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The book's claim is something like "most millionaires are people who own ordinary small businesses without a luxurious lifestyle". This article seems to be try

The book's claim is something like "most millionaires are people who own ordinary small businesses without a luxurious lifestyle". This article seems to be trying to refute the different claim that "even a low-income person can easily become a millionaire". But I don't think that's ever been true, and it's not really the book's message. Someone making $130,000 as a small business owner isn't "low-income" - the book is mainly contrasting this group with highly educated doctors, lawyers, MBAs, etc, who also have high incomes but spend much more.

kixiQu 5y ago
The linked piece about that book has a different idea of its claim: > The book “stands today as a sort of promise that everyday people have a shot at accumulating true wealth through habits and not just outsize risk,” wrote Ron Lieber at the New York Times. Wall Street Journal columnist Jonathan Clements called it “a roadmap for everyday Americans who want to accumulate significant wealth.” That piece links this one: https://www.reuters.com/article/idUS394135834820131016 https://www.reuters.com/article/idUS394135834820131016 > When Thomas Stanley and William Danko published their best-selling book in 1996, they made much of the statistic that “80 percent of America’s millionaires are first-generation rich.” The majority, they pointed out, were entrepreneurs, many working in blue-collar professions. > Anyone could make it big, the two authors all but proclaimed; all you need is frugality and a few tax breaks. Don’t live in a pricey home. Put a cork in the Cabernet, and pop a Coors instead. But most important, open your own business. When it came to the secret sauce for scoring a million bucks, “a very big factor is self-employment,” Stanley said. > The ensuing years have not been kind to the working-class millionaire. > A little-noticed marketing report released last month by U.S. Trust contained the disturbing statistic that while almost a third of Baby Boomers worth more than $3 million claimed to have grown up in lower-middle-class homes, the number fell precipitously for younger cohorts, with 18 percent of Gen Xers and a mere 6 percent of such Millennials saying they came from working-class stock.
- apsec112 5y ago
  If you're measuring by net worth, that's super confounded - making $3 million by growing a small business is a lot slower than being born to wealth. So the former will be disproportionately old regardless of generational cohort.
  - kixiQu 5y ago
    Yup, it needs a point-in-time comparison from when the Boomers' avg. age matched.
- candybar 5y ago
  > A little-noticed marketing report released last month by U.S. Trust contained the disturbing statistic that while almost a third of Baby Boomers worth more than $3 million claimed to have grown up in lower-middle-class homes, the number fell precipitously for younger cohorts, with 18 percent of Gen Xers and a mere 6 percent of such Millennials saying they came from working-class stock. This is the 2013 report being referenced here: http://doingmorethatmatters.com/wp-content/uploads/2013/09/2013-UST-Insights-Wealth-and-Worth-Full-Report.pdf http://doingmorethatmatters.com/wp-content/uploads/2013/09/2... Age Cohort Definition: Millennials: age 18–32 Generation X: age 33–48 Baby Boomers: age 49–67 Socio-economic status growing up among the wealthy: Age 18-32: 0% Poor, 6% Lower Middle Class Age 33-48: 4% Poor, 18% Lower Middle Class Age 49-67: 5% Poor, 31% Lower Middle Class Age 68+: 7% Poor, 24% Lower Middle Class This is almost entirely due to the fact being wealthy (to the tune of 3M+ net worth) is a far more exceptional outcome for younger people than it is for older people, especially given how much asset prices have gone up over the past few decades. Also these rely on self-assessments and my personal experience is that there's been a class inflation of how people describe themselves and their own upbringing. I suspect older people are more likely to describe their own upbringing as "Lower Middle Class" than younger people.
clutchdude 5y ago
Quick note, the 1996 $130k salary, when adjusted for inflation, is about $230,000 in 2021 dollars.
- VLM 5y ago
  Pew research data seems to imply it would be more like $150K
  - Mindless2112 5y ago
    $220k according to Wolfram Alpha. https://www.wolframalpha.com/input/?i=%24130k+1996+USD+in+2021+USD https://www.wolframalpha.com/input/?i=%24130k+1996+USD+in+20...
  - dlp211 5y ago
    BLS says closer to $250k using CPI. https://www.bls.gov/data/inflation_calculator.htm https://www.bls.gov/data/inflation_calculator.htm
- bloodyplonker22 5y ago
  I'm not a socialist, but we also have to adjust for what being a "millionaire" is today.
  - dharmab 5y ago
    I've seen alternate definitions proposed for millionaire including $1M in annual income rather than net worth.
  - lghh 5y ago
    Why would you being a socialist or not make a difference here?
  - WalterBright 5y ago
    The 1920's version of a millionaire is like a billionaire today.
abecedarius 5y ago
Yes, I've read the book and see this article as slanted just as you say. When I saw the author's name at the end I was like "oh, that explains it" -- I used to live in LA and I'd wonder why this LA Times business columnist seems to hate business so much.
merpnderp 5y ago
My friend's grandfather worked as a meter reader for the electrical company, and maxed out at $30k/year back in 1990. He retired a millionaire by investing as much as he could and never buying anything on credit, even his house. Most of the growth happened in the electrical company he worked for who's stock didn't grow much, but paid great dividends, which he always turned into new stock purchases.
- IAmGraydon 5y ago
  Buying things with cash and not credit works against you unless interest rates are very high. Let’s say you have $200,000 and could buy a house with it. Alternately, you could finance the house at 4% and put the $200,000 in an index fund that makes 8% per year. In the end, you’ll end up with far more money if you take the second option. Credit is a tool for creating financial leverage and realizing larger gains, if you know how to use it. The problem is that most people use it to buy things they just can’t afford in the first place.
  - MandieD 5y ago
    Interest rates were high enough in the late 70s/early 80s that my grandmother bought a $10,000 20-year US Treasury bond in 1981 that paid her $1500/yr. My parents’ mortgage in 1979 was also somewhere around 12% - I remember my mom gleefully refinancing it in the 90s.
  - mlac 5y ago
    Yeah - “affordability” in most people’s minds stops at the monthly payment. It isn’t whether they have $200K to invest in a house or invest in the market. It’s “I can afford a $200K house with the rates they are today. But if they go up, I can only afford the payments on a $150K house”. I think we will have a rude awakening when, for every % we move up in interest, we add ~$200 per month on people’s payments on a $200k house. At 6%+ mortgage rates we will see a lot of people stuck in their current house and a lot of the people who look at affordability through the lens of a monthly payment will suddenly be able to afford a lot less house.

