8 ms·

>Not compared with the loads of stories of people who worked hard, improved themselves, and still don't earn anywhere near $1M/yr The vast majority of single d

by ux-app 9y ago

>Not compared with the loads of stories of people who worked hard, improved themselves, and still don't earn anywhere near $1M/yr The vast majority of single digit millionaires are doctors, lawyers, construction company owners. I've even personally met a factory worker who retired with > $1mm in savings due to prudent money management (no lottery wins, just basic financial management for 30+ years). I live in a completely unremarkable town and there are loads of millionaires around. I bumped into one recently when I accidentally stumbled onto his property while hiking. Judging by the sprawling estate he's at least in $5mm+ net worth range. What does he do for a living? He owns an earth moving company. That's right, at the ripe age of about 45, he made tons of money moving dirt from one spot to another. Lovely guy too. My friend from high school is also in the millionaire club. We're both from a public school background. Unremarkable back stories in just about every way possible. Now he runs a very successful web agency. He's super smart, hard working and I'm sure that accounts for the majority of his success. My point is that there are loads of millionaires around, even in my little backwater. Far, far more than there are lottery winners. Seems to imply that luck plays a far smaller role in the success of millionaire next door types than simple hard work.

gk1 9y ago
You may like reading The Millionaire Next Door. It explains that the majority of millionaires in the US are like those you describe, and not like the flashy movie ones we see in the media. Edit: Link for convenience: https://www.amazon.com/Millionaire-Next-Door-Surprising-Americas/dp/1589795474 https://www.amazon.com/Millionaire-Next-Door-Surprising-Amer...
- taneq 9y ago
  The bar for 'millionaire' is significantly lower than it once was. Inflation, combined (in some markets) with huge raises in property values, basically means that anyone who's paid their house off is likely to qualify. A total net worth (including real estate etc.) of more than a million dollars doesn't imply that someone's particularly wealthy the way it once did.
  - ux-app 9y ago
    The home you live in is usually not included when classifying high net worth individuals. A common definition at least here in Australia is: "a HNWI defined as having more than US$1 million in investable assets, excluding their primary residence, collectibles and consumables"
    - taneq 9y ago
      Huh, I'd missed that point. Thanks.
Noseshine 9y ago
Not to take anything away from your stories because I don't think that group is the problem (as the Economist wrote in an article, it's the 0.01% not the 1% we should worry about, we are much more top-heavy than we think), I would just like to raise this question: Do you know the difference between advice that works for anyone and advice that works for everyone? Because I have a strong suspicion this is the former. It only works until everybody starts believing and following it. The American dream, for example. Which stopped working, it is said... because it just doesn't work for everyone? My point is, what if what you say already happened and didn't pan out, what if too many people tried for it to work? So what we have now is not that everybody is lazy, but that too many people realized the system doesn't work for everyone, only for some. Who those "some" are does not matter, it's not a feudal system where titles are inherited so we have more flexibility and who is on top changes. It's just that there can't be too many. Not because it's completely impossible, but just the way everything is set up currently, which seems to promote a flow to the top instead of "trickle down". I certainly don't provide here a complete model to understand what happens, not even close, I just want to give a nudge, a hint of something else there than "laziness". We are way down the path of an endless feedback cycle.
frgtpsswrdlame 9y ago
>He's super smart, hard working and I'm sure that accounts for the majority of his success. Why are you sure? Social mobility in america is depressingly low right now. Our meritocracy is a meritocracy no more, if it ever was one.
- ctdonath 9y ago
  The mobility is there for the taking, though disincentives are at an all-time high. Welfare benefits are structured (presumably unintentionally) to discourage working: earning about $12/hr plus welfare equals about $36/hr without welfare ... but in between, welfare benefits plummet so fast that trying to work your way up from $12/hr to $36/hr amounts to a huge pay cut. As such many can't or won't make the bridging effort. The proliferation of debt is the other major problem. With social norms & pressures to buy more house & goods than one can actually afford, one becomes self-trapped in preserving an existing paycheck and fulfilling debt maintenance rather than really saving money and taking risks that may temporarily disrupt income. The smart & hard working ones realize up front that climbing a mountain may involve traversing a valley first, and that poor-looking social presence is necessary to accumulate wealth (to be flaunted later). The rest get stalled trying to make credit card interest payments.
