>simply having wealth begets more wealth
It's not a 100% rule. Lots of wealth has been lost due to wrong investment. Many rich people lose their fortunes.
It's not a 100% rule. Lots of wealth has been lost due to wrong investment. Many rich people lose their fortunes.
When you're poor, you are taxed:
- High interest loans
- Remittances with high fees e.g. with Western Union
- Using Cash (on average, you pay a tax on items which have the credit card fee priced in)
- Access to banking (low interest savings/checking accounts)
- Credit cards with high fees, low kickbacks
As you get wealthier:
- Credit cards with kickbacks (e.g. travel, cash back)
- Access to bank accounts with higher interest
- Access to international banking
- Access to international stock markets
As you get wealthier:
- Ownership of businesses which allow you to store your wealth without getting taxed
- Ownership of international businesses which allow you to find the best tax situation internationally
As you get wealthier:
- Access to private markets
- Ownership of businesses where you can directly partner with other businesses
- Running a financial institution
- Running a business so large that you can influence governments
- ...
Up to a point. The ultra-rich have so much money now that it would take a monumental disaster for them to become poor again. IIRC only one person in history has ever stopped being a billionaire: J. K. Rowling, and that was due to enormous philanthropic giving.
Mere millionaires come and go, but once you're talking hundreds of millions the positive feedback loop of capital makes it difficult to lose everything.
Maybe the reason we never see hundred millionaires lose everything is because they have the necessary skill to manage the money well.
I don't think it would be correct to attribute causation based on the information we have available.
Some of it may be the forced diversification you get with this much money. It's hard or impossible to dump $100M into a single stock unless you are an Elon Musk type and own the company. So if you make a bad bet and lose a million bucks, well, that's just 1% of your portfolio and the rest will make up for it. Of course you're a regular millionaire and lose a million bucks on a bad investment you are going to the poorhouse.
You could dump $100M into GE without triggering anti hostile takeover actions, but they're also not likely to go bankrupt anytime soon.
Maybe some hundred millionaires could have had their portfolio completely tied up in Lehman Brothers a few years ago, but even then you probably would have gotten a fair bit of money back.
But this goes back to my point that as long as you aren't pants on head with your investments you are beyond the point where it's possible to ever be poor again.
The articles says 'But the aim is usually to diversify risk, not concentrate power, by taking capital from the original family business and putting it into a widely spread portfolio.'
It uses the word 'usually' and it's also a blanket that's trying to generalize all these parties, while in a reality that may not be true.
Here are 3 constructed but plausible goals one may have: 1) Make 100% sure that you remain wealthy (make almost nothing but never lose anything) 2) 9-in-10 chance to do worse than SP500 index, but 1-in-10 chance to get 'literally take over the world' rich 3) Investing in causes that seem good for the world a la green energy, tesla motors, etc
As a counter example, I present cases of lottery winners who go broke. There are multiple documented cases of 10+ million and 100+ million winners who lose the majority of their wealth.