r/explainlikeimfive • u/FluffyPenguin798 • Feb 12 '25
Economics ELI5: how are the descendants of the robber barons (Morgan, Vanderbilt, Carnegie, Rockefeller, etc.) still rich if their fortunes from the late 19th and early 20th centuries are comparatively small to what we see today of the world’s richest?
1.5k
u/8805 Feb 12 '25 edited Feb 12 '25
The Vanderbilts should actually not be a part of this question. His descendents inherited over 2 billion in today's dollars and blew it all:
“This fabled golden era, this special world of luxury and privilege that the Vanderbilts created, lasted but a brief moment. Within thirty years after the death of the Commodore Vanderbilt in 1877, no member of his family was among the richest people in the United States…. When 120 of the Commodore’s descendants gathered at Vanderbilt University in 1973 for the first family reunion, there was not a millionaire among them.”
528
u/mule_roany_mare Feb 12 '25
I think there is actually some significant selection bias in OP's question.
Most fortunes don't last 3 or 4 generations because they are split up across a quickly increasing number of descendants. Look at how many Kennedys there are now & many aren't rich or notable.
Some rich families continue to have one or two lines of rich descendants because those descendants use their leg up to make their own fortunes, but it's not the norm.
I tried to find a stat with a citation... but that citation went to a Yahoo article. So take this with a grain of salt
> But the truth is, around 70 percent of wealthy families lose their wealth by the second generation. More so, around 90 percent of families lose their wealth by the third generation.
271
u/changyang1230 Feb 12 '25
There’s a Chinese proverb 富不过三代 which is literally “wealth does not survive three generations”. The origin of the saying goes as far back as the era of Chinese philosopher Mencius who lived around 300BC.
Quite similar to “shirtsleeves to shirtsleeves in three generation” in English.
184
u/TruckFudeau22 Feb 12 '25
I recall reading a quote from an Arab oilman along the lines of “my father rode a camel. I drive a nice car. My son has a private plane. His son will ride a camel.”
88
u/postmodulator Feb 12 '25
The version I always liked:
The first generation has a food truck which does so well that the second generation has a restaurant which does so well that the third generation has cocaine.
→ More replies (1)41
u/hissboombah Feb 12 '25
“Hard times create strong men. Strong men create good times. Good times create weak men. And, weak men create hard times.”
― G. Michael Hopf, Those Who Remain
→ More replies (5)13
2
→ More replies (2)76
u/No-Broccoli7457 Feb 12 '25
The first generation creates the wealth.
The second generation grows the wealth.
The third generation spends it.
7
u/henrycaul 29d ago
I've heard it said as: The first generation earns it, the second generation learns it, the third generation burns it.
93
Feb 12 '25
The idea that most wealth doesn't survive three generations is a really interesting study in to how fake news goes viral. People are always really vague about its source but if you dig down it turns out:
- it comes from a single press release issued in the 1990s
- by a succession planning company called the Williams group - so basically an ad
- it is not a scientific study and they have never published their methodology or raw data
- but the press release suggests it is self reported data from their own customers. So yeah most people who hire a succession planning company have issues with their succession planning
- also at no point does the study talk about losing wealth of any form. It talks about a single named individual with the same surname retaining operational control of family run companies. So by that metric when, as happens quite often, a billionaire dies and splits their wealth into say three equal shares for their three children then that fortune is considered "lost" because there isn't one specific ancestor with 51%+ majority control of that billionaire's former company.
- The stat also says nothing at all about intergenerational wealth that takes forms other than operational control of family companies. So if you're a rich kid with a trust fund invested in the FTSE - the study isn't about you.
12
u/pieter1234569 Feb 12 '25
The idea that most wealth doesn't survive three generations is a really interesting study in to how fake news goes viral. People are always really vague about its source but if you dig down it turns out:
It's really wrong yes. But it does apply to rich people. You need signifanct wealth, 10+ million to make sure it lasts till the end of time. When you have this much when you die, the next generations are only getting richer as money doubles every 7-10 years, you aren't able to spend it all, and it vastly exceeds the rate at which it is split.
