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> It’s very hard to blow it if you’re born rich. It's actually extremely easy to blow money on poor investments, and it happens all the time. People don't just

> It’s very hard to blow it if you’re born rich. It's actually extremely easy to blow money on poor investments, and it happens all the time. People don't just get born with the skill to handle money well. Over multiple generations, there is no risk-free asset that will beat inflation, and inflation will easily eat up your wealth in that timespan, even if your family lives a modest lifestyle. Of course the matthew principle still applies, but that's besides my point here.

buqler 7y ago
I think the point is that the ability to achieve success ought not be so skewed towards those whose ancestors achieved success, but rather towards individuals that have worked for it and have legitimate merit in society. If you’re suggesting that it’s easy to go from being rich to being poor, I think it would be useful to find data that examines how many people born rich become poor over time, and how many people born poor stay poor over time. Like, backing that claim up would make it more believable. Anecdotally, I don’t think it’s that hard for rich people to be born and then stay rich. Especially considering all the things that money can buy that helps one make even more money. Like a better education, for example.
- gridlockd 7y ago
  > If you’re suggesting that it’s easy to go from being rich to being poor, I think it would be useful to find data that examines how many people born rich become poor over time, and how many people born poor stay poor over time. Like, backing that claim up would make it more believable. It's not easy to get data on the very rich. However, the top fifth of the population is about as likely to become poorer over time as the the bottom fifth is likely to get richer over time (page 6): https://www.pewtrusts.org/~/media/legacy/uploadedfiles/wwwpewtrustsorg/reports/economic_mobility/pursuingamericandreampdf.pdf https://www.pewtrusts.org/~/media/legacy/uploadedfiles/wwwpe... In total, only a minority (~40%) maintain their status over the course of a single generation.
  - mlthoughts2018 7y ago
    You need something like decile transition probabilities, not merely directional changes. Going from the top decile of wealth to the second or third from top is not a significant loss of wealth. Even if “most rich people lost money” over their lifetimes, it would say nothing about how easy it is to go from rich to poor. How many people who are born into the top decile of wealth end up below the poverty line in total assets + income?
    - gridlockd 7y ago
      > You need something like decile transition probabilities, not merely directional changes. That's exactly what's in the linked article. The probability of going from the top to the bottom in one generation is 8%, to second-to-bottom 10%. That's a significant chance. > Going from the top decile of wealth to the second or third from top is not a significant loss of wealth. I disagree. Going to the third decile likely puts you in the bottom half. > How many people who are born into the top decile of wealth end up below the poverty line in total assets + income? Roughly 8%, as the bottom decile roughly coincides with the poverty line.
mlthoughts2018 7y ago
Your definition of “blow it” seems silly and inapplicable. When you have a huge financial parachute behind the scenes, you have room to absorb losses from poor investments, and again the cases when legacy money is mishandled so badly as to lead to ruin are extremely rare and over-popularized in media. Getting one’s rich parents to fund a dumb start-up idea that wastes millions crashing and burning, and then reluctantly using family connections to get a $400k/year job in a finance or white-shoe law firm is not at all any version of “blowing it.”
- gridlockd 7y ago
  > Your definition of “blow it” seems silly and inapplicable. When you have a huge financial parachute behind the scenes, you have room to absorb losses from poor investments, and again the cases when legacy money is mishandled so badly as to lead to ruin are extremely rare and over-popularized in media. I'm not just talking about total financial ruin, I'm talking about staying rich over multiple generations. Over that timeframe, you'll have wars, market crashes, sovereign debt crises, currency crises, riots, and so on. Let's say I give you 10 million dollars, which puts you in the top 1% in the US. Over an 80 year lifespan, that's 125,000$ per year. In the period from 1900 to 1980, that money lost about 90% of its purchasing power. If you do "nothing", at the end of that period, you will be poor. So you have to invest the money. Who do you trust? The government? Untrustworthy. The stock market? Highly volatile. Gold? No yield whatsoever. Real estate? Requires upkeep, vulnerable to structural change. Diversify? You may not even beat inflation. It's easy to say in hindsight what is an isn't a dumb investment. You're biased by living in the tail end of the best century of the best economy in the history of humanity. > Getting one’s rich parents to fund a dumb start-up idea that wastes millions crashing and burning, and then reluctantly using family connections to get a $400k/year job in a finance or white-shoe law firm is not at all any version of “blowing it.” You think Wall Street just hands out $400k jobs to rich kids because they went to some prestigious school? You believe lawyers are hired on the basis of their inheritance?
  - perl4ever 7y ago
    "You think Wall Street just hands out $400k jobs to rich kids because they went to some prestigious school?" I basically agree with your overall point that there are a lot of things that can happen to rich people or families over long periods of time, but I can't help pointing out that yes, Wall Street does just hand out jobs to rich kids: https://dealbreaker.com/2013/08/sometimes-jpmorgan-hired-the-children-of-its-clients https://dealbreaker.com/2013/08/sometimes-jpmorgan-hired-the... "Nepotism is allowed and inevitable; what is punished is clumsy nepotism. Invoking the proper formulas, observing the proper cooling-off periods between hiring a client's kid and using him to seek business, keeping the quid pro quo off of email: that's what counts. Obviously you hire the children of important clients and potential clients, and obviously that helps you at the margin to win business; you just have to do it the right way. There's a reason it's the Foreign Corrupt Practices Act; the goal is to make sure that companies conform their foreign corrupt practices to American standards of corrupt practice. When you follow other cultures' forms of corrupt practice, you get in trouble." https://dealbreaker.com/2015/02/wait-is-it-not-typical-of-jpmorgan-to-hire-people-people-who-send-sexually-explicit-emails-to-hr-and-are-described-as-the-worst-candidate-ever https://dealbreaker.com/2015/02/wait-is-it-not-typical-of-jp... https://dealbreaker.com/2015/11/jp-morgan-sons-and-daughters https://dealbreaker.com/2015/11/jp-morgan-sons-and-daughters

buqler 7y ago

I think the point is that the ability to achieve success ought not be so skewed towards those whose ancestors achieved success, but rather towards individuals that have worked for it and have legitimate merit in society. If you’re suggesting that it’s easy to go from being rich to being poor, I think it would be useful to find data that examines how many people born rich become poor over time, and how many people born poor stay poor over time. Like, backing that claim up would make it more believable. Anecdotally, I don’t think it’s that hard for rich people to be born and then stay rich. Especially considering all the things that money can buy that helps one make even more money. Like a better education, for example.

