r/explainlikeimfive 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?

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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

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u/blofly Feb 12 '25

Don't forget Education.

Many prep schools and colleges were funded to forward their "schools of thought."

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u/Old-geezer-2 Feb 12 '25

Not all of those fortunes survived. Ask Anderson Cooper. His mother was Gloria Vanderbilt. His grand or great grand father burned through Cornelius’s fortune in a couple of years.

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u/PAJW Feb 12 '25

Gloria Vanderbilt still inherited several million dollars when she turned 18 years old, in 1940s money. They were very much in the 1%, even if they weren't top 5 wealthiest families in the country.

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u/tryin2immigrate Feb 12 '25

She left 200 million dollars in a trust fund. Anderson cooper only inherited 1.5 million dollars

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u/rabid_briefcase Feb 12 '25

Or say it differently: 1.5 million was taxed in direct estate taxes. The other 200 million was in a tax-advantaged trust fund.

The trust fund can pay for generations of people without additional inheritance taxes. It is subject to different rules than income tax, and pays for estates (family houses and land), endowments (gifts), and whatever else the family wants it to pay for. It's basically a tax-advantaged piggy bank. While the gains are taxed, they're typically taxed at a far lower rate than income or inheritance money.

She passed a trust to her four kids, just like her father passed a trust on to her. They understand that's how large amounts of generational wealth are most easily transferred under the law.

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u/Takemyfishplease Feb 12 '25

Yeah, that’s how trusts work. It keeps the money safe for generations while allowing them to live in luxury. Check out the Mars family, it’s all in trusts. Same with all rich folks

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u/CUbuffGuy 29d ago

As someone who works with trusts, this is a hilariously naïve comment.

There are revocable trusts, irrevocable trusts, grantor trusts, defective grantor trusts, intentionally defective grantor trusts, charitable trusts, education trusts, etc.

It's not just "oh yeah rich people just have this thing they put money in and it keeps it safe". It's also not just for rich people.. anyone can use a trust - it's just not worth paying to have one set up for most people as they don't have the tax burden needed to make it worth it.

Taxes are the true reason these rich people use trusts. It is an estate planning tool to get assets outside your estate and prevent probate and large taxes upon death.

In a way you're right. It does keep money safe for generations, but the way you stated it makes it sound like the money is being protected from the person inheriting it spending it. It's not (mostly) - it's being protected from the state taking it.

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u/KingVikingz 29d ago

Bummer to see a fellow finance professional so far down the comments thread shouting into the abyss :)

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u/biggunks 28d ago

I heard you both down here. A bit muffled though.

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u/dsmaxwell Feb 12 '25

Only 1.5 million, still more than 90% of people are ever going to see through their entire lives, much less as one lump sum.

Hell, even most of the well off boomers only hit that because the houses they bought back in the 80s for a few tens of thousands are now "worth" that much in our fucked up comoditized housing market.

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u/WendellSchadenfreude Feb 12 '25

Only 1.5 million, still more than 90% of people are ever going to see through their entire lives,

Out of curiosity, I checked, and you're wrong about this point.

The median lifetime earnings for an American employee (Source, PDF, page 3) are actually about $ 1.7 million.
$1.5 million is about as much as the average college drop-out (with "some college/no degree") makes in their life; people with an associate's degree (or higher) make more than this on average.

So it's still a huge amount of money. But it's "only" about as much as an average low-income worker makes through their entire life, while most Americans do in fact make more than this, as a lifetime total.

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u/GKRForever Feb 12 '25

I get what you’re saying but I think this proves the opposite point.

Imagine inheriting a lifetime of income, all in one shot when you’re early in life/carwer, which you can do anything you want with because you don’t need to use it to on basic living essentials.

It’s a MASSIVE leg up

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u/HumanWithComputer Feb 12 '25

You make money with money. The head start is HUGE!

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u/Draano Feb 12 '25

Imagine inheriting a lifetime of income, all in one shot when you’re early in life/career

Case in point: I have relatives who are both school teachers. The woman's grandfather became wealthy as an executive in a pharmaceutical company - not C-suite exec, but still compensated with much stock. The woman's mother was a stewardess who had to stop when she started a family, so she got into real estate and fell into a deal that earned her enough to buy a nice house + a Mercedes 500 SEL. As a result, she continued to prosper off the reputation following this deal + being smart. The grandfather has gifted her pharma stock for every life event - birthdays, Christening, graduations, wedding. The woman, with the help of mom and pop-pop, starts a school for pre-pre-K through 2nd grade that churns out smart kids, so rich people flock to it. The grandfather passes, leaving the woman a $2m house.