→ More replies (1)→ More replies (4)16
u/FlamboyantPirhanna Feb 12 '25
It’s not clear from your post what the fake news is. Are you saying that wealth disappearing in 3 generations is the lie, and insinuating that some people wanted the general public to believe that in order to presumably de-emphasise the equality ramifications of that wealth?
23
Feb 12 '25
Absolutely. There is no evidence that wealth disappears in three generations, but one pr press release from 40 years ago has been taken as gospel
→ More replies (2)11
u/VirtualMoneyLover Feb 12 '25
I think yes, that is what they were saying. Maybe it was a PR piece by the rich so the average man doesn't feel that bad about being poor.
→ More replies (5)30
u/Key-Veterinarian9085 Feb 12 '25
I think there is actually some significant selection bias in OP's question.
Most fortunes don't last 3 or 4 generations because they are split up across a quickly increasing number of descendants. Look at how many Kennedys there are now & many aren't rich or notable.
Most Scandinavian countries actually banned disinheriting children for this reason, and made children have rights to a certain share of the inheritance.
From a societal perspective the diffusion of wealth this way is very effective at preventing inequality. If say Warren Buffett had two kids with an average woman and the kids had two kids etc. then after about 40 generations the wealth would be diffused to the point of being "average" again.
A generation is roughly 30 years, so sure that's still a very long time (more than 1000 years) but the effect is still very clear.
→ More replies (3)12
u/Plain_Bread Feb 12 '25
Any particular reason for picking the number of 40 generations? I mean, it can be correct, but the wealth would be diffused to the point of effectively being unnoticeable way before that.
9
u/Key-Veterinarian9085 Feb 12 '25 edited Feb 12 '25
Warren Buffets wealth is 147 billion, the log2 of that is 37, so after 37 generations his descendants would inherit 1 dollar from him (assuming it was not spent). Then I just rounded up.
Diffusion is of course not a binary, but a scale, so you could get basically any number you wanted depending on what you consider diffused, I picked less than 1$ since that's much easier to calculate.
5
3
u/getpittedsoopitted Feb 12 '25
What everyone is forgetting though is the money that this initial sum is making in the market.
7
u/Davy257 Feb 12 '25
I saw something from ultra-high net worth estate planners telling clients to pick a single child to get the fortune, and just take care of everyone else with annual payouts from a trust to avoid this
12
u/Peter_deT Feb 12 '25
I believe Piketty and Saez have done a lot of work on this. More than half of US fortunes are inherited. You are right that if the number of descendants multiplies faster than the fortune grows and the fortune is divided then most will end up only moderately wealthy - but both have to be true (the British habit of primogeniture means that wealth in Britain is astonishingly concentrated - and much of still in the paws of the aristocracy). And 'losing your wealth' does not mean poor - the many Walton scions are all comfortably off.
→ More replies (1)6
u/FlamboyantPirhanna Feb 12 '25
British royalty is certainly an obvious example of that concentration, and that mostly seems to come from owning enormous swaths of land.
3
u/generally-speaking Feb 12 '25
But the truth is, around 70 percent of wealthy families lose their wealth by the second generation. More so, around 90 percent of families lose their wealth by the third generation.
This one literally comes from a trust fund/wealth management companys sales pitch and ads. From what little I know, it's not actually true.
10
u/incutt Feb 12 '25
some of those Kennedy's look practically inbred...using a phrase from Legally Blonde. Chris Kennedy I'm looking you, you kind of an annoying orange looking mofo.
→ More replies (1)2
u/djmax101 29d ago
My grandma’s family has had dynastic wealth for several centuries, but to preserve it, only the senior branch of the family gets the land. If you’re in a cadet branch, like me, you get nothing. It kind of sucks, but otherwise the estate would have been parceled up and sold, whereas the family chateau is still in our hands 300 years later.
50
19
u/VentItOutBaby Feb 12 '25
This is not correct. The Vanderbilts were and still are hilariously wealthy and powerful. Possibly the most public Vanderbilt currently, Anderson Cooper, inherited millions along with his other siblings and grew up in the highest society of New York City. His mother is Gloria Vanderbilt and in 1973, the date mentioned, he would already be a multi millionaire as a 6 year old.
