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You may like reading The Millionaire Next Door. It explains that the majority of millionaires in the US are like those you describe, and not like the flashy movie ones we see in the media.

Edit: Link for convenience: https://www.amazon.com/Millionaire-Next-Door-Surprising-Amer...

The bar for 'millionaire' is significantly lower than it once was. Inflation, combined (in some markets) with huge raises in property values, basically means that anyone who's paid their house off is likely to qualify.

A total net worth (including real estate etc.) of more than a million dollars doesn't imply that someone's particularly wealthy the way it once did.

The home you live in is usually not included when classifying high net worth individuals. A common definition at least here in Australia is:

"a HNWI defined as having more than US$1 million in investable assets, excluding their primary residence, collectibles and consumables"

Huh, I'd missed that point. Thanks.

It's not about whether they're single-digit millionaires or billionaires. It's about falsely attributing a causal relationship between the people's actions and their success. It's about ignoring the counterfactual cases.

What about the factory workers who also practiced prudent money management and did not end up millionaires?

What about the many other dirt movers who worked just as hard but did not end up being the one owning the company?

What about the other smart web professionals who worked just as hard as your high school friend yet do not currently run the show?

"What about the factory workers who also practiced prudent money management and did not end up millionaires?"

Then he at least ended up better off than he would have if he had not practiced prudent money management. Anything else would require stretching the definition of "prudent" beyond anything that fits.

It is a fallacy to believe all of life's outcomes are purely due to skill, one that will harm anyone who acts on it. But it is also a fallacy to believe that all of life's outcomes are purely based on luck and privilege, and of the two, this one is far more harmful to anyone who acts on it than the first one.

It is also a fallacy to believe that all possibly skill improvements are equal, a fallacy that helps people over-attribute things to luck when they see "Well, these two people both worked on skills and look at their divergent outcomes!" But if one guy was carefully tuning the skills to things that the market wanted and would lead to success, and the other guy followed, say, a socially-approved educational outcome that produced a very shiny credential, even perhaps in the same field, but did not provide real things that anybody else wanted, you will get divergent outcomes. But that will be less due to luck than someone who assumes that the skills obtained by both were the same would think.

I don't think what you're saying holds correct. You're just applying survivorship bias at a smaller and therefore less obvious scale.

We do not know the amount of luck based causality versus non luck based. What we do know is the probability of ending up a millionaire vs not.

So say it's 10% millionaire. I'm pulling this out of my ars. Now the question becomes what non luck based actions were performed by the 10% of millionaire and not by the 90% of non millionaire that caused them to become the ones to end up millionaires.

That's not a trivial thing to answer. First, it's possible there exist no non luck based actions. Maybe all actions had an element of luck. Second, it's possible no single action had a majority role. So it becomes a sum of small actions.

Now, even if we assume the best case scenario. That is, there exist a single action which is 100% responsible and has no luck involved. Well, how did the 10% knew to do that and the 90% didn't? That's also luck,or a just as complicated question to answer.

Now say the survivors, aka, the 10% came and said the secret guaranteed to work action is X. It does not mean it is repeatable once there is already 10% millionaires. What if the 90% now all do that magic action, there is not enough money for 100% millionaire. So you can see that this action would not anymore suffice and therefore starts to have an element of luck again.

We know I am correct that success is not entirely luck, because we can observe that no success comes to someone who just sits and waits for luck to strike them like a bolt of lightning. Even the lottery winner had to go out and buy the lottery ticket. Note I'm partially defining success as something like "a sustained and significant increase in wealth", so by my metric here even someone lucky enough to be born to the wealthiest person in the world and inherit more wealth than anyone else may still not experience "success" if they fritter away the wealth to no great effect. I don't think this is an unacceptable odd definition in this context, and those born into wealth so great that they literally have no responsibilities in life and can't manage to lose it no matter how hard they try are edge conditions anyhow.

This bounds luck's contributions to less than 100%. Mathematically that's a pretty weak bound, but it's not hard to see that it must be substantially less than that in the real world for the observed results to make sense, though. How substantially is hard to even put numbers on, so I'm not going to try, because the real point I'm trying to make here is that it is dreadfully dangerous to sell the idea that success is entirely luck based. It is far more dangerous to both individuals and the society they live in than to sell the idea that success is based on skill and effort. As I am a rather old fashioned person who still believes that truth is better than falsehood, the fact that telling people that success is based on skill and work works better than telling people that success is pure unadulterated luck suggests to me that the "skill and work" explanation, while still not Aristotelian truth, is likely closer to the truth than the "pure luck" explanation. (I'm skipping over some connecting justification there because this is an HN comment and not a philosophy essay; if you agree truth is better than falsehood you can probably fill it in yourself, and if you do not, then why are you arguing anyhow since no argument will produce anything better than what you already have.)

