Article seems confused about the difference between 'wealth' and 'income'.
It has to be tough trying to write about complicated topics while staying under a 'fourth grade reading comprehension' ceiling, or whatever the target is.
How confusing the world is when you have to stick to the 'ten hundred' most common words and concepts. (ten-hundred from XKCD)
I've found a slight modification of the ten hundred word concept pretty useful when/if I want to write a simple explanation. Sticking rigidly to 1,000 words introduces its own problems, but judicious use of the principle usually turns out a pretty nice result. I start with the ability to use those 1,000 words freely, and if I want to use a word not on the list, I consider carefully whether the value in introducing it outweighs the cognitive overhead, and/or if I can use words already in the list without loss of meaning, and generally allow words I've used at least once to get used again (so the list grows once I've decided that I really have to use a word not on the list). Additionally, no jargon at all appears on the list, so I often explain a jargon term in terms of words on the list or that I've added to the list, then add the jargon word to the list and keep using it going forward, so it serves as a canary-in-the-coal-mine for terms I should explain rather than start throwing around without thinking about it in that way as well.
It can turn out a surprisingly clear result that doesn't even show much sign of having started with a limited amount of words. It doesn't seem dumbed-down or vocabulary impaired, just easy to read (given that I do use any word that really seems to decrease the complexity of the explanation or cognitive overhead.)
It takes some time, so I didn't do it here, but if I did, this explanation would be clearer!
If you own your home, and are otherwise completely out of debt, you can live much better on far less income.
Income doesn't mean much if most of it is going toward debt service. Anecdote: Trump had an epiphany when he realized a bum on the street was literally worth more than he was financially.
Well they are in circles where they feel decidedly poor. Just see the excesses in the Bay area and come out feeling real poor even if you are in the 1% income bracket. Of course everything is relative and you might need 50 years income to buy a place that would be considered awful in Iowa.
Most of those people in the Bay Area are not forced to live in the Bay Area. Most have fairly portable professional skills that they could bring to a lower cost area. They might take a pay cut, but they’d still certainly be among the highest income circles in Iowa.
There’s two primary reasons they choose to continue to live in the Bay Area. One is they value the amenities of the metro. Many view Iowa as a terrible fate, even if they are living in a mansion. In this case, they may be “living poor” in terms of housing, but only because they choose to spend most of their income on the luxury good of Bay Area living. Same way, I wouldn’t be crying for a high income guy who’s always broke because he spends all his money on his boat.
Second reason people live in the Bay Area is because it gives them access to very high paying career paths. Even if it’s a bad deal for an L2, by the time they make L6 at Google, their living standards will be much higher than what they could earn in Iowa, even given the cost of living.
This group is best thought of as sacrificing consumption today to invest in their human capital. Much like medical residents, while they’re low paid today, they’ll be very high paid in short order. Again, we really wouldn’t feel two bad about medical residents having to drive a used car for a couple years while they rocket up the career ladder.
I feel a lot worse for a medical resident than I do for a Google L2. There are arguments for paying newcomers to skilled fields less, but we shouldn't pay people abusively low wages for physically and emotionally draining work.
The third is that if you live frugally in a super expensive metro, your absolute savings rate can be much higher than it would be in rural Iowa (well, covid changed that a bit, but most companies still have “COL factors” on your comp). This is truer for single people, who can live a low impact lifestyle in a studio or 1bed apartment, no car, and taking advantage of office amenities than it is for families.
This. Saving, say, 10% of income is a whole different game in a HCOL area vs saving 10% in a low one provided that one retires outside of the HCOL area.
So cash in and move. I keep seeing examples of Bay Area "awful", and note that one can get a lakefront McMansion within a 30 minute drive of Atlanta for the same price. Too many wallow in the "feel" and don't leverage their opportunity.
(Yes, I moved 1000 miles. I know the pain of leaving it all behind, and the joy of 2x the house for 1/6th the taxes and more job opportunities.)
"more job opportunities" is the pivotal one. I don't think most people can check all those boxes together.
If you're coming from big tech or big startup in Bay Area, it is unlikely you will find "more [acceptable] job opportunities" in a significantly lower col area.
This. I moved here from Seattle in 2006, and immediately had 10x as many inquiries from recruiters. Local salaries more than made up for the ridiculous rents here.
In the United States, private health insurance often includes a lifetime cap on coverage of certain conditions. Before the ACA was passed under President Obama, many policies would not cover pre-existing conditions. Insurance companies no longer deny coverage for pre-existing conditions but there are no price controls on premiums. It is very conceivable to end up with a multi-million dollar healthcare bill in the United States, even with a good private health insurance policy. Insurance reduces the chances of that happening but it does not guarantee freedom from the chance of a medical bankruptcy.
Healthcare providers will work out manageable/fair billing and payment plans, if the patient will simply take the initiative to discuss it. They're just not going to advertise the fact.
The limit on lifetime and annual caps only applies to "essential health benefits" which gives insurance companies the ability to deny first and force the insured to fight to get payment. Grandfathered legacy policies are also allowed to maintain lifetime bans.
Pretty much anyone with ACA insurance (through employer or exchanges) does NOT have a grandfathered plan. They are an exception and usually tied to exempt plans through unions, etc.
I mean, you could have something so expensive that you run out of your insurance's maximum benefit. But, first, that's really rare (not that that's any comfort if it happens to you). And second, if you were somewhere like Canada or Britain that has "real" health coverage, they probably hit the brakes somewhere before you burn $10 million in care, too. (I admit that I don't actually have evidence of this statement.)
There seems to be this "but medical" narrative (GP is not the only example in this thread), and I suspect the hidden message is "we need real healthcare coverage so that it doesn't bankrupt you!" And, maybe we do. But claiming it could bankrupt the multi-millionaires just makes you look silly. That's not the way to persuade people.