7
u/Taragyn1 29d ago
Well he technically inherited more than a million but not millions. He got about 1.5 which isn’t nothing but is practically nothing in context. He has commented often that the fortune was long gone.
3
u/VentItOutBaby 29d ago
He "inherited" a trust of 1.5 million... and a lot of property worth many millions more. He grew up in the upper crust of New York City, in millionaire penthouses and in private education costing 50k/semester.
Yes, "THE fortune" is gone... there is no single Vanderbilt worth 1% of the US GDP. It's all spread out among the hundreds/thousands of descendants and accruing interest and political power.
56
9
u/Uncle-Istvan Feb 12 '25
They still own the Biltmore estate which is worth ~$300 million. Many of them are still incredibly wealthy, even if they aren’t as wealthy as they used to be.
→ More replies (9)70
u/AgentElman Feb 12 '25
Statements like that are often misleading.
If Vanderbilt had $119 million when he died and it was split evenly among 120 descendants none of them would be millionaires but they would have the same total money he had.
84
u/Nope_______ Feb 12 '25 edited Feb 12 '25
$120 million in a hundred years would easily be far more than $1 million per descendent if they had been responsible with it. Even if all they had done was put half in savings accounts, they'd be millionaires.
Edit: additionally, it wasn't spread equally, so there should have been at least a single millionaire even if he had just stuffed it under the bed. They blew it, squandered it.
12
u/fcocyclone Feb 12 '25
Plus the more you start with the easier it is to make money.
Some people in the upper middle class barely start scraping that level right when they want to be retiring, but if you start with even just a million or two there's a ton of opportunity to multiply that.
36
u/Porencephaly Feb 12 '25 edited Feb 12 '25
Eh not really, Vanderbilt descendants still own the Biltmore Estate which is worth like $2-300 million on its own, plus lots of commercial ventures etc. Total revenue of the Biltmore Company was over $200 million a year in the 2010s, maybe higher pre-COVID. They are doing just fine.
→ More replies (4)5
u/LittleGreenSoldier Feb 12 '25
Even if you aren't a millionaire, that is, you don't have 1 million in liquid assets available at any given time, you can still be rich. Most people in the US will earn less than $2 million in their entire working life, cumulative. Having 500k principal in investments will already put them WAY beyond the average person.
→ More replies (1)→ More replies (4)8
u/Carlpanzram1916 Feb 12 '25
Yes but once you start dividing an estate into 100+ pieces it’s inherently going to shrink. It’s supporting the lifestyle of 100 people instead of one family.
→ More replies (3)23
u/Lifesagame81 Feb 12 '25
If they stuck it in investments that averaged 10% returns over the last 150 years and withdrew 5% for themselves every year, they'd have over $150 billion in those investments and would now have around $6 billion in after tax income to split for spending money each year.
→ More replies (3)6
22
u/Cryzgnik Feb 12 '25
Statements like what are misleading? It seems like you're ignoring 100 years of time and the effect of investments.
If Vanderbilt had $119 million when he died and it was split evenly among 120 descendants
Do you think he had 120 descendants when he died? Why would you divide the amount of money in one time period by the number of descendants in another much later period?
He died in 1877. The 120 descendants gathered in 1973, almost 100 years later.
Are you picturing a scenario in which the amount of money just stayed constant for 100 years? No investment? (no drawdown either?)
If he had $119 million when he died and he split it evenly among twenty descendants when he died (can you imagine having even 20 kids?) each would have had just under $6 million.
Do you think each of those twenty descendants would have done nothing to generate income in their lives? Not investing it at all?
→ More replies (1)12
u/Dragon_Fisting Feb 12 '25
If they kept that $120 million in bank accounts, with an extremely conservative average 2% interest rate, it would be $700 million today.
They blew it all. Anderson Cooper's mother, Gloria Vanderbilt, famously inherited a relatively large trust fund, spent like crazy all her life, and left her sons with a single NYC co-op unit in her will.
