Birth, Beer or the Big Break? Which is the Key to Wealth?
Last week, I talked about needs, wants and delayed gratification in the pursuit of a goal.
This week, I want to explore what it takes to become rich.
Actually, that’s not quite right. In fact, I’d say that if you gave this man a pile of money right now, he’d have lots of fun for a while but would likely have even more trouble afterwards. He’d have used his funds for pie in the sky junk and to attract a cute girl but would likely be left be left no girl and lots of debt. So much for instant riches.
Mr. Beerver’s goal is not to be rich but to be wealthy. There’s a significant difference.
Warren Buffet is rich. Bill Gates is rich. They have so much money they can’t think about how else to use it so they give most of it away to charity groups who do have a use for it. Great for them! Also: Thanks! I don’t hear about the super-rich from many other countries who give off most of their fortunes to charities. Perhaps they do and it’s not publicized, in which case, great! Otherwise, it would seem to indicate they are hoarding sums of money too great for them to spend… perhaps not so great.
The Millionaire Next Door type however may not be rich but only wealthy. Sure, he has more than enough to live on but after he passes away, the kids will not even be wealthy just from the inheritance. They’ll have to work hard to get ahead and achieve the same status as their parents. This is the level of wealth that Mr Beerver would like to achieve. Enough to retire on comfortably but not enough that his kids will be silver-spoon fed brats.
So what’s the mindset that separates the wealthy from the poor? Are they rich because of luck? Birth? Beer drinking?
Can someone realistically progress from being poor to being wealthy or is social class much like a caste which you can’t escape?
This is a great article on American class mobility: Turns out that where you live matters quite a lot!
Accortding to PEW research, American children are those whose mobility in society is most directly related to their parents education background. So, if your parents are well educated, you have a high chance of being more socially mobile than otherwise.
Also from PEW:
If your parents are poor (bottom 33% of income), you have a 53% chance of also being in that category.
If your parents are rich (top 33% of income), you have a 52% of also being there later in life.
So there is some truth in saying that the rich are born into it and that education is the great equalizer. Too bad the equalizer may take 2 generations to run its course but if you want your descendants to be rich, you now know what to do help them get out of poverty: get some schooling and let them reap the benefits!
Interesting. This seems to run somewhat counter to what The Millionaire Next Door author argues: That most millionaires are NOT born into it. That they achieve their wealth in the space of a single generation.
Let’s look at the PEW numbers another way: If your family is poor, you have a 47% chance of getting OUT of poverty! You’ll have to study your butt off, work hard AND get a couple of lucky breaks, but it is possible.
Speaking of luck, Fama and French have found recently that it’s just dumb luck and not skill that is the most significant part of the reason mutual funds do well.
Perhaps it’s what they drink that determine people’s wealth?
No way! According to this, relatively few beer-drinkers were famous. Gin appears to be the historical drink of choice for the rich and famous. Mr Beerver really doesn’t want to be renamed to Mr Ginver. That just sounds wrong.
Absinthe drinkers even beat out beer drinkers! Now that’s just insane!
Well then… Mr Beerver will just have to beat the odds. DESPITE his love of beer and his not being born into the top 33%, he’ll do his darnedest to become wealthy!
But first, a beer!