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Recently a fellow asked me about my impressions of French economist Thomas Piketty's new book, Capital in the Twenty-first Century. I have not read the book, but I've read comments about it including a recent interview with the author. He postulates the existence and forecasts the growth of inequality in terms of the concentration of wealth and income.
In the introduction to the interview, there was an interesting statement: "hard work will matter less, inherited wealth more." Really? Added up the entire annual realized income of those households in the $10M and over category the total would be over $300 billion. What percent of this amount is derived from trusts and estates? The answer is 1.3%. This percentage even doubled or tripled would hardly qualify America as a country where inherited wealth "mattered more."
It appears from the interview that both Mr. Piketty and the interviewer are using income and wealth as synonymous terms. They are not. In my thirty plus years of surveying and studying millionaires, I have consistently found that 80 to 86% are self made. That also applies to decamillionaires. In 1982 according to Forbes about 38% of America's wealthiest people were self made. In 2012, the percentage jumped to 70%.
In a recent blog, I cite what many consider to be the most exhaustive study of socioeconomic mobility in America. Professors Chetty of Harvard and Saez of Cal-Berkeley studied about 50 million federal income tax returns of parents and their adult children. Part of this study as mentioned in The Wall Street Journal stated that:
The odds of a child moving up the economic ladder have remained the same for about the past three decades . . . that contradicts the narrative in Washington that economic mobility has declined in recent years.
Economic opportunities abound in this country. Yet most Americans are not wealthy. It is easy to blame the so-called inequities in our economy. But it is more about the fact that Americans spend all or most of their income on things that have little or no lasting value! They lack the discipline required to accumulate wealth. Most households are on a treadmill of working and consuming. The typical American household has a median annual realized income within the $50,000 to under $75,000 bracket. Only 6.3% of these people have any realized capital gains income. Thus an update is in order. Remember what I wrote in The Millionaire Next Door: big hat, no cattle. And now the update: no capital, no capital gains.
Yes, economic opportunities to abound in this country. But to become wealhy you need to have either (1) the right skills, (2) capital, or (3) access to capital.
Yes, economic opportunities to abound in this country. But to become wealhy you need to have either (1) the right skills, (2) capital, or (3) access to capital.
The right skills won't knock on your door and install themselves in you. You have to make an effort to learn and choose. A lot of americans are unwilling to undertake the learning. Some don't want to learn what isn't their best hobby. They act like spoiled teenagers polarizing mom and dad. There is a thread in personal finance board on what traits make people successful. Lots of good advice there.
I believe americans do possess the mental and cognitive potential to thrive to survive the global economy. But we must at least be willing to be realistic, to endure some hardship, to make wise decisions, to learn from mistakes. Otherwise we will likely suffer. The future world is going to be hard on us.
And if people decide that they want so called pitchforks, it would eventually damage our economy and ruin our standard of living. The proletariate class will suffer the most in that even though they may think they are having fun and being cool in some movement. America will end up in poverty. Once that clock is turned, fortune goes east and won't be back in any meaningful time. Let's see if we are going to learn it the hard way.
In a recent blog, I cite what many consider to be the most exhaustive study of socioeconomic mobility in America. Professors Chetty of Harvard and Saez of Cal-Berkeley studied about 50 million federal income tax returns of parents and their adult children. Part of this study as mentioned in The Wall Street Journal stated that:
The odds of a child moving up the economic ladder have remained the same for about the past three decades . . . that contradicts the narrative in Washington that economic mobility has declined in recent years.
Wow. It's strange that he would note this fact without noting that Saez and Chetty ALSO conclude that upward mobility in the U.S. has been well behind the rest of the first world for that entire period. They conclude that while upward mobility has remained about the same, it was actually very bad to begin with.
His analysis of Piketty's work without reading it and his citation of a random statistic not based on a representative sample (80-86% of those I survey.) further decreases the value of his argument, if any. I mean, he quotes 70% from Forbes and then 80-86% from his own?
EDIT: It appears he is differentiating between maybe the top 400 and other millionaires? In any case, the 80-86% self-made is not defined. What background constitutes self-made and what does not?
Last edited by kwhitegocubs; 07-18-2014 at 12:24 AM..
The right skills won't knock on your door and install themselves in you. You have to make an effort to learn and choose. A lot of americans are unwilling to undertake the learning. Some don't want to learn what isn't their best hobby. They act like spoiled teenagers polarizing mom and dad. There is a thread in personal finance board on what traits make people successful. Lots of good advice there.
I believe americans do possess the mental and cognitive potential to thrive to survive the global economy. But we must at least be willing to be realistic, to endure some hardship, to make wise decisions, to learn from mistakes. Otherwise we will likely suffer. The future world is going to be hard on us.