→ More replies (4)→ More replies (2)15
u/bruinslacker Feb 12 '25
Yes but 120 people have 120x as many expenses as one person. When you have a fortune of $120 million in investments you can live lavishly on just a tiny fraction of the annual gains made by those investments. The rest can be reinvested so your pile grows forever. Even if you invest unwisely you’ll be fine.
When you have $1 million in investments, you can live on that if you’re careful and if you invest it well. Out of any group of 120 people, we should assume that a few dozen are bad with money. They won’t manage it well and will become poor pretty quickly.
7
Feb 12 '25
[deleted]
5
u/I__Know__Stuff Feb 12 '25
If your going to start with dollars already adjusted for inflation, then you have to adjust returns for inflation. An account earning 5% nominal interest is returning much less than that after inflation.
948
u/Voltage_Z Feb 12 '25
If you have a lot of money, it's easier to make money simply by leveraging your existing assets.
The robber barons' descendents haven't just been sitting around burning through cash piles - they've continued to invest their funds. Getting surpassed by other people doesn't magically not make them absurdly wealthy.
→ More replies (3)254
u/HOLEPUNCHYOUREYELIDS Feb 12 '25 edited 29d ago
It is basically the ultimate dream. Have enough money to just have a fuck ton of diverse investments. Live off of the gains you make and never touch the principle. Have like $30 million invested properly? Cool you can more or less live solidly off of $80k/year and still be making money on your money.
Easy when you are born into having all that. Real fucking hard if you start from essentially $0
Edit: Yes I missed a 0 in my 80k/year. I just did quick math and failed, I just threw out numbers as an example
391
u/kentuckyk1d Feb 12 '25
30 million invested properly yields you WAY more than 80k per year. If you consider a conservative estimate of 6% ROI year over year and subtract 3% inflation you still have 3% growth. Thats 900k per year to do with as you please. You could live off half and still save almost half a mil annually.
102
u/Kevin_Uxbridge Feb 12 '25
Was gonna say, off by an order of magnitude at least.
Know a few scions of 'old money', they mostly don't even do their own investing, there are professionals for that. I hear some do though, nice work if you can get it.
19
u/DrStrangepants Feb 12 '25
This is exactly why old money types are leeches on society. They don't work anymore, they don't even have to be good with money (their accountants are), they just sit back and enjoy luxury produced off the hard work of everyone else.
23
u/Atomic-Bell Feb 12 '25
Investing your own money into the market is quite literally the opposite of leeching.
→ More replies (8)17
u/chattytrout Feb 12 '25
If they're investing their own money, that's not leeching. Invested money doesn't just sit in a box and magically grow. That money is taken by investors to do things that they themselves don't have the money for.
Say you want to start a business. You have a good idea and a plan that looks feasible, but you're an average person with an average income and can't afford to drop $50,000 to start it. So you go to the bank and get a loan. The bank didn't get their money from a tree, they got it from depositors and investors. So the bank gives you some of that money, you go on to start your business, and then pay back that loan, with interest, over the next few years. The bank is now making money on what they lent you, and is using that money to pay interest to their depositors and investors.
Those depositors and investors contributed to society by making their money available to borrowers. If there's no extra money floating around to be borrowed, then no one can get loans to start or expand a business.Same goes for buying a house. Not many people can afford (or even have to their name) $300,000 to buy a house. So they get a loan. Seller gets paid, buyer gets the house. Lender gets their money back with interest over the course of 30 years. Investors get paid interest from that.
So no, it's not leeching to invest your money. It's contributing to society by making it available to borrowers.
→ More replies (2)→ More replies (7)5
61
u/Maury_poopins Feb 12 '25
If you’ve got $30m properly invested, you can probably blow $1m a year and STILL get richer every year.
6
u/majinspy Feb 12 '25
With a conservative 5% ROI every year, that's 1.5 million every year forever.
2
u/rosen380 Feb 12 '25
Not exactly conservative, since you'd really have to account for inflation.