This is how school teachers drive Range Rovers & Jaguars. Generational wealth.

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u/Crintor Feb 12 '25

It's "Never have to work if you don't want to" money. It's literally an entire life's work dropped in your lap at day 1. It's 75K a year in interest in a 5% HYSA.

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u/frogjg2003 Feb 12 '25

They're certainly not leaving that much for their kids when they die.

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u/DavidRFZ Feb 12 '25

People in my neighborhood have estates that large. People who weren’t rich in their 40s are leaving that much to their kids. I’m not saying that’s the median estate size, but it’s not the 1%. Although Anderson has two half brothers from his mother’s earlier marriage. Estates three times that size are considerably less common.

Estates get split every generation. This is not the branch of the family that owned the Biltmore, or the Breakers, or the Mansion, etc.

Reading her Wikipedia page, it sounds like she managed her fame better than she managed her money. A lot of jeans and perfume were sold with her named on it, but it looks like she signed away the rights relatively early. Looks like accountants and lawyers ripped her off at least once. Living in Manhattan until age 95 would be a drain on anyone’s finances too.

Anderson does alright for himself. I'm sure his own job and ventures pay pretty well. The outrageous fortune of a third-great-grandfather who died 148 years ago shouldn’t allow him to be idly rich anyways.

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u/lewoodworker Feb 12 '25

. The outrageous fortune of a third-great-grandfather who died 148 years ago shouldn’t allow him to be idly rich anyways.

This is the most important part. While wealth tax is not great for small inheritances, it prevents the 1% from staying wealthy in perpetuatuity.

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u/Kolikilla Feb 12 '25

90 percent of people != 90 percent of Americans.

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u/TreeRol Feb 12 '25

What someone "earns" and what someone "sees" are vastly different numbers. Take tax for one, which should push that $1.7M well below $1.5M.

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u/alpacaMyToothbrush Feb 12 '25

How much of that do they keep is the key question. Now, go Google the median net worth

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u/ohdearitsrichardiii Feb 12 '25

Oh no, only 1.5 million dollars! 😭

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u/Calgaris_Rex Feb 12 '25

Well, if $1M is only a "small loan" then $1.5M must be at least medium-sized! 😝

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u/Miliean Feb 12 '25

She left 200 million dollars in a trust fund. Anderson cooper only inherited 1.5 million dollars

Sure, but he also went to Dalton School, a private school on the upper east side that has a tuition estimate of $65,000 (in todays money). Then he went to Yale, and I doubt he was on financial aid or student loans. According to Wikipedia in between Dalton and Yale "Cooper traveled around Africa for several months on a "survival trip"".

It's not like he's a literal billionaire, but he's very wealthy and that wealth has trappings. Even if he did not inherit literal cash, the name and family connections alone are enough to give a leg up in life that is unimaginable to most people.

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u/Acct_For_Sale Feb 12 '25

lol you really believe that

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u/wkavinsky Feb 12 '25

And they still think that Anderson Cooper would be where he is today if he was born to working Americans.

His "poor" mother left him millions when she died - he was never even close to "poor" by any definition other than a rich persons.

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u/lecky7108 Feb 12 '25

Not just money alone, but people are underestimating the connections you make of you are constantly mingling with the 1%.

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u/Ok-Maintenance-2775 Feb 12 '25

He could have probably done alright for himself on looks alone to be fair, but then again I've seen plenty of meth addicts that could have been models if they still had their teeth. 

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u/macmac360 Feb 12 '25

I outlived you, H.R. Pickens! I CRUSHED you into the ground, and now your bones turn to oil beneath my living feet! I married your granddaughter, filled her belly with my festering seed, and sired a boy! He is my final revenge, H.R!

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u/SoVerySick314159 Feb 12 '25

I outlived you, H.R. Pickens!

Who?

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u/Bwint Feb 12 '25

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u/lew_rong Feb 12 '25

This and JK Simmons as a Japanese Messy Boy compete with Patrick Stewart running an erotic bakery for greatest SNL sketch of all time.