  - ericrav 9y ago
    Are you referring to the US? Since we don't have a federal cash welfare program[0], what welfare program are you talking about that gives recipients an additional $24/hr ($50,000 a year if working full time)? [0]: https://fivethirtyeight.com/features/most-welfare-dollars-dont-go-directly-to-poor-people-anymore/ https://fivethirtyeight.com/features/most-welfare-dollars-do...
    - jdmichal 9y ago
      Not OP, but my guess would be that such a number would have come from pricing out equivalent services as those being provided. That is, providing discounted housing is not handing out money. But you could take the average discounted rent, and the average non-discounted rent, and come to an approximate cash-equivalent "value" of that discount. Also, I find the direction of the article in your link interesting. That is, given this: > Under TANF, states can spend welfare money on virtually any program aimed at one of four broad purposes: (1) assistance to needy families with children; (2) promoting job preparation and work; (3) preventing out-of-wedlock pregnancies; and (4) encouraging the formation of two-parent families. I'm a little surprised to see this a couple paragraphs down: > In 1998, nearly 60 percent of welfare spending was on cash benefits, categorized as “basic assistance.” By 2014, it was only about one-quarter of TANF spending. That shift has happened despite a burgeoning economics literature suggesting that direct cash transfers are in many cases the most efficient tool to fight poverty. I don't see "fighting poverty" on the list of four things, so I'm not surprised that it got disincentivized.
ryandrake 9y ago
It's not about whether they're single-digit millionaires or billionaires. It's about falsely attributing a causal relationship between the people's actions and their success. It's about ignoring the counterfactual cases. What about the factory workers who also practiced prudent money management and did not end up millionaires? What about the many other dirt movers who worked just as hard but did not end up being the one owning the company? What about the other smart web professionals who worked just as hard as your high school friend yet do not currently run the show?
- jerf 9y ago
  "What about the factory workers who also practiced prudent money management and did not end up millionaires?" Then he at least ended up better off than he would have if he had not practiced prudent money management. Anything else would require stretching the definition of "prudent" beyond anything that fits. It is a fallacy to believe all of life's outcomes are purely due to skill, one that will harm anyone who acts on it. But it is also a fallacy to believe that all of life's outcomes are purely based on luck and privilege, and of the two, this one is far more harmful to anyone who acts on it than the first one. It is also a fallacy to believe that all possibly skill improvements are equal, a fallacy that helps people over-attribute things to luck when they see "Well, these two people both worked on skills and look at their divergent outcomes!" But if one guy was carefully tuning the skills to things that the market wanted and would lead to success, and the other guy followed, say, a socially-approved educational outcome that produced a very shiny credential, even perhaps in the same field, but did not provide real things that anybody else wanted, you will get divergent outcomes. But that will be less due to luck than someone who assumes that the skills obtained by both were the same would think.
  - didibus 9y ago
    I don't think what you're saying holds correct. You're just applying survivorship bias at a smaller and therefore less obvious scale. We do not know the amount of luck based causality versus non luck based. What we do know is the probability of ending up a millionaire vs not. So say it's 10% millionaire. I'm pulling this out of my ars. Now the question becomes what non luck based actions were performed by the 10% of millionaire and not by the 90% of non millionaire that caused them to become the ones to end up millionaires. That's not a trivial thing to answer. First, it's possible there exist no non luck based actions. Maybe all actions had an element of luck. Second, it's possible no single action had a majority role. So it becomes a sum of small actions. Now, even if we assume the best case scenario. That is, there exist a single action which is 100% responsible and has no luck involved. Well, how did the 10% knew to do that and the 90% didn't? That's also luck,or a just as complicated question to answer. Now say the survivors, aka, the 10% came and said the secret guaranteed to work action is X. It does not mean it is repeatable once there is already 10% millionaires. What if the 90% now all do that magic action, there is not enough money for 100% millionaire. So you can see that this action would not anymore suffice and therefore starts to have an element of luck again.
TheCoelacanth 9y ago
$5mm net worth is considerably easier than the $1-$10mm/year that was quoted. That's achievable with income of several hundred thousand a year, which is orders of magnitude more common than making several million per year.

