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Are super-rich people just better at making money?

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Re: Are super-rich people just better at making money?

#441

Post by cloutchaser »

burlesona wrote: post #377

There are two core insights here that are actually pretty obvious: 1. 20% of 1200 is more than 20% of 800. Duh! But the practical insight is simply that people with more wealth can afford bigger bets and expect bigger payouts. 2. Many systems are sensitive to initial conditions. In this model, the first coin flip matter vastly more than all others and determines almost the entire outcome. As others have pointed out t…

Another solution is for the fed to stop pumping the stock market for the last 14 years like crazy and offering free money to the finance sector.

Frankly blaming actual entrepreneurs and business owners for the gains in the stock market is such a misguided target it’s insane. The only reason Musk, bezos and others have gotten so insanely rich recently is because the fed had increased its balance sheet by about $8trn. That money went somewhere.

But it’s not because of “rich people”.

It’s because a bunch of bankers destroyed the financial system in 2008, got bailed out, and never got criminally charged. It’s absolutely insane and it’s fuelling this completely misplaced neo Marxism.

Re: Are super-rich people just better at making money?

#442

Post by CadmiumYellow »

manimino wrote: post #320
lelag wrote: post #99

Earlier quoted context omitted.

> Buying a second, third, fourth home? It's too easy for the ultra-rich to find loopholes in any rules. If there is a tax on homeownership, they will simply not own any home but will own some corporate entity that own the asset. See ? No secondary residence. Just an investment in a corporation that happens to home a bunch of houses.

Yes, there will always be workarounds, but those come with prices of their own (such as time spent getting around them, people to hire, etc.) As an analogy, we catch more dumb criminals than smart criminals - but overall it's still worth having police, even if a few bad guys get away.

The cost of hiring people to get around regulations so you don't have to waste your own time doing it is trivial to someone extremely wealthy. Those things really are not deterrents at all. They'd only work on the upper middle class, meaning we'd end up in the exact same situation we're in right now. If you can pay someone to make a problem go away then the very rich are going to do that almost 100% of the time.

Re: Are super-rich people just better at making money?

#443

Post by gjulianm »

abigail95 wrote: post #388
gjulianm wrote: post #219

Earlier quoted context omitted.

> If this was true about wealth creation, intergenerational wealth would eventually outcompete everything else, while it looks like the opposite is true. Not outcompete, but intergenerational wealth does play a huge part in class mobility [1]. > The what they invest it in, is the whole point. If you spend your life and wealth playing 20% of your bankroll with zero expected value - you should completely expect not to…

I disagree with the conclusions you draw and how you apply them to this context. Richer people don't have access to higher EV else their kids wouldn't have very similar relative mobility, they should be richer than their parents. And it seems that the risk of becoming downwardly mobile (absolute and relative) increases along with income. Which makes sense as some sort of mean reversion. Along with the bottom quintile…

Not many people with 500 dollars invest it because they probably need it for essential things. Not to mention that the money you can get at 40 years doesn’t really matter too much when right now you can’t buy a house, even can’t pay your bills…

Re: Are super-rich people just better at making money?

#444

Post by dragonwriter »

burlesona wrote: post #377

There are two core insights here that are actually pretty obvious: 1. 20% of 1200 is more than 20% of 800. Duh! But the practical insight is simply that people with more wealth can afford bigger bets and expect bigger payouts. 2. Many systems are sensitive to initial conditions. In this model, the first coin flip matter vastly more than all others and determines almost the entire outcome. As others have pointed out t…

> A very simple distribution solution therefore is to stop privileging capital gains and tax all income equally. But of course this has been considered and hasn’t gained traction.

There's one substantive and one political issue that are important; the substantive issues is that in an annual progressive income tax system, there are real fairness issues with taxing the outcome of multiyear processes as current-year income at full (whether nominal or, using inflation indexed basis value, real gains). [0]

The political one is that the vrry rich havr predominantly capital gains, and progressive tax with reduced capital gains tax rates is how the capitalist class maintains “the rich pay higher income taxes” as a propaganda point while actually paying lower taxes.

[0] there are fairly straightforward solutions for this, which make irregular income from sources already subject to normal income tax more fair, but they add a little more complication to the overall solution.

Re: Are super-rich people just better at making money?

#445

Post by sangnoir »

xg15 wrote: post #440
burlesona wrote: post #377

There are two core insights here that are actually pretty obvious: 1. 20% of 1200 is more than 20% of 800. Duh! But the practical insight is simply that people with more wealth can afford bigger bets and expect bigger payouts. 2. Many systems are sensitive to initial conditions. In this model, the first coin flip matter vastly more than all others and determines almost the entire outcome. As others have pointed out t…

> A very simple distribution solution therefore is to stop privileging capital gains and tax all income equally. But of course this has been considered and hasn’t gained traction. A reason why it hasn't gained traction though is that wealth doesn't just give you buying power but also political influence. So especially those who already have excessive wealth would be in a position to block such a measure.

I remain convinced that unbridled capitalism is incompatible with democracy in the long term, particularly when buying political influence is legitimized.

Re: Are super-rich people just better at making money?

#446

Post by mrep »

prottog wrote: post #311
greedo wrote: post #291

Earlier quoted context omitted.

Bezos may not be able to sell his shares in significant amounts, but he can sure use them for collateral. This is a very basic strategy for the super rich...

It'll be interesting to see if that strategy continues to work in a rising-rates environment, where the value of AMZN or TSLA may not be infinitely appreciating.

It's even worse that that. As interest rates rise, equities generally fall as they have been as they need to compete with interest bearing assets so their costs are skyrocketing and their collateral is collapsing risking them for a margin call and loosing everything.

Re: Are super-rich people just better at making money?

#447

Post by 29athrowaway »

AuthorizedCust wrote: post #424
29athrowaway wrote: post #412

Earlier quoted context omitted.

If you have a tornado coming straight at your house with your family inside you will be praying I guarantee you. If you lived in a sparse, lonely place, with a bad economy, maybe joining a church starts sounding like a good idea. Instead of judging people consider yourself lucky.

Nice strawman. I wrote “extremism”. You’re responding to something else.

Then who are the southern religious extremists? name them.

Re: Are super-rich people just better at making money?

#448

Post by WalterBright »

nmfisher wrote: post #117
WalterBright wrote: post #101

Earlier quoted context omitted.

Borrowed money is not income.

No, but it is an avoidance mechanism specifically designed to avoid tax on income. If an independent third party has deemed your stock sufficiently valuable (and stable) to lend money against, then you should be taxed on that loan. You can get a credit when you repay the loan (to offset tax on the income you used to repay).

You'll have to realize the gain eventually, and pay the tax.

Re: Are super-rich people just better at making money?

#449

Post by eertami »

raverbashing wrote: post #141
Yizahi wrote: post #109

Earlier quoted context omitted.

It is reasonably easy. Step 1. The country creates a law forbidding any financial interactions with "offshore" countries (list is populated manually by lawmakers) and also with companies working with such offshore companies (shell intermediaries) in "good" countries. Step 2. Country forbids its citizens from owning any assets or be incorporated in the same "offshore" countries. Step 3. Blanket ban of cryptotokens. St…

Yeah, that's a very easy way... Of making all your modestly rich people close shop and leave > forbidding any financial interactions with "offshore" countries And what do you think "offshore" means? This is TikTok levels of financial naivety

> Of making all your modestly rich people close shop and leave

Switzerland has a wealth tax, yet it also has some very rich residents (wealth tax is applied to your worldwide assets/cash, and it includes companies you own, so you have no way to avoid it.)

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