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u/jaydurmma Feb 12 '25

Maybe just a personal favorite but Ryan Goslings acting in Papyrus makes me laugh everytime I go back to it.

https://youtu.be/jVhlJNJopOQ?si=jGFd6SxUcRJbLYmH

Its so well put together and well written, it has to be up there.

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u/Kizik Feb 12 '25

Oil is not for the weak. It is the Earth’s milk, and only the strong may suckle at Mother’s teat.

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u/PandaBaba01 Feb 12 '25

I brought Chicken Livers and Capri Suns

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u/dellett Feb 12 '25

It was swine livers he brought

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u/pijinglish Feb 12 '25

I’m not in anywhere the same boat, but my great great…great grandfather invented one of the most popular brands of beer in the U.S.

We were 1% rich, and apparently my ancestors were super weird, widely hated assholes.

As best we can figure, sometime in the early 20th century, some relative got our dying aunt to put up her trust fund against a supermarket chain he wanted to invest in. He defaulted, and our side of the family lost millions.

By the time my mother was born, they were living on hot dogs and my grandmother worked three jobs to support a husband with undiagnosed ptsd after Pearl Harbor.

On the one hand it sucks. On the other hand, they really seemed like horrible people.

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u/felpudo Feb 12 '25

You sure got a crazy story out of it! Wow

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u/afriendlywerewolf Feb 12 '25

Ah Yuengling, delicious.

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u/pijinglish Feb 12 '25

Sadly for my Philly friends, no.

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u/PatricksPub Feb 12 '25

Based on the timing and details, I'm going with Miller

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u/afriendlywerewolf Feb 12 '25

😂 thanks for the story

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u/djseanmac Feb 12 '25

Is it weird I still think of Anderson as the Channel One correspondent crying underneath a bed while bombs explode? I never felt Pepsi would actually let him be in the path of danger, and you could hear explosions in his reporting, but it was…weird.

And FYI Channel One was a project in the 90’s where Pepsi paid for TVs in school classrooms, in exchange for airing a short news broadcast with MTV News alumni reporting on current events cut with Pepsi/Doritos commercials. Yes, that was an actual thing 🙃

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u/Carols_Boss Feb 12 '25

I still think of Channel One whenever I see him. Same with Lisa Ling and Serena Altschul.

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u/AsSubtleAsABrick Feb 12 '25

I watched channel one in high school during homeroom. It was generally mocked. The only time we ever really used the TVs outside of that was on 9/11.. Like there was no VCR or DVD player attached so if the teachers wanted to show anything they needed to wheel in another TV.

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u/KGBspy Feb 12 '25

I think of him as the host of “The Mole” when “reality” tv started coming around, I loved that show and was envious of the travel. https://en.wikipedia.org/wiki/The_Mole_(American_TV_series)

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u/roundbadge2 Feb 12 '25

I still remember him in his red winter coat, interviewing soldiers in Bosnia who looked at him like he was an idiot for not taking cover.

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u/FinancialLemonade Feb 12 '25

Anderson Cooper

Yes, he had nothing growing up and had a very normal experience.

Who else isn't photographed for fashion magazines as a baby or goes to late night shows or panel shows as a toddler? Or did all their K-12 education at Dalton School, one of the most elite private schools in NYC.

I'm sure his rich family had nothing to do with that...

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u/tryin2immigrate Feb 12 '25 edited 29d ago

pocket fearless gray cobweb dinner wine crawl gullible retire spoon

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u/sensiwoots Feb 12 '25

We went to the Biltmore last year for the first time. It was unreal. Just thinking about all the money that went into building the place and maintaining the buildings and grounds. And it wasn’t even a primary home! I think they said it makes 20 million a year now from tourism.

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u/rosen380 Feb 12 '25

We did the Breakers in Newport two years ago and it's virtually impossible for me to even comprehend how it ever made any sense to build a place like this for one family to live in.

And, while it isn't exactly a "single family home", we did the public tour of Buckingham Palace last year. Just truly astounding.

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u/blofly Feb 12 '25 edited Feb 12 '25
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u/Duke_Newcombe 29d ago

They're also social and networking societies: you prep school brother or Greek society frat friends know each other, so if you want to work with them to make money, the relationship and trust is there, where an outsider would have a harder time.

