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I say this over and over again in all my comments on the subject, but wealth passed on through inheritance has fallen a lot. I don't know why its always assume

by bko 11y ago

I say this over and over again in all my comments on the subject, but wealth passed on through inheritance has fallen a lot. I don't know why its always assumed to be true that all this wealth that's driving inequality is inherited. It's not true. > Over the past 30 years, the origin of the wealth of the richest people in the United States has shifted away from old, inherited money. Our new metric, the self-made scores developed for the Forbes 400, shows that increasingly we find self-made billionaires among the ranks of the richest people in the country. This has accompanied the incredible increase in wealth of the members of the Forbes 400, which has jumped 1,832% times since 1984, when the total net worth of our list was $125 billion, compared with $2.29 trillion today.[0] > There’s no doubt that entrepreneurship is thriving globally. Fully 1,191 members of the list are self-made billionaires, while just 230 inherited their wealth. Another 405 inherited at least a portion but are still working to increase their fortunes. [1] [0]http://www.forbes.com/sites/afontevecchia/2014/10/03/there-are-more-self-made-billionaires-in-the-forbes-400-than-ever-before/ http://www.forbes.com/sites/afontevecchia/2014/10/03/there-a... [1] http://www.forbes.com/sites/kerryadolan/2015/03/02/inside-the-2015-forbes-billionaires-list-facts-and-figures/ http://www.forbes.com/sites/kerryadolan/2015/03/02/inside-th...

adrianbg 11y ago
Really interesting. I wonder how politicians would rate.
tomp 11y ago
There's inheritance and there's inheritance. I suspect most rich people don't actually inherit money/wealth (in the legal sense). Instead, they set up trust funds for the benefit of their families/children, and so protect the assets and avoid taxes at the same time. Also, with the sheer number of tax havens and offshore secret bank accounts available nowadays, I'm very sceptical that the official statistics are able to reflect the true concentration of wealth. Which is exactly the problem - there are so many loopholes and workarounds that we can't even imagine the true extent of wealth concentration!
- bko 11y ago
  Perhaps there are wealthy people that, through hidden inheritance, should be on the list. But what this article looks at is the Forbes 400 richest. Unless there are some Vanderbilts hiding somewhere with billions in offshore accounts, then I would say that inheritance is not driving inequality as much as you think. Also, you have to consider that inheritance is often passed on is often wasted in a few generations. > Indeed, research shows that family money rarely survives the transfer for long, with 70 percent evaporated by the end of the second generation. By the end of the third? Ninety percent [0] http://www.wsj.com/articles/SB10001424127887324662404578334663271139552 http://www.wsj.com/articles/SB100014241278873246624045783346...
  - nitrogen 11y ago
    The most valuable forms of inheritance are the attitudes and connections of one's friends and family. The only way to stop that would be forced isolation/extreme desegregation. That almost sounds like a plot for a Hollywood reboot of Ayn Rand -- "In a world where rich kids are forcibly distributed and forbidden from having rich friends, three teenagers find each other and, surviving their bizarre love triangle, start a mountain colony where rich kids can get together and par-tay."
k__ 11y ago
The richest people in Germany are part of families who inherited the money over generations.
- skwirl 11y ago
  Perhaps that points to a problem with Germany's climate for entrepreneurship. http://www.economist.com/news/business/21587209-vigorous-start-up-scene-has-yet-produce-its-first-big-breakthrough-slow-climb http://www.economist.com/news/business/21587209-vigorous-sta...
Spooky23 11y ago
Forbes 400 represents mostly principals of public business enterprises that are super-successful, and is dominated by stock wealth. It doesn't capture private assets. It's also ephemeral -- for every Bill Gates, there are plenty of multi-billionaires who decend into the depths of multi-millionairehood when their stocks implode. Beyond that, you're going to have trouble measuring stuff. There are folks in upstate NY still inheriting and generating income from property acquired during the Dutch colonial period. Many, many people are members of LLCs or corporate officers who have the ability to direct money their way and control lots of money that doesn't necessarily "pass" to them and trigger inheritance taxes. I have some family members who are wealthy enough to think about generational wealth for their descendants. So they structure their life to compartmentalize risk and maximize the ability to transfer wealth at low/no cost. Their homes? Owned by a pseudo-anonymous Nevada LLC. Cars? Owned by another LLC. Investment properties? Owned by individual LLCs, which are in turn owned by some other corporate entity.
- bko 11y ago
  Forbes 400 is not perfect. If you have a better measure of wealth that would suggest that inherited fortunes are a significant contributor to wealth inequality, you can cite that. Perhaps self-made wealth dominates the .001% of wealthy individuals but doesn't apply for the 0.999% of the top 1% but I don't see any evidence or better proxy for the source of wealth so I'm using the Forbes 400. What I'm trying to say in my comment is that the belief that inherited wealth is driving inequality (as compared to self-made wealth) is not supported by anything I have read.
  - Spooky23 11y ago
    There isn't a lot of data about this for the US. There is, however, writing on the subject that should be of interest: http://www.economist.com/blogs/buttonwood/2014/03/inequality http://www.economist.com/blogs/buttonwood/2014/03/inequality "Whenever the rate of return on capital is significantly and durably higher than the growth rate of the economy, it is all but inevitable that inheritance (of fortunes accumulated in the past) predominates over saving (wealth accumulated in the present).... Wealth originating in the past automatically grows more rapidly, even without labour, than wealth stemming from work, which can be saved." Per the article, there is extensive data available from France on wealth, and in France inheritances as a proportion of income went from 24% in 1900 to 4% in 1950, but has increased to 11% today. If that proportion regressed to 1900 levels, 90% of wealth would be inherited by mid-century. IMO, we're at the start of this process in the US, as tax-insulated retirement schemes like Roth accounts, trusts and other mechanisms allow for long-term/generational transfer of wealth without taxation.

