That's not how most generational wealth was created. From mobsters that went "legit" (Bronfmans, Kennedys...) to people who build their fortunes off war profiteering, slavery, genocide, child labor... They weren't grinding away for 40-100 years at some labor job. They exploited people, captured the gains, then used the power law to stay on the top.

Sure - those are some very specific examples. But whatever town you're in, drive around the nice areas. Those $1M-$5M houses with BMW's or etc. Are they gangsters and warlords? No, they're just normal people who tried and took a different path. Some by luck, some by skill, some by experience.

Just as one can't judge a person who's on the streets - one can't judge a wealthy person with such lenses.

The vast majority of those people are middle/upper-middle class people in massive debt. The kind of upper-class Harvard grad that VCs like are most definitely of the old money variety.

>The kind of upper-class Harvard grad that VCs like are most definitely of the old money variety.

Do you have any evidence for this?

[edit] Of course, you'll likely be able to find a single case and that's any evidence. So how about is there sufficient evidence to support your conclusion that "old money" is getting all the VC funding?

I don't think there's been research done on generational wealth of funded founders, but there's plenty that shows highly skewed investment patterns:

https://techcrunch.com/2021/08/29/diversifying-startups-and-...

Similar to the other post, Every American who passes a house to their decendents has built some level of generational wealth. There are a lot more people in this bucket than the Kennedy wealth bucket

We're talking about wealthy entrepreneurs that raise millions of dollars from VCs, not average homeowners. One house passed down to 4 kids, isn't going to get those kids invited to Marc Andreessen's bbqs.

To the contrary, the parent post you respnded was talking about what options middle class families have to make it to the upper class. This is a seperate question than what option middle class familes have to get to an Andreesen BBQ.

Maybe it is just a confusion over the definition of "multi generational wealth".

Many if not most people consider getting a house, inheretence, or small business "multi generational wealth", especially in economic literature.

You dont need an 8+ figure inheretence to be upper class in the US.

I think multi generational wealth would mean that people are a member of the capital class and not the labor class (i.e. they don't have to work for a living). Those are the people who go on to be serial entrepreneurs, because, why not? Nothing to lose other than effort.

Anyone else is taking on risk of becoming destitute if they repeatedly try to start businesses. Even a small business can drain a million dollars very quickly.

> You dont need an 8+ figure inheretence to be upper class in the US.

I think you do since that's about the level where you don't have to work anymore, especially if you're talking about passing that money down to multiple children and keeping them in the upper class.

Disagree. You're not mentioning something just as important, and even more powerful than work. Compounding

I don't think you are using a conventional definition of upper class, or that it is interchangeable with capital class. I also don't think these are the definitions for the Post you were responding to.

That said, I agree eight figures is about the right number for when a family would not have to work assuming that the capital assets are managed appropriately.

I think high value labor is the main path between lower class and middle class. High value labor plus smart investment of surplus capital gets families from middle class to high class. The path from high class to Capital class, as you call it is, primarily return on Capital management.

To get from Capital class to Kennedy class requires a significant windfall or luck, as you would expect for tail end of a Pareto distribution.

How do you define generational wealth? 7 figures? 8? 9? There are many small to medium sized family businesses that were not built on criminal or immoral activities.

I'd say 8,9 or 10. Generally people who would be considered LPs for VCs and have political and/or media influence. It is the children of these people that are highly over represented in the executive and funded entrepreneur ranks.

That doesn't describe most generational wealth.

A family house is generational wealth. Most people who at age 65-75 are worth over $1 million dollars didn't get there by using the power of law to stay on top or profiteering from slavery or genocide. That's insane.

> didn't get there by using the power of law

NIMBYism is the power of law. Mortgage interest deduction is the power of law. Without either, that million dollars of wealth, much of it in the home, would be a lot less.

Even if I take that as true, it's still not "using the power of law" to follow the law. "Using the power of law" implies some degree of control over the law.

People vote, and on some issues they vote as blocks.

I said "power law" not "power of law", meaning winner take all.

https://en.wikipedia.org/wiki/Power_law

That's not what the power law means, though. It's not a thing you 'use' to stay on top. It describes things, it doesn't influence things. Just because 20% earn 80% doesn't mean that you can use the Pareto distribution to keep in that 20%.

In capitalism it does mean that you use it to stay on top. You attract more capital, build more moats, consolidate more competitors, exploit more labor... It's why we have a winner takes all economy with record high wealth inequality.

No. You use moats, consolidation and capital to stay on top. You don't use the power law.

I think there's a basic misunderstanding here. If I say that you are in the 80th percentile, that doesn't mean anything other than you are, right at this moment, in the 80th percentile. It doesn't say anything about your position in the future, and even if it says that the 80th percentile will still be there in the future you may not be in it. You can't use the fact that I have described your position to maintain your position.

Incorrect. If you're in the 80th percentile, you're permanently locked out of opportunities available to those in the 99th percentile because they can build effective barriers with their capital. I'm hardly the first to say this, it's well trod territory. Here's some basics if you want to read up on it: https://www.aeaweb.org/articles?id=10.1257/jep.30.1.185

That's not because of the power law, though. That's because of the circumstances that give rise to the power law. I'm saying that the power law does not cause any of this.

Did you not read what you linked? It deals with the causes of power laws in economics, it does not by any means say that power laws cause stagnancy among the relevant population. It does not say this because that would make no sense.

Power laws when applied to economics are an indicator that there are underlying processes (effective barriers with capital may be one) that cause the distribution to look this way. They are an illustration, not a cause.