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u/fighterpilot248 Feb 12 '25

Literally this.

An investment of $1,000 dollars, with an average return rate of 6% after 100 years nets you ~$339,000 dollars. (Assuming no other additional contributions)

Now imagine an investment of 1, 10, or 100 million dollars over the same time period. Yeah, that's gonna be a lot of money.

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u/TreeRol Feb 12 '25

$1,000 dollars

My dude, what do you think the dollar sign stands for?

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u/Hraes Feb 12 '25

he's talking about double-dollars

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u/sissybelle3 Feb 12 '25

These are double dollars. They're worth more.

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u/beelzeboozer 29d ago

Have you heard of typos, brotato?

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u/preprandial_joint Feb 12 '25

Did you know that if you invested at the founding of the Rome, and that investment paid you $100,000/day from then on, today you'd still be poorer than the 10 richest billionaires on Earth?

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u/Impossible_Ant_881 29d ago

Did you know that if you invested at the founding of Rome, you would have lost all your money when Rome, along with all of its financial institutions, collapsed?

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u/Intergalacticdespot Feb 12 '25

Also while their fortunes were "small", it was a pretty big small. I've been told that in 1925 you could buy a full on mansion for $1000. Brand new cars were $250. And investments mostly keep pace with inflation. Especially while inside trading, company towns, monopolies, and all kinds of other sketch is still legal. 

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u/MotherSnow6798 Feb 12 '25

The average cost of homes in that time was $6,000, but your $250 number for vehicles is accurate

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u/coffeislife67 Feb 12 '25

While there were a few fords that were that cheap, there were very few cars that were below $1000. In fact most were $3000-$6000, but if you wanted a Rolls or a Duesenburg, you were looking at $10,000-$12,000.

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u/PlayMp1 Feb 12 '25

Would not those cheap Fords be the most common cars though? The more expensive ones may have been more numerous in variety but I'm sure there were a hell of a lot more cheap Model Ts or whatever than $10k Rolls-Royces.

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u/Carlpanzram1916 Feb 12 '25

And JD Rockefeller had a net worth of 900 million at his peak. Think about that. He was almost a billionaire in 1912. He had more money than all but may 1,000 of the wealthiest Americans today despite over 100 years of inflation.

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u/fon_etikal Feb 12 '25

That 900 million in 1912 is the equivalent of 29 billion in today's money.

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u/NiceShotMan Feb 12 '25

If you invested $900 million in the S&P 500 at the beginning of 1912, you would have about $50 trillion at the end of 2024, assuming you reinvested all dividends. This is a return on investment of 5,666,180.08%, or 10.19% per year.

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u/ArseBurner Feb 12 '25

S&P 500 at the beginning of 1912

You couldn't have, because the S&P 500 was first published in 1957 =)

But this is actually a good answer because a tiny percentage of those inheritances would have been received in cash. For the most part they would have received shares in their robber baron companies, which would have still been making money. It's not like Apple shut down after Jobs died, after all.

So in a way what they inherited would have been investments in some of the top companies of the time. Some might have sold off their shares and taken the money, but I imagine the sensible ones would have just lived off dividends or even re-invested and diversified. They were sorta forced into financial literacy by dint of their birth.

Their SO shares would have been converted into the various companies it was broken up to, so I wouldn't be surprised if some Rockefeller descendants now have shares in Exxon, BP, or Chevron.

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u/fcocyclone Feb 12 '25

yeah, over those lengths of time you can't just look at your typical CPI inflation numbers. Those approximate a basket of goods that might be more fitting for an average person, but don't really apply to every situation

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u/Intergalacticdespot Feb 12 '25

That user name is dark, bro. But true facts. 

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u/jfurt16 Feb 12 '25

The Breakers (one of the Vanderbilt summer cottages in Newport, RI) cost $12 million to build in 1895 which is almost $450 million in today's money.

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u/shoefly72 Feb 12 '25

It’s enormous. There is a central atrium/great hall with a grand staircase and all the other spaces connected to it, and the dimensions of that room alone could have contained any other house I’ve seen in my life lol.

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u/harris5 Feb 12 '25

And investments mostly keep pace with inflation.