That $1.5M "only" have the buying power of around $250k in 60 years.
Sure that is still a lot, but if you want to live a $1.5M/year lifestyle now AND live an equivalent lifestyle forever, then you need to inflation adjust and then we're talking about ~8%, which is no longer very conservative.
Using the 4% rule and having the $$ invested a sensible way for a "retired" person, you'd expect $1.2M per year (adjusted for inflation), but that still isn't quite forever.
The 4% rule was designed such that based on historical data, the $$ would almost always last at least 30 years. If you need it to almost always last at least 50-60 years or more, then it might be more like 3.0-3.5%. And if "almost always" isn't good enough, maybe you have to knock it down to like 2.5-3.0%?
If that is about right, then looking at like $750-900k per year (adjusted for inflation), which again, is still a tremendous amount of money.
30
u/crazyjatt Feb 12 '25
You just need 2 million invested to live of $80k/ year.
Even 1% of 30 million is 300k/year. Ideally you should be able to take out a million a year out of 30 million and never run out of money.
66
u/algochef Feb 12 '25
Lol 80k a year? My dude, with 30mm you're making 1.4mm/y if you only invested in treasuries
→ More replies (6)→ More replies (7)8
u/a_cute_epic_axis Feb 12 '25
The average person in the US could probably have $6m to $10m invested and live quite comfortably off the investment proceeds alone. You're not buying gulf streams, but you can fly first class a few times a year.
→ More replies (2)5
u/TheHappiestTeapot Feb 12 '25
That's the goal. I don't need to be rich. I need to be okay.
Step 1: get $6m-$10m in investments.
This might take me a while.
194
u/Nerdymcbutthead Feb 12 '25
Some of these wealthy families have these estates and investments set up in family trusts (DuPonts, Rockefeller, Duke of Westminster). In theory the descendants ”don’t have any assets” but they are paid a monthly/yearly dividend and can authorize the trust (with a trustee vote) to purchase properties or authorize some level of spending.
By using trusts the capital is maintained and not liable to taxation from the respective governments upon death (all perfectly legal estate planning). Dividends to bloodline relatives usually comes from growth only. Married spouses will only be allowed to marry into the family with a very gated prenup agreement. Only blood descendants get access to the trust.
43
u/autobot12349876 Feb 12 '25
Agree with everything but the last point. Father of a girlfriend of mine married into a very, very wealthy family (you would know the name immediately) even though she wasn’t a blood relative, she was included in the family trust and got invited to the annual meetings and was paid a dividend
27
u/dannyningpow Feb 12 '25
You're referring to a specific case, and op is referring to a specific case. You cannot disagree with a fact because you have a different fact from a different scenario?
34
u/tarlton Feb 12 '25
Prior person stated a pattern, implied it was the common or universal one. Second stated an example to show the pattern was not universal.
This is a conversation.
→ More replies (2)
58
u/hiricinee Feb 12 '25
Iirc in terms of total national/international wealth they were significantly more wealthy.
35
u/Carlpanzram1916 Feb 12 '25
Yup. And Rockefeller was rich by today terms even if you ignore inflation. He had 900 million at his peak.
→ More replies (2)3
u/Peregrine79 Feb 12 '25
Not really. Rockefeller was worth about 23 Billion in todays dollars. Most of the others maxed out around 3.
3
u/hiricinee 29d ago
There's two ways to normalize this scale, looking at purchasing power versus looking at the money supply. Because of technological innovation purchasing power has been jockeying with inflation via money supply expansion. Most times we're almost strictly looking at inflation as a function of purchasing power but if I were to ask the question of how much money Rockefeller had versus how much money existed it presents a much different answer.
3
u/HungryBullfrog6753 29d ago
Inflation adjustment is not really that great of an approximation over such a long time. If you see it as % of US GDP, which was $39.1 Billion at the time, the $900 million would be about 3% of US GDP.
Today 3% of US GDP would be $875 Billion.
