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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

#241

Post by godelski »

chrischattin wrote: post #130
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…

Hardly empirical. The data shows the opposite. ~80% of current billionaires in the U.S. are self-made first generation.

> ~80% of current billionaires in the U.S. are self-made first generation.

I see conflicting evidence to the claim[0,1,2]

I'd argue that you also got to be really careful with these studies. Defining "self-made" is not a straight forward issue. In some sense, no person is self made as we're all products of our environments and the opportunities presented to us. If it were consistent you wouldn't see these numbers swing between studies, so don't just pick the highest one. Metrics are deceptive because their subtleties and you need to carefully consider their alignment.

[0] https://finance.yahoo.com/news/79-millionaires-self-made-les...

[1] https://www.businessnewsdaily.com/2871-how-most-millionaires...

[2] https://www.fool.com/the-ascent/personal-finance/articles/st...

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

#242

Post by creato »

munificent wrote: post #151
gretch wrote: post #86

Earlier quoted context omitted.

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…

I think you're confusing zero-sum between people at different economic levels and zero-sum between people at different points in time. Yes, people at a given economic percentile today have many things better in absolute terms compared to poor people at that same economic percentile X years ago. (This is obviously true for large enough X. Everyone's got it better today than the Cro-Magnons did!) That does not mean the…

> Every dollar in a billionaire's bank account is a dollar that could be in someone else's instead.

This is true, but billionaires don't just have a billion dollars sitting in bank accounts. The billions in wealth comes from ownership of property and companies. Some of this may be considered "zero sum" in the way you describe (e.g. a billionaire that owns and rents out single family homes).

However, I would guess the majority of that wealth is not "zero sum" in the way you describe, such as a warehouse robot (or the warehouse itself). What are you going to do with a warehouse robot? It has no value to you, or almost anyone else.

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

#243

Post by TacticalCoder »

gcheong wrote: post #114

Choose your parents wisely.

> Choose your parents wisely.

Or accept that your parents are your parents and they decided to have you.

From the point of view of the parents, suddenly things change: I fully knew I'd have the money to all least raise my kid well. Do all parents even think about that?

Mike Judge's Idiocracy movie is always a good watch.

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

#244

Post by jay_kyburz »

rabuse wrote: post #127
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…

What happens when the masses get fed up with the inequality and 400+ million guns in the U.S.?

I see people joking about this all up and down this thread, but rich peoples wealth is not sting around in gold bars waiting to be stolen by poor people.

All that will happen in a violent uprising is a lot of people will die, and peoples houses will burn down, but nothing will happen to those numbers in a spreadsheet.

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

#245

Post by smallerfish »

Zambyte wrote: post #71
SketchySeaBeast wrote: post #46

Earlier quoted context omitted.

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.

As someone in my 20s, I couldn't even retire with $1m. On the other hand, I could live off the interest alone in a savings account with $1b. (Obviously putting $1b entirely into a savings account is a terrible idea, just making a point)

> I could live off the interest alone in a savings account with $1b.

I mean, you could live off the interest alone in a savings account with $5m (you can easily get 2.5% at the moment.)

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

#246

Post by ReallyAnonymous »

alweirjt wrote: post #194
zozbot234 wrote: post #150

Earlier quoted context omitted.

> why should a small minority of kids get a huge extra unearned boost? That unearned boost is already available to anyone who manages to bequeath sufficient amounts of wealth to the next generation, and conversely becomes unavailable to those who squander that wealth instead. That doesn't really change all that much if you introduce redistribution: either way, there will always be plenty of kids who will spend the mo…

> being bequeathed a sizeable inheritance in the first place at least implies that one's attitude to managing wealth has already stood the test of time. I don't believe so. At best it means perhaps your parents knew how to manage wealth. It doesn't imply the child inheritors will manage it well, or better than anyone else. At worst, it might simply mean the parents had so much wealth they were unable to spend it all…

The USA tax code potentiates this. First $12m tax free, step up basis allow tremendous wealth to be bequeathed without financial penalty.

Trusts, when set up correctly, can do so as well.