I think that if we fixed the costs of healthcare in this country we could set reasonable limits (i.e. $10M lifetime maximum or something as you said - perhaps it could be a sliding scale with age even though that's taboo to talk about). If you run beyond that - it's unfortunate, but the medical system will not help you anymore - you can go to hospice and pass on your own terms (if it comes to that). It will be a painful tradeoff, for sure - but the keeping people alive at any cost mentality also has externalities. We're all going to die someday in the end.
The main thing is to make healthcare more affordable and have reasonable limits (i.e. $10M) to ensure people are not bankrupted by it.
The interesting point that this one misses is that the children of this class are often not counted as part of the 9.9%, but are effectively part of it nonetheless because of the backstop an benefits that the 9.9% confer onto them. And their beliefs, etc. are pretty well in line with the 9.9. So really, it's more like the top 20% that's in this category, even though it doesn't look like it on paper.
"The net worth of that group ranges from about $1.2 million to $20 million per household, Stewarts says."
In Australia apparently all you have to do to get into this group would be to actually own a paid off house. :/
I think this says far more about housing then wealth inequality though.
In America, paid off or not, the location of your house pretty much guarantees a lower bound on your kid's future in the richer neighborhoods and unfortunately an upper bound in many poorer ones.
Decades of twin studies have consistently shown that family environment (which by definition includes the zip code you’re raised in) has nearly zero causal impact on adult outcomes in America.
Yes, it’s true that kids from well to do areas grow up to become well to do. But twin studies tell us the mechanism of heritability is entirely genetic.
location => zip code. Twin studies are not what you look at to prove (or disprove) this hypothesis. You have a much richer data set. All the kids that grew up in a zip code. A lot of twin studies have no control groups! With a richer data set, you can more easily look at the zip code someone grew up in and look at where they end up in life. You don't have to track them. Also, the reason why I insist on focusing on zip code is that peer groups matter much more than family environment.
Below, I've linked some of the articles I have read on this in the past.
A refreshing comment as the role of genes are so little talked about, yet I strongly believe it is one of the strongest influences in outcomes. I believe success is born.
I'm born into the lower working class, Western Europe. And so is my brother. From an early age it was clear that my brother has limited intellectual interests or ability, nor is he creative. He simply isn't a learner, not a man for the books. He's a most excellent blue collar worker and that is the outcome. He's doing fine and is happy.
Me, I seem to be born to live in my head. An almost exact opposite. It was absolutely inevitable for me to end up in a creative or intellectual field. Which tend to have better compensation.
I could brag about how very hard I had to work to actually arrive at that place, coming from rock bottom. But these self congratulations would be misplaced. Anybody can work hard and my brother also works hard, if not harder. What decided between these vastly different outcomes is the brains we were born with, as everything else is equal. Perhaps even a good work ethic is in part genetic, I'm unsure.
There is a huge catch to this story. I was fortunate to live in a time and place where education was open and accessible. My parents' economic status didn't matter, I was in the same schools as people far richer. Society allowed me to compete and thrive from an equal and fair starting point, and then let genes (and some merit) play out. Which not only enables a great outcome for me, also for society.
I believe this equal access is absolutely critical. In fact, access to education has such a dramatic positive return that I believe education should be free. Insane! Who will pay for that?
"The net worth of that group ranges from about $1.2 million to $20 million per household, Stewarts says. Those assets include cash savings and investments, as well as real estate. Many members of the 9.9% don’t feel enormously wealthy but they are still doing better than the vast majority of the country."
A household with $1.2M in assets does not belong to the same group as a household with $20M in assets.
I really don’t think this is the case. One is owning a house, and probably still working. The other is owning a house and other passive income sources, probably enough that you don’t need to work. There is a massive gulf between a million and 20 million dollars.
I’m virtually certain that if you compare hours worked among households worth $20 million and households worth $1.2 million (controlling for retirement age), the former is significantly higher.
In theory ultra high wealth buys the luxury of leisure. In practice, in the US today, leisure monotonically decreases with income and wealth. By far the bottom quintile works much fewer hours than the top 1%.
Ok I’ll admit I didn’t believe this, but it turns out it’s partially true [1]. Hours worked by wage group increases up to the 95% level, then drops again. So the bottom quintile works substantially fewer hours than the top quintile of earners, but the top 5% work fewer hours than the top 90-95%.
Citation needed. And also depends on the definition of work. If we define work as trading health for pay (whether mental or physical), then I'm not sure there is a monotonically increasing relationship.
If we define work as "hours spent doing something", then potentially. But I like my first definition better.
Being a CEO is one of the highest impact careers in terms of lowering life expectancy. Most high paid careers are extremely stressful and come with more serious health impact than the average worker.
> Being a CEO is one of the highest impact careers in terms of lowering life expectancy. Most high paid careers are extremely stressful and come with more serious health impact than the average worker.
Perhaps, though that effect must be offset by other things (and/or access to healthcare), since the life expectancy based on income graph is monotonically increasing for both genders.
My hunch is that the well off might have stress on the job (though again, this is a subset of well-paid positions, and I think the subset is actually smaller than you think), but everyone else has a lot more stress outside of the job which is much more important. The stress associated with poverty cannot be understated - it lowers IQ by ~15 points.
Responsibilities cause stress, but power to address those responsibilities mitigates it somewhat. CEO's have much more of that power than middle managers do.
They're saying "household" remember. If you have ten children, $1.2M can be used up extremely quickly.
Lifestyle doesn't matter. You can be extremely wealthy and live austerely, if you desire. What matters is security, power/influence, and so the ability to pass wealth to further generations.
This is not really true. There are plenty of people that are retired with ~$1MM in assets and thus, are not part of the rat race. But they live a frugal life if they continue to live in America.
If you're extremely frugal, have a very small family (no kids or at most one) and live in a world where inflation doesn't exist, $1M would last you (and I'm being VERY generous) for about 20 years. If you're 40 now then your future will be $0 at 60, which happens to be the time where the really expensive stuff kicks in (like health issues and insurance). So, nope, 1M is not enough to stop worrying about money; neither 2-3M, about 5M+ is where you can retire and coast on that if you manage it wisely.
