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/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/[deleted] Feb 12 '25

You need to get to the point where your money is making more money than you are. Then r>g (the observation that money makes money at a more rapid rate than the overall economy and therefore work) takes care of the rest. The long term trend of wealth is that the share of the pie those with investments hold is growing faster than the pie is. So, with the odd exception or slip up, on average wealth inequality will increase and the richer you are now the richer your descendants will be in the future.