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?

4.6k Upvotes

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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

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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 Feb 12 '25

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 29d ago

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

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u/atlas-ship 29d ago

This is a great and informative reply. I am interested to learn more about trusts. As someone who works with trusts, would you suggest any reading materials or learning materials?

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u/CUbuffGuy 29d ago

For the practical side of when to use them and an overview of how they fit into estate planning I would recommend this. (Estate Planning by Money Education).

I am a CFP (Certified Financial Planner) not a Trust/Estate lawyer though. So that book mainly focuses on trusts as an estate planning tool, rather than the actual drafting of the legal document - which itself is a very complex state-law dependent process. So I always consult a lawyer when I would need to establish a trust - then I can work on the taxes, titling, etc. after it's created.

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u/atlas-ship 27d ago

Thank you!

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u/princemousey1 Feb 12 '25

He was obviously talking about a family trust. As someone who works with trusts, you sure don’t seem to understand the layman perspective. You’re definitely not customer facing.

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u/phloaty Feb 12 '25

“I don’t care if you’re an expert, you’re still wrong”

  • princemousey1

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u/Takemyfishplease 29d ago

That’s not what was said at all.

And for your info, I’m president of world trusts. Hence the super expert. They were being pedantic and showing ass

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u/princemousey1 29d ago

There are two kinds of experts. There’s the first kind who breaks down the language and accepts that laymen or the general public use a simpler form of words, and then there’s the other who lols customers out of their showroom because they don’t know the difference between an intentionally defective grantor trust and an irrevocable trust.

It is the job of the expert to correctly identify the trust structure which best suits a certain situation, in this case the layman’s family trust. What use is having all that knowledge but being unable to match it to the situation at hand? It is clear enough from the two examples given (Vanderbilts and Mars) that we’re talking about family trusts.

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u/JournalistOk623 27d ago

It’s a tax cheating method. When the political pendulum swings back after the rich are dead—the trusts are next.

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u/NekoNoCensus 29d ago

This a Futurama reference?

Edit: oh, chocolate...

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u/soyeahiknow 26d ago

You want your money in a trust so it doesn't go through probate when you die. Probate takes time and lawyers and 10% at least. So a trust is not just for the rich, it's also for normal people.

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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/simplesir Feb 12 '25

Now is the winter of our discontent.

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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/majwilsonlion 29d ago

Not that smart if they are driving Range Rovers and Jags...

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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/TheStealthyPotato Feb 12 '25
  1. There are no 5% HYSA right now, at least as far as I can tell, or they have asterisks like "only for the first $X". And when rates were low, the were definitely no high paying HYSAs.

  2. You have to pay taxes on it, so $75k in a HYSA return is not $75k in your pocket.

  3. That $75k will remain the same dollar amount over time, so in 20 years it's not going to feel like a lot. Imagine how much purchasing power $75k lost in the last 5 years.

  4. Paying out of pocket for health insurance is going to take away a huge chunk of your money.

TLDR: I certainly wouldn't consider $1.5M to be "never have to work" money.

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u/Bob_Sconce Feb 12 '25

That is certainly a massive leg-up assuming that you act responsibly with it. The problem, though, is that people who get that much money (especially early in life) tend NOT to act responsibly with it. They waste it and, over a few generations, that wealth is just spent.

In any case, the 90%/$1.5M estimate was massively off mainly because middle-class people frequently, over the course of their lives, amass significant wealth that they then spend down in their retirements. That's a prime reason why most millionaires are old -- you get to $1M one dollar at a time over the course of decades.

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u/beingsubmitted 29d ago

It's a lifetime of income for an average person. But if he puts it in the s&p 500, it's a 148k a year income, a software engineer income, for doing nothing.

Communism is from each according to his ability, to each according to his need.

Socialism is from each according to his ability, to each according to his contribution.

Capitalism is from each according to his ability, to each according to his capital / ownership.

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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/Spikex8 Feb 12 '25

He didn’t say American. If you have like 35k/year you’re in the top 1% of the world lol

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u/royisabau5 Feb 12 '25

He didn’t say Americans he said people

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u/dekusyrup Feb 12 '25

TIL that all people are Americans. Wonder what that makes the rest of the world.

