# The Wealth of Nations (or, who's wealthier, a Maasai elder or your average American?)

Who’s wealthier, a Maasai elder or your average American?

A few years ago, my wife and I enjoyed a marvelous hike through the bush of Tanzania while on safari. After camping in the village of Nainokanoka, we set off early with Moloton, our Maasai guide, and we walked amongst the buffalo, gazelles, wildebeest, and zebra on our way to a campsite at Empakaai, a gorgeous crater lake that legions of flamingos call home.

It was positively Edenic … I still can’t believe my wife did it while pregnant …

Anyway, as we walked through some of the villages, I noticed an abundance of domesticated animals grazing around the boma — cattle, goats, sheep, chickens.

Since this was a long hike, I had lots of time to get lost in thought. And I kept pondering the question at the top of this page.

I’m sure this is an oversimplification but consider the following: these Maasai lived in houses they built for themselves on land for which they pay no rent (as far as I know). They tend to their livestock, which nourish them, and which may be sold for cash / bartered for other goods.

Also, they’re (semi-)nomadic. If things go south, they can pick up stakes and search for a new place to live — cattle, goats, sheep, and chickens in tow.

Moreover, I can’t speak for him or about his aspirations, but Moloton didn’t seem to need much to get by. Sure, he had a mobile phone and wore a jacket under his shúkà, but when we offered him water throughout the day, or some of our gristly chicken legs to snack on during lunch, he always declined. Even on the strenuous uphill climbs.

He said he’d had some milk in the morning and was used to walking / running 40+ km a day without the extra calories.

But then, maybe he just didn’t like the look of our chicken legs.

When our safari guide, Innocent, drove us back to Nainokanoka to drop off Moloton, I asked how much these cattle and goats could be sold for in the market.

Moloton and Innocent had a back-and-forth for some time, but as I recall the cattle sold for ~\$500 per head, and the goats were worth 10% of a cow. Now, the elders of the villages we passed had at least 100 cattle and three times as many goats. Some own upwards of 1,000 cattle and thousands of goats. These are proper franchises. Again, these are assets that produce food and regenerate themselves — they literally compound themselves over time. So how much wealth did this represent? Let’s do the math. The elders we passed on our hike owned assets that could be converted to cash for at least \$65,000. This ignores the sheep and the chickens, whose wool and eggs and meat could be bartered away or sold.

The Maasai elders’ liabilities (as far as I know) are approximately \$0. Now, consider the United States of America, a country where 40% of the citizenry can’t cover a \$400 emergency expense with cash.

According to the U.S. Federal Reserve’s most recent Survey of Consumer Finances, in 2016, the median family held financial assets valued at \$23,500. A perusal of the Fed’s 1,262-page chartbook reveals that the aggregate statistic is virtually meaningless, failing to account for staggering differences in wealth by race, age, family structure, etc. Nevertheless, it is clear that the vast majority of Americans do not own income-generating assets. Unlike our Maasai elder, few Americans have assets that are compounding themselves in their sleep. For example, only 5.4% of American families in the middle quintile of incomes own a pooled investment fund (e.g., mutual funds, ETFs, etc.; see below). The most broadly owned income-generating assets are retirement accounts, but the median values for the bottom four income quintiles are woefully inadequate to the task of future expenses. Of course, the United States prides itself on being a nation of homeowners. Almost two-thirds of families in the middle quintile of incomes own their primary residence, with a median value of \$150,000.

These are assets, but they’re not liquid and there are many frictions when converting them to cash: long and expensive sales process, finding a new place to live, finding a new school / daycare for your kid(s), lugging your belongings to your new residence, registering with the DMV, etc. etc. etc.

They’re also liabilities. For example, the Fed data show 41.9% of Americans held mortgages or home-secured debt — a figure that seems low — with a conditional median value of \$111,000. More generally, 77.1% of households owed debt in 2016, with a conditional median value of \$59,800. The median debt-to-income ratio is 95.1.

I mean, American households are in debt up to their eyeballs. According to the New York Fed, as of Q1 2018, the household debt stock stood at \$13.21 trillion (including \$8.9T in mortgages, \$1.2T in auto loans, \$800B in credit card debt, and ~\$1.5T in student loans). This economy runs on credit. So, where does this leave us? Let’s take a look: My assumptions get us to a place where the Maasai elder has nearly \$18,000 more wealth than your average American.

And like, I think this is a way more favorable view of the average American’s balance sheet than is warranted — remember how 40% of Americans don’t have \\$400 to cover an emergency expense?

But maybe you feel differently. Maybe, you say, money isn’t the fount of wealth: health is, or happiness, or friends, or discretionary time.

My question to you would be: who has more of those? Your average American?

Consider the following:

Health — Americans are generally unhealthy. Half of all adults have one or more chronic health conditions; 30% of American adults have hypertension; 24% haven’t participated in any physical activity in the last month; 35% haven’t visited a dentist in the last year.

Moreover, a lot of folks can’t afford to go to the doctor. While access to health insurance has expanded dramatically since 2011, many people can’t afford to see a physician. To wit, nearly 40% of adults are enrolled in high-deductible plans, while the JPMorgan Chase Institute finds that out-of-pocket healthcare spending on debit cards increased 83% in the week after a tax refund.

Happiness — Between 2011-2014, surveys show 13.9% of the U.S. population had taken an antidepressant in the previous month, while 6.2% took an anti-anxiety medication (see Table 080 here).

Just this month the Centers for Disease Control released data showing 45,000 Americans committed suicide in 2016 — that’s enough to fill Madison Square Garden twice over, and then some — with the suicide rate increasing >30% in more than half of U.S. states since 1999. Awful.

Friends — A Cigna / Ipsos survey of 20,000 U.S. adults finds that 46% of Americans report sometimes or always feeling alone. Nearly half “sometimes or always feel as though they lack companionship (43%), that their relationships are not meaningful (43%), that they are isolated from others (43%), and / or that they are no longer close to anyone (39%).”

Discretionary Time — How much time do Americans have for leisure? Apparently 283 minutes per day, according to the OECD. That sounds like a lot, until you realize how it stacks up against other OECD countries (see below). Also, how does the average American spend his leisure time? Reading? Painting? Enjoying the country’s purple mountain majesties? Nah, he just watches television, really — 2.73 hours of it per day.

Who do you think is wealthier?