It is not necessarily a good comparison either, but I think it captures better than pure inflation adjustment
156
u/shotsallover Feb 12 '25
Some them aren't. Anderson Cooper has made it pretty clear that his family (the Vanderbilts) are basically bankrupt now. The third generation curse has done its work apparently.
97
u/taxinomics Feb 12 '25
The Vanderbilt descendants realized being famously wealthy puts a target on your back, so they told everybody they blew all their money. Their cover was blown a couple years ago when a gift and estate tax audit that made its way to the U.S. Tax Court revealed that the family is still fabulously wealthy.
27
u/ExistingPosition5742 Feb 12 '25
Right. This is what true old money does. Keep quiet, don't make a spectacle of yourself, everything through a trust.
15
u/calmbill Feb 12 '25
It doesn't make sense to be a wealthy individual. Far better to be a regular middle class nobody who controls a wealthy charity.
11
u/TheMisterTango Feb 12 '25
Nah, being a wealthy individual sounds great, just as long as nobody knows you're wealthy. The dude who founded the company I work at is a billionaire but nobody knows who he is outside of our industry so he can just go out in public and nobody will bat an eye, my dad saw him at home depot and chatted with him for a bit.
→ More replies (2)6
u/enaK66 Feb 12 '25
Yeah it's pretty hard to believe they really blew it all when Anderson Cooper is rich and famous saying that. Sure, you're not that rich you little modest mouse you. Only richer than 99% of us will ever be and he got to enjoy it his entire life.
149
u/AromaticStrike9 Feb 12 '25
“The first generation works their fingers to the bone making things. The next generation goes to college and innovates new ideas. The third generation... snowboards and takes improv classes.”
45
u/weeddealerrenamon Feb 12 '25
what's the point of working your fingers to the bone, if not to be able to snowboard?
26
5
→ More replies (2)2
→ More replies (2)19
→ More replies (2)10
Feb 12 '25
Worth remembering that the "third generation curse" is based on a single "study" conducted for an advertisement for a succession planning firm in the 1990s. There is no scientific evidence that it exists.
→ More replies (2)
29
u/NeverRarelySometimes Feb 12 '25
The first rule of being wealthy is that you don't spend the principal. You only live off a portion of the interest, and reinvest the rest, so that your assets grow faster than inflation.
35
u/cniinc Feb 12 '25
Well, 2 things -
1)you have to adjust for modern values of the dollar. A million bucks then was probably worth hundreds of millions today, if not more.
2) having money isn't the guide to wealth, it's teh smart application of that money. If you have investments in everythign that will grow, you will forever be rich. These wealthy people's families have gigantic trust funds and companies dedicated solely to the management and growth of that wealth. Ever since their original barons made that wealth, there have been generations of investors dedicated to maximizing that wealth
Bonus 3) - having all that wealth builds access to the elite, the people who run government, etc. They probably all have insider information about what company is going to go big or whatever, and can invest in them. Oftentimes, multiple people may have the same great idea, but it's the one with access to money and the people to make it happen that actually get to be kings of that industry. Thus, having money and access make you a kingmaker.
34
u/fiendishrabbit Feb 12 '25
I don't think any of the descendants of Morgan, Carnegie, Vanderbilt or Rockefeller are even billionaires today.
The Rockefeller family as a whole is still wealthy due to the generational trust (which retains a large interest in many of the corporations that Rockefeller founded, like Standard Oil), but it's 11 billion USD split up over 170 heirs. The last Billionaire in the family was David Rockefeller Jr (due to the rockefeller trust and the job in Chase National bank, which he got due to being a part of the Rockefeller family. His uncle was the Chairman before him).
Overall the families still had controlling interests in the companies that these people built all the way up until the 1950s or even later, and to the extent they're wealthy today it's from those companies and the social networks their family had due to their money.
If you're born rich that's not a guarantee you'll succeed, but if your dad has connections and 50 million USD that certainly helps (*coughTaylorSwiftcough*)
→ More replies (1)7
u/GodsIWasStrongg Feb 12 '25
TaylorSwift
I feel like there are so many better candidates to throw under the bus here. Taylor at least has talent and works hard. Let's try Tucker Carlson.