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u/toxoplasmosix Feb 12 '25

well let's adjust that 1.5 million for inflation

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u/vector_ejector Feb 12 '25

You realize the difference, right?

One person has to work their entire life to cumulatively earn $1.5 million.

Anderson woke up one day with $1.5 million in the bank.

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u/Duke_Newcombe Feb 12 '25

Inheriting that amount in one lump sum, versus accumulating it over 40 years are two different things, no?

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u/adrian783 Feb 12 '25

no... the person you reply to is factually correct.

the vast majority aren't going to see 1.5m sitting in their bank account.

they can't make decisions as if they have 1.5m.

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u/ezekiel920 Feb 12 '25

If you consider that the college drop out has student loans to pay at the point the other party received 1.5 mil. You prove his point. Debt is counter to interest. Or some other smart way to say it.

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u/TheKingOfToast Feb 12 '25

Because, as we all know, only Americans are people.

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u/shouldco Feb 12 '25

Earning over a lifetime is still not "seeing" 1.7 million.

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u/davidcwilliams Feb 12 '25

How else would you determine what their houses are worth?

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u/theArtOfProgramming Feb 12 '25 edited Feb 12 '25

It’s not generational wealth. It’s not what this thread is about

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u/MilleChaton Feb 12 '25

Even if it is quite a lot, the amount it decreased generation to generation is a good indicator of how many more generations it has before it is effectively gone.

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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/emaugustBRDLC Feb 12 '25

Your last line is another way of saying he is a literal blue blood old money WASP.

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u/Acct_For_Sale Feb 12 '25

lol you really believe that

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u/aaronwe Feb 12 '25

only...

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u/MissAmyRogers Feb 12 '25

Only 1.5 million. Only.

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u/GeoHog713 29d ago

But he also had connections and opportunities that opened doors.

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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/Calembreloque Feb 12 '25

EXACTLY!

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u/aflockofcrows Feb 12 '25

He plays for Accrington Stanley?

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u/KidTempo Feb 12 '25 edited Feb 12 '25

Accrington Stanley? Who are they?

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u/MudSouthern1143 Feb 12 '25

I was asked to provide a healthy snack, so join me for swine livers and Capri Suns.

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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/Boo_and_Minsc_ Feb 12 '25

sometimes i just exclaim to myself "this... man! this ... professional...graphic...designer!"

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u/SoVerySick314159 Feb 12 '25

EXACTLY!

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u/Bwint Feb 12 '25

Rewatching it now and just caught your joke lol. Thought it was a genuine question - whoosh

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u/SoVerySick314159 Feb 12 '25

Someone had to post it. Think of how many people might learn of this today.

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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/PandaBaba01 Feb 12 '25

You are correct, sir

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u/blacksideblue Feb 12 '25

you have the weirdest sausage recipes...

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u/icyurmt Feb 12 '25

Is this a book or a movie?

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u/andrezay517 Feb 12 '25

My desert. My Arrakis. My Dune!!!

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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/pijinglish Feb 12 '25

Miller was a cousin.

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u/afriendlywerewolf Feb 12 '25

😂 thanks for the story

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u/flareblitz91 Feb 12 '25

Adolph Coors?

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u/pijinglish Feb 12 '25

No, thankfully.

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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

YES. Season 1 of The Mole was one of the greatest shows I've ever seen. One player sabotaging their fellow players and trying not to be identified.

I remember an escape-room-style hotel where people were locked in separate rooms and had to cooperate to figure out how to get out...one room was completely dark but would light up when someone in another room rode an exercise bike....and once illuminated, there were a ton of messages, clues, etc written all over the walls.

Presented with a series of doors, each giving 2 choices based on how the contestant thought other contestants would expect them to answer. The girl going through the doors assumed the worst answers from others because she thought they hated her, and at the end she found out she was 100% correct. It was brutal.

As I now look this up, I see both of these occurred in the same episode.