gridlockd 7y ago
> If you’re suggesting that it’s easy to go from being rich to being poor, I think it would be useful to find data that examines how many people born rich become poor over time, and how many people born poor stay poor over time. Like, backing that claim up would make it more believable. It's not easy to get data on the very rich. However, the top fifth of the population is about as likely to become poorer over time as the the bottom fifth is likely to get richer over time (page 6): https://www.pewtrusts.org/~/media/legacy/uploadedfiles/wwwpewtrustsorg/reports/economic_mobility/pursuingamericandreampdf.pdf https://www.pewtrusts.org/~/media/legacy/uploadedfiles/wwwpe... In total, only a minority (~40%) maintain their status over the course of a single generation.
- mlthoughts2018 7y ago
  You need something like decile transition probabilities, not merely directional changes. Going from the top decile of wealth to the second or third from top is not a significant loss of wealth. Even if “most rich people lost money” over their lifetimes, it would say nothing about how easy it is to go from rich to poor. How many people who are born into the top decile of wealth end up below the poverty line in total assets + income?
  - gridlockd 7y ago
    > You need something like decile transition probabilities, not merely directional changes. That's exactly what's in the linked article. The probability of going from the top to the bottom in one generation is 8%, to second-to-bottom 10%. That's a significant chance. > Going from the top decile of wealth to the second or third from top is not a significant loss of wealth. I disagree. Going to the third decile likely puts you in the bottom half. > How many people who are born into the top decile of wealth end up below the poverty line in total assets + income? Roughly 8%, as the bottom decile roughly coincides with the poverty line.

mlthoughts2018 7y ago

Your definition of “blow it” seems silly and inapplicable. When you have a huge financial parachute behind the scenes, you have room to absorb losses from poor investments, and again the cases when legacy money is mishandled so badly as to lead to ruin are extremely rare and over-popularized in media. Getting one’s rich parents to fund a dumb start-up idea that wastes millions crashing and burning, and then reluctantly using family connections to get a $400k/year job in a finance or white-shoe law firm is not at all any version of “blowing it.”

gridlockd 7y ago
> Your definition of “blow it” seems silly and inapplicable. When you have a huge financial parachute behind the scenes, you have room to absorb losses from poor investments, and again the cases when legacy money is mishandled so badly as to lead to ruin are extremely rare and over-popularized in media. I'm not just talking about total financial ruin, I'm talking about staying rich over multiple generations. Over that timeframe, you'll have wars, market crashes, sovereign debt crises, currency crises, riots, and so on. Let's say I give you 10 million dollars, which puts you in the top 1% in the US. Over an 80 year lifespan, that's 125,000$ per year. In the period from 1900 to 1980, that money lost about 90% of its purchasing power. If you do "nothing", at the end of that period, you will be poor. So you have to invest the money. Who do you trust? The government? Untrustworthy. The stock market? Highly volatile. Gold? No yield whatsoever. Real estate? Requires upkeep, vulnerable to structural change. Diversify? You may not even beat inflation. It's easy to say in hindsight what is an isn't a dumb investment. You're biased by living in the tail end of the best century of the best economy in the history of humanity. > Getting one’s rich parents to fund a dumb start-up idea that wastes millions crashing and burning, and then reluctantly using family connections to get a $400k/year job in a finance or white-shoe law firm is not at all any version of “blowing it.” You think Wall Street just hands out $400k jobs to rich kids because they went to some prestigious school? You believe lawyers are hired on the basis of their inheritance?
- perl4ever 7y ago
  "You think Wall Street just hands out $400k jobs to rich kids because they went to some prestigious school?" I basically agree with your overall point that there are a lot of things that can happen to rich people or families over long periods of time, but I can't help pointing out that yes, Wall Street does just hand out jobs to rich kids: https://dealbreaker.com/2013/08/sometimes-jpmorgan-hired-the-children-of-its-clients https://dealbreaker.com/2013/08/sometimes-jpmorgan-hired-the... "Nepotism is allowed and inevitable; what is punished is clumsy nepotism. Invoking the proper formulas, observing the proper cooling-off periods between hiring a client's kid and using him to seek business, keeping the quid pro quo off of email: that's what counts. Obviously you hire the children of important clients and potential clients, and obviously that helps you at the margin to win business; you just have to do it the right way. There's a reason it's the Foreign Corrupt Practices Act; the goal is to make sure that companies conform their foreign corrupt practices to American standards of corrupt practice. When you follow other cultures' forms of corrupt practice, you get in trouble." https://dealbreaker.com/2015/02/wait-is-it-not-typical-of-jpmorgan-to-hire-people-people-who-send-sexually-explicit-emails-to-hr-and-are-described-as-the-worst-candidate-ever https://dealbreaker.com/2015/02/wait-is-it-not-typical-of-jp... https://dealbreaker.com/2015/11/jp-morgan-sons-and-daughters https://dealbreaker.com/2015/11/jp-morgan-sons-and-daughters