Daniella's Ramblings

No, I do not want to make this into a political post (although you can never really escape politics), especially as living at the bottom of Africa I have way less stake in the outcome of this election than many of you*, but I do want to try and illuminate some facts and figures. As you may be aware, Donald Trump boycotted the recent Republican Party Presidential Nominees Debate hosted by Fox News. Instead he hosted a fundraising event for America’s military veterans.

There has been much debate about this and as always people have adopted entrenched positions, especially on social media. It is not my intent to debate the merits of his decision. I was however interested in his claim on Twitter that he had raised $6 million for the veterans.

I thought that this was a particularly small amount of money given his undoubted personal fortune as well as his access to other wealthy individuals. I also thought that if he was serious about giving money to veterans he could have donated some of his own money and still attended the debate, an undoubted win-win solution for the veterans and the American public who deserve to be able to determine who to vote for.

I therefore did some analysis, so brace yourselves!

By his own admission, Donald Trump’s nett worth is somewhere between $4 billion and $10 billion. I have decided to use the lower estimate as I would hate to be accused of putting up a straw horse, so let us do the best for him we can.

If we assume that he acts rationally (perhaps a stretch given some of his recent statements, but nonetheless, let us assume he acts rationally with his own money) then we can assume that he invests it well. On average, stock markets return somewhere between 10 and 14 percent per annum. Thus he really should be earning returns of around 12 percent per annum. This is approximately one percent per month. One percent of $4 billion is $40 million. We can therefore determine that he should be earning a return of $40 million every month as a bare minimum. Given his stated belief in his own exceptionalism I would expect this to be higher, but again, to avoid any accusations of setting up a straw horse.

Given the above calculations we can see that $6 million is a mere 15% of what his nett worth should be growing by every month. Thus he could have relatively easily donated this amount of money to the veterans himself and attended the debate.

Some people may still feel that $6 million is a lot of money and that it is unreasonable to expect him to donate so much of his own money. Also given the self congratulatory tweets on Twitter, it seems that Donald Trump things he did a great job of fundraising, so let us put this into context.

The average American citizen has a nett worth of around $182 000**.  If we assume that the average American is able to invest in the stock market and achieve average growth of 12 per cent per annum on this investment, then the average American would also grow their investments by around 1 percent per month. 1 percent of $182 000 is $1 820. If we take the 15 percent we calculated above and apply it to this figure we get $273. Thus we can show that Donald Trump, relative to the average American raised the equivalent of $273. This is very close to the amount of money my daughter’s Brownie pack raised at their annual fete. It is not a large amount of money and I am sure many Americans donate this amount to charity through the course of the year, if not more regularly.

In relative terms Donald Trump is a rather ineffective fundraiser. He seems to think he is a lot better at this than he really is. It seems Donald Trump may suffer from the Dunning Kruger effect. Something American voters would do well to recognise, something seemingly confirmed by this video.

 

*Having said that, American politics does affect the whole world due to the USA’s sheer size and importance in the world, so I do feel I have a right to have my say.
** I realise that the article cites figures of between $109 000 and $301 000 but I have gone with the figure of $182 000 because that is what the author seems to think is most likely correct. Even the figure of $301 000 would not make a material difference to the calculations as it is still a lot less than Donald Trump’s worth. Even doubling the $273 to $546 does not change the picture all that much.