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Billionaires amass more through inheritance than wealth creation, says UBS

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Re: Billionaires amass more through inheritance than wealth creation, says UBS

#81

Post by Fauntleroy »

abeppu wrote: post #59
mushufasa wrote: post #17

This is the conclusion of Thomas Picketty's 2013 book, "Capital in the 21st Century." Due to the historical averages of the rate of return on capital, he concluded empirically that wealth will continue to concentrate to the point to inheritors, to the extent that individuals become increasingly unable through labor to achieve parity to the inheritors. The book was very provocative in economist circles, but even the c…

I also think it's worth calling out that his follow-up, "Capital and Ideology" in its latter sections includes several suggestions for counteracting the trend to increasing inequality. One of these is basically that _every_ person should have a windfall inheritance when they're in their early adulthood, which would give them opportunities to pursue education, try starting a business, or whatever else. And naturally,…

People whine about "wealth distribution" day and night, but at the end of the day what alternative is there to combat the (continually increasing) concentration of wealth at the top? At some point there will have to be redistribution, in some form, and the sooner society comes around to that the better off we'll all be.

Re: Billionaires amass more through inheritance than wealth creation, says UBS

#82

Post by zozbot234 »

abeppu wrote: post #59
mushufasa wrote: post #17

This is the conclusion of Thomas Picketty's 2013 book, "Capital in the 21st Century." Due to the historical averages of the rate of return on capital, he concluded empirically that wealth will continue to concentrate to the point to inheritors, to the extent that individuals become increasingly unable through labor to achieve parity to the inheritors. The book was very provocative in economist circles, but even the c…

I also think it's worth calling out that his follow-up, "Capital and Ideology" in its latter sections includes several suggestions for counteracting the trend to increasing inequality. One of these is basically that _every_ person should have a windfall inheritance when they're in their early adulthood, which would give them opportunities to pursue education, try starting a business, or whatever else. And naturally,…

So he supports education vouchers and healthcare vouchers for everyone? Because that's what "wealth you can spend down for some specific purposes" is, in a practical sense. That's a welcome attitude, given that these things are often dismissed ideologically.

(Also, we generally want people to have some retirement income in their old age when they can't work, and the goal of letting young folks spend down their "inheritance" seems to be in tension with that.)

Re: Billionaires amass more through inheritance than wealth creation, says UBS

#83

Post by jononomo »

itsoktocry wrote: post #62
raincom wrote: post #6

There are more secret billionaires, who don't appear on the billionaires list. I know of two such billionaires. One is super, super secretive, who passes off as a multi millionaire. There are special trusts that billionaires make use of. Treat a trust like a corporation, with its own independent existence. Such trusts can be set up for multiple generations: these trusts (corporations) are run by professionals, while…

> who passes off as a multi millionaire. What does this look like?

Has a nice house, a second beach house, and drives a Lexus. Doesn't own any super-cars and flys business class rather than in a private jet. People think he's worth $3 million, not $1.3 billion. (I just made all that up.)

Re: Billionaires amass more through inheritance than wealth creation, says UBS

#84

Post by hibikir »

SketchySeaBeast wrote: post #46
WXLCKNO wrote: post #22

Earlier quoted context omitted.

Being worth 50 million puts you in the ultra high net worth category (>30M$) and you live an incredible lifestyle obviously. But your entire net worth is 5% yearly interest on a billion dollars. It's hard to imagine for regular people just how far a billion dollars is, you're essentially royalty at that point as far access to anything in life is concerned.

Yes, by the numbers million vs billion is massive, yes, but for quality of life and for worrying about monetary things? You no longer need to be concerned about food or any type of shelter. It's a matter of the size of yacht you can buy.

50 million is still not an 'I have staff and a house in every major city' kind of thing. But once you get to the billions you have an 'I can make significant changes to the world' button. Want to redevelop North St Louis? Get 1:1 time with any politician I want to influence them about any hobby project? Make a university build a dorm without windows, because I pay them?

It's very different than just caring for food and shelter, but at those levels, personal luxury isn't really the most important thing. And really, for many things, even a billion isn't enough. Imagine you wanted to personally make high speed train happen between two US cities. A billion doesn't even begin to fund your real life Sim City project.

Re: Billionaires amass more through inheritance than wealth creation, says UBS

#85

Post by Fauntleroy »

suoduandao3 wrote: post #38
mushufasa wrote: post #17

This is the conclusion of Thomas Picketty's 2013 book, "Capital in the 21st Century." Due to the historical averages of the rate of return on capital, he concluded empirically that wealth will continue to concentrate to the point to inheritors, to the extent that individuals become increasingly unable through labor to achieve parity to the inheritors. The book was very provocative in economist circles, but even the c…

It's an interesting model and in my opinion, provides a much better model for the 'fourth turning' pattern than the mechanism put forward by the authors. The predictable return on capital Picketty points to after all only happens during times of stability, during times of instability wealth disparities actually decrease. If too much concentration of wealth leads to crisis and crisis is a 'distributing' mechanism this…

Perhaps there is a better alternative to this. Rather than simply waiting for "times of instability," society at large could take a more proactive approach.