by bko 11y ago

adrianbg 11y ago

Really interesting. I wonder how politicians would rate.

tomp 11y ago

There's inheritance and there's inheritance. I suspect most rich people don't actually inherit money/wealth (in the legal sense). Instead, they set up trust funds for the benefit of their families/children, and so protect the assets and avoid taxes at the same time. Also, with the sheer number of tax havens and offshore secret bank accounts available nowadays, I'm very sceptical that the official statistics are able to reflect the true concentration of wealth. Which is exactly the problem - there are so many loopholes and workarounds that we can't even imagine the true extent of wealth concentration!

bko 11y ago
Perhaps there are wealthy people that, through hidden inheritance, should be on the list. But what this article looks at is the Forbes 400 richest. Unless there are some Vanderbilts hiding somewhere with billions in offshore accounts, then I would say that inheritance is not driving inequality as much as you think. Also, you have to consider that inheritance is often passed on is often wasted in a few generations. > Indeed, research shows that family money rarely survives the transfer for long, with 70 percent evaporated by the end of the second generation. By the end of the third? Ninety percent [0] http://www.wsj.com/articles/SB10001424127887324662404578334663271139552 http://www.wsj.com/articles/SB100014241278873246624045783346...
- nitrogen 11y ago
  The most valuable forms of inheritance are the attitudes and connections of one's friends and family. The only way to stop that would be forced isolation/extreme desegregation. That almost sounds like a plot for a Hollywood reboot of Ayn Rand -- "In a world where rich kids are forcibly distributed and forbidden from having rich friends, three teenagers find each other and, surviving their bizarre love triangle, start a mountain colony where rich kids can get together and par-tay."

k__ 11y ago

The richest people in Germany are part of families who inherited the money over generations.

skwirl 11y ago
Perhaps that points to a problem with Germany's climate for entrepreneurship. http://www.economist.com/news/business/21587209-vigorous-start-up-scene-has-yet-produce-its-first-big-breakthrough-slow-climb http://www.economist.com/news/business/21587209-vigorous-sta...

Spooky23 11y ago

Forbes 400 represents mostly principals of public business enterprises that are super-successful, and is dominated by stock wealth. It doesn't capture private assets. It's also ephemeral -- for every Bill Gates, there are plenty of multi-billionaires who decend into the depths of multi-millionairehood when their stocks implode. Beyond that, you're going to have trouble measuring stuff. There are folks in upstate NY still inheriting and generating income from property acquired during the Dutch colonial period. Many, many people are members of LLCs or corporate officers who have the ability to direct money their way and control lots of money that doesn't necessarily "pass" to them and trigger inheritance taxes. I have some family members who are wealthy enough to think about generational wealth for their descendants. So they structure their life to compartmentalize risk and maximize the ability to transfer wealth at low/no cost. Their homes? Owned by a pseudo-anonymous Nevada LLC. Cars? Owned by another LLC. Investment properties? Owned by individual LLCs, which are in turn owned by some other corporate entity.

bko 11y ago
Forbes 400 is not perfect. If you have a better measure of wealth that would suggest that inherited fortunes are a significant contributor to wealth inequality, you can cite that. Perhaps self-made wealth dominates the .001% of wealthy individuals but doesn't apply for the 0.999% of the top 1% but I don't see any evidence or better proxy for the source of wealth so I'm using the Forbes 400. What I'm trying to say in my comment is that the belief that inherited wealth is driving inequality (as compared to self-made wealth) is not supported by anything I have read.
- Spooky23 11y ago
  There isn't a lot of data about this for the US. There is, however, writing on the subject that should be of interest: http://www.economist.com/blogs/buttonwood/2014/03/inequality http://www.economist.com/blogs/buttonwood/2014/03/inequality "Whenever the rate of return on capital is significantly and durably higher than the growth rate of the economy, it is all but inevitable that inheritance (of fortunes accumulated in the past) predominates over saving (wealth accumulated in the present).... Wealth originating in the past automatically grows more rapidly, even without labour, than wealth stemming from work, which can be saved." Per the article, there is extensive data available from France on wealth, and in France inheritances as a proportion of income went from 24% in 1900 to 4% in 1950, but has increased to 11% today. If that proportion regressed to 1900 levels, 90% of wealth would be inherited by mid-century. IMO, we're at the start of this process in the US, as tax-insulated retirement schemes like Roth accounts, trusts and other mechanisms allow for long-term/generational transfer of wealth without taxation.