I think it's a mixed bag. Without progressive taxation regimes and property tax, I would expect those people to have much more wealth, not less.

The very top, sure. But there are effects all down the ladder, and at some point the effects of the laws stop helping build wealth and start hurting it. Some of these taxation regimes are functionally regressive, at least at the top.

https://www.forbes.com/sites/eriksherman/2023/03/26/financia...

> The reason most people don’t get the mortgage interest benefit is because claiming it requires itemizing tax deductions rather than using the standard deduction. But to itemize, you need enough deductions. In 2019, the Tax Foundation estimated how many people itemized after those big tax changes in 2017 that made it harder for most taxpayers to do so. It was 13.7%, or more than 17 percentage points lower than before the 2017 law.

> Desmond pointed to a National Bureau of Economic Research study from 2015. Even at that point, about $195 billion of the $270 billion the federal government spent on housing was in the form of these tax code-based deductions. The remaining $75 billion is spent on the poor, or less than a third as much.

> That $195 billion now is for the people who can claim it on their taxes, or less than 14% of the tax paying population.

>But there are effects all down the ladder, and at some point the effects of the laws stop helping build wealth and start hurting it.

This was actually the point I was trying to make. It depends on how you look at it, but by one measure, taxes on net are slowing the wealth accumulation of everyone who pays more than the national average tax. Those who pay less than the average are typically living hand to mouth and not accumulating wealth. When you look at where tax revenue comes from, it is mostly the high earners that are paying for everything, offsetting the their wealth accumulation. Even despite factors like itemized tax deductions, your high earner will still be paying far more than your low earner. For example, the federal rate of 37% on income over 500k will still be far more than 12% on less than 41k, even with tax deductions.

There are of course some factors that offset this, like maintaining the rule of law, education, and property rights which help lift all boats, rich and poor.

For the generationally wealthy laws such as stepped up basis and lower taxes on capital gains are also counter factors.

The mortgage interest deduction in particular now helps the top 20% or so afford their homes. And afford to continue paying more for homes in their range. Thus boosting property values and prices. While the lack of mortgage interest deduction for additional homes increases the cost of homes which are let out as rentals, which directly impacts the cost of renters, and indirectly boosts the costs of renters through the rise in property values.

I haven't studied this, and lack the ability to do an economic analysis of the yoyoing of increasing home prices versus new construction. But there's probably a regressive effect on wealth even for some of those who aren't living hand-to-mouth.

It looks like the mortgage interest tax deduction did decrease from interest on up to $1 million in loans to interest on up to $750 thousand with the 2017 tax change. This should help reduce the effect on house prices a little bit on the margin.

> it is mostly the high earners that are paying for everything, offsetting the their wealth accumulation.

To an extent this is true. But this argument is also used to say that renters don't pay property taxes. Maybe not, but property taxes have a direct, proportionate effect on the rent that they pay.

I agree with most of what you said, but I would quibble with how costs are passed on to consumers. passing costs on is a lot more complext when goods are not being sold at their margional production costs (e.g. someone has a profit margin).

>To an extent this is true. But this argument is also used to say that renters don't pay property taxes. Maybe not, but property taxes have a direct, proportionate effect on the rent that they pay.

When you have makets with a gap between production cost and the market price, there is the possiblity that the seller simply eats the cost.

Imagine wallmart selling widgets with a profit. If the price of the widget is already set where the marginal profit for increasing the sticker price is zero, This holds true even if production costs go up. i.e., raising the price still results in fewer sales and less profit, independent of production cost.

In terms of housing, if nobody can afford higher rent, landlords cant raise it without more vacancies. In that case, tax might come out of their profit and not be passed on.

> In that case, tax might come out of their profit and not be passed on.

Yes, this is true. Some landlords merely use rent to offset the cost of the house, not to cover it entirely. But over enough years, the majority of rental property has to be paying its way, or it gets sold off.

That's not true. A large majority of middle class kid can rely on their parents support until their 30s. I personally know several shitheads doing that and they're doing so because they're lazy. Not because they're working hard on some start up.

Sure, but that safety net runs out. And once it runs out with nothing established beyond it, the "shithead" is SOL.

Sure, but it runs out after a dozen start up attempts. And at that point you haven't got a business you can live on it's because you're not cut out to be a founder.

> Sure, but it runs out after a dozen start up attempts.

For middle class adults living with their parents?

If you do one a year from 18 to 30 that's an even dozen.

> Don't get mad at someone else because of your own families path

Should I get mad at my family? This part is not clear to me.

You are also saying this like it's possible for everyone to become wealthy, if only they were picking one of these three options. Not every family can be wealthy - the wealthy make sure of it. It's a zero-sum game (well, more of a negative-sum game? as wealth becomes more concentrated at the top).

Actually, the more I think about it, the less I see how these are three different options. For me as an individual, #3 comes down to inheriting wealth that someone else generated with #1, which is just #2 + luck.

If the economy was a zero or negative sum game we'd still have the same food insecurity we did 500 years ago. But we don't, the world has gotten much better in the last 500 years from people working hard on making it better, many getting rich in the process.

Your benchmark was Rich. Rich is a relative term, it means more money that everyone else.

If everyone owns 5 houses, to be rich you have to own 500

The status is zero sum, wealth is not. We all live in bigger houses with more amenities and greater food security than our ancestors.

If you compare to peasants who lived 100 years ago, sure. But go back two generations, and as inequality has risen swaths of people have fallen into property.