what is exactly does it mean when they list bezos’s net worth at such and such number? Or the fact that Tesla seems to be “cash poor” but Musk’s net worth recently skyrocketed?
In: Economics
Stock options are often part of a company owners salary. While they do not have the capital in liquid assets, their net worth includes the things they own, which include pieces of billion dollar companies.
The guys you mention in your question own stock in Amazon and Tesla respectively. Their net worth is based on the publicly disclosed block of shares that they own multiplied by the share prices of the stocks issued by those companies. In other words if you see that Elon Musk is worth $120 billion and Tesla stock is selling for $695 per share then you can infer that Musk owns 172 million shares of Tesla stock. The same goes for Bezos, Gates, Zuckerberg, Buffett, etc ….
That’s an oversimplification of course, but you should get the general idea.
Net worth is all of your assets minus all of your debt.
In case of these ppl, their assets are their stock holdings. If I own 1000 shares of amazon stock, that means my assets are 1000*$3200 as of today. But if stock price goes up to $5000, my net worth just skyrocketed but that doesn’t mean I have cash money in my wallet.
Maybe people are net worth rich but cash poor. I’m right now a net worth millionaire but almost 95% of that is my retirement portfolio which is in stocks and funds. Which means being unemployed the past year and covid, I’m really cash poor.
Net worth encompasses a multitude of different assets: cars, houses, boats, property, technology etc. Basically, the value of whatever you own is calculated into your net worth. In *my* case – that would mean all my textbooks, my laptop, my phone, the cash in my bank account, my headphones, my computer mouse, etc. In Jeff Bezos’ case, a vast majority of his net worth is currently held in stock options from Amazon – the company he founded. SO while Jeff might be ‘worth’ $180 billion or whatever – if he wanted to buy a 100 billion dollar spaceship he would have to liquidate his stock options, which might well take up to (or more than) a decade. So really, the net worth of Jeff Bezos is kind of misleading – he might have *access* to 180+ billion dollars, but in reality he probably has less than 10 billion in actual physical goods and cash at any given moment (all spread across his houses and cars and shit).
EDIT: forgot to mention; for tesla, a big reason why they’re ‘poor’ but Musk is ‘rich’ comes down to those stock options. The value of stocks can fluctuate based on a multitude of factors, but the main thing to remember is that they have no value in themselves. Unlike gold (which is stable in value), stocks can rise and drop based on group psychology and world events and the like. Because Musk owns a bunch of stock in the company he owns, his net worth will rise if the stock price rises – but tesla the company doesn’t see any of that ‘cash’ unless they sell stocks.
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