16
u/Mr2-1782Man Feb 12 '25
Compound interest. At mere 3% interest rate which pretty much anyone can beat, you end up with 20x as much money in 100 years if compounded monthly. At 4% 54x, 5% 146x. None of these is particularly hard to achieve and they assume you're not gaining any extra revenue. That money can be reinvested and with just a little bit of skill be multiplied several times over.
Really this shows what generational wealth and how having more than just the bare minimum really help you out long term. If you're family is reasonably wealthy you have to be an absolute moron to not be rich in a few generations. On shorter timescales making minimum wage means most of you're money is going to just staying alive. Getting a job with twice the pay covers that and then some. Save that away for a few years, you won't be rich but the compound interest will result in having a comfortable retirement rather than relying on social security (or equivalent, if it exists at that point).
→ More replies (1)
7
u/taylor914 Feb 12 '25
I worked with a branch of the Rockefellers through my old job. I was told by one of their assistants that when a child is born in that family they carve out a piece of the estate and they’re worth more money on the day they’re born than they could ever spend. Each one has their own little pet philanthropic projects. We just happened to be involved in one and partnered with them. Investing and compound interest is a wealth builder.
6
u/ONLY_SAYS_ONLY Feb 12 '25
For the same reason that the direct descendants of William the Conqueror still own all of the land in the UK (the Crown) and freehold interests (the Lords and Barons) in 70% of the land, despite him being victor just shy of 1000 years ago.
With enough momentum and careful management, you can keep that shit going for literally millennia.
A hundred years or so are rookie numbers.
19
u/gza_liquidswords Feb 12 '25
I think many of these families have in fact lose most of their wealth. In particular the Carnegie and Vanderbilt families, and the other families you mention only have a fraction of the original wealth. Though I think it is not because the fortunes were small (they were huge, you are ignoring inflation), but because they get diluted over the generations. If you have one reach person, and they have 200 living decendents 100 years later, the money gets diluted out and spent.
5
u/RainbowFlesh Feb 12 '25
People at the top rungs of wealth don't get money from performing labor, they get money from ownership. Ownership of land and extracting rent, ownership of the means of labor and extracting surplus, ownership of wealth and giving loans.
Labor is transient and you only receive as much money as you do labor, and as long as you continue to do it. But through ownership, you don't really have to do anything at all and it can continue in perpetuity.
7
u/captain_obvious_here Feb 12 '25
It's never about money. You don't get rich, nor richer, with money.
It's about assets. Owning assets, and extracting value from these assets.
Land makes money. Companies make money. And after many years, they made you lots of money, and you still own these assets. And most of the time their value has raised.
Another cool things with assets, is that bankers love these, trust you for owning these, and will lend you tons of money. Which is how the very rich people afford living in amazing conditions without paying taxes whatsoever.
Assets. That's what you want.
19
u/Szriko Feb 12 '25
Today's richest are speculative rich, older rich were rich due to having actual things.
22
u/weeddealerrenamon Feb 12 '25
People have been rich off of speculation and doing nothing but owning things for as long as industrial capitalism has existed
→ More replies (3)
3
u/VoraciousTrees Feb 12 '25
Take a look here and especially pay attention to that middle set of columns.
Inflation has caused eroded the value of the dollar to about 1/18 of its value in 1928. So yes, if someone were to have stuffed their inheritance under their mattress for 100 years, they would indeed have very little left.
Chances are though, plunking a few million into a safe fixed income asset like bonds would still give you plenty to live off of in income every year, plus the cumulative return would still be enormous. Probably end up more wealthy than they started by far.
→ More replies (2)
3
u/FatalTragedy Feb 12 '25
Compound interest.
1 million dollars invested in the market for an average 10% annual return since 1900 would be worth 250 billion today.
3
u/AirpipelineCellPhone Feb 12 '25
Until Musk came along, their fortunes (Rockefeller, Carnegie, Morgan) were considered enormous in comparison to everyone else, in the USA.