by ux-app 9y ago

gk1 9y ago

You may like reading The Millionaire Next Door. It explains that the majority of millionaires in the US are like those you describe, and not like the flashy movie ones we see in the media. Edit: Link for convenience: https://www.amazon.com/Millionaire-Next-Door-Surprising-Americas/dp/1589795474 https://www.amazon.com/Millionaire-Next-Door-Surprising-Amer...

taneq 9y ago
The bar for 'millionaire' is significantly lower than it once was. Inflation, combined (in some markets) with huge raises in property values, basically means that anyone who's paid their house off is likely to qualify. A total net worth (including real estate etc.) of more than a million dollars doesn't imply that someone's particularly wealthy the way it once did.
- ux-app 9y ago
  The home you live in is usually not included when classifying high net worth individuals. A common definition at least here in Australia is: "a HNWI defined as having more than US$1 million in investable assets, excluding their primary residence, collectibles and consumables"
  - taneq 9y ago
    Huh, I'd missed that point. Thanks.

Noseshine 9y ago

Not to take anything away from your stories because I don't think that group is the problem (as the Economist wrote in an article, it's the 0.01% not the 1% we should worry about, we are much more top-heavy than we think), I would just like to raise this question: Do you know the difference between advice that works for anyone and advice that works for everyone? Because I have a strong suspicion this is the former. It only works until everybody starts believing and following it. The American dream, for example. Which stopped working, it is said... because it just doesn't work for everyone? My point is, what if what you say already happened and didn't pan out, what if too many people tried for it to work? So what we have now is not that everybody is lazy, but that too many people realized the system doesn't work for everyone, only for some. Who those "some" are does not matter, it's not a feudal system where titles are inherited so we have more flexibility and who is on top changes. It's just that there can't be too many. Not because it's completely impossible, but just the way everything is set up currently, which seems to promote a flow to the top instead of "trickle down". I certainly don't provide here a complete model to understand what happens, not even close, I just want to give a nudge, a hint of something else there than "laziness". We are way down the path of an endless feedback cycle.

frgtpsswrdlame 9y ago

>He's super smart, hard working and I'm sure that accounts for the majority of his success. Why are you sure? Social mobility in america is depressingly low right now. Our meritocracy is a meritocracy no more, if it ever was one.

