National Incomes vs Global Incomes

Some of my favorite data visualizations are the charts produced by Branko Milanovic, which compare national income distributions to global income distributions. So I was thrilled to discover this website (created by Boris Yakubchik) which transforms Milanovic’s data into an interactive format where users can select which countries they want to graph. Below is a sample that I created using some of my favorite countries.

It can take a minute to understand what is going on, so here’s a brief primer and some examples. The vertical y-axis displays PPP-adjusted income and global income percentile, while the horizontal x-axis displays national income percentile. Let’s look at some examples from my chart:

  • An American earning $5,000/year is in the 8th percentile of American earners, but in the 70% percentile globally.
  • An Indonesian earning $3,000/year earns more than 90% of Indonesians, but only more than 60% of people globally.
  • A Dane earning $20,000/year is a very average Dane (~50% percentile), although they are close to the top 5% of earners globally.

It is easy to see that even poorer Americans and Danes are generally wealthier than the richer Indians, Indonesians, and Nepalis. This is just one observation made about a handful of countries, but there are many more ideas to takeaway from this data. Check out the website and create your own!

Giving More, Tomorrow

For one reason or another, people often share with me that they want to start donating money or increase the amount that they are donating. This is always great news, but often accompanied by real and/or perceived challenges. A few common ones that I hear include:

  • I want to start donating, but I don’t feel like I can right now.
  • I’m donating x% of my income. I feel compelled to give >x% of my income, but I don’t think I can do that right now.
  • I want to give $x, but my spouse is not on board with that.

In an ideal world, we could all just start donating our desired amount or increase to our desired amount at any time. Sometimes, we are unable to make these changes immediately or are looking for a more gradual approach. Several years ago, Shlomo Benartzi gave a TED Talk titled “Saving for Tomorrow, Tomorrow,” which relates to saving, but it could just as easily apply to giving.

Benartzi’s basic recommendation is to commit to saving a percentage of future increases in income (like raises and bonuses). Saving a portion of an increase requires no sacrifice today and takes the edge off of future sacrifices because net income still increases (because the new saving is just a portion on the increased amount). As an example, let’s say that I make $50,000 and want to save $5,000. It may be difficult to save 10% of my income immediately, but I could commit to saving 50% of my next raise. If I get a $1,000 raise, then I’ll save $500. Even though I’ve stuffed $500 into savings, I’m still netting an additional $500 of income. 

As mentioned, we could easily apply the same principles to giving. Below are some examples:

  • Someone who’s currently donating 10% of their income could try to get up to 12% by donating 20% of their future increases in income until their overall giving hits 12%.
  • Someone who wants to start donating could commit to donating 100% of any bonus.
  • There are all sorts of derivations and room for creativity. Suppose someone wanted to donate 6% of their income this year. They could donate 1% of income in Month 1, 2% of income in Month 2, and so on until Month 12 when they donate 12%. This is both gradual and would get them to their 6% annual giving target in Year 1 (a great feat). AND, the person would feel some relief when they drop their 12% donation rate back down to 6% in Month 13 (assuming they want to donate 6% each month in Year 2).

Sometimes getting started is the hardest part. Hopefully, the above is helpful in thinking about how to start giving or how to give more generously.

The Mexican Fisherman

The famous “Mexican Fisherman” story is at least fifty years old, but it is a timeless tale that is both revealing and enlightening. Below is one version of the story:

An American investment banker was taking a much-needed vacation in a small coastal Mexican village when a small boat with just one fisherman docked. The boat had several large, fresh fish in it.

The investment banker was impressed by the quality of the fish and asked the Mexican how long it took to catch them. The Mexican replied, “Only a little while.” The banker then asked why he didn’t stay out longer and catch more fish?

The Mexican fisherman replied he had enough to support his family’s immediate needs.

The American then asked “But what do you do with the rest of your time?”

The Mexican fisherman replied, “I sleep late, fish a little, play with my children, take siesta with my wife, stroll into the village each evening where I sip wine and play guitar with my amigos: I have a full and busy life, señor.”

The investment banker scoffed, “I am an Ivy League MBA, and I could help you. You could spend more time fishing and with the proceeds buy a bigger boat, and with the proceeds from the bigger boat you could buy several boats until eventually you would have a whole fleet of fishing boats. Instead of selling your catch to the middleman you could sell directly to the processor, eventually opening your own cannery. You could control the product, processing and distribution.”

Then he added, “Of course, you would need to leave this small coastal fishing village and move to Mexico City where you would run your growing enterprise.”

The Mexican fisherman asked, “But señor, how long will this all take?”

To which the American replied, “15–20 years.”

“But what then?” asked the Mexican.

The American laughed and said, “That’s the best part. When the time is right you would announce an IPO and sell your company stock to the public and become very rich. You could make millions.”

“Millions, señor? Then what?”

To which the investment banker replied, “Then you would retire. You could move to a small coastal fishing village where you would sleep late, fish a little, play with your kids, take siesta with your wife, stroll to the village in the evenings where you could sip wine and play your guitar with your amigos.”

(This story was originally written by Heinrich Böll, although Tim Ferriss published the above adapted version which can be found across the internet.)