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The widening wealth inequality as it relates to inheritance can be explained mostly by one simple concept, something Buffett himself call the most powerful forc
by bedhead 13y ago
The widening wealth inequality as it relates to inheritance can be explained mostly by one simple concept, something Buffett himself call the most powerful force in the universe: compounding. Wise people with money, given enough time, will rocket to become insanely wealthy. Compounding does nothing for the middle class who generally spend most of their income, and it works the opposite way for the poor who are debtors. Over time this force will make the wealth gap worse and worse, which is exactly what's happened.
- deleted 13y ago[deleted]
- ljf 13y ago"wise people with money" or did you mean "people who are wise with their money" - America seems to have a default setting of rich people = good, poor = stupid.
- leoedin 13y agoI don't think the commentor implied that people without money couldn't be wise, but just that people who are both wise and posess money will be able to make it grow.
- deleted 13y ago[deleted]
- bedhead 13y agoJust run a little experiment in Excel to see what I mean. Plug in 100 numbers representing wealth in a normal distribution. Then fast forward these over say, 25 years. But the key here is that the top ~20% grow at 15%, the bottom 20% grow at 0%, and everyone in between grows at inflation so about 3%. This is generally what happens in the real world, for the most part. Watch how skewed that normal distribution becomes over 25 years. It's not a conspiracy, it's just algebra.
- paulhauggis 13y agoSo, what would you call people that continually make poor life decisions over and over and end up in large amounts of debt for the foreseeable future? Smart?
- barrkel 13y agoI believe it's a combination of a necessarily present (as opposed to future) bias, and stress reducing available concentration for good decisions, because that's what the studies on the matter support. http://www.sciencemag.org/content/341/6149/976 http://www.sciencemag.org/content/341/6149/976 http://serendip.brynmawr.edu/exchange/node/3880 http://serendip.brynmawr.edu/exchange/node/3880 http://www.cepr.eu/meets/wkcn/7/770/papers/Banerjee.pdf http://www.cepr.eu/meets/wkcn/7/770/papers/Banerjee.pdf Have a good look at yourself in the mirror.
- paulhauggis 13y ago"Have a good look at yourself in the mirror." I don't need to. I look around me and continuously see people making poor life decisions and blaming it on the "system". The truth hurts.