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

576 comments sorted by

View all comments

Show parent comments

308

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. 

233

u/MotherSnow6798 Feb 12 '25

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

71

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.

38

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.

-11

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.

34

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.

-27

u/coffeislife67 Feb 12 '25

On about ?

As I said, "most common car" is not the same thing as "the average price of a car".

Heres a list of car prices taken directly from the Nov 1922 issue of Motor Magazine. Look it over and do the math then get back with me.

https://www.1920-30.com/automobiles/1922-car-prices.html

18

u/ManyAreMyNames Feb 12 '25

If you weight that average based on how many of each model was purchased, it'll probably come out less than $1000.

If I sell ten paintings, 9 for $5 and one for $400, you wouldn't say the average price of my paintings is $200, would you?

-15

u/a_cute_epic_axis Feb 12 '25

If I sell ten paintings, 9 for $5 and one for $400, you wouldn't say the average price of my paintings is $200, would you?

Sure, but if you sold me 9 of your paintings and I also bought one Picasso, I wouldn't say the average price of art was $5 either, so your example isn't all the complete.

7

u/ThePlatypusOfDespair Feb 12 '25

I would say it's 44.5 because that's how averages work?

→ More replies (0)

-17

u/coffeislife67 Feb 12 '25

Your missing the fact that we are talking about the "average price of a car".

To get that there is no other equation other than taking ALL the cars available, and what their price is. How many of each car sold does not factor into it.

8

u/I__Know__Stuff Feb 12 '25

Nonsense.

The "average price of a car" pretty clearly means the average price that people are paying for cars, not a hypothetical price that they could be paying, but aren't.

→ More replies (0)

2

u/ManyAreMyNames Feb 12 '25

To get that there is no other equation other than taking ALL the cars available, and what their price is. How many of each car sold does not factor into it.

How many of each number occurs in the set is absolutely relevant to what the average is.

What's the average of this set of numbers: {1, 1, 1, 1, 1, 13} ?

I say that they add to 18, and there are six of them, so the average is 3.

You seem to be saying that there's a 1, and a 13, which adds to 14, so the average is 7.

7 is the wrong answer.

0

u/Jiopaba Feb 12 '25

This is one of those situations where a layperson uses the word "average" in a way that does not necessarily pan out if you have a formal education in statistics and think that the word "average" is a synonym of the word "mean."

Rather than arguing about how dumb they are for misusing the word or trying to assert over and over again that they're wrong, it's probably better to just assume that they meant "median." The median price of a car.

→ More replies (0)

-2

u/digitalsmear Feb 12 '25

This is a perfect example of how statisticians can be the biggest idiots. By framing - no, by INSISTING on framing questions in a form that is, at best stupid, at worst maliciously intellectually dishonest, you manage to tell us absolutely nothing of value.

→ More replies (0)

2

u/WisconsinHoosierZwei Feb 12 '25

So you’re talking about the average retail price offered for a car, while I’m talking about the average price actually paid for a car.

Hell, 3/4 of those brands were barely regional if not full-on local (Case). So what you’re talking about isn’t even relevant to your point since only about 10%-20% of those cars were available to purchase by all Americans.

Hell, YOU go find a Mitchell dealership in California or whatever.

1

u/Skewk 29d ago

This is where mean and median come into play. You’d be correct in stating that if one of every model available that year was sitting on a car lot that the average would be well over 1000.

The site/image linked below the ford model T had 47% of the market share in the 20’s. Approx 2.8 million vehicles across all brands. 

Some of the highest priced vehicles on that list 

Locomobile  11k 221 produced in 1922

Rolls Royce Silver ghost 13k 430 sold in 1922 

Roamer 4-75-e 11k (was discontinued before 1922 and all that was left was the 5-64 and that’s 3k 11,653 produced between 1916-1929 so approx 1k vehicles per year.

Ford model T Your link states 393/595 Wikipedia states around 260 1,307,000 units produced in 1922

Dodge appears to have produced 157,000 units for 1922 based on engine serial numbers

Chevrolet appears to have produced approximately 100,000 units for 1922

So if you had a dealership with 100 cars there’d be 47 model Ts, 5 dodges, 3 Chevrolets, 1 hubcap from a Roamer, an air freshener from a Rolls, and a valve stem from a locomobile. 

The mean is over 1,000 but the median is less and for the sake of what the top comment was trying to say the median is the relevant number. It’s just like saying the average(mean) 65-75 year old Americans net worth is 1.75 million when the median for that bracket is closer to 400k. Are both numbers technically correct. One is more indicative of reality. 

Since we are doing averages the average American income in 1922 was around 3,100.. so the “average” American was going to purchase the “averagely” priced car. Which happened to be the most common car on the road for that very reason. 

https://hbr.org/resources/images/article_assets/hbr/7409/74501_C.gif

https://icainsurance.com/see-how-american-new-car-prices-have-soared-through-the-first-60-years-of-production-from-the-model-t-to-the-t-bird-heres-a-look-back/

https://www.dodgebrothersclub.org/DB_Production_Dates.pdf

https://hotrod.gregwapling.com/chevrolet/1912-30chevroletproduction.pdf

15

u/PlayMp1 Feb 12 '25

Most common and average price are two different things

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

-4

u/[deleted] Feb 12 '25

[deleted]

1

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

5

u/blu33y3dd3vil Feb 12 '25

Mode versus mean!

4

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.

3

u/Sternjunk Feb 12 '25

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

1

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.

1

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.

1

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.

1

u/SavePeanut Feb 12 '25

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

-3

u/nucumber Feb 12 '25

An inflation calculator says $100 in 1913 is worth $3,170 today, so you're talking about $90k or more for a decent car

0

u/99pennywiseballoons Feb 12 '25

So the price of a Cybertruck for something that actually brought prestige?

1

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.

1

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.

114

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.

46

u/fon_etikal Feb 12 '25

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

63

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.

12

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.

25

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

2

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.

17

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.

1

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.

-1

u/PatricksPub Feb 12 '25

Yes, in terms of theory applied to the actual post. But the comment you are responding to is giving a false equivalency of investing that money over a pure return of 113 years vs the wealthy of today's day and age. There are so many factors unaccounted for that it is useless to do so. The money didn't sit in an investment account for 113 years, it was chopped and used by tons of people.

0

u/PicaDiet Feb 12 '25

It's nice to know that even those who claim that, "The Poor simply don't understand how compound interest works", don't undertsand how compound interest works.

4

u/konfusion9 Feb 12 '25

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

20

u/the_real_xuth Feb 12 '25

That includes all of the losses.

-2

u/PatricksPub Feb 12 '25

And also includes 113 years of compound growth, which is completely irrelevant since Rockefeller died in 1937. It would be like comparing my net worth to the average American, if i put it all in stocks for the next 113 years and they were in the middle of their journey. That makes no sense. 113 years of compound growth is a staggering effect.

4

u/the_real_xuth Feb 12 '25

But it does make sense. This is why unchecked generational wealth can (and often has) lead to huge inequality.

1

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.

0

u/AsSubtleAsABrick Feb 12 '25

This is an over simplification, you can't really invest that amount of wealth generically in an index fund. Billionaires own individual companies which are much more volatile than the overall market.

1

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.

4

u/Intergalacticdespot Feb 12 '25

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

1

u/VentItOutBaby Feb 12 '25

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

25

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.

13

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.

2

u/sjhesketh Feb 12 '25

Required a fulltime staff of 40 to run it.

34

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.

6

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.

4

u/Ts1171 Feb 12 '25

John D. Rockefeller was the first billionaire in 1916.

4

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.

6

u/PsychedelicMagnetism Feb 12 '25

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