ctdonath 9y ago
The mobility is there for the taking, though disincentives are at an all-time high. Welfare benefits are structured (presumably unintentionally) to discourage working: earning about $12/hr plus welfare equals about $36/hr without welfare ... but in between, welfare benefits plummet so fast that trying to work your way up from $12/hr to $36/hr amounts to a huge pay cut. As such many can't or won't make the bridging effort. The proliferation of debt is the other major problem. With social norms & pressures to buy more house & goods than one can actually afford, one becomes self-trapped in preserving an existing paycheck and fulfilling debt maintenance rather than really saving money and taking risks that may temporarily disrupt income. The smart & hard working ones realize up front that climbing a mountain may involve traversing a valley first, and that poor-looking social presence is necessary to accumulate wealth (to be flaunted later). The rest get stalled trying to make credit card interest payments.
- ericrav 9y ago
  Are you referring to the US? Since we don't have a federal cash welfare program[0], what welfare program are you talking about that gives recipients an additional $24/hr ($50,000 a year if working full time)? [0]: https://fivethirtyeight.com/features/most-welfare-dollars-dont-go-directly-to-poor-people-anymore/ https://fivethirtyeight.com/features/most-welfare-dollars-do...
  - jdmichal 9y ago
    Not OP, but my guess would be that such a number would have come from pricing out equivalent services as those being provided. That is, providing discounted housing is not handing out money. But you could take the average discounted rent, and the average non-discounted rent, and come to an approximate cash-equivalent "value" of that discount. Also, I find the direction of the article in your link interesting. That is, given this: > Under TANF, states can spend welfare money on virtually any program aimed at one of four broad purposes: (1) assistance to needy families with children; (2) promoting job preparation and work; (3) preventing out-of-wedlock pregnancies; and (4) encouraging the formation of two-parent families. I'm a little surprised to see this a couple paragraphs down: > In 1998, nearly 60 percent of welfare spending was on cash benefits, categorized as “basic assistance.” By 2014, it was only about one-quarter of TANF spending. That shift has happened despite a burgeoning economics literature suggesting that direct cash transfers are in many cases the most efficient tool to fight poverty. I don't see "fighting poverty" on the list of four things, so I'm not surprised that it got disincentivized.

ryandrake 9y ago

It's not about whether they're single-digit millionaires or billionaires. It's about falsely attributing a causal relationship between the people's actions and their success. It's about ignoring the counterfactual cases. What about the factory workers who also practiced prudent money management and did not end up millionaires? What about the many other dirt movers who worked just as hard but did not end up being the one owning the company? What about the other smart web professionals who worked just as hard as your high school friend yet do not currently run the show?

jerf 9y ago
"What about the factory workers who also practiced prudent money management and did not end up millionaires?" Then he at least ended up better off than he would have if he had not practiced prudent money management. Anything else would require stretching the definition of "prudent" beyond anything that fits. It is a fallacy to believe all of life's outcomes are purely due to skill, one that will harm anyone who acts on it. But it is also a fallacy to believe that all of life's outcomes are purely based on luck and privilege, and of the two, this one is far more harmful to anyone who acts on it than the first one. It is also a fallacy to believe that all possibly skill improvements are equal, a fallacy that helps people over-attribute things to luck when they see "Well, these two people both worked on skills and look at their divergent outcomes!" But if one guy was carefully tuning the skills to things that the market wanted and would lead to success, and the other guy followed, say, a socially-approved educational outcome that produced a very shiny credential, even perhaps in the same field, but did not provide real things that anybody else wanted, you will get divergent outcomes. But that will be less due to luck than someone who assumes that the skills obtained by both were the same would think.
- didibus 9y ago
  I don't think what you're saying holds correct. You're just applying survivorship bias at a smaller and therefore less obvious scale. We do not know the amount of luck based causality versus non luck based. What we do know is the probability of ending up a millionaire vs not. So say it's 10% millionaire. I'm pulling this out of my ars. Now the question becomes what non luck based actions were performed by the 10% of millionaire and not by the 90% of non millionaire that caused them to become the ones to end up millionaires. That's not a trivial thing to answer. First, it's possible there exist no non luck based actions. Maybe all actions had an element of luck. Second, it's possible no single action had a majority role. So it becomes a sum of small actions. Now, even if we assume the best case scenario. That is, there exist a single action which is 100% responsible and has no luck involved. Well, how did the 10% knew to do that and the 90% didn't? That's also luck,or a just as complicated question to answer. Now say the survivors, aka, the 10% came and said the secret guaranteed to work action is X. It does not mean it is repeatable once there is already 10% millionaires. What if the 90% now all do that magic action, there is not enough money for 100% millionaire. So you can see that this action would not anymore suffice and therefore starts to have an element of luck again.

TheCoelacanth 9y ago

$5mm net worth is considerably easier than the $1-$10mm/year that was quoted. That's achievable with income of several hundred thousand a year, which is orders of magnitude more common than making several million per year.