It seems you don't really argue to know that luck is or isn't the only factor. Which is really what I'm against. I'm against someone claiming he has proof of an answer, and he believes it is the full truth.

So ya, I think the danger part you're also generalizing a little. There are some people who telling them that luck isn't a factor is doing them a disservice. Like people who have been unlucky. There are a lot of people who try and fail. Why is that? It is not enough to work hard and spend a lot of time chasing success, that's why. That's the essence of survivorship bias. You must also be talented, smart, strong, tall, healthy, handsome, connected, etc. These things I argue you have or don't pretty much based out of luck. Out of everyone who tries, those who succeed will have either because of pure luck, like imagine everyone trying did 100% exactly the same actions, and it still ends up that only a fraction of those succeed, that would be pure luck. Or, it is the luck of what has caused you to beat the others, to think of better actions, and execute them better, to end up being one of the successful ones.

I personally think if our society acknowledged this, maybe we'd start thinking about society differently. Maybe we'd be more inclined to accept social programs. Instead of seeing everyone who is not a millionaire as lazy, and like it is entirely their fault. Maybe we'd have to come up with an organisation structure where maybe we don't have a winner takes most model. Or we'd need to recognize people's individual strengths, and make sure we find a way to make them helpful in those ways.

I see your point, and I actually mostly agree. I think it just depends who the audience is. If you talk to youths, obviously you should try to motivate them and ingrain into them a sense of having to work for success, and try to give them the smarts to do so. Also have them believe the effort is not wasted, and will make a difference in their life. But if you talk to people struggling to succeed, even after putting in the effort, I think you should also recognize that they can't be blamed entirely, a big part of success is luck. In the end, our society must find the right balance between the two.

> It's about falsely attributing a causal relationship between the people's actions and their success.

Yes of course that's the definition of survivorship bias. For the most part that doesn't apply to most rich (>$1mm net worth for argument's sake) people. The vast majority of millionaires achieved their success in a perfectly repeatable fashion. This is self evident. How many people globally are at the Zuckerberg tier of success? A dozen maybe. Globally, how many people have a > $1mm net worth by

  - choosing a safe, boring, white collar job
  - running a local service business
  - saving aggressively over decades

the number is in the millions.

It's absurd to think that so many people could become (relatively speaking) rich, using means where there was little or no "causal relationship between the people's actions and their success".

I think you're helping to make my point, so thanks!

For every $1mm net worth person who chose a safe boring white collar job, ran a local service business, or saved aggressively over decades, I'll show you ten people who who attempted a safe boring white collar job, tried to run a local service business, or planned to save aggressively over decade, but did not achieve $1mm net worth.

> I'll show you ten people who who attempted a safe boring white collar job, tried to run a local service business, or planned to save aggressively over decade, but did not achieve $1mm net worth

For the purpose of this discussion that's irrelevant.

As you yourself stated

> [Survivorship bias is] about falsely attributing a causal relationship between the people's actions and their success

Given that within a 50km radius of wherever you currently are in the world there are almost certainly 1000s of people with >$1mm net worth it would be absurd to think that they achieved this outcome through actions which had little or no causal relationship to their success.

The numbers speak for themselves. In Australia where I'm from there are approx 234,000 high net worth individuals (HNWI) (defined as having more than US$1 million ($1.35 million) in investable assets, excluding their primary residence, collectibles and consumables). We have 8 capital cities. Using a simple naive, even, distribution gives approx 30,000 people per capital city that fit this definition.

This means that being "rich" is relatively common. If it's common, then it's silly to think that all these people got rich through actions that have little or no

>causal relationship between the people's actions and their success

The uncomfortable conclusion which follows from this is that if you're not rich by this definition you're not trying hard enough.

Edit:

and just to put those numbers into further context, In AU there are approx 70,000 flu cases in 2015. In the same year approx 9,000 new HNWI joined the ranks. Becoming "rich" is almost as common as getting the flu!

You're talking 1% of Australia's population. But, hey, let's assume that counts as "common." What I'm hearing is "since outcome X is commonly found happening for people, then outcome X must be attributable to some action taken by those people." I'm not sure how you are concluding this.

