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Those very same APIs that create the incentive to make human labor obsolete also destroy existing business models, where old money is parked. You vastly undere

Those very same APIs that create the incentive to make human labor obsolete also destroy existing business models, where old money is parked. You vastly underestimate how hard it is to stay rich. Most families are back to square 1 after 3 generations.

addicted44 12y ago
The difference between today and before is that old money is rarely parked in a single business model. The sophistication in finance, and the spread of public companies means the Waltons don't only stay rich as long as Walmart is successful. In fact, I'd bet their wealth is affected far less by Walmart than it is by the tens or hundreds of hedge funds and VC firms they are invested in. Money is rarely parked at any one place today, but rather, is largely distributed throughout the economy.
- snowwrestler 12y ago
  Which raises the question of whether 2nd generation rich are actually bad for overall wage growth. The industries that typically have the highest wages are the cutting-edge technologies; these are also typically industries that rely on a large pools of capital to fund high-risk investments. Venture capitalists have played a huge role in the story of the technology industry over the past 15 years, but where do VC's get their money? From the hedge funds of rich people like the Waltons.
frostmatthew 12y ago
> Most families are back to square 1 after 3 generations. Any sources to back this up?
- sp332 12y ago
  It's a common cycle. The saying is "shirtsleeves to shirtsleeves in 3 generations." https://www.moneynews.com/StreetTalk/family-wealth-heir-children/2014/06/25/id/579236/ https://www.moneynews.com/StreetTalk/family-wealth-heir-chil... http://www.cnbc.com/id/101837456 http://www.cnbc.com/id/101837456
rictic 12y ago
Here's what I could find on maintaining wealth over time: http://www.econ.ucdavis.edu/faculty/gclark/papers/Sweden%202012%20AUG.pdf http://www.econ.ucdavis.edu/faculty/gclark/papers/Sweden%202... - A study of Swedish surnames since 1700s suggested that wealth regressed to the mean quite slowly (the statistical measure b), finding significant differences between those holding noble and common names after hundreds of years http://www.eea-esem.com/files/papers/EEA-ESEM/2013/1862/SUwp13_03.pdf http://www.eea-esem.com/files/papers/EEA-ESEM/2013/1862/SUwp... - Another study of Swedish intergenerational wealth transfer finds similarly. http://www.econ.ucdavis.edu/faculty/gclark/papers/Clark%20Cummins%201800-2011%20Revision2.pdf http://www.econ.ucdavis.edu/faculty/gclark/papers/Clark%20Cu... - A study of rare British surnames since 1800s finds a similar rate of regression to the mean. And taking a different tack, studying lottery winners with modest sums: http://www.econ.pitt.edu/papers/Mark_lottery.pdf http://www.econ.pitt.edu/papers/Mark_lottery.pdf - only 3 years after winning 50-150k people have regressed to the mean rate of bankruptcy http://www.nber.org/papers/w19348 http://www.nber.org/papers/w19348 - land seized from Cherokee people in 1832 was given away in a lottery. The land was valued at between 20k and 150k in modern terms, depending on how you count - inflation vs relative value of unskilled labor. Sons of lottery recipients had no better adult outcomes than the sons of eligible men who received nothing. So, all of these do find a significant regression to the mean and not a permanent upper class, but for large wealth and social status differences it can take hundreds of years. For more moderately sized random windfalls it happens rather quickly. I'm out of time to write this comment further, but I'd like to look next for research on what happens a generation or two after a family makes a very large move, i.e. rags-to-riches and riches-to-rags.

addicted44 12y ago

The difference between today and before is that old money is rarely parked in a single business model. The sophistication in finance, and the spread of public companies means the Waltons don't only stay rich as long as Walmart is successful. In fact, I'd bet their wealth is affected far less by Walmart than it is by the tens or hundreds of hedge funds and VC firms they are invested in. Money is rarely parked at any one place today, but rather, is largely distributed throughout the economy.

snowwrestler 12y ago
Which raises the question of whether 2nd generation rich are actually bad for overall wage growth. The industries that typically have the highest wages are the cutting-edge technologies; these are also typically industries that rely on a large pools of capital to fund high-risk investments. Venture capitalists have played a huge role in the story of the technology industry over the past 15 years, but where do VC's get their money? From the hedge funds of rich people like the Waltons.

frostmatthew 12y ago

> Most families are back to square 1 after 3 generations. Any sources to back this up?

sp332 12y ago
It's a common cycle. The saying is "shirtsleeves to shirtsleeves in 3 generations." https://www.moneynews.com/StreetTalk/family-wealth-heir-children/2014/06/25/id/579236/ https://www.moneynews.com/StreetTalk/family-wealth-heir-chil... http://www.cnbc.com/id/101837456 http://www.cnbc.com/id/101837456

rictic 12y ago

Here's what I could find on maintaining wealth over time: http://www.econ.ucdavis.edu/faculty/gclark/papers/Sweden%202012%20AUG.pdf http://www.econ.ucdavis.edu/faculty/gclark/papers/Sweden%202... - A study of Swedish surnames since 1700s suggested that wealth regressed to the mean quite slowly (the statistical measure b), finding significant differences between those holding noble and common names after hundreds of years http://www.eea-esem.com/files/papers/EEA-ESEM/2013/1862/SUwp13_03.pdf http://www.eea-esem.com/files/papers/EEA-ESEM/2013/1862/SUwp... - Another study of Swedish intergenerational wealth transfer finds similarly. http://www.econ.ucdavis.edu/faculty/gclark/papers/Clark%20Cummins%201800-2011%20Revision2.pdf http://www.econ.ucdavis.edu/faculty/gclark/papers/Clark%20Cu... - A study of rare British surnames since 1800s finds a similar rate of regression to the mean. And taking a different tack, studying lottery winners with modest sums: http://www.econ.pitt.edu/papers/Mark_lottery.pdf http://www.econ.pitt.edu/papers/Mark_lottery.pdf - only 3 years after winning 50-150k people have regressed to the mean rate of bankruptcy http://www.nber.org/papers/w19348 http://www.nber.org/papers/w19348 - land seized from Cherokee people in 1832 was given away in a lottery. The land was valued at between 20k and 150k in modern terms, depending on how you count - inflation vs relative value of unskilled labor. Sons of lottery recipients had no better adult outcomes than the sons of eligible men who received nothing. So, all of these do find a significant regression to the mean and not a permanent upper class, but for large wealth and social status differences it can take hundreds of years. For more moderately sized random windfalls it happens rather quickly. I'm out of time to write this comment further, but I'd like to look next for research on what happens a generation or two after a family makes a very large move, i.e. rags-to-riches and riches-to-rags.