Tweet
I was looking at lists of good investing books the other day and I noticed something. Peter Lynch’s "One Up On Wall Street" was on all of them. In fact this top investment books list has only two entries and that’s one of them. Peter Lynch is apparently someone who knows something about money.
Meanwhile I was also amused to read Warren Buffet’s recent comments about how he thinks it’s ridiculous that he pays less in income tax than his secretary does (I didn’t think we called them that anymore, but whatever). Both of these men seem to exude a lot of common sense and understanding that while a lot of skill went into their success, a lot of luck did too. They don’t suggest that there’s no room to garnish their success slightly to make sure that those who don’t have the same combination of skill and luck can be a little more secure.
What seems to be a striking difference between these men and those who suggest that others "pull themselves up by their bootstraps" is that these men actually made their own success. Despite having actually pulled themselves up by their bootstraps, they don’t suggest that that’s a pure indicator of success or worthiness.
Meanwhile second generation and later wealth is terrified of losing the money they have no idea how to make. The early members of Walt Disney’s Studios are geniuses who respect what has been done since. The modern captains of the company simply want to continue to see how long they can milk the legacies of those geniuses. This seems to strike a strange tone:
Those who made their own money are grateful.
Those who didn’t are not.
Somehow the ones who are gifted a fortune and never work a day in their life (I’m looking at you Shrub), feel justified in telling the others to work harder. While those who really have earned their fortune seem to appreciate all the help it took to get them there. I’m not sure this anecdotal belief is sufficient to develop policy from, but it makes me feel like an increase in inheritance tax is warranted.
14 Comments
Its funny how Bush and Cheney both claimed to be self made men. Bush failed at every business he did until his Dad and friends got him the baseball team. And Dick a man with no business experience seems to have traded a Congressman’s job real quick into corporate jobs.
His biggest move as CEO was buying a Asbestos Company given the liability he also bought well there was no upside.
I think there is inherited wealth like Bush. Then there is flunky wealth like Dick Flunky wealth comes from people like Dick, Sarah Palin, Rush, Newt people who get rich by doing what the rich want them to do and selling the Rich’s pull yourself up by the bootstraps philosophy.
Chicago School Economists and NeoCons would be Flunky wealth. Both Inherited and Flunky wealth want everone to think that they are self made men.
A list of rich people maybe Forbes top 100 richest American? If we divide self made men from inherited wealth we could test this theory if we could get voting records Dem and GOP and how much they donate to charity.
What other factors should we look at?
Didn’t he get rich off of Fannie Mae? The same group Jane wants Rahm to be investigated for?
One of the things I least understood about the Shrub era was how in the world the voters of America looked at a boy who was given everything and thought: “That guys a hard working fellow, just like me.”
This is actually the exercise that got me thinking about this subject. As I was looking through those lists of investing books, I was curious whether Lynch was a Republican or a Democrat so I went to look at his campaign contributions. I then did the same thing with a few random people that were clearly “self-made.” But of course that term is very hard to define (See Bush Jr for example) and subjective. Sadly many if not most of the Forbes 100 definitely aren’t self made so I think you’d have to be really broad. I’d love to see the numbers of what percentage of their net worth given individuals can be seen to have contributed to themselves, but I’m not sure that research is available.
In my contact with second generation money, largely through philanthropy, I’ve seen many anecdotes to reinforce my beliefs. These are multi-millionaires, not billionaires, but the lesson seems the same. If you made your own money you have a better understanding of how the world works.
He was an investor, not a decision maker. It’s just one of many stocks he made a lot of money off of at Fidelity. If there’s any other information I’m not aware of it.
I’m not sure the premise is entirely accurate — that the self-made tend to be more altruistic than their offspring.
An obvious case in point: Joe Kennedy was a cut throat, right-winged, unethical businessman. His offspring became some of the country’s greatest advocates for civil rights, health care, and altruistic ideals — polar opposite of their father.
Look at Jack Kent Cook (billionaire — used to own the Redskins and the Chrysler Building in Manhattan) — one of the shrewdest, greediest ass-wipes who ever lived. He’d dock his employees’ pay by $.30 if they dared to throw a candy bar on the bill when grocery shopping for him. He personally would check the receipts and deduct it from their pay. His grandson — at least many years ago — was an artsy, hippy type.
In fact, very often you find that first generation wealth tends to be made by very shrewd, narcissistic, sometimes sociopathic personalities. That’s how they got where they did — to a point of obscene wealth. Their kids, on the contrary, often get far better educational opportunities than their parents did — they travel around the world, and see how others live. They get exposed to things their parents — often busy trying to make obscene money — didn’t.
