| I don't understand the concept or the graphics are rendered wrong on my computer. Better would it be do explain with a standard distribution (what wealth isn't). Lets assume that 1 SD of income corresponds to 10 cm. So 3SD or 60cm, basically your screen size, corresponds to 99.7% of the population. Some random data from the internet:
"The median household income in Franklin County Ohio is about $43,000 although the average household income is closer to $54,000. The standard deviation of household incomes is about $30,000. You pick a random sample of 50 households. What is the chance the average household income in your sample is over $60,000?"
https://online.stat.psu.edu/stat100/lesson/8/8.3 Household income may be even two earners. But assuming broadly 50k, sd 50k per person to make it easier and taking into account more affluent areas, only a few people make more than 200k per year. Now lets assume Bill Gates or the Oligarch of your choice makes 10% ROE on his wealth. If he has 100 Billion, this is 10 Billion a year. This should be 200,000 Standard Deviations. If one SD corresponds to 10 cm, this should be 20 km on our scale. So we can see the income of 99.7% of the population on our screen, but Bill Gates income would be 20 km away. (Hope I made no mistake, feel free to correct) PennState used an extraordinary bad example to teach the normal distribution, they chose a case where you have a fat tail distribution. |