And if people decide that they want so called pitchforks, it would eventually damage our economy and ruin our standard of living. The proletariate class will suffer the most in that even though they may think they are having fun and being cool in some movement. America will end up in poverty. Once that clock is turned, fortune goes east and won't be back in any meaningful time. Let's see if we are going to learn it the hard way.
Capital and access to capital are tools of great wonder; with either you can get training to acquire the right skills.
??? I'm a prole and I'm not having fun and I'm not cool. I'm poor and I have to do everything the hard way.
]The right skills won't knock on your door and install themselves in you. You have to make an effort to learn and choose. A lot of americans are unwilling to undertake the learning.[/b] Some don't want to learn what isn't their best hobby. They act like spoiled teenagers polarizing mom and dad. There is a thread in personal finance board on what traits make people successful. Lots of good advice there.
I believe americans do possess the mental and cognitive potential to thrive to survive the global economy. But we must at least be willing to be realistic, to endure some hardship, to make wise decisions, to learn from mistakes. Otherwise we will likely suffer. The future world is going to be hard on us.
And if people decide that they want so called pitchforks, it would eventually damage our economy and ruin our standard of living. The proletariate class will suffer the most in that even though they may think they are having fun and being cool in some movement. America will end up in poverty. Once that clock is turned, fortune goes east and won't be back in any meaningful time. Let's see if we are going to learn it the hard way.
So youre saying anyone can be a doctor, lawyer, NBA basketball player, movie star if only Americans would learn. Lol thats about the dumbest thing Ive ever heard.
PS: if youre not a multi millionaire that must mean youre super lazy yourself if its soo easy.
if you can't make it here , odds are you aint doing it anywhere else in the world
Agreed. I believe hard work and financial discipline are key to moving up. With those, it's probably easier to move up in America that most other places in the world. Unfortunately, those two key concepts are not are not ingrained in most people at an early age.
So youre saying anyone can be a doctor, lawyer, NBA basketball player, movie star if only Americans would learn. Lol thats about the dumbest thing Ive ever heard.
PS: if youre not a multi millionaire that must mean youre super lazy yourself if its soo easy.
You don't have to be any of those to become a millionaire. My dad was a manager at UPS with no college degree and he is a millionaire.
You have to invest instead of spending every dime you make. Money makes money. Even a little money makes money.
Investing 100 dollars a month over 45 years will get you around 300k. That is $25 a week. Sure there are plenty of families and people that can't afford that, but if you are telling me that 30-50% of people and families can't afford that you are being dishonest. When Nielson reports that nearly 90% of households have some form of cable or satellite...there is 100 dollars a month to invest for these 90% of households.
So youre saying anyone can be a doctor, lawyer, NBA basketball player, movie star if only Americans would learn. Lol thats about the dumbest thing Ive ever heard.
PS: if youre not a multi millionaire that must mean youre super lazy yourself if its soo easy.
What is wrong with being just a "regular" millionaire? And of the millionaires I personally know a whole more have done it through things like growing a business, owning property, selling a whole lot of something, and other things that have much more to do with "hard work" than any freakish talent...
I literally know several dozen millionaires that are first generation immigrants. The "barriers" they had to overcome are far greater than anything that native citizen faced yet everyone of them would say if folks would put of the 100% effort down the same path they did the success is repeatable.
There is big difference between the kind of riches that comes from a big sports contract or after a blockbuster movie and the kind that grows more slowly as one accumulates assets that grow in value / throw off more income. Even when it comes to somebody getting tens or hundreds of millions for what they can do in front of big crowd that really does nit come overnight but after decades of improving their skills. Sadly too few people have the patience to understand that.
I saw an "interview" with a woman that has worked a minimum wage fast food job for over eleven years. She has never gotten a promotion or even enough hours to say she really can support herself and her two kids yet she went on the "strike" / march for the $15/hr wages. Of course the next day she was back at her minimum wage fast food job.
People have to wake up and realize that if they do not increase their own knowledge there is no reason to expect that their pay will increase. The work situation won't do it alone either. Knowing all the details of how to assemble a BigMac won't help you own a franchise. I have seen people learn all the details of scheduling the employees and doing the accounting move up to manager and I have fast food managers move to fine dining and then to management of a region and on to ownership or corporate level responsibility. It happens when people have drive.
Beyond that, when people take their earnings and set aside some to have something that grows and throws off income they really set themselves apart from "the pack" -- there are folks making six figure+ salaries that will always be dependent on employers. Far better to have a little something that gives one the potential to be more independent.
These things are not hard but getting people to understand can be like talking to a wall.
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Pretty huge leap of illogic...