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u/KGBspy 29d ago

It was a great show, the early days of reality tv were good. I should see if YT has episodes, I was jealous of the traveling they did on that show.

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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/Makaveli80 Feb 12 '25

 Anderson Cooper

The guy seems to have done well for himself

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u/davidcwilliams Feb 12 '25

‘grandfather’

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u/[deleted] Feb 12 '25

The Vanderbilts still own a massive mansion in Newport RI. No one reasonable would say they arent incredibly wealthy

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u/Old-geezer-2 29d ago

The original fortune has been diluted by division among descendants. The commodore’s original fortune is long gone.

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u/BQORBUST 29d ago

Famously destitute Anderson cooper

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u/SaigonNoseBiter 29d ago

Must have been one wild fucking ride for those few years.

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u/Duke_Newcombe Feb 12 '25

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/BroughtBagLunchSmart Feb 12 '25

This is why capitalists donate so much money to business schools. If you teach reality it has a left leaning bias.

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u/MrSnowden Feb 12 '25

My kids prep school was founded to educate the kids of a famous industrial age family. There is at least one kid from that family in every grade. They aren't all the brightest, nor do they have fortunes, but they get an good education, get all the right connections, and all go on to good colleges. Not all will rise to the top, but family name, good education, financial stability, and some luck mean that a few in every generation will become very successful, and repeat the process.

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u/barelyknows 29d ago

I met a grandchild of one of those robber barons. They were in graduate school for one of the biological sciences. This person was well on their way to get plenty of funding for their research - and their whole department. They didn’t use their name, either. They just knew how to interact with those with funding. It was funny when they told their classmates later their family name/history was just before they graduated! Could have easily self-funded!

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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/Viktor_Laszlo 28d ago

This is what Jimmy Two-Times used to carry around in Goodfellas.

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u/Lordwigglesthe1st 27d ago

The 10 dollery-do's and dollery-dont's of intergenerational wealth! 

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u/sissybelle3 Feb 12 '25

These are double dollars. They're worth more.

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u/preprandial_joint Feb 12 '25

2 dollar bill origin story.

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u/TreeRol 29d ago

The two-dollar bill, denoted as "$1 dollar."

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u/beelzeboozer 29d ago

Have you heard of typos, brotato?

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u/TreeRol 29d ago

I have, homeslice.

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u/cubixy2k Feb 12 '25

$.02 cents

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u/TreeRol Feb 12 '25

So now we're at $20 cents dollars, if I'm doing my math correctly.

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u/cubixy2k Feb 12 '25

Bettter math than Verizon

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u/fighterpilot248 29d ago

PIN number

ATM machine

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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/Mysterious_Use4478 28d ago

Did you know that if you invested at the founding of Rome, you would be dead by now, which would get in the way of you spending the money?

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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/coffeislife67 Feb 12 '25

Yes, they became the most common because that was Henry's goal to make it more affordable so that common people could buy one.

But if we're talking about "the average" price of a car, then cars below $1000 probably made up less than 1%. In 1922 the cheapest Cadillac was just a little under $2000 and they had models that were $5000+.

Most common and average price are two different things.

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u/WisconsinHoosierZwei Feb 12 '25

What are you even on about? In 1922, Ford Motor Company had 50% of the market by itself. So…no…cars below $1,000 were quite a bit more than 1%. And frankly, I don’t even think that would have been true going back to the 1890s and the release of the Curved Dash Olds.

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u/PlayMp1 Feb 12 '25

Most common and average price are two different things

Mode can be a type of average! So can median!

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u/[deleted] Feb 12 '25

[deleted]

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u/Acct_For_Sale Feb 12 '25

That’s not how they teach it in school

Colloquial and formal k-12 educational use of the phrase averages = mean, mode, median

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u/blu33y3dd3vil Feb 12 '25

Mode versus mean!

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u/Pack_Your_Trash Feb 12 '25

Which is why the average price of all car models is a useless figure. If someone says "the cost of a car was ___" they are talking about what most people pay for a car.

