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At a micro level, taking money out of a deposit and investing it does not create inequality. At a macro level, the fact that simply having wealth begets more we

by drewrv 8y ago

At a micro level, taking money out of a deposit and investing it does not create inequality. At a macro level, the fact that simply having wealth begets more wealth in a way that labor cannot accomplish is a driving force behind inequality.

dgudkov 8y ago
>simply having wealth begets more wealth It's not a 100% rule. Lots of wealth has been lost due to wrong investment. Many rich people lose their fortunes.
- pvarangot 8y ago
  Even if it happened rarely capital gains would be a force driving inequality as the barrier to entry into investing your capital to offset for doing actual work remains high. That it sometimes fail would be sad for the ones it failed for, but still doesn't stops it from being a driving force for a big effect on the economy.
- jandrese 8y ago
  > Many rich people lose their fortunes. Up to a point. The ultra-rich have so much money now that it would take a monumental disaster for them to become poor again. IIRC only one person in history has ever stopped being a billionaire: J. K. Rowling, and that was due to enormous philanthropic giving. Mere millionaires come and go, but once you're talking hundreds of millions the positive feedback loop of capital makes it difficult to lose everything.
  - gretch 8y ago
    My hypothesis of the world is that someone must have luck AND skill to become 100M+ wealthy and I think people commonly create a false dichotomy of luck OR skill. Maybe the reason we never see hundred millionaires lose everything is because they have the necessary skill to manage the money well. I don't think it would be correct to attribute causation based on the information we have available.
    - jandrese 8y ago
      This article suggests that their investment strategies may be suboptimal in many cases. Some of it may be the forced diversification you get with this much money. It's hard or impossible to dump $100M into a single stock unless you are an Elon Musk type and own the company. So if you make a bad bet and lose a million bucks, well, that's just 1% of your portfolio and the rest will make up for it. Of course you're a regular millionaire and lose a million bucks on a bad investment you are going to the poorhouse. You could dump $100M into GE without triggering anti hostile takeover actions, but they're also not likely to go bankrupt anytime soon. Maybe some hundred millionaires could have had their portfolio completely tied up in Lehman Brothers a few years ago, but even then you probably would have gotten a fair bit of money back. But this goes back to my point that as long as you aren't pants on head with your investments you are beyond the point where it's possible to ever be poor again.
      - gretch 8y ago
        I think it's not possible conclude on optimality without firmly understanding the specific goals. The articles says 'But the aim is usually to diversify risk, not concentrate power, by taking capital from the original family business and putting it into a widely spread portfolio.' It uses the word 'usually' and it's also a blanket that's trying to generalize all these parties, while in a reality that may not be true. Here are 3 constructed but plausible goals one may have: 1) Make 100% sure that you remain wealthy (make almost nothing but never lose anything) 2) 9-in-10 chance to do worse than SP500 index, but 1-in-10 chance to get 'literally take over the world' rich 3) Investing in causes that seem good for the world a la green energy, tesla motors, etc As a counter example, I present cases of lottery winners who go broke. There are multiple documented cases of 10+ million and 100+ million winners who lose the majority of their wealth.
- csytan 8y ago
  Having more wealth gives you access to more efficient financial vehicles that generate (or maintain) wealth. When you're poor, you are taxed: - High interest loans - Remittances with high fees e.g. with Western Union - Using Cash (on average, you pay a tax on items which have the credit card fee priced in) - Access to banking (low interest savings/checking accounts) - Credit cards with high fees, low kickbacks As you get wealthier: - Credit cards with kickbacks (e.g. travel, cash back) - Access to bank accounts with higher interest - Access to international banking - Access to international stock markets As you get wealthier: - Ownership of businesses which allow you to store your wealth without getting taxed - Ownership of international businesses which allow you to find the best tax situation internationally As you get wealthier: - Access to private markets - Ownership of businesses where you can directly partner with other businesses - Running a financial institution - Running a business so large that you can influence governments - ...
lokidokiro 8y ago
Labor begets wealth. What are you trying to say here?

by drewrv 8y ago

dgudkov 8y ago

>simply having wealth begets more wealth It's not a 100% rule. Lots of wealth has been lost due to wrong investment. Many rich people lose their fortunes.

pvarangot 8y ago
Even if it happened rarely capital gains would be a force driving inequality as the barrier to entry into investing your capital to offset for doing actual work remains high. That it sometimes fail would be sad for the ones it failed for, but still doesn't stops it from being a driving force for a big effect on the economy.
jandrese 8y ago
> Many rich people lose their fortunes. Up to a point. The ultra-rich have so much money now that it would take a monumental disaster for them to become poor again. IIRC only one person in history has ever stopped being a billionaire: J. K. Rowling, and that was due to enormous philanthropic giving. Mere millionaires come and go, but once you're talking hundreds of millions the positive feedback loop of capital makes it difficult to lose everything.
- gretch 8y ago
  My hypothesis of the world is that someone must have luck AND skill to become 100M+ wealthy and I think people commonly create a false dichotomy of luck OR skill. Maybe the reason we never see hundred millionaires lose everything is because they have the necessary skill to manage the money well. I don't think it would be correct to attribute causation based on the information we have available.
  - jandrese 8y ago
    This article suggests that their investment strategies may be suboptimal in many cases. Some of it may be the forced diversification you get with this much money. It's hard or impossible to dump $100M into a single stock unless you are an Elon Musk type and own the company. So if you make a bad bet and lose a million bucks, well, that's just 1% of your portfolio and the rest will make up for it. Of course you're a regular millionaire and lose a million bucks on a bad investment you are going to the poorhouse. You could dump $100M into GE without triggering anti hostile takeover actions, but they're also not likely to go bankrupt anytime soon. Maybe some hundred millionaires could have had their portfolio completely tied up in Lehman Brothers a few years ago, but even then you probably would have gotten a fair bit of money back. But this goes back to my point that as long as you aren't pants on head with your investments you are beyond the point where it's possible to ever be poor again.
    - gretch 8y ago
      I think it's not possible conclude on optimality without firmly understanding the specific goals. The articles says 'But the aim is usually to diversify risk, not concentrate power, by taking capital from the original family business and putting it into a widely spread portfolio.' It uses the word 'usually' and it's also a blanket that's trying to generalize all these parties, while in a reality that may not be true. Here are 3 constructed but plausible goals one may have: 1) Make 100% sure that you remain wealthy (make almost nothing but never lose anything) 2) 9-in-10 chance to do worse than SP500 index, but 1-in-10 chance to get 'literally take over the world' rich 3) Investing in causes that seem good for the world a la green energy, tesla motors, etc As a counter example, I present cases of lottery winners who go broke. There are multiple documented cases of 10+ million and 100+ million winners who lose the majority of their wealth.
csytan 8y ago
Having more wealth gives you access to more efficient financial vehicles that generate (or maintain) wealth. When you're poor, you are taxed: - High interest loans - Remittances with high fees e.g. with Western Union - Using Cash (on average, you pay a tax on items which have the credit card fee priced in) - Access to banking (low interest savings/checking accounts) - Credit cards with high fees, low kickbacks As you get wealthier: - Credit cards with kickbacks (e.g. travel, cash back) - Access to bank accounts with higher interest - Access to international banking - Access to international stock markets As you get wealthier: - Ownership of businesses which allow you to store your wealth without getting taxed - Ownership of international businesses which allow you to find the best tax situation internationally As you get wealthier: - Access to private markets - Ownership of businesses where you can directly partner with other businesses - Running a financial institution - Running a business so large that you can influence governments - ...

lokidokiro 8y ago

Labor begets wealth. What are you trying to say here?