Forbes is out with its list of the world's top billionaires, and Bill Gates is once again at the top of the list. His $76 billion puts him ahead of Mexico's Carlos Slim ($72 billion) and Amancio Ortega ($64 billion). The Forbes list calculates wealth by total assets, and that is certainly a reasonable way to do it, given that today's billionaires are global in nature. But it's also worth pondering geographic differences. If Gates buys most of his goods and services in the United States, but Slim consumes most of his goods and services in Mexico, Slim might be wealthier because you get a lot more for a dollar in Mexico.
Indeed, this is what inequality researcher Branco Milanović has found. He's come up with a nifty, if back-of-the-napkin, way to compare global wealth. He calculates a billionaire's wealth by evaluating national purchasing power. He assumes that a billionaire's overall wealth generates 6 percent interest per year, which is equivalent to their annual income. And then he divides that amount by the billionaire's home country's average annual income. That way, he measures a billionaire's income as the amount of labor he or she can buy in his or her country.
In terms of the Forbes list, this places Gates at No. 3, behind Slim and Ortega. That's because though Gates has more wealth, Mexico and Spain are poorer countries. To see this visually, first consider Forbes' list of the 20 richest billionaires:
Now, you'll see that if you adjust for Milanović's measure, the picture changes somewhat.
And for some fun, Milanović has also used his calculation to determine wealth over history. Here's my integration of that data. Slim tops the list.