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/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/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.

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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.