Once inherited, the first $90,000 (married couple) of qualified dividend income is tax free. Plus, standard $29,000 (married couple) deduction means that the first $119,000 of investment income can be tax free. You will see the wealthy either try and start a company or not work. Why work a job where about 30% of your income is taxed when you can stay home and not work. If you inherit your parents' home, you can easily live without working.

Current safe dividend yields are about 6% so all it takes is inheriting $1.5m. There are 24 million millionaires in the USA so there may be quite a few that take advantage of this. When the wealthy start giving their children their inheritance while they are still alive ........

Currently, you can give your children up to a total of $12m combined in your lifetime, before taxes have to be taken out.

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

#247

Post by rufus_foreman »

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…

>> 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

Adjusted for inflation, John D. Rockefeller had 340 billion dollars of wealth in 1918. What has that fortune grown to? It hasn't. It is gone. He gave it away.

Adjusted for inflation, Andrew Carnegie had 370 billion dollars of wealth in 1901. What has that fortune grown to? It hasn't. It is gone. He gave it away.

John Jacob Astor's fortune? Gone. Vanderbilt's? Gone.

Looking at a few different lists, those are the 4 wealthiest people in US history. They either gave the money away or their heirs spent it all.

If wealth was going to automatically concentrate, it would have. It didn't. Rockefeller's 340 billion invested in the stock market from 1918 to today would roughly equal the entire net wealth of the US. That didn't happen for the Rockefellers and it didn't happen for any of the other many fortunes in the past.

What Picketty "concludes empirically" does not in fact happen. If it did in fact happen, all the wealth of the US would be in the hands of one person.

To figure out if wealth will concentrate in the hands of inheritors, you need to know many different things.

Will people give their wealth to their children or will they give it away? Zuckerberg, Gates, Buffet, Ellison, all giving their money away.

Will people give their wealth to a single child? Elon Musk has 10 kids. If he gave away money to each child, his wealth would not be concentrated. (Oops, 11 children. Even less concentrated.) If those children went on to have multiple children, the inheritance gets diluted even more.

Some rich people, believe it or not, actually spend money. People who inherit wealth rather than earning it seem to be particularly good at spending wealth faster than it grows.

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

#248

Post by SXX »

elzbardico wrote: post #164
yboris wrote: post #32

Earlier quoted context omitted.

> "Dynasty trusts can be created in South Dakota for families who do not live in the state. South Dakota allows trusts to continue in perpetuity, avoiding federal transfer taxes for generations. The state does not impose any form of taxation (income, dividend interest, capital gains) on these trust assets."

What is the point for South Dakota if they don't collect taxes? Just being conservative assholes against the other states? Being ideological jerks?

There are still high-paying jobs for those maintaining this infrastructure as well as income for law and accounting firms serving them. Cashflow is always good even without taxes to collect.

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

#249

Post by somenameforme »

kasey_junk wrote: post #69
IAmNotACellist wrote: post #33

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

This is a stat that is never sourced and is mostly cited by the wealth planning industry that have an ulterior motive for making people believe it. I’d love to see a rigorous backing of this stat.

As would I, but I think there's some pretty straight forward logic in favor of it. The richest of the rich tend to have a healthy number of children, both in the past and in the present. Bezos has 4, Musk has 11, Sam Walton had 4, Vanderbilt had 13, and so on. When people die they are going to be distributing their wealth not only to their children, but also their grand children, and perhaps even further along. And then this happens over and over again, each generation. If your children fail to have children, the fortune is gone. If your children don't grow the fortune, it's gone. If your children spend the fortune, it's gone.

Another issue is that I think we take living modestly for granted. Somebody born to the super-rich probably has a very different perspective on money and costs. It has to be quite the lesson to try to teach somebody the value of something when they have what likely seems like a practically unlimited amount of it, and but one life to live. So I think we can add another one to the above - if your values don't successfully transfer, it's gone.

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

#250

Post by yterdy »

zozbot234 wrote: post #82
abeppu wrote: post #59

Earlier quoted context omitted.

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 "inhe…

I didn't need education vouchers, I had a full ride off of my academic achievement. Money for effective therapy and stable housing, however...

The point of currency is the fungibility. Everyone has different needs, that (I'm told) no bureaucracy is equipped to manage. So, no, not vouchers. Cash. And then we focus on the social and communal aspects of people being equipped to make smart decisions with it.

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