Yes they absolutely are. $1.2M in assets can easily be a normal home in a high CoL area. $20M in assets is either a few luxury homes in a high CoL area or dozens of regular homes. Someone with $1.2M might not even be a accredited investor if most of that is tied up in their primary residence so they don't even have access to many investment options that the $20M person/household has.
A person with $20M assets at 8% earns $1.6M per year. A 20x difference in assets is essentially an entire generation of wealth accumulation..
> A person with $20M assets at 8% earns $1.6M per year. A 20x difference in assets is essentially an entire generation of wealth accumulation..
Indeed, imagine saying: “there's not that much difference between $50,000 in assets and $1,000,000 in assets.” Of course more money earns more money, but it's still important not to underestimate the importance of a factor of 20. One can try it the other way: “there's not much difference between $20,000,000 and $400,000,000.” Except that many of us here probably can't really grasp either, I think we wouldn't believe that.
I completely agree. A frugal 30/40 something can have 1.2m net worth mostly locked up behind 401k and home value.
Both of which do nothing for that persons daily life. Can’t unlock home equity because they need a place to live. Not unlocking 401k value because… we’ll they are frugal and that is a bad idea.
While they are definitely well off, perhaps upper middle class, it is a vastly different lifestyle than 20mm net worth.
You are making an argument about assets and income. The parent said lifestyle. Warren buffet could have the same lifestyle as someone with 1.2 M in omaha
Could, but they don't. Someone with $1.2MM has enough that they could sustain a lifestyle that ~$36k/yr* could afford them. Someone with a NW of $20MM has enough that they could sustain a lifestyle of $600k/yr.
Those lifestyles are no where near being the same.
*based on a conservative 3% withdrawal, but the point stands irrespective of the withdrawal percentage.
I find that really hard to believe. $1.2M in assets will not go far after factoring in raising/educating two or more kids. Certain they will be comfortable, but someone with $20M can really afford the best in terms of home in an urban area, education, and medical care.
If you do a modest 2% annual withdrawal on $20M, that's $400K pre-tax. You can live very comfortably and likely never need to work another day in your life regardless of your current age.
If you are retired with $1.2M in assets, even a 3% draw down rate only gives you $36K a year. You can make that work if you are frugal but that is a vastly different lifestyle from the $20M individual.
I worked for over a decade at a large trust company.
The lifestyle difference between 1.2 and 20 million in assets are not similar.
$1.2 million is comfortable and $20 million is generational wealth. Many people who have that level of assets are part of a multi family office that will literally do your chores for you.
Uh no. $1.2 is my retirement fund. I have another 20+ years of work ahead of me. $20 million and I’m retiring tomorrow and earning 1.2+ in interest most years.
None of which is to imply I’m not rich to most of the country. I am. But I still have to work 40+/week to pay my mortgage.
> But I still have to work 40+/week to pay my mortgage.
...and child care (for 3 children under 3 years old), elder care (my parents are over 70 with existing and emerging conditions), etc. I just don't really expect to retire, to be perfectly honest, despite what my net worth is on paper.
$1.2M in assets is nothing. Invested yielding 4% in bonds and you got $50k pre-tax, I guess its ok if you're single with no dependents. Otherwise you're working. Worse if its tied up in your property, because then you're getting poorer with 1 or 2% property tax.
Someone with $21M doesn't belong in the same group as someone with $1B. Someone with few assets doesn't belong in the same group as someone deep in debt.
All simplifying assumptions necessarily group some unlike elements. But we need to simplify in order to describe complex systems.
$20M is retirement money. $1.2M isn't. But $1.2M is FU money, and that's the most important part. You can't stop working indefinitely, but it does give you the power to walk away from any job even if you don't have the next one lined up.
Or at least it should be. Many people with $1.2M cannot go a few months without a pay cheque because it's all locked in a house and a retirement fund -- make sure you're not one of them. An emergency fund is the best way, but I also recommend having an open HELOC. They're a lot easier to get when you have a job, and you don't have to draw on them until you have an emergency.
I know it’s way more than most people have, but $1.2M is not really FU money, at least in the US. It’s probably enough to take a gamble on, but it’s still not enough that you cannot be wiped out by bad luck or a significant health event while unemployed. And unless you are very young (and very lucky to have that much capital already) that $1.2M probably represents the gain from quite some years of work, and is critical as the basis for eventually gaining enough to actually be economically safe in retirement.
There's virtually no amount of net worth that would save you from a plane crash or an auto accident either - I would say 1.2M is enough as FU money in 99% of cases. Whether it's enough for you depends on your risk tolerance.
That's a huge blanket statement. Some people live under the bridge and to them even $1000 might be FU money. For the Bay Area, $1.2mil is enough for a family to scrape by if you have a house (on the way to getting paid off), otherwise that's not enough for a basic retirement and you are definitely on the hook to continue working, especially if you have (or plan to have) a family. If you say screw Bay Area and move to rural Montana, well, that's not 99% of cases.
You seem to misunderstand FU money. FU money it's not about "basic retirement" - it's about "I do not have to worry where my next meal is coming from for next X months/years". 1.2M$ can do a lot in that department.
Yeah, FU money and FIRE are different concepts (although there are some overlap). The former is just about being able to quit a job whenever (with the expectation that you will find another one eventually)
I live in a HCOL area, so I get this sentiment. But it doesn't match at all with actual reality in the US. The median 65-69 year old has a net worth of $272k, with the average being $1.25M [0]. A lot of places are pretty cheap - especially since even modest earners could get thousands of $ in SS each month.
The article is not about what kind of life style they can afford. It's more about their common belief system. They think they get where they are by hard working and ignore the luck factor. They think people poorer than them because they don't work hard enough.
I'd say the author of the article doesn't have a very good grasp of this concept.
There is a vast difference between, as she says, "1.2 million" and "20 million."
