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Comment by teddyh | Hacker News Reader

Most people who randomly get a windfall of money were previously poor. If you’re poor and suddenly get lots of money, you most probably can’t handle it; “#4. Extra Money Has to Be Spent Right Goddamn Now!”: http://www.cracked.com/blog/the-5-stupidest-habits-you-devel...

MacArthur winners have two advantages: First, they are probably good at something, and therefore are likely not poor. Secondly, even if they are poor, they are probably very focused on their thing which made them get the prize, and any money goes to their thing, not to themselves, which makes most people a little more rational when deciding things.

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I think there is more to it than just not being able to handle it. Two aspects occurred to me:

Having a saturation point: some people just keep on spending, way beyond what they can actually get comfort and enjoyment from. When poor people have this personality, they spend their windfall and go broke. When rich people have this personality, they also spend almost all the free-floating cash they have. The difference is just their money keeps growing back. However, when their money source dries up, many rich people do indeed quickly go broke as well.

It can take a lot of money to upgrade a life (permanently): for poor people suddenly receiving lots of money, it can seem like all their problems are solved. But upgrading your lifestyle, your family, your social situation can easily swallow up millions of dollars without necessarily "wasting" anything. If you're permanently and hereditarily poor, there is a more profound form of debt than just what you owe to the bank. This debt still needs to be paid, and it can easily be more than the windfall provided.

>> there is a more profound form of debt than just what you owe to the bank. This debt still needs to be paid, and it can easily be more than the windfall provided.

I have my own thoughts on this, but would love to hear you or others expound upon it.

Additionally the MacArthur grants are divided into quarterly payments over five years, so you're not getting 625k all at once, you're getting 20 payments of $31,250, one every three months. That makes it pretty much impossible to blow all of it within half a year.

People could still get into debt because they know that the money is coming. Look at how many people buy things and assess the price based on the size of the monthly payments instead of the actual total price.

You could literally go into debt by using the structured payments as collateral for a loan for something close to the full amount up front.

Not really, it makes it less likely sure but far from impossible. For one, a guaranteed cashflow contract is something you can sell to lots of different parties for a discounted lump sum right away. Hell a month ago or so there was an article on HN about a iirc mentally handicapped woman who'd received a legal settlement payout because a company had been negligent in letting her live in housing which was filled with neurotoxins (in the paint iirc), and some guy called her up and swindled her out of a large portion of the money by buying her settlement contract and paying her a ridiculously low discounted value. Anyway it happens all the time, most companies sell or buy B2B with 30-60 day payments, and many companies with cashflow issues will sell those future payments for money today. It's not a loan that you pay back at some point when you get the money, rather you're selling a loan/credit (for instant cash) someone has with you who's contractually obliged to make future payments on that to you.

And secondly you can incur lots of debt, or spend money you had saved up, knowing it'll be replenished.

Either of the two or a combination could let you blow through the money in half a year, not impossible, although it's unlikely.

>First, they are probably good at something, and therefore are likely not poor.

The wider world is not a meritocracy. The United States isn't even remotely a meritocracy. There is a prevailing ideology that depends upon this presumption of meritocracy, but that's all you can say.

yep, agreed. and also the macarthur isn't nearly as much money as the usual lottery windfalls

Is this just because there have been some high profile cases in the media like Viv Nicholson the Spend Spend Spend woman

There may be many previously poor recipients who haven't blown it all.

> If you’re poor and suddenly get lots of money, you most probably can’t handle it;

The last study I saw said this was not true. And it's pretty illogical really. A bit of a Gladwellian story, or worst an urban legend since it's pretty mean.

People who are poor/less educated do have trouble with money, yes.

But if you give them a big chunk (lotto or smaller) it greatly improves their lives.

Well off/educated people generally invest the money better but it's silly to think poor people would blow it or worse, become less well off.

Do you have a link to that study?

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