The valuation shown for a member of the general public is an estimation based on U.S. demographic data and income trends. We intend to personalize valuations as we invest in each individual’s future economic output.
To estimate how someone’s income might grow in the future, we use the following parameters for different periods in a person’s life:
- For ages 25 to 55 (primary income-earning years): we use academic research data that examines how the income of U.S. workers changes from the age of 25 to 55. The research tracks income changes for workers in three different national percentiles of income: the 50th, 75th, and 90th percentiles. We identify the user's percentile based on the current age and income they provide and then assume their income will grow at the corresponding rates each year.
- For ages 21-25: we estimate income growth based on median incomes from the Current Population Survey in the United States.
- For ages 18-21 and 55 and beyond: we assume that income growth is equal to inflation. We assume a future inflation rate of 2.3% per year based on the implicit inflation expectations found in U.S. government bond market prices instead of the current inflation rate.
To calculate the valuation, we use the Discounted Cash Flow approach using a person’s age, income, inflation rate, and discount rate of 6.96%, an inflation-adjusted discount rate of S&P 500 Index over the last 20 years. We believe that company indexes should be equal to human indexes.