20 million is "screw you" money. In that someone could quit everything they do, and live their whole life very comfortably on the wealth they have in hand, by paying cash for their house, setting aside a million in rainy day money, and putting the rest into very low risk bonds.
1.2 million is just enough money to get someone in trouble if they make a few mistakes. Buy an expensive house in the wrong place? Not a millionaire anymore. Ill-timed stock returns that turn south around the first of the year? Not a millionaire anymore. Try to start another business that doesn't pan out? Not a millionaire anymore. There's a million ways (pun intended) for someone with 1.2 million dollars to find themselves fast running out of money. Someone with 20 million? Not so much.
Hey, look -- the 0.1% are seeing tax proposals on their radar that might actually land on them for once. Quick, to the propaganda cannons! Deflect those taxes, make sure they land on the upper middle class instead, like the last 10 times this happened!
There's been a noticeable boost just in the last 24 hours. The super wealthy are remarkably adept at getting the masses to advocate on their behalf. E.g. Musk has already marshaled his sizable army.
More prosaic explanation: this "philosopher" (AKA dude with philosophy degree who was a management consultant for 20 years) is on a press tour for his new book.
edit: Not that I disagree about the existence of the dynamic you point to.
I'm not entirely convinced that these are two different mechanisms. Think tanks, economists, political commentators, and politicians all experience strong selective pressure to promote opinions that people with influential money find agreeable. In turn, people with influential money tend to find agreeable opinions to be exactly those that deflect their taxes (or disadvantage labor, or look away from the externalities on which they have built their fortune, etc).
Fair. Agree completely. But you do still have a wild mix of ambitions, commitments and incentives even among the wealthy/influential that frequently put them at odds with each other. Eg- Omidyar is backing the leaker vs. Zuckerberg -- billionaire contra billionaire.
And there's definitely a class of super wealthy who are "class traitors" in the sense that they advocate against super wealth. (You could certainly doubt and debate whether they just support those messages or whether they also support good faith action to that end).
Yeah, the article references a philosopher (Matthew Stewart) [1] who was previously a management consultant and who seems to write primarily on sociological/economic issues. It's not clear what insight or authority he has in these matters and the claims ("The New Aristocracy") are vague and subjective. As others have said, this has been as the middle class for a long time (the original concept of the middle class, not the American concept of everyone who owns a house). And the middle class has been both insecure and sort-of privileged since forever. But you can call 9.9% "very well off" just because the 90% have been sheared so completely (and the 90% get sheared by 9.9% at the direction of the 0.1%, to go back to your point).
Might I suggest the formula of guilt tripping (you just got lucky, it's not merit) and a pinch of racial tension so that resistance makes you look like a fascist?
> Related fact: the US "poverty line" is at the 80th percentile of world incomes
That looks like you are taking the world individual income distribution and the US household poverty line for single member households. That's...not really sensible.
> That looks like you are taking the world individual income distribution and the US household poverty line for single member households. That's...not really sensible.
It's quite accurate. But let's dot our i's and cross our t's as the procedural criticism is a fair one. U.S. poverty for a single household with 1 member is $12,880. Plug that into our handy WAPO calculator here:
The problem really comes down to security. Unless you have 10+ million in the bank, you are probably at a non zero risk of having one of the following occur
- unable to retire/aged out of the workforce
- lose house
- lose job and unable to find replacement.
- unable to afford living in your area.
- broken by medical bill/disaster.
- unable to afford education/childcare for children
My partner and I work in well known tech companies, but don’t come from money - we are well off as long as one of us doesn’t get a bad performance review and there isn’t a crash.
It’ll be decades if ever when I have the financial security to consider myself wealthy.
No, with only 5 million in the bank, you are not at risk of losing your house - not unless you mess up spectacularly.
Even a catastrophic medical issue shouldn't make you lose your house, unless you don't bother to have insurance - and if you have 5 million in the bank, you absolutely can afford to have insurance.
Hell, with a paid off house and a mere 2M in savings I could choose to retire. Even without touching the principle, if there is no mortgage in the picture $60K/year is equivalent to over $100K in real annual income. In lots of places that's plenty for a very comfortable lifestyle.
It never stops. I met a very, very wealthy guy a while back. All he was concerned with was how to preserve his wealth for the next generation. He did not feel financially secure at all.
So, what will happen once you succeeded bringing those risks down to zero? Is that the time you start pursuing your dreams or will you start trying to get the next set of risks down to zero?
But these things are relative right 1 million at 6% a year yields 60k per year which plenty of people live on. The median income in the US is only ~70k. I'm not saying you should accept a large reduction in your quality of life or to move, but that is the trade off you're making right?
Incomes keep pace with inflation and generally don’t have crash years which diminish their future value.
If you are taking the full 6% then inflation is eating the asset, in 30 years the 60k will be equivalent to 24k. If you started this in 98 then you would have seen your assets halved twice, and would be living off of 15k or so in 2008.
Inflation adjusted the stock market has grown at 7% per year. I'm not sure what the proper return rate to assume is, but 6% doesn't seem far off it and that's before eating into the principle because none of us will live forever
This is a common mistake and doesn't account for sequence risk. While it is true that the long run, inflation adjusted, DRIP average is about 7%, over the short run, those returns are not guaranteed and a few bad years can break your retirement.
A much safer withdrawal rate is 3-4% with some inflation adjusted caps and floors so that in good years you grow your investments and in bad years you maintain a certain level of lifestyle.
Well regardless 40k is still completely livable even ignoring the tax advantages we give capital right? I'm not saying a millionaire is wrong to want more, plenty of people can and do live on the passive income generated by that amount of money
And how much would need to feel secure against the threat of asteroid collision? Absolute catastrophe is always possible. Jeff Bezos could die from a heart attach or a murder, even though he spends $1M on security.
Everyone knows they need 2x their current wealth to feel secure.
The average American will make 1.5 million TOTAL during their entire working lifetime from teenager to retirement/death.