Cancer is common, too--much more common than becoming a millionaire. Is a cancer diagnosis attributable to someone's actions or is it just chance? Sometimes it is, sometimes it is not.

> I'm not sure how you are concluding this.

1 in 100 Australians are in the millionaire club. By contrast winning the Powerball Lottery has odds of

76,767,600:1

To win Powerball you need "only" to match 7 numbers from a pool of 40 possible choices.

By contrast to become a millionaire you had to make 1000s of individual decisions along the way and yet every year approx 10,000 new millionaires join the ranks. How many Powerball winners are there per year? 1 maybe?

It may be comforting to think that luck plays a large part in people becoming rich, but logic dictates otherwise.

The fact that something is more common, doesn't mean it's not still largely luck.

Ignore the powerball and look at scratch off lottery winners. There are thousands of people who 'win' at it every day but that doesn't mean it's not luck.

You're mixing frequency with luck. Something can occur frequently and still be heavily influenced by luck.

> For the purpose of this discussion that's irrelevant.

Actually, no, that's precisely the discussion we're having.

> In Australia where I'm from there are approx 234,000 high net worth individuals (HNWI) (defined as having more than US$1 million ($1.35 million) in investable assets, excluding their primary residence, collectibles and consumables).

Which is where, precisely?

> We have 8 capital cities. Using a simple naive, even, distribution...

Have you actually been to Australia? Our population distribution, let alone wealth distribution, is anything but even.

I live is Australia. I used an even distribution for simplicity's sake. Obviously the wealth is skewed toward Melb/Syd.

The issue is that of the three issues you listed, they aren't all due to luck. There is some degree of chance associated with running a business, but you're missing that there is a difference between 'planning to save aggressively' and saving aggressively, which is a matter of living below your means. There's no luck in how much of your paycheck you put towards your savings account.

>>people who who attempted a safe boring white collar job, tried to run a local service business, or planned to save aggressively over decade, but did not achieve $1mm net worth.

In most cases, discounting unexpected health disasters or other such life events that befall a person. Most people's definition of 'savings' is very different. And that leads to very different ends.

But you will be hard pressed to find people who did the right stuff over the years and didn't come out better.

Frugality is pretty much a gradient and not a flat plain recipe. Based on how far you can squeeze and invest, that much mileage comes out. Everybody is different, based on how much you can endure YMMV.

Not to take anything away from your stories because I don't think that group is the problem (as the Economist wrote in an article, it's the 0.01% not the 1% we should worry about, we are much more top-heavy than we think), I would just like to raise this question: Do you know the difference between advice that works for anyone and advice that works for everyone?

Because I have a strong suspicion this is the former. It only works until everybody starts believing and following it. The American dream, for example. Which stopped working, it is said... because it just doesn't work for everyone?

My point is, what if what you say already happened and didn't pan out, what if too many people tried for it to work? So what we have now is not that everybody is lazy, but that too many people realized the system doesn't work for everyone, only for some. Who those "some" are does not matter, it's not a feudal system where titles are inherited so we have more flexibility and who is on top changes. It's just that there can't be too many. Not because it's completely impossible, but just the way everything is set up currently, which seems to promote a flow to the top instead of "trickle down". I certainly don't provide here a complete model to understand what happens, not even close, I just want to give a nudge, a hint of something else there than "laziness". We are way down the path of an endless feedback cycle.

$5mm net worth is considerably easier than the $1-$10mm/year that was quoted. That's achievable with income of several hundred thousand a year, which is orders of magnitude more common than making several million per year.

>He's super smart, hard working and I'm sure that accounts for the majority of his success.

Why are you sure? Social mobility in america is depressingly low right now. Our meritocracy is a meritocracy no more, if it ever was one.

The mobility is there for the taking, though disincentives are at an all-time high.

Welfare benefits are structured (presumably unintentionally) to discourage working: earning about $12/hr plus welfare equals about $36/hr without welfare ... but in between, welfare benefits plummet so fast that trying to work your way up from $12/hr to $36/hr amounts to a huge pay cut. As such many can't or won't make the bridging effort.

The proliferation of debt is the other major problem. With social norms & pressures to buy more house & goods than one can actually afford, one becomes self-trapped in preserving an existing paycheck and fulfilling debt maintenance rather than really saving money and taking risks that may temporarily disrupt income.

The smart & hard working ones realize up front that climbing a mountain may involve traversing a valley first, and that poor-looking social presence is necessary to accumulate wealth (to be flaunted later). The rest get stalled trying to make credit card interest payments.