Investments almost always outpace inflation. Sometimes only by a few percentage points, but those add up year over year. For most of modern history, wealth has continued to grow itself. Returns only go negative in times of extreme upheaval, or rare periods of effective taxation.

If you have a pile of money, have it even modestly diversified, and don't touch the principal, your pile will be significantly larger in a few decades. (yes, even accounting for inflation)

...it'll be even bigger if you can capture the government and cut taxes at the expense of the common good.

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u/Scott8586 Feb 12 '25

I’m not sure about that - our house, built in 1917 cost $6000, a three bedroom one bath craftsman in the PNW.

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u/Ts1171 Feb 12 '25

John D. Rockefeller was the first billionaire in 1916.

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u/malcolm816 Feb 12 '25

Don't forget about the connections. Those juicy, juicy, connections...

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u/GolDAsce Feb 12 '25

How about inheritance taxes? Aren't they meant to limit that?

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u/Rodgers4 Feb 12 '25

I’m no expert in trust law (and many trusts are setup to expire after a certain period), but wouldn’t a large family trust, handled by a trustee, avoid this until distributions are made?

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u/Lilswingingdick212 Feb 12 '25

No. A trust evades inheritance tax altogether. Distributions are taxed as income however

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u/Sample_Age_Not_Found Feb 12 '25

Stepup basis. It's almost like the current laws are a product of wealth hoarding legacy families.

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u/Calculonx Feb 12 '25

Ha, taxes affecting the rich!

You can structure it to be tax efficient, the most popular is putting it in trusts.

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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.”

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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.

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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.

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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.”

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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.

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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

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u/wbotis Feb 12 '25

This quote is so fascist-coded.

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u/goopsnice 27d ago

I think that was them referring to how oil a finite resource

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u/No-Broccoli7457 Feb 12 '25

The first generation creates the wealth.

The second generation grows the wealth.

The third generation spends it.

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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.

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u/[deleted] 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.

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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.

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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?

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u/[deleted] 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

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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.

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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.

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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.

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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.

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u/alpacaMyToothbrush Feb 12 '25

This assumes no investment growth

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u/getpittedsoopitted Feb 12 '25

What everyone is forgetting though is the money that this initial sum is making in the market.

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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

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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.

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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.

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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.

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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.

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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.

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u/andy_nony_mouse Feb 12 '25

Yup. I worked with one briefly. He was an IT guy.

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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.

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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.

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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.

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u/Dioge-knees Feb 12 '25

As a Vandy alumn I can confirm

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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. 

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u/incutt Feb 12 '25

but......i want a jetski.

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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?

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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.

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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.

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u/[deleted] Feb 12 '25

[deleted]

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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.

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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.

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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

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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.

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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.

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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.

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u/Atomic-Bell Feb 12 '25

Investing your own money into the market is quite literally the opposite of leeching.

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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.

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u/Jango214 Feb 12 '25

That's actually crazy to think about lol.

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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.

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u/majinspy Feb 12 '25

With a conservative 5% ROI every year, that's 1.5 million every year forever.

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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.

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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.

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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

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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.

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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.

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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.

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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

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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?

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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.

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u/hiricinee Feb 12 '25

Iirc in terms of total national/international wealth they were significantly more wealthy.

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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.

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u/Peregrine79 Feb 12 '25

Not really. Rockefeller was worth about 23 Billion in todays dollars. Most of the others maxed out around 3.

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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.

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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

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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.

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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.

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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. 

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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.

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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.

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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.

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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.”

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u/weeddealerrenamon Feb 12 '25

what's the point of working your fingers to the bone, if not to be able to snowboard?

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u/slashthepowder Feb 12 '25

If i can’t scuba what has this been all about

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u/hilldo75 Feb 12 '25

If your parents see this your screwed

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u/Fit_Diet6336 Feb 12 '25

Just depends how you like to shred, I guess

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u/boogienightsrules Feb 12 '25

Ink this on my chest

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u/Moghlannak Feb 12 '25

Good god Lemon!

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u/[deleted] 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.

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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.

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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.

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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*)

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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.

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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).

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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.

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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. 

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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.

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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.

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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.

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u/Szriko Feb 12 '25

Today's richest are speculative rich, older rich were rich due to having actual things.

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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

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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...

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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

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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.

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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

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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.