If you have that amount or more on hand right now in investable assets, the only thing keeping you from financial freedom is the desire to have a fancier lifestyle than the average American.
*Present day value. Not including fringe benefits like insurance, 401k match, etc. And if we have a period of high inflation, you have to make sure your assets actually stay on top of that; otherwise your 1.5M can quickly shrink in real value. And also you have to include the implied value of Social Security for the average worker, as well as any asset appreciation they experience from owning a house (Social Security is roughly ~500K present value, since avg. payment is ~1.5K/month, paid off house(s) could be worth up to another $1M in appreciation over a lifetime). So that's closer to $3M (minus taxes) to equal the average American (and whatever inheritance they might or might not have).
Yes, most likely you are set if you have 1.5M - but it's not a guarantee.
Wealthy is like AI, always the next step, never the current circumstances.
Even with 1 million in the bank, the only risk you may face is a slightly worse lifestyle and the possibility of having to relocate to a cheaper area. In a world where working remote at least partially has become a viable solution unless you work in hardware.
My first tech job paid 30k/yr 10 years ago. Present tech incomes are not necessarily indicative of future earnings potential.
Agreed that with 1 million in the bank destitution is not a real risk, but childcare can run 30-70k/yr. Being forced by circumstances to uproot is far from ideal.
1 million in the bank with drawdowns also runs a severe risk of being hit by a crash sometime in the next 30-70 years one might draw from it.
Educated, have good jobs, own a single-family house, pay for their kids' college, save money for retirement – in any other country/culture this category would be known as "middle class".
I fall into this 9.9% as well, so someone please tell me where I can exert this "Aristocratic influence" I have.
Do you contribute to campaigns and attend fundraising events? I realize a corporation or PAC can drop a lot of money in expectation of influence. I am also amazed that I can can meet future senators, representative, etc. and have them listen to me. I can be cynical but sometimes feel my voice is heard.
The point is to demonize you and gain popular support for more wealth redistribution. It isn't about inherited power, just look at how 2nd and 3rd generation communist families tend to have so much power in China.
Socialist busybodies, always concerning themselves with what others spent their time earning, in fear of a situation where normal people have anything of value for too long…
It's always so important to convince each cohort of the population that every step of the ladder above them is absolutely crushing it, probably at their cohort's expense, and they probably deserve to be taxed harder.
After all, what other business does anyone have judging how well others live?
Meanwhile, acorns has raised over $100 million from Black Rock, celebrities, NBC Universal, etc.
After reading this, it feels like a piece designed to get working class people to fight amongst themselves vs. the actual billionaires.
Like 20 Million is a HUGE AMOUNT
but that's 5x less than 100M, and 50X less than a billion. 50X
Maybe it's a regional thing but I feel like there are some pretty big caricaturisations is this piece.
On meritocracy:
"I think a defining feature of the group culturally is this belief in meritocracy, in the sense merit is what makes the economy work. The sum total of our GDP is the sum total of the individuals in it."
Nothing too controversial...
"Everyone earns what their merit is worth."
I feel like this only works in a very technical sense and doesn't translate to what people would mean using natural language. Merit is a morally loaded term which I think makes the whole debate over Meritocracy confusing. A better way to put this would be:
1. Individuals have different amounts of leverage, which is correlated to earnings.
2. Competency is non-trivial and significant source of leverage.
3. A person with competency has more leverage than a person without competency all things being equal.
"That is coupled with a market myth that says that whatever people do that earns money is essentially good for society."
Perhaps there are people that believe this, but they must be a small group of people. Everyone everywhere complains about the knock-on effects of different industries.
It's not clear to me where they are drawing these conclusions from.
>How does the 9.9% vary across racial lines? The numbers are not very precise. White people make up about 90% of the 9.9%, which is not at all representative of the total. It’s not all white but much more white than the rest of the population.
Whites are 72% of the population so 90% falls pretty close to what we would expect to begin with. It seems an awful lot like the author was digging for any "us vs them" that they could find. Seeing as that the author of the book being reviewed and the author of the article are both shameless leftist shills according to their respective Twitter accounts, I feel comfortable sorting this article into the propaganda bin.
First off, blacks are only 14.2%[0] of the population. If they represented 18% of this group, they would be nearly a third overrepresented.
Second, this is an incredibly arbitrary group. $1.2 to $20 million? Why the fuck would you choose $1.2? It seem glaringly obvious that the author chose an overly-specific range so that their numbers would conveniently match their agenda.
Finally, valid statistical analysis is not "casual dismissal".
At the end of the day, they can still sell their house and have 1M. I can sell my house and have 150K. There is definitely more to it than just being wealthier on paper.
It depends where you live. If you live in the US, you can sell your house, have 1M, move to a low cost housing part of the country, buy a house for 150k and have 850k leftover for retirement.
I live in Singapore. If I have a 1M house, I can sell it, have 1M. Now I have two choices. I can either choose to be homeless, or I can buy another house for another 1M and be stuck in the same position as I was in in the first place. That 1M is really just "on paper" if you live in a country where housing is equally expensive everywhere.
That may be the case, but this article is about Americans. If we're opening up to the world, then just as well you actually have three options: move to a different country.
Which is also an option for Americans? Middle class city Americans are rich compared to middle class rural Americans, and the later are rich compared to other places in other countries still. Shrug.
Sure, I agree with that and that's my point. You can have your basic 1M house, but your 1M house sells for 1M at the end of the day. My 150K house will never be 1M. There's more involved than regional cost of living (such as salary, value of assets, value of work performed in relationship to where you live). You can move anywhere and some jobs will be the same or similar enough in pay, but my job will never pay enough for me to own a 1M house.
In summary, some of these wealthier on paper people you mentioned way back may in fact just be wealthier. They can also live a wealthier lifestyle if they so choose.
I don't think anybody is saying $1.2 is no big deal, only that it's not remotely the same as $20.
$1.2 isn't an unusual amount of assets for a pair of professionals in the US, once you include house and retirement accounts, neither of which can be easily converted into cash for spending.
