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How the .0001% Made Its Money

priceonomics.com

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Re: How the .0001% Made Its Money

#61

Post by Zimahl »

icebraining wrote: post #35
werner34 wrote: post #19

Earlier quoted context omitted.

Exactly my opinion. And even though I normally lean towards free market related views when it comes to regulation and government, I think a high inheritance tax would be justified in western countries. With it universities & infrastructure could be funded and possibly enable more people to get a university degree. My underlying reasoning: Every new generation is a giant possiblity for mankind. Now who do we want to c…

Though I'm attracted to the idea, inheritance tax was always a concept that I see (probably due to ignorance) as extremely vulnerable to "an extra layer of indirection". You see, I'm not actually transferring the company to my son, I'm transferring it to a trust in Switzerland that is controlled by my daughter-in-law.

That's certainly a possibility, and it certainly is done by the wealthy all the time. At least in the US it is very difficult to transfer large sums of money out of the country without accounting for it, so these end-arounds of taxation are quite difficult to pull off.

Inheritance taxes are better because they force the rich out of a hording mentality - either leave your family with sustaining businesses, which help the middle class by providing jobs, or lose half and have that reallocated. Right now, without an inheritance tax, there's no appeal to take risks on building anything. Just invest at moderate returns and the family fortune will never run out (except in extreme circumstances).

Re: How the .0001% Made Its Money

#62

Post by holograham »

I am curious on this articles definition of poverty. The statement that 20% of the forbes 400 was born in poverty is insufficient on it's own. More telling would be that percentage compared to the percentage of poor in America. That number could be very favorable (or very unfavorable) depending on the metric for poverty used.

Re: How the .0001% Made Its Money

#63

Post by elp1stolero »

werner34 wrote: post #19
Shivetya wrote: post #9

the good take-a-way is that more people created than inherited

Exactly my opinion. And even though I normally lean towards free market related views when it comes to regulation and government, I think a high inheritance tax would be justified in western countries. With it universities & infrastructure could be funded and possibly enable more people to get a university degree. My underlying reasoning: Every new generation is a giant possiblity for mankind. Now who do we want to c…

I certainly feel your sentiment, werner38 (Re: Paris Hilton - right?), but I disagree with your conclusions.

And I agree with you that it is not necessarily a positive outcome that a king's heir would assume the wealth of the king. However, I think the trade-off of using law to essentially plunder property (again, assuming the property was acquired through no act of injustice), undermines the purpose of law - to defend against injustice.

Property (acquired or created justly) is typically an outcome of liberty, and often fate (birth, luck, etc). I don't believe we can alter either of these conditions through tax law (force) without undermining the justice of law itself.

Furthermore, in my view, I don't believe an individual's property is something that anyone else has a claim to dispense with, especially a political organ such as the 'the state' (an entity which bears very little responsibility for the outcome of it's economic and financial actions).

That doesn't mean I necessarily like the idea of people amassing or acquiring resources without work. But the reason I work hard is to benefit the things which I choose to value: my family, my community, the erasing of Star Wars Ep. 1-3 from history, etc. I want to give my kids a better shot at life than myself. Property may be a component, but is far down the list from things like values, and work ethic. But these are my choices for my life. That to me, is the American Dream - to be free live how I choose - not wealth and things. Whether I am very rich at some point, or not - I don't believe force should be employed to negate or alter my choices, nor do I wish to use force to alter your's or someone else's.

Maybe I'm way out of my gourd, but the fact that Paris Hilton has a huge amount of wealth, and no values is a total failure of her parents - not the inheritance itself.

Re: How the .0001% Made Its Money

#64

Post by count »

seferphier wrote: post #29
NhanH wrote: post #12

Earlier quoted context omitted.

I might well be very wrong here, but the main difference is that the other type of wealth-creation process actually creates more wealth (more products for everyone). While finance seems more like wealth-accumulation without the creation process - I'm aware that redistribution of resource in an efficient way is supposedly the part finance does in the wealth creation process, I'm just unconvinced of how much does that…

I agree. Finance created lots of value for the British Empire when they were colonizing countries - where they could raise money to buy navy ships and soldiers. Finance does create value in the long run. However, it creates minimal value in the short run. Debt being traded in the short run is a zero sum game which does not create any value for the society. Considering that we allocate the best and the brightest peopl…

Aside from the VC's in the valley, what business in America runs without using debt in the short term today? Finance enables the day to day operations of the entire economy - I'd say it creates a ton of new wealth, in every segment.

Re: How the .0001% Made Its Money

#65

Post by vidarh »

klochner wrote: post #25
Florin_Andrei wrote: post #21

Earlier quoted context omitted.

Let me emphasize it again - perhaps by sheer repetition, the main point will become obvious: It's not something relevant to the general population, the middle class in general, or the concept of social mobility, IF IT ONLY APPLIES TO 1 PERSON IN 1 MILLION.

The article presents that caveat straightforwardly: The popular view of America's upper class is that of an ossified aristocracy. But research from the National Bureau of Economic Research shakes up this view, at least among America's richest individuals. And elaborates: Over the last 30 years, income inequality has grown and intergenerational mobility has decreased. The rich are getting richer and drawing up the lad…

The problem is that on one hand the try to talk about "America's upper class", on the other hand they restrict themselves to looking at members of the Forbes 400.

In other words: They're seemingly trying to make the story sound more relevant than it is, by framing it as if they have something to say about "America's upper class", when the data they look at consists only of a tiny subset of extreme outliers.