kixiQu 5y ago

The linked piece about that book has a different idea of its claim: > The book “stands today as a sort of promise that everyday people have a shot at accumulating true wealth through habits and not just outsize risk,” wrote Ron Lieber at the New York Times. Wall Street Journal columnist Jonathan Clements called it “a roadmap for everyday Americans who want to accumulate significant wealth.” That piece links this one: https://www.reuters.com/article/idUS394135834820131016 https://www.reuters.com/article/idUS394135834820131016 > When Thomas Stanley and William Danko published their best-selling book in 1996, they made much of the statistic that “80 percent of America’s millionaires are first-generation rich.” The majority, they pointed out, were entrepreneurs, many working in blue-collar professions. > Anyone could make it big, the two authors all but proclaimed; all you need is frugality and a few tax breaks. Don’t live in a pricey home. Put a cork in the Cabernet, and pop a Coors instead. But most important, open your own business. When it came to the secret sauce for scoring a million bucks, “a very big factor is self-employment,” Stanley said. > The ensuing years have not been kind to the working-class millionaire. > A little-noticed marketing report released last month by U.S. Trust contained the disturbing statistic that while almost a third of Baby Boomers worth more than $3 million claimed to have grown up in lower-middle-class homes, the number fell precipitously for younger cohorts, with 18 percent of Gen Xers and a mere 6 percent of such Millennials saying they came from working-class stock.