"Most members of the 9.9% also talk about the amazing virtues of education and go out and build these systems where the educated will succeed. Then we have a system of financing college where a large majority of people have to buy that. They have to buy that behavior or life pattern.
It’s like someone manages to jump across a pit of fire and get to the other side and then convinces everyone else they should do the same thing. Unfortunately, statistically, those following that model are not all going to succeed. It does not make sense to have a society that is either defaulting on student debt or they are so burdened by it they can’t buy houses or take other important steps in life."
The path of getting a good, useful education, making decent life decisions, and slowly building up wealth over time via real estate? Ya, that will work for most people. The jump over that fire pit is pretty short. And while some people can't jump at all, a lot can.
Unfortunately, statistically, those following that model are not all going to succeed.
Except, statistically, most people jumping the fire pit (going to college) do succeed, so making the jump, in aggregate, is worth it. On an individual level, sure, somebody should consider the pros and cons. But from a policy perspective, we absolutely should be pushing some sort of higher education (albeit not necessarily the standard 4-year BA).
And I do hate that college costs have gone up as much as they have. My parents paid cash for my and my sister's undergrad. Despite similar incomes (adjusted for inflation), doing that for my son was a real stretch.
"The 9.9 Percent: The New Aristocracy That Is Entrenching Inequality and Warping Our Culture."
No examples of policy, law, or any specifics how this group is "entrenching inequality". This is more reductive single factor race blaming. Nothing regarding how many of the 9.9% inherited this class status, so how is this an Aristocracy?
Demonizing merit seems like a terrible strategy for a society.
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[ 2.9 ms ] story [ 299 ms ] threadIt has to be tough trying to write about complicated topics while staying under a 'fourth grade reading comprehension' ceiling, or whatever the target is.
How confusing the world is when you have to stick to the 'ten hundred' most common words and concepts. (ten-hundred from XKCD)
https://xkcd.com/thing-explainer/
It can turn out a surprisingly clear result that doesn't even show much sign of having started with a limited amount of words. It doesn't seem dumbed-down or vocabulary impaired, just easy to read (given that I do use any word that really seems to decrease the complexity of the explanation or cognitive overhead.)
It takes some time, so I didn't do it here, but if I did, this explanation would be clearer!
Income doesn't mean much if most of it is going toward debt service. Anecdote: Trump had an epiphany when he realized a bum on the street was literally worth more than he was financially.
There’s two primary reasons they choose to continue to live in the Bay Area. One is they value the amenities of the metro. Many view Iowa as a terrible fate, even if they are living in a mansion. In this case, they may be “living poor” in terms of housing, but only because they choose to spend most of their income on the luxury good of Bay Area living. Same way, I wouldn’t be crying for a high income guy who’s always broke because he spends all his money on his boat.
Second reason people live in the Bay Area is because it gives them access to very high paying career paths. Even if it’s a bad deal for an L2, by the time they make L6 at Google, their living standards will be much higher than what they could earn in Iowa, even given the cost of living.
This group is best thought of as sacrificing consumption today to invest in their human capital. Much like medical residents, while they’re low paid today, they’ll be very high paid in short order. Again, we really wouldn’t feel two bad about medical residents having to drive a used car for a couple years while they rocket up the career ladder.
(Yes, I moved 1000 miles. I know the pain of leaving it all behind, and the joy of 2x the house for 1/6th the taxes and more job opportunities.)
If you're coming from big tech or big startup in Bay Area, it is unlikely you will find "more [acceptable] job opportunities" in a significantly lower col area.
https://www.hhs.gov/healthcare/about-the-aca/benefit-limits/...
I mean, you could have something so expensive that you run out of your insurance's maximum benefit. But, first, that's really rare (not that that's any comfort if it happens to you). And second, if you were somewhere like Canada or Britain that has "real" health coverage, they probably hit the brakes somewhere before you burn $10 million in care, too. (I admit that I don't actually have evidence of this statement.)
There seems to be this "but medical" narrative (GP is not the only example in this thread), and I suspect the hidden message is "we need real healthcare coverage so that it doesn't bankrupt you!" And, maybe we do. But claiming it could bankrupt the multi-millionaires just makes you look silly. That's not the way to persuade people.
The main thing is to make healthcare more affordable and have reasonable limits (i.e. $10M) to ensure people are not bankrupted by it.
The interesting point that this one misses is that the children of this class are often not counted as part of the 9.9%, but are effectively part of it nonetheless because of the backstop an benefits that the 9.9% confer onto them. And their beliefs, etc. are pretty well in line with the 9.9. So really, it's more like the top 20% that's in this category, even though it doesn't look like it on paper.
In Australia apparently all you have to do to get into this group would be to actually own a paid off house. :/ I think this says far more about housing then wealth inequality though.
Yes, it’s true that kids from well to do areas grow up to become well to do. But twin studies tell us the mechanism of heritability is entirely genetic.
Below, I've linked some of the articles I have read on this in the past.
Here is a book pointing out various issues with twin studies: https://dl.uswr.ac.ir/bitstream/Hannan/139363/1/978113881306...
https://www.brookings.edu/opinions/americas-zip-code-inequal...
"Today, the state of the American Dream—the ability of anyone to work hard and get ahead—largely depends on one’s zip code." https://talkpoverty.org/2015/12/17/american-dream-zip-codes-...
https://www.forbes.com/sites/michaeltnietzel/2020/01/02/solv...
I'm born into the lower working class, Western Europe. And so is my brother. From an early age it was clear that my brother has limited intellectual interests or ability, nor is he creative. He simply isn't a learner, not a man for the books. He's a most excellent blue collar worker and that is the outcome. He's doing fine and is happy.
Me, I seem to be born to live in my head. An almost exact opposite. It was absolutely inevitable for me to end up in a creative or intellectual field. Which tend to have better compensation.