Are you referring to the US? Since we don't have a federal cash welfare program[0], what welfare program are you talking about that gives recipients an additional $24/hr ($50,000 a year if working full time)?

[0]: https://fivethirtyeight.com/features/most-welfare-dollars-do...

Not OP, but my guess would be that such a number would have come from pricing out equivalent services as those being provided. That is, providing discounted housing is not handing out money. But you could take the average discounted rent, and the average non-discounted rent, and come to an approximate cash-equivalent "value" of that discount.

Also, I find the direction of the article in your link interesting. That is, given this:

> Under TANF, states can spend welfare money on virtually any program aimed at one of four broad purposes: (1) assistance to needy families with children; (2) promoting job preparation and work; (3) preventing out-of-wedlock pregnancies; and (4) encouraging the formation of two-parent families.

I'm a little surprised to see this a couple paragraphs down:

> In 1998, nearly 60 percent of welfare spending was on cash benefits, categorized as “basic assistance.” By 2014, it was only about one-quarter of TANF spending. That shift has happened despite a burgeoning economics literature suggesting that direct cash transfers are in many cases the most efficient tool to fight poverty.

I don't see "fighting poverty" on the list of four things, so I'm not surprised that it got disincentivized.

It's the proliferation of programs, most of which don't write checks to the individuals but do provide generous coverage & subsidies. EBT (aka "food stamps"), health insurance, "Section 8 housing" ("right" to rent in upscale neighborhoods with capped cost), etc all add up. Details are out there, often reported. https://downtrend.com/robertgehl/welfare-payouts-top-20-per-... http://nypost.com/2013/08/19/when-welfare-pays-better-than-w... The totality of details is too much for a brief casual blog comment, and it may not be exactly so in all cases, but point is there is a substantial drop in welfare benefits above a certain income threshold for given jurisdictions, enough that between about $12-20/hr the decrease in benefits is more than the increase in wages - to wit: the more you earn, the lower your revenue at an economic strata where decreased income is extremely difficult to bridge. ...and that economic barrier to social mobility is an artificial construct instituted by a well-meaning, but deeply misguided, sociopolitical philosophy.

If your problem with welfare is that it should have no drop off points, what makes that the product of a "deeply misguided, sociopolitical philosophy"? It seems to me more like a problem created by the fumblings of a bipartisan beauracracy.

Welfare should absolutely not be structured to cut one's net revenue when one makes the effort to earn more.

Methinks welfare, as currently implemented, serves the "something must be done!" industry. Many would work themselves out of a job if "poverty" were eliminated as their goal states, so they keep redefining "poverty" and solving it in ways that generate more of it. The operative philosophy indicated simultaneously addresses manifestations of poverty (via income supplements, rent controls, food subsidies, free services), and aggravates the causes (prohibition of low income[1], strict zoning laws, costly food regulations with diminishing/marginal benefits, undermining low-cost services).

Admittedly, a bipartisan system which simultaneously treats government as the solution to, and the cause of, poverty is really going to screw things up.

[1] - I find "minimum wage" the modern equivalent of "debtor's prison": if you can't produce enough value, you're prohibited from producing any value at all.

I disagree and typed out a bit of a longer refutation but I'm honestly more interested in where our disagreement stems from, I think this question might answer that for me:

I'm sure that you know people who have high incomes/lots of wealth and who are smart & hardworking. Do you know any older "poor" people (yearly income bottom quintile <$21,000, second quintile < $41,000) who are the same?

Feel like I'm walking into a trap here.

Myself being near a half-century, I've watched the development of minimum wage, wage-limited welfare, and easy credit. As such, I have to observe that older people (of whatever income) have mostly lived their earlier low-wage years without those two institutionalized traps, managing to work up their income past that $12-36/hr (inflation adjusted) gap before it appeared, and acquired most of what they're going to acquire (non-consumables) with cash or have long paid off major debts. As such, they had more natural socioeconomic mobility, and regardless of income most retired into a scenario where income can be very low while maintaining a quite comfortable existence - ergo pegging them as bottom/second quintile can be quite misleading, as contrasted with the otherwise presumed "growing family" that does desperately need income & mobility.

To wit: those elderly I know who likely have such low incomes likely own their homes etc outright, know how to live well on a frugal income, avoided/eliminated debt, and are in a position to choose to cut their own income to maximize net revenue (extreme ex.: the "millionaire on food stamps" cases, rich but currently no earned income).