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How the .0001% Made Its Money

priceonomics.com

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Re: How the .0001% Made Its Money

#141

Post by bedhead »

ljf wrote: post #131
bedhead wrote: post #116

Earlier quoted context omitted.

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 debtor…

"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.

Just 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.

Re: How the .0001% Made Its Money

#142

Post by PeterisP »

technosmurf wrote: post #46
adventured wrote: post #30

Earlier quoted context omitted.

Bill Gates shouldn't be listed as someone who inherited his wealth: he did not inherit it. The $100 billion he'll give away was of his own creation, spurred from effort of his own mind, from a company born of his own fingers and imagination. We're having this conversation thanks to the Internet, probably via relatively inexpensive tools/gadgets. Which means we've all inherited an extraordinary privilege - courtesy of…

> Bill Gates shouldn't be listed as someone who inherited his wealth: he did not inherit it. According to Philip Greenspun, Bill Gates started off with a million-dollar trust fund: "William Henry Gates III made his best decision on October 28, 1955, the night he was born. He chose J.W. Maxwell as his great-grandfather. Maxwell founded Seattle's National City Bank in 1906. His son, James Willard Maxwell was also a ban…

And? A million dollar trust fund means that he inherited 0.001% of his 100B quoted wealth.

If a million dollar net worth person inherits $10, does that mean that his wealth is inherited? The proportion is the same.

Re: How the .0001% Made Its Money

#143

Post by paulhauggis »

ljf wrote: post #131
bedhead wrote: post #116

Earlier quoted context omitted.

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 debtor…

"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.

So, 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?

Re: How the .0001% Made Its Money

#144

Post by humanrebar »

nitrogen wrote: post #128
humanrebar wrote: post #106

Earlier quoted context omitted.

I read that article. While those studies are interesting, they are definitely limited and far from conclusive. For example, they didn't control for genetics as far as I can tell. It's entirely plausible that "rich" people are rich in the first place because, statistically speaking, innate intelligence lets them make better financial decisions even under duress. While it's possible and interesting, I certainly wouldn'…

I do know that I felt less intelligent when I was more worried about money, as though some fixed cognitive reserve were depleted by worrying about uncertain near-term survival, leaving fewer intellectual resources for long-term planning and development.

To be clear, I don't deny it's plausible. I deny that the science is convincing. With all due respect, the combination of a few anecdotes and a couple limited studies should not carry much weight.

Re: How the .0001% Made Its Money

#145

Post by humanrebar »

walid wrote: post #114
humanrebar wrote: post #106

Earlier quoted context omitted.

I read that article. While those studies are interesting, they are definitely limited and far from conclusive. For example, they didn't control for genetics as far as I can tell. It's entirely plausible that "rich" people are rich in the first place because, statistically speaking, innate intelligence lets them make better financial decisions even under duress. While it's possible and interesting, I certainly wouldn'…

I don't think you can control for genetics, at least not directly. There is no intelligence genetic marker as far as I know which only leaves testing the IQ/intelligence of the whole family tree as the only option. However getting access to ancestors might not be feasible. On the other hand having a large pool of people is good enough since the distribution of intelligence is usually uniform and not restricted to thi…

> I don't think you can control for genetics, at least not directly.

That's my point, really. My conclusion is that these studies are interesting, but the body of evidence isn't scientifically rigorous enough that it should affect policy decisions.

Re: How the .0001% Made Its Money

#146

Post by humanrebar »

chc wrote: post #120
quinnchr wrote: post #107

Earlier quoted context omitted.

Are you seriously asserting poverty is not a known vector for stunted childhood development? Do you realize there are millions of impoverished people in this country who can't afford to eat healthily? You are aware of the effect nutrition has on childhood development right? Do you realize there exist impoverished parts of this country which simply don't have access to fresh healthy food? There's literally hundreds of…

If you actually read the thread, he's asserting the same thing you are asserting. What he's disputing is the idea that one of the chief reasons poverty is hard to get out of is that, once there, the mind is too fixated on survival for higher intellectual achievements.

Technically, I'm asserting that we don't have enough evidence to say one way or another and that we shouldn't let studies like these affect our decisions or worldviews yet.

Re: How the .0001% Made Its Money

#147

Post by djt »

Amadou wrote: post #130
kkowalczyk wrote: post #42

Earlier quoted context omitted.

Quotation needed about mother's involvement. The story that I've read was that IBM had the hardware but didn't think they could make software on time so they went shopping for the OS. First they went to Digital Research who didn't want to do it. Microsoft jumped in and promised to deliver what would become MS-DOS. The rest is history. In no way was Gate's mother instrumental in the process. Citation: http://forwardth…

> Quotation needed about mother's involvement. "In 1980, she discussed with then-IBM Corp. Chairman John Opel, who was also on the United Way committee, the business IBM was doing with Microsoft. Opel, some accounts say, knew little about the venture, but mentioned Mary Gates to IBM executives who introduced Microsoft at a meeting of IBM's top-level management committee a few weeks later." http://articles.latimes.com…

Nice detective work

Re: How the .0001% Made Its Money

#148

Post by nitrogen »

humanrebar wrote: post #144
nitrogen wrote: post #128

Earlier quoted context omitted.

I do know that I felt less intelligent when I was more worried about money, as though some fixed cognitive reserve were depleted by worrying about uncertain near-term survival, leaving fewer intellectual resources for long-term planning and development.

To be clear, I don't deny it's plausible. I deny that the science is convincing. With all due respect, the combination of a few anecdotes and a couple limited studies should not carry much weight.

I agree, the best anecdotes can do is demonstrate plausibility, not provide proof.

Re: How the .0001% Made Its Money

#149

Post by barrkel »

paulhauggis wrote: post #143
ljf wrote: post #131

Earlier quoted context omitted.

"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.

So, 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?

I 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://serendip.brynmawr.edu/exchange/node/3880

http://www.cepr.eu/meets/wkcn/7/770/papers/Banerjee.pdf

Have a good look at yourself in the mirror.

Re: How the .0001% Made Its Money

#150

Post by count »

NhanH wrote: post #69
count wrote: post #64

Earlier quoted context omitted.

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).

Finance is a circular argument, due to the nature of finance (see what I did there?).

It's fiat currency and fractional reserve banking - the initial bootstrapping of the system is a giant 'just trust us' and 'go with it' moment for society. Debt is easiest way to grow an economy, as loaning money helps create new wealth. It allows banks to turn $5 actual dollars into $15 actual dollars, without having to take $10 actual dollars from anybody. It's magic, but it only works when people trust the system to not disappear/default, and borrow money. Without debt, there is no growth of the overall economy, there is only shifting of reserves from point a to point b.

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