I could brag about how very hard I had to work to actually arrive at that place, coming from rock bottom. But these self congratulations would be misplaced. Anybody can work hard and my brother also works hard, if not harder. What decided between these vastly different outcomes is the brains we were born with, as everything else is equal. Perhaps even a good work ethic is in part genetic, I'm unsure.
There is a huge catch to this story. I was fortunate to live in a time and place where education was open and accessible. My parents' economic status didn't matter, I was in the same schools as people far richer. Society allowed me to compete and thrive from an equal and fair starting point, and then let genes (and some merit) play out. Which not only enables a great outcome for me, also for society.
I believe this equal access is absolutely critical. In fact, access to education has such a dramatic positive return that I believe education should be free. Insane! Who will pay for that?
The future will pay for it, in multiples.
A household with $1.2M in assets does not belong to the same group as a household with $20M in assets.
In theory ultra high wealth buys the luxury of leisure. In practice, in the US today, leisure monotonically decreases with income and wealth. By far the bottom quintile works much fewer hours than the top 1%.
Edit: forgot link
[1] https://www.epi.org/publication/ib348-trends-us-work-hours-w...
If we define work as "hours spent doing something", then potentially. But I like my first definition better.
https://www.businessinsider.com/stress-effect-on-aging-healt...
Perhaps, though that effect must be offset by other things (and/or access to healthcare), since the life expectancy based on income graph is monotonically increasing for both genders.
http://www.equality-of-opportunity.org/health/
My hunch is that the well off might have stress on the job (though again, this is a subset of well-paid positions, and I think the subset is actually smaller than you think), but everyone else has a lot more stress outside of the job which is much more important. The stress associated with poverty cannot be understated - it lowers IQ by ~15 points.
(Poverty and IQ: https://www.pbs.org/newshour/economy/making-sense/analysis-h...)
Responsibilities cause stress, but power to address those responsibilities mitigates it somewhat. CEO's have much more of that power than middle managers do.
https://www.shrm.org/resourcesandtools/hr-topics/employee-re...
Lifestyle doesn't matter. You can be extremely wealthy and live austerely, if you desire. What matters is security, power/influence, and so the ability to pass wealth to further generations.
A person with $20M assets at 8% earns $1.6M per year. A 20x difference in assets is essentially an entire generation of wealth accumulation..
Indeed, imagine saying: “there's not that much difference between $50,000 in assets and $1,000,000 in assets.” Of course more money earns more money, but it's still important not to underestimate the importance of a factor of 20. One can try it the other way: “there's not much difference between $20,000,000 and $400,000,000.” Except that many of us here probably can't really grasp either, I think we wouldn't believe that.
Both of which do nothing for that persons daily life. Can’t unlock home equity because they need a place to live. Not unlocking 401k value because… we’ll they are frugal and that is a bad idea.
While they are definitely well off, perhaps upper middle class, it is a vastly different lifestyle than 20mm net worth.
Those lifestyles are no where near being the same.
*based on a conservative 3% withdrawal, but the point stands irrespective of the withdrawal percentage.
You could scrutinize loans based on assets to close the gap.
If you are retired with $1.2M in assets, even a 3% draw down rate only gives you $36K a year. You can make that work if you are frugal but that is a vastly different lifestyle from the $20M individual.
The lifestyle difference between 1.2 and 20 million in assets are not similar.
$1.2 million is comfortable and $20 million is generational wealth. Many people who have that level of assets are part of a multi family office that will literally do your chores for you.
https://www.wsj.com/articles/SB10001424127887323551004578441...
Of course wealth is a gradient, and any buckets are approximations.
None of which is to imply I’m not rich to most of the country. I am. But I still have to work 40+/week to pay my mortgage.
...and child care (for 3 children under 3 years old), elder care (my parents are over 70 with existing and emerging conditions), etc. I just don't really expect to retire, to be perfectly honest, despite what my net worth is on paper.
All simplifying assumptions necessarily group some unlike elements. But we need to simplify in order to describe complex systems.
Or at least it should be. Many people with $1.2M cannot go a few months without a pay cheque because it's all locked in a house and a retirement fund -- make sure you're not one of them. An emergency fund is the best way, but I also recommend having an open HELOC. They're a lot easier to get when you have a job, and you don't have to draw on them until you have an emergency.
I live in a HCOL area, so I get this sentiment. But it doesn't match at all with actual reality in the US. The median 65-69 year old has a net worth of $272k, with the average being $1.25M [0]. A lot of places are pretty cheap - especially since even modest earners could get thousands of $ in SS each month.
[0] https://dqydj.com/average-median-top-net-worth-percentiles-b...
There is a vast difference between, as she says, "1.2 million" and "20 million."
20 million is "screw you" money. In that someone could quit everything they do, and live their whole life very comfortably on the wealth they have in hand, by paying cash for their house, setting aside a million in rainy day money, and putting the rest into very low risk bonds.
1.2 million is just enough money to get someone in trouble if they make a few mistakes. Buy an expensive house in the wrong place? Not a millionaire anymore. Ill-timed stock returns that turn south around the first of the year? Not a millionaire anymore. Try to start another business that doesn't pan out? Not a millionaire anymore. There's a million ways (pun intended) for someone with 1.2 million dollars to find themselves fast running out of money. Someone with 20 million? Not so much.
edit: Not that I disagree about the existence of the dynamic you point to.
And there's definitely a class of super wealthy who are "class traitors" in the sense that they advocate against super wealth. (You could certainly doubt and debate whether they just support those messages or whether they also support good faith action to that end).
https://en.wikipedia.org/wiki/Matthew_Stewart_(philosopher)
Oh wait, looks to be already done.
That looks like you are taking the world individual income distribution and the US household poverty line for single member households. That's...not really sensible.
It's quite accurate. But let's dot our i's and cross our t's as the procedural criticism is a fair one. U.S. poverty for a single household with 1 member is $12,880. Plug that into our handy WAPO calculator here:
https://www.washingtonpost.com/graphics/2018/business/global...