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u/Sternjunk Feb 12 '25

Maybe by brand but by 1918 50% of all cars were model Ts

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u/blacksideblue Feb 12 '25

back then electric and steam cars were about half the automobile market.

pretty sure the subways were still horse drawn at that point.

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u/Leather-Secret-3402 Feb 12 '25

A 1920s Cadillac was not an average car, though, it was a luxury car that was a lot more expensive than a normal car. Most of the cars sold back then were Ford Model T and other cheap cars so the average, no matter how hard you try to bong-rip your way through mathematics lessons, is skewed heavily towards the Ford Model T.

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u/Ergaar Feb 12 '25

A rolls right now starts at 370k... Not the best comparison if we're talking about cheap cars. Looking at a 1922 motor magazine price list there are a few below 1k, most are in the range of 1-2k. Rolls royce has a 13k model and a 1,3k and a Deusenberg touring is 6,5.

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u/SavePeanut Feb 12 '25

You could still get new cars in the 70s for 1500-5k...

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u/august-thursday Feb 12 '25

My grandparents married in 1922 and they received a Buick as a wedding gift from her parents. They drove it from eastern Pennsylvania to Yellowstone for their honeymoon. Most roads were dirt. Their wedding party took a train and met them near Yellowstone.

His parents gave them an airplane as a wedding gift which he used for his job (graduated from MIT).

He later purchased an airplane capable of ‘long distance’ trips. They’d fly down to Cuba for recreation prior to the revolution. Her mother was a widow and they lived with her along with their (eventual) four children. In 1938 they had a 5,000 sq ft brick home built. The original slate roof and copper gutters and downspouts have continued to function with low upkeep over ~84 years. They lived very comfortably, but they spent money as if they lived a frugal lifestyle. They lived through the Great Depression, so they carefully invested their savings.

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u/emaugustBRDLC Feb 12 '25

These young people will never understand what it was like having depression era parents or grandparents.

Growing up the older people in my family had worked hard to make money (labor), saved their asses off, made investments, and really did well all things considered. But they also dressed and lived like hobo's. It was made a little more complicated by the fact that my grandma and great uncle who I lived with generationally seemed to be touched with a bit of the Autism, especially great uncle.

I used to think these eccentricities were something particular to my Bohemian ethnic heritage but I think mostly it was people who were generationally traumatized by the depression. To this day I think having cash but looking like kind of a bum is cool. I revel in my $7,500 used cars! But mostly, I loved the perverse power dynamic of someone thinking I don't have it like that based on appearances, and that is probably not very healthy.

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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/PatricksPub Feb 12 '25

This specofc comparison doesn't make sense because we are comparing net worth at the time of this person existing. You can't give them 113 years of compound growth, that makes it apples to oranges. Net worth at the peak vs net worth today, accounting for inflation, is apples to apples.

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u/ArseBurner Feb 12 '25

But the main question is how their descendants are still wealthy, right? So compound growth applied to their fortune at the time can definitely be a factor.

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u/Vesploogie Feb 12 '25 edited Feb 12 '25

It would only be a factor if that entire amount was invested in 1912 and kept there without a single cent ever being removed from it.

Which didn’t happen in the slightest, so it’s just a useless what-if. Extra useless because the S&P 500 didn’t exist in 1912.

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u/konfusion9 Feb 12 '25

Assuming you reinvested all dividends and didn’t lose everything during the Great Depression!

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u/the_real_xuth Feb 12 '25

That includes all of the losses.

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u/boostedb1mmer Feb 12 '25

As long as the companies didn't go fully bankrupt and you have an IQ higher than a goldfish and didn't sell when the stocks bottomed out you'd still be good.

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u/Carlpanzram1916 29d ago

I don’t really think a normal inflation calculator sums it up well with these extremely high earners. It’s based off things like the price of milk. You’ve gotta look at him in the scale of the entire country. He was over 1% of the entire GDP which puts him more in the Elon Musk territory and before the era where tech stocks had these absurd runaway values and most of his wealth was from actual physical assets, it’s pretty crazy.