apsec112 5y ago
If you're measuring by net worth, that's super confounded - making $3 million by growing a small business is a lot slower than being born to wealth. So the former will be disproportionately old regardless of generational cohort.
- kixiQu 5y ago
  Yup, it needs a point-in-time comparison from when the Boomers' avg. age matched.
candybar 5y ago
> A little-noticed marketing report released last month by U.S. Trust contained the disturbing statistic that while almost a third of Baby Boomers worth more than $3 million claimed to have grown up in lower-middle-class homes, the number fell precipitously for younger cohorts, with 18 percent of Gen Xers and a mere 6 percent of such Millennials saying they came from working-class stock. This is the 2013 report being referenced here: http://doingmorethatmatters.com/wp-content/uploads/2013/09/2013-UST-Insights-Wealth-and-Worth-Full-Report.pdf http://doingmorethatmatters.com/wp-content/uploads/2013/09/2... Age Cohort Definition: Millennials: age 18–32 Generation X: age 33–48 Baby Boomers: age 49–67 Socio-economic status growing up among the wealthy: Age 18-32: 0% Poor, 6% Lower Middle Class Age 33-48: 4% Poor, 18% Lower Middle Class Age 49-67: 5% Poor, 31% Lower Middle Class Age 68+: 7% Poor, 24% Lower Middle Class This is almost entirely due to the fact being wealthy (to the tune of 3M+ net worth) is a far more exceptional outcome for younger people than it is for older people, especially given how much asset prices have gone up over the past few decades. Also these rely on self-assessments and my personal experience is that there's been a class inflation of how people describe themselves and their own upbringing. I suspect older people are more likely to describe their own upbringing as "Lower Middle Class" than younger people.

clutchdude 5y ago

Quick note, the 1996 $130k salary, when adjusted for inflation, is about $230,000 in 2021 dollars.

VLM 5y ago
Pew research data seems to imply it would be more like $150K
- Mindless2112 5y ago
  $220k according to Wolfram Alpha. https://www.wolframalpha.com/input/?i=%24130k+1996+USD+in+2021+USD https://www.wolframalpha.com/input/?i=%24130k+1996+USD+in+20...
- dlp211 5y ago
  BLS says closer to $250k using CPI. https://www.bls.gov/data/inflation_calculator.htm https://www.bls.gov/data/inflation_calculator.htm
bloodyplonker22 5y ago
I'm not a socialist, but we also have to adjust for what being a "millionaire" is today.
- dharmab 5y ago
  I've seen alternate definitions proposed for millionaire including $1M in annual income rather than net worth.
- lghh 5y ago
  Why would you being a socialist or not make a difference here?
- WalterBright 5y ago
  The 1920's version of a millionaire is like a billionaire today.

abecedarius 5y ago

Yes, I've read the book and see this article as slanted just as you say. When I saw the author's name at the end I was like "oh, that explains it" -- I used to live in LA and I'd wonder why this LA Times business columnist seems to hate business so much.

merpnderp 5y ago

My friend's grandfather worked as a meter reader for the electrical company, and maxed out at $30k/year back in 1990. He retired a millionaire by investing as much as he could and never buying anything on credit, even his house. Most of the growth happened in the electrical company he worked for who's stock didn't grow much, but paid great dividends, which he always turned into new stock purchases.

IAmGraydon 5y ago
Buying things with cash and not credit works against you unless interest rates are very high. Let’s say you have $200,000 and could buy a house with it. Alternately, you could finance the house at 4% and put the $200,000 in an index fund that makes 8% per year. In the end, you’ll end up with far more money if you take the second option. Credit is a tool for creating financial leverage and realizing larger gains, if you know how to use it. The problem is that most people use it to buy things they just can’t afford in the first place.
- MandieD 5y ago
  Interest rates were high enough in the late 70s/early 80s that my grandmother bought a $10,000 20-year US Treasury bond in 1981 that paid her $1500/yr. My parents’ mortgage in 1979 was also somewhere around 12% - I remember my mom gleefully refinancing it in the 90s.
- mlac 5y ago
  Yeah - “affordability” in most people’s minds stops at the monthly payment. It isn’t whether they have $200K to invest in a house or invest in the market. It’s “I can afford a $200K house with the rates they are today. But if they go up, I can only afford the payments on a $150K house”. I think we will have a rude awakening when, for every % we move up in interest, we add ~$200 per month on people’s payments on a $200k house. At 6%+ mortgage rates we will see a lot of people stuck in their current house and a lot of the people who look at affordability through the lens of a monthly payment will suddenly be able to afford a lot less house.