Re: Billionaires amass more through inheritance than wealth creation, says UBS

#86

Post by gretch »

Qem wrote: post #53
mushufasa wrote: post #17

This is the conclusion of Thomas Picketty's 2013 book, "Capital in the 21st Century." Due to the historical averages of the rate of return on capital, he concluded empirically that wealth will continue to concentrate to the point to inheritors, to the extent that individuals become increasingly unable through labor to achieve parity to the inheritors. The book was very provocative in economist circles, but even the c…

We are devolving to the status quo from the nineteen century and before. A couple owners of inherited wealth and huge dispossessed masses.

This is true if you view the world from a zero-sum perspective. If the rich are winning, then the poor must be losing.

But I would argue the world is not zero-sum. Modern life for middle class or poor class people is a lot better than the vast majority of history (the 2 notable exceptions are post WWII USA and post Cold War USA, when America was punched through as an undisputed global superpower).

We are a looooonnng way away from 19th century standards. Like seriously, would you desire to go back in time to 1890? Okay, have fun if you're not white. Good luck with polio and leprosy. Hope you're not bored with reading (if you can read) because video barely exists.

Re: Billionaires amass more through inheritance than wealth creation, says UBS

#87

Post by pmorici »

This doesn’t appear to breakout by country. This isn’t surprising for more socialist countries like in the EU where it is harder to start and build businesses (wealth) in general. I’d be surprised if it was the same in the US where studies have shown that the majority of wealth is not inherited.

Re: Billionaires amass more through inheritance than wealth creation, says UBS

#88

Post by SketchySeaBeast »

Zambyte wrote: post #31
tylersmith wrote: post #15

Earlier quoted context omitted.

It's the difference between someone having $2k and $1 million dollars.

I think with the "distinction without a difference" bit they meant that if you look like you have $2k instead of looking like you have $1m, what is the difference in your life than just having $2k? The answer to that is: you have $1m of peace of mind to live your comfortable lifestyle of someone with $2k. Now living the lifestyle of someone woth $2k might not be particularly desirable to most, but living the life of…

Yes, exactly. If you live like you're making minimum wage as a millionaire that's obvious, but if you're living like a multi-millionaire instead of a billionaire how could you even tell?

Re: Billionaires amass more through inheritance than wealth creation, says UBS

#89

Post by ff317 »

jshen wrote: post #52
IAmNotACellist wrote: post #33

And yet 70% of generational wealth is gone by the 2nd generation.

I was wondering the same thing. I've heard conflicting things and I'm not sure how to make sense of that.

I have no data, but I would hypothesize that the generational advantages do not disappear easily, even if a large chunk of the monetary value does.

Even just looking at from a purely monetary angle: maybe generation two manages to "lose" 70% of a $50 million inheritance. They've still got $15 million to start over with. Even if they lost 95% of the inheritance, they're still on a better financial footing than most with $2.5 million of capital laying around to rebuild themselves from. That's not enough to live like a king and never work, but if you're even remotely smart in managing that amount from somewhere in early to middle adulthood, that's still enough to at least never have a mortgage or worry about college for yourself or your kids. It's enough to start a successful small business or three as well.

But I think there's another angle on this. Even if the kids stupidly lose a lot of the cash, they're still riding on a ton of benefits from their enriched childhood: far better health thanks to a virtually limitless diet of high quality food and great medical care, the best schools and tutors, connection networks to all the other rich kids from their rich neighborhoods and schools, and learning (through osmosis if not explicitly) all about their parents and grandparents lessons of being in executive positions and how to invest wisely and preserve capital, what kinds of lawyers and insurances you should have, etc. Bottom line is they could literally set 100% of the inherited cash on fire and they'd still have a much higher chance of re-becoming wealthy than most.

Re: Billionaires amass more through inheritance than wealth creation, says UBS

#90

Post by lotsofpulp »

yboris wrote: post #37
tylersmith wrote: post #23

Earlier quoted context omitted.

But what about it a Trust is depressing exactly? It's just a legal agreement for how wealth can be spent.

0 taxation on assets or income and it's available to people living outside of the state. So rich people can avoid paying taxes.

It’s for avoiding federal taxes. The federal government can fix the situation anytime it wants, and it won’t matter where in the US people live.
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