pay down the principal on my commercial mortgage, and then more money to pay for the taxes on that money so that when I ask my accountant for money to buy a boat the number is around 47% of any money taken out going to taxes.

There's exaggeration and then there's exaggeration...

At a little over $150k CAD (about $124k USD and very much middle class income level) if I'm reading that right:
- 29% Federal
- Provincial income tax is unclear from the info provided. but looked up and it's 11-12% in that income range.
- Add in 13% sales tax in Ontario.

That's a marginal rate of around 53%.

At higher income levels, that jumps up by another 5% (4% federal & 1% provincial), so even if you drop the sales tax, the marginal rate is 46% which back of napkin calculations...most people would equate to around half (ie: pretty close to 50%)

I would be surprised if there aren't other misc taxes floating around that increase it even more (registrations, licensing, property tax, etc...)

Admittedly, someone making $30k CAD per year will only be paying a marginal rate of around 33% but it sure looks like there are people paying 50% taxes.

Another reason, govts like income tax is it tends to be out of sight, out of mind.
- Most people once they know what the bi-weekly amount going into the bank is, as long as that amount shows up in the bank, they only check their pay stub on rare occasions like when there is a change in income.
- Sales tax, you get handed a receipt every time you buy something. (of course, some countries have responded by burying the sales tax in the item price rather than calculating and listing it separately).

[Mike OReilly]

Ontario 2022 tax rates

• 5.05% on the portion of your taxable income that is $46,226 or less, plus
• 9.15% on the portion of your taxable income that is more than $46,226 but not more than $92,454, plus
• 11.16% on the portion of your taxable income that is more than $92,454 but not more than $150,000, plus
• 12.16% on the portion of your taxable income that is more than $150,000 but not more than $220,000, plus
• 13.16% on the portion of your taxable income that is more than $220,000

Please note: "on the portion of your taxable income that is more than..."

You are not paying 11.16% on $150K. You are paying that rate on the amount OVER $150K. And so on down the line. So you can't simply add up the percentages to get your actual effective tax rate.

Also, you can't simply add 13% for HST. That assumes 100% of the income is spent on HST-applicable goods or services. That would be truly a magical feat.

[valhalla360]

Originally Posted by Mike OReilly

Ontario 2022 tax rates

• 5.05% on the portion of your taxable income that is $46,226 or less, plus
• 9.15% on the portion of your taxable income that is more than $46,226 but not more than $92,454, plus
• 11.16% on the portion of your taxable income that is more than $92,454 but not more than $150,000, plus
• 12.16% on the portion of your taxable income that is more than $150,000 but not more than $220,000, plus
• 13.16% on the portion of your taxable income that is more than $220,000

Please note: "on the portion of your taxable income that is more than..."

You are not paying 11.16% on $150K. You are paying that rate on the amount OVER $150K. And so on down the line. So you can't simply add up the percentages to get your actual effective tax rate.

Also, you can't simply add 13% for HST. That assumes 100% of the income is spent on HST-applicable goods or services. That would be truly a magical feat.

That's why I used the term "marginal tax"

[Mike OReilly]

Originally Posted by valhalla360

That's why I used the term "marginal tax"

"There's exaggeration and then there's exaggeration..."

[valhalla360]

Originally Posted by Mike OReilly

"There's exaggeration and then there's exaggeration..."

So you said "no one".

Someone making $500k and up is going to be paying an "Effective tax rate" of around 50% as the lower brackets make ever smaller portions of their income.

[goboatingnow]

Sounds about fair. Make the rich pay lots of taxes ( definition a rich person is someone earning more then me ) I need that taxation to pay for my state pension , free land travel , free healthcare. Keep having children we need lots of future taxpayers

[NPCampbell]

Originally Posted by Mike OReilly

Here are the Canadian tax brackets for 2022:

• 15% on the first $50,197 of taxable income, plus
• 20.5% on the next $50,195 of taxable income (on the portion of taxable income over 50,197 up to $100,392), plus
• 26% on the next $55,233 of taxable income (on the portion of taxable income over $100,392 up to $155,625), plus
• 29% on the next $66,083 of taxable income (on the portion of taxable income over 155,625 up to $221,708), plus
• 33% of taxable income over $221,708
• In addition, Ontarians paid a tax rate of 5.05% on the first $45,142 and 13.16% on all portions above $220,000 in 2021.

No one is paying 50%.

Ouch.

Unless I am reading this wrong, Canada taxes the poor at incredibly high rates. A single tax payer in the US making $50k CAD ($40k USD) pays 7.7%.

I dunno. Maybe they are the same if Canada doesn't charge for social services?

[Mike OReilly]

Originally Posted by NPCampbell

Ouch.

Unless I am reading this wrong, Canada taxes the poor at incredibly high rates. A single tax payer in the US making $50k CAD ($40k USD) pays 7.7%.

I dunno. Maybe they are the same if Canada doesn't charge for social services?

That's been noted by others NP. While Canada's overall effective tax rates aren't high compared to most developed nations, they aren't particularly favourable to the poor. In part this is because our federal tax brackets have shrunk considerably over recent decades. We are far less 'progressive' that we used to be.

That said, the basic deduction actually makes this bottom-bracket income more like $63,000. Nationally, our median income is $39,500, and the average is $51,300.

https://www150.statcan.gc.ca/t1/tbl1...101%2C20200101