And you are better off than 80% of the world (if the calculator is to be believed). Try it yourself!
- unable to retire/aged out of the workforce
- lose house
- lose job and unable to find replacement.
- unable to afford living in your area.
- broken by medical bill/disaster.
- unable to afford education/childcare for children
My partner and I work in well known tech companies, but don’t come from money - we are well off as long as one of us doesn’t get a bad performance review and there isn’t a crash.
It’ll be decades if ever when I have the financial security to consider myself wealthy.
Even a catastrophic medical issue shouldn't make you lose your house, unless you don't bother to have insurance - and if you have 5 million in the bank, you absolutely can afford to have insurance.
So, what will happen once you succeeded bringing those risks down to zero? Is that the time you start pursuing your dreams or will you start trying to get the next set of risks down to zero?
If you are taking the full 6% then inflation is eating the asset, in 30 years the 60k will be equivalent to 24k. If you started this in 98 then you would have seen your assets halved twice, and would be living off of 15k or so in 2008.
A much safer withdrawal rate is 3-4% with some inflation adjusted caps and floors so that in good years you grow your investments and in bad years you maintain a certain level of lifestyle.
Everyone knows they need 2x their current wealth to feel secure.
If you have that amount or more on hand right now in investable assets, the only thing keeping you from financial freedom is the desire to have a fancier lifestyle than the average American.
Yes, most likely you are set if you have 1.5M - but it's not a guarantee.
Even with 1 million in the bank, the only risk you may face is a slightly worse lifestyle and the possibility of having to relocate to a cheaper area. In a world where working remote at least partially has become a viable solution unless you work in hardware.
Agreed that with 1 million in the bank destitution is not a real risk, but childcare can run 30-70k/yr. Being forced by circumstances to uproot is far from ideal.
1 million in the bank with drawdowns also runs a severe risk of being hit by a crash sometime in the next 30-70 years one might draw from it.
I fall into this 9.9% as well, so someone please tell me where I can exert this "Aristocratic influence" I have.
It's always so important to convince each cohort of the population that every step of the ladder above them is absolutely crushing it, probably at their cohort's expense, and they probably deserve to be taxed harder.
After all, what other business does anyone have judging how well others live?
Meanwhile, acorns has raised over $100 million from Black Rock, celebrities, NBC Universal, etc.
2. Shave off the most extreme outliers at the top
3. Give this group a catchy name and attribute values to them
4. Make enough money off of pop-sociology to be included in this group
5. Repeat with n=n/2
On meritocracy:
"I think a defining feature of the group culturally is this belief in meritocracy, in the sense merit is what makes the economy work. The sum total of our GDP is the sum total of the individuals in it."
Nothing too controversial...
"Everyone earns what their merit is worth."
I feel like this only works in a very technical sense and doesn't translate to what people would mean using natural language. Merit is a morally loaded term which I think makes the whole debate over Meritocracy confusing. A better way to put this would be:
1. Individuals have different amounts of leverage, which is correlated to earnings. 2. Competency is non-trivial and significant source of leverage. 3. A person with competency has more leverage than a person without competency all things being equal.
"That is coupled with a market myth that says that whatever people do that earns money is essentially good for society."
Perhaps there are people that believe this, but they must be a small group of people. Everyone everywhere complains about the knock-on effects of different industries.
It's not clear to me where they are drawing these conclusions from.
Whites are 72% of the population so 90% falls pretty close to what we would expect to begin with. It seems an awful lot like the author was digging for any "us vs them" that they could find. Seeing as that the author of the book being reviewed and the author of the article are both shameless leftist shills according to their respective Twitter accounts, I feel comfortable sorting this article into the propaganda bin.
Second, this is an incredibly arbitrary group. $1.2 to $20 million? Why the fuck would you choose $1.2? It seem glaringly obvious that the author chose an overly-specific range so that their numbers would conveniently match their agenda.
Finally, valid statistical analysis is not "casual dismissal".
Being wealthier on paper doesn't always translate to a more wealthy lifestyle.
I live in Singapore. If I have a 1M house, I can sell it, have 1M. Now I have two choices. I can either choose to be homeless, or I can buy another house for another 1M and be stuck in the same position as I was in in the first place. That 1M is really just "on paper" if you live in a country where housing is equally expensive everywhere.
In summary, some of these wealthier on paper people you mentioned way back may in fact just be wealthier. They can also live a wealthier lifestyle if they so choose.
$1.2 isn't an unusual amount of assets for a pair of professionals in the US, once you include house and retirement accounts, neither of which can be easily converted into cash for spending.
It’s like someone manages to jump across a pit of fire and get to the other side and then convinces everyone else they should do the same thing. Unfortunately, statistically, those following that model are not all going to succeed. It does not make sense to have a society that is either defaulting on student debt or they are so burdened by it they can’t buy houses or take other important steps in life."
The path of getting a good, useful education, making decent life decisions, and slowly building up wealth over time via real estate? Ya, that will work for most people. The jump over that fire pit is pretty short. And while some people can't jump at all, a lot can.
Except, statistically, most people jumping the fire pit (going to college) do succeed, so making the jump, in aggregate, is worth it. On an individual level, sure, somebody should consider the pros and cons. But from a policy perspective, we absolutely should be pushing some sort of higher education (albeit not necessarily the standard 4-year BA).
And I do hate that college costs have gone up as much as they have. My parents paid cash for my and my sister's undergrad. Despite similar incomes (adjusted for inflation), doing that for my son was a real stretch.
Ah, a political article. I thought it was about something else when I started reading it. It's clearly meant to be persuasive.
"The 9.9 Percent: The New Aristocracy That Is Entrenching Inequality and Warping Our Culture."
No examples of policy, law, or any specifics how this group is "entrenching inequality". This is more reductive single factor race blaming. Nothing regarding how many of the 9.9% inherited this class status, so how is this an Aristocracy?
Demonizing merit seems like a terrible strategy for a society.