The very fact they didn’t have to go out and claw their way up the economic ladder means they often devote their energies towards more fulfilling endeavors like the arts, philanthropy, and social causes.
But then again, you also get the George W. Bush’s, …
I think New York City private schools sort of show the huge variation in the different types of wealthy kids. Some schools are flooded with those of the rich and famous (but you’ll never know it. Because everyone there comes from means, no one feels special). And they are often really liberal, non-competitive environments, and then again other private schools in the City are rather pretentious, though their wealth is probably no greater than those at the other schools.
I’ve read three books on Warren Buffet over the last twenty years and consider him one of the most brilliant, astute investors ever. However, I suspect Buffet is more of an exception to the rule on these matters. I don’t believe that most people become billionaires by being altruistic, kind-hearted people. Although there are exceptions to be sure …
Having said all that, I’m not disagreeing with your opinion on inheritance taxes.
I think every one of us would like to be able to pass something along to our wives and children to ensure they don’t end up homeless if we can help it. But is it necessary for someone worth say $1 billion or $100 million to leave it all to his offspring? That’s impractical for a government drowning in debt…
Most estate taxes are paid by estates with less than $10,000,000:
http://www.epi.org/economic_snapshots/entry/webfeatures_snapshots_20050913/
Most estate taxes are paid by the “very comfortable,” and not the “obscenely rich.”*
EDIT: * as of 2003. The Bush Tax Cuts obviously shifted some of the burden to the extremely wealthy by gradually upping the amount of an estate that is exempt, but the law reverts back in 2011.
@TheCallUp:
I think your points are all interesting. Since my point is purely anecdotal, I’m sure we can both present anecdotes supporting our hypothesis. It would be really interesting to look at the more broad “wealthy people” spectrum. In philanthropy I come in contact with a lot of 2nd generation money that thinks of itself as liberal, but really has no concept of what it’s like to be a “real person.” And their children are even more insulated and tend to have a very low degree of empathy. I see this as the road to becoming a “me-first” entitled rich kid. As such I probably only choose to acknowledge the anecdotes that support my bias from working with spoiled rich kids.
@badgerexpat:
Great point, of course that’s a matter of implementation. Once again referencing philanthropy, I see all kinds of “family foundations” passing on untaxed wealth that manages to get put to all kinds of questionable purposes.
Well, they are paying a greater percentage of the total collected — only because the floor of those who have to pay estate taxes was raised — but the mega-rich are actually paying a much lower rate now than they were in 2003.
Here’s how Bush’s tax break laws affected estate taxes:
So beginning this year and ending next year, billionaires pay no estate taxes. If Warren Buffet were to die in 2010, and leave $60 billion dollars, his heirs will pay not a single penny in inheritance taxes.
Considering our country is virtually bankrupt, with an increasing poverty level, a shrinking middle class, and an inability to provide health care, that’s just an irresponsible fiscal policy.
Well, as I think both of our links demonstrate, doing nothing and allowing the estate tax to revert unamended in 2011 will distribute more of the estate tax burden on moderately sized estates ($1M-$10M)than on the truly wealthy.
And yes, I think we can all agree that the 2010 Estate Tax holiday is insane, just think of the perverse incentives it creates!
I’ve seen stories on the internet (such as: http://www.taxpolicycenter.org/numbers/displayatab.cfm?DocID=1850) suggesting that Obama’s proposal involves a $3.5M cap and a 45% rate. It looks like this results in ~20% of estate taxes coming from estates that are smaller than $10MM, which seems to me a much more reasonable result.
That was sort of my point — just to provide anecdotal evidence to the contrary. Stereotyping is a hard thing to pull off, because for every anecdote one can find, someone can find a counter anecdote to weaken the stereotype.
I agree that many who are born into extremely wealthy families will likely never walk in the shoes of the poor and disenfranchised, and unfortunately that’s how empathy often arises in a culture as narcissistic as ours. But I know people born into extremely wealthy families who don’t fit that nice little stereotype: People who’ve chosen to do relief-work in Africa, etc. who could have instead chosen to live sheltered trust fund lives.
And in all fairness to the first generation of wealth, for every Jack Kent Cook, there’s likely someone who perhaps had a start-up go public and instantly became a centi-millionaire or billionaire — who is not shrewd, greedy, and cut throat like a Jack Kent Cook.
One thing about those at the highest end of wealth — they have the best accounting teams available to man. They set their estates up specifically to avoid paying inheritance taxes. There are so many ways to get out of paying the tax man, and that’s why estate tax loopholes should be addressed as well.
Those at the lower end of the estate tax spectrum often will end up paying taxes that they could have possibly gotten out of paying had they had the accounting expertise that those at the other end of the spectrum could easily afford.