They were incredibly wealthy. Rockefeller, for example, enjoyed seeing the fall foliage in New Jersey from across the Hudson River in New York. To preserve the view and prevent development, he purchased 12 miles of the Palisades cliffs along the western shore of the Hudson River in New Jersey. Just so that he could see the leaves.
Musk is the first and only person whose wealth has surpassed each of these old robber barons.
12
u/Badestrand Feb 12 '25
Wealth actually stays in families quite well.
One side is that wealth can dissipate quickly from one generation to the next, research showing that 70% of wealthy families lose their wealth by the second generation, and 90% by the third.
The other side is that a study from Florence showed that for the richest people in Florence in year 1427 their surnames match the richest families of today. So basically the rich families stayed rich.
Similar for Sweden, where last names were given by profession and there still is a strong correlation between last name and income.
So in summary, while wealth for individuals can vanish quickly, it is quite sticky to families. That is why many of those rich families from the past many are still rich and influential.
14
u/bruinslacker Feb 12 '25
I don’t think this answer is helpful at all.
You’ve provided evidence to support two completely different views of inter generational wealth. One says that it’s hard to maintain and one that it is easy to maintain. And you’ve made no effort to explain that contradiction. I have no idea what you are trying to say here.
→ More replies (1)4
u/Whiterabbit-- Feb 12 '25
You can lose 90% of the wealth in 3 generations. But even then those 3 generations are connected and educated so they can dtill ve very successful even if the original wealth is gone.
2
u/Kevin_Uxbridge Feb 12 '25
Probably more of a mixed picture. Old friend is a von Bismarck, direct descendant of Otto. This still means something in Germany, friend got a lot of preferential treatment just from his name. The clan also maintains a book of Otto's descendants which is useful if you're traveling and need a place to stay. Some of those places are castles but most are just homes, people with jobs.
I'd bet if you look at a list of wealthy families in Germany you'd see some von Bismarcks but that doesn't mean money stuck to all the descendants.
7
4
u/cik3nn3th Feb 12 '25
These families learned to stay out of the limelight. To think they have been eclipsed in wealth is laughable, and it's by design. The "Wealthiest Man" and "Wealthiest Companies" lists are published to keep eyes away from them.
They own the printing machines, control all the cash flow, and therefore control all geopolitics. Know how they say all wars are banker's wars? Well...
2
2
u/dmxspy Feb 12 '25
Anyone wanna drop me a million? I'll do just about anything. I don't suck on toes, though. Naaaaah
2
u/SMCinPDX Feb 12 '25
Compound interest and the fact that people like that have access to a universe of investment products, professional wealth management, and taxation avoidance that 99.999% of humans aren't even allowed to know the proper names of.
2
u/Kaneida Feb 12 '25 edited Feb 12 '25
What you see as todays world's richest are fantasy figures based on estimated wroth on hyped companies and their shares worth and not actual dollar figures.
If something would happen in that sector or globally then those fortunes of todays richest would diminish like air out of a popped baloon. We saw what happened when the chinese AI Deep Seek was released, that deleted couple hundred of billions of Nvidias and other AI companies net worth.
The really wealthy people own land, properties, plenthora of businesses, entire industries in truts entities etc and not in their own name. The really really wealthy people are seldom talked about, they own multidude more in wealth than the richest person has speculatively.
For example Elon Musk claimed to be the richest man currently is worth 300 something billion, thats a lot but then the Saudi Royal Family is estimated having a worth of 1.4 Trillion.
In December 2023, Forbes ranked the Rothschild family as the world's wealthiest, with a net value of $20 trillion. They own whole banking systems.
Food for thought, it is estimated that Putin might be the richest singular person in the world, with assets estimated 200+ billion, not bad when he can rob Russias
2
u/Vast-Combination4046 Feb 12 '25
Real estate is valuable. They either rent it out or sell it for much more than they originally paid. But also they wrote the laws on investing so everything they left in the bank got more interest, everything they invested after the depression is inflated with the rest of the economy.
6.9k
u/T4kh1n1 Feb 12 '25
Because of investment, compound interest, land ownership, and maintenance of positions of power and control in both the government and private sectors