Re: How the .0001% Made Its Money

#66

Post by werner34 »

icebraining wrote: post #35
werner34 wrote: post #19

Earlier quoted context omitted.

Exactly my opinion. And even though I normally lean towards free market related views when it comes to regulation and government, I think a high inheritance tax would be justified in western countries. With it universities & infrastructure could be funded and possibly enable more people to get a university degree. My underlying reasoning: Every new generation is a giant possiblity for mankind. Now who do we want to c…

Though I'm attracted to the idea, inheritance tax was always a concept that I see (probably due to ignorance) as extremely vulnerable to "an extra layer of indirection". You see, I'm not actually transferring the company to my son, I'm transferring it to a trust in Switzerland that is controlled by my daughter-in-law.

Well, true, somebody that wants to game the system will find a way.

However, you could still say that everything up to 20 Million* has a lower tax on it and you can give that to your kids in legal ways. I think Warren Buffett and Bill Gates want to give most of their wealth away with a similar reasoning anyways.

That amount of money is still enough to buy a Ferrari and never work again while taking loads of drugs in Monaco every day.

The extra layer of indirection might be enough to guide people in the right direction. I am not sure many people would bet their fortune on their son/daughter in law being good to their kids indefinitely. That would probably provoke some very annoying lawsuits between your kids and their spouses sooner or later.

*= With some correction for inflation over the years, but lets say 20 Million of todays Dollars for example.

Re: How the .0001% Made Its Money

#67

Post by alnis »

Samuel_Michon wrote: post #52
programminggeek wrote: post #32

> The economic story of the past decades is supposed to be the death of the American Dream. Income inequality has risen, the wealth of the middle class stagnated, and stories of the poor working their way to prosperity became just stories. I think the article doesn't really do a good job to change that view. The inequality has risen and the wealth of the middle class has stagnated. This is absolutely true. Things lik…

> The top 0.0001% gained their wealth not by inheriting it How did you come to that conclusion? I looked for that in the figures, but I couldn’t find what percentage came into money from an inheritance. Perhaps it’s placed in the 12% ‘Diversified/Other’ category, but the impression I got from the article was that they tallied how the money was earned in the first place, not where the ones holding the purse got it fro…

From the article:

> Kaplan and Rauh find that America’s wealthiest are no longer a collection of Rockefellers and Carnegies. During the period the researchers investigated, the number of individuals on the Forbes 400 who were the first in their family to run a business rose from 40% to 69%. Sixty percent of individuals on the list grew up wealthy in 1982 while only 32% did in 2011.

> Although being born into wealth is less and less necessary for admission to the club of America’s wealthiest individuals, ...

Re: How the .0001% Made Its Money

#68

Post by [deleted] »

Samuel_Michon wrote: post #52
programminggeek wrote: post #32

> The economic story of the past decades is supposed to be the death of the American Dream. Income inequality has risen, the wealth of the middle class stagnated, and stories of the poor working their way to prosperity became just stories. I think the article doesn't really do a good job to change that view. The inequality has risen and the wealth of the middle class has stagnated. This is absolutely true. Things lik…

> The top 0.0001% gained their wealth not by inheriting it How did you come to that conclusion? I looked for that in the figures, but I couldn’t find what percentage came into money from an inheritance. Perhaps it’s placed in the 12% ‘Diversified/Other’ category, but the impression I got from the article was that they tallied how the money was earned in the first place, not where the ones holding the purse got it fro…

[deleted]

Re: How the .0001% Made Its Money

#69

Post by NhanH »

count wrote: post #64
seferphier wrote: post #29

Earlier quoted context omitted.

I agree. Finance created lots of value for the British Empire when they were colonizing countries - where they could raise money to buy navy ships and soldiers. Finance does create value in the long run. However, it creates minimal value in the short run. Debt being traded in the short run is a zero sum game which does not create any value for the society. Considering that we allocate the best and the brightest peopl…

Aside from the VC's in the valley, what business in America runs without using debt in the short term today? Finance enables the day to day operations of the entire economy - I'd say it creates a ton of new wealth, in every segment .

This is kind of a circular argument, business runs with debt in the short term nowadays because our current system is being set up this way. It doesn't mean with some other settings, debt is an absolutely necessary (it also doesn't mean that the "other setting" won't be just Finance 2.0, however).

Re: How the .0001% Made Its Money

#70

Post by selmnoo »

nostromo wrote: post #57
firstOrder wrote: post #23

The first paragraph says: > The popular view of America's upper class is that of an ossified aristocracy. But research from the National Bureau of Economic Research shakes up this view, at least among America's richest individuals. Not much has shaken up this view. Half of the list inherited $400 million or more upon turning 18. Even the other half of the list are from among a small percentage of America's upper midd…

Your comment has sparked a debate that always plays out the same way. Let's just jump to the punchline and argue if the universe is deterministic or not.

From a broadly macroscopic point-of-view, it most definitely is. A child in Nigeria born to dirt poverty has near zero chance of, for example, having a stable, respectable salary (of our definition) in his or her future. I think microscopically it might be a little controversial to call it deterministic, but my personal anecdotes certainly point that way. I attended a public school in the inner city when I was young, and later moved out of there to a suburbun school. Looking at where the two sets of folks are now with a little Googling and a little Facebooking, the former are not doing well at all; the latter are doing very well. What's more, the folks I expected to be doing well from the inner city crowd are not doing well, and conversely a lot of the slackers from the suburban school are actually doing remarkably, surprisingly well in some cases.
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