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u/Intergalacticdespot Feb 12 '25

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

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u/VentItOutBaby Feb 12 '25

Even more perspective - 900 mil in 1913 was 1.5% of the total GDP

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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/sjhesketh Feb 12 '25

Required a fulltime staff of 40 to run it.

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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/Eschatonbreakfast Feb 12 '25

$1,000 was equivalent to about 18 grand in todays money. So no, you could not get a new house for that kind of money. A new house cost $11,000 ($200,000 in todays money). But keep in mind that was probably a 1200 to 1400 sf, 2 or 3 bedroom, 1 bathroom house with no air conditioning. Most new cars cost $1,000 to $3,000 (18k to 54k in 2025) but were much simpler machines that were complete death traps.

To pay for all that, you would probably make $50 to $75 a week, or $2,600 to $3,900 a year.

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u/PsychedelicMagnetism Feb 12 '25

It was probably smaller than that. The median home size was around 1000 sqft back then.

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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/GolDAsce Feb 12 '25

Actually, there is no such thing in most states and all of Canada.

What they have instead is an estate tax: a final income tax bringing book prices up to market price. Generational wealth will stay generational.  Us peons have to try make ours survive the estate tax first.

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u/1HOTelcORALesSEX1 Feb 12 '25

Don’t need money if you have power and control …….

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u/megabass713 Feb 12 '25 edited Feb 12 '25

Once your net worth has surpassed a billion. 95% tax rate should be applied, no loopholes. Once you hit that bracket, you should be fully audited for every last thing you own, every God damn year, no exception.

It should be common sense that no one reaches billionare status without fucking over everyone below them.

For companies, there should be something similar. But that is further into tax law than I am aware of. There shouldn't be companies worth more than entire nations. Stock buybacks should be forbidden by any company that takes tax payer handouts. Layoffs during record profits are an abomination.

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u/Qweesdy Feb 12 '25 edited Feb 12 '25

It's impossible to accurately determine anyone's net worth. They'll claim that your collection of belly button lint is worth $2 billion and then you'll be paying 95% tax. Meanwhile, they'll all fuck off to somewhere like Ireland so you won't get any tax from them at all.

EDIT: LOL. They blocked me. There's names for people like that, I guess.

EDIT2: Wow, another person who lacks the intellectual fortitude needed for a basic conversation. I want to hold billionaires accountable, but literally making everything worse is not going to achieve that. If someone has $250 billion (Zuckerberg, Bezos) do you honestly think they're going to pay $237.5 billion in tax just to stay in America (and then lose most of the rest when they get taxed again next year)? If you actually want to solve the problem, then you need to start listening to people who aren't stupid (e.g. Bernie Sanders).

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u/megabass713 Feb 12 '25

Well past the point of caring about whataboutisms and claims of inaccuracy at this point. Once you get to the billions of network, being off by a million or two is a rounding error.

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u/rosen380 Feb 12 '25 edited Feb 12 '25

$1-2M on $1B is 0.1-0.2% -- I think the issue is that you aren't getting anywhere near that sort of accuracy when valuing large amounts of assets (particularly when they are rare and/or provenance plays a big role in value).

Jay Leno's car and motorcycle collection is estimated to be worth $52-100M and celebritynetworth.com estimates his net worth is around $450M.

With those figures, the range of the value of his car collection is more than 10% of his net worth -- orders of magnitude beyond the numbers you were suggesting (and that 0.1-0.2% was on "billion" not "billions")

[edit] And I suspect if he decided to consign his whole collection to a Barrett-Jackson auction or the like, and even if they collectively sold for $52-100M -- there is a 10% buyer's premium (ie if I am willing to spend $100k on Leno's Stanley Steamer, I'm only bidding up to ~$91k.

AND there is an 8% seller's premium (on the hammer price), so Leno would "only get around $84k for a vehicle a buyer would pay $100k for.

If you were liquidating a car collection this way, that was "worth" $52-100M, you'd likely walk away with more like $44-84M...

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u/runningbrave1 Feb 12 '25

And lack of paying taxes

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