The surprising psychology behind being rich | Hacker News Reader

The surprising psychology behind being rich

bbc.com

41 pointsquickthrower247 comments

The problem isn't really the billionaires, so much as they are the modern version of the king/feudal system because the wealth becomes hereditary.

I'm pretty much a believer that estate taxes should be 100% over some fixed threshold, say 5x the median wealth. And no, I don't feel bad about the "family farm" which turns out to be worth 50 million dollars.

Median household wealth in the US is less than $100k, so 5x would be half a million.

So I guess the question is, do you feel bad about the family farm that turns out to be worth 1 or 2 million?

("No" is a legitimate answer, but probably a rather controversial one)

It seems like there ought to be a happy medium between taxing nearly all homes in California at 100% and the Prop 13 level of 1%/max 2% inflation.

There are two reasons this is a very bad idea:

1. Who is going to take it? The government is a very bad guardian. Everyone from the former East Block can attest (me including). This literally happened here after 1944 and we still suffer the consequences. The political class became all-powerful as they controlled all the resources.

2. This will make people a lot less entrepreneurial and as a result - everyone will become a lot poorer. This also happened in my country between 1944 and 1989. Even the Chinese realised this can't and won't work and are currently heading in the opposite direction.

Really, fantasy is a great thing, but you have to think about the consequences. The Western World is heading off a steep cliff with this kind of thinking.

1. Sell it, finance public services with the revenue, and lower other taxes. You don't have to be socialist and/or critical to market economies to support 100% OP's proposal.

2. I don't think "estate taxes were raised" is all that happened in the East Block.

1. Who is going to do it? Politicians? As it works here with the EU subsidies - 80% of the money goes through the PM's cousin's company and a hefty percentage leaks to offshore banks :)

2. Yeah, after they did that, people didn't want to work any more, so they had to force them :)

I'm not interested in debating someone who thinks raising estate taxes is what ruined the East Block.

Enlighten me, what ruined it?

I guess the incarceration rate would be a good candidate too

Totalitarian rule. Lack of democracy. Lack of freedom of speech. Constant surveillance. Integration of politics into every aspect of life. Economic exploitation by Russia. Intentional undermining of historical cultural identity.

I could on.

So you say that a government which takes (unwillingly) the inheritance of all its citizens can pull it off without a totalitarian approach, suppressing freedom of speech, constant surveillance (to figure out who has what) etc?

I don't buy it :)

Yes, taxing people is not a totalitarian thing.

A more generous response would respond to the original point. If we tax the rural aristocracy (i.e. concentrated land-owners) out of existence, then who will then administer that property? The obvious answer is large-scale agribusiness which achieves mortmain and never dies. Given the history of the unholy alliance between ADM, Monstanto, and the US government, it is fair to ask if that would be an improvement.

Personally, I think unlocking the land from the trust-fund people cosplaying farmers until they can turn it into housing would be a good thing. But there are a lot of moving parts.

If not the aristocrats, then who? Someone will run things, and it isn't always obvious who will do it better.

> The government is a very bad guardian. Everyone from the former East Block can attest (me including).

So, you had a bad government, therefore all governments are bad?

> This will make people a lot less entrepreneurial

Do you think Jeff Bezos would have given up if he was able to become only a multi-millionaire, instead of a billionaire?

- Yeah, I know it wasn't real socialism. You will build the real one.

- The OP says nothing about not allowing Bezos to become billionaire, only confiscating his wealth upon his death. Yeah, I think he would have given up in this case. And I don't only think, I can show it to you repeatedly in socialist countries. There is no "Bezos" there :)

> The government is a very bad guardian. Everyone from the former East Block can attest

“I had an abusive parent” does not imply “In general, parents are bad guardians”.

The same thing for governments.

I'm not saying that there isn't a valid critique of government-as-guardian generally, but any such valid critique is going to be more involved than “governments of the Soviet Bloc were bad, so government is bad”.

Can you show one "non-abusive" government that confiscates people's properties? I fail to see one. And I see many proving the opposite.

If you consider taxes to be a form of property confiscation, then all governments confiscate property, and therefore all governments are abusive. I don't think that's a very convincing argument against taxation.

People will just sell their possessions to the largest corporation around and then spend their remaining money on something wasteful. Others will try to find loopholes such as buying products from your daughter's company or simply smuggle their assets.

Proposals like this also usually do not address what should be done with the tax revenue. It's almost guaranteed that it will be used for something that increases wealth inequality, because as it is right now that is the default state.

Interesting thing about the family farm anecdotes, supposedly, researchers have struggled to find even a single instance of a family farm getting broken up by estate taxes.

The trivial way around this is to start a non-profit, put all your net worth into it, then appoint your children/heirs as the sole execs.

The children give part of the yield which still amounts to plenty of money without touching the principle, and use the non-profit as a limitless expense account to travel the world or curry favor as needed. All tax-free.

You can't actually give all your money to a non-profit and then spend it on yourself, so that won't work.

I mean, you can, but if you get caught, which you almost certainly will, you will go to jail.

Source: Ask any CPA.

Of course you don't spend it all yourself, but if your parents put $1B in your non-profit you can pretty easily get a 5% ROI and safely spend 45 mil / year on actual donations and 5 mil / year on your 'business trips'.

That would be fraud. It's not likely that you would get away with this.

How is it fraud to have your corporate meetings in Hawaii, in the swiss alps, to have team building events that are ski trips etc.

Academic conferences work this way - are they frauds?

You could do that, but it doesn't achieve the goal that was being discussed.

Spending money on trips is not a "ROI" (return on investment).

Plus, if you spend $5M personally on trips, that will most likely be caught as fraudulent. Because it clearly is. The IRS looks at what charities spend their money on.

Meta: I will try not to engage in these kinds of discussions on HN in the future since people have made it clear they don't want this information.

Derek Sivers did something like that, just before CD Baby got acquired: https://sive.rs/trust

Thank you, this is an interesting example.

A Charitable Remainder Unitrust is a very specific thing. It does not make sense to create one unless you actually are charitably minded. If you look at it merely as a way to reduce taxes, you'd end up preferring to keep the money yourself (and pay taxes normally), because the amount you have available to spend is higher that way.

Also, it can't be inherited.

Selling assets to offspring for a $1 is as old as money

To close all the simple loop holes and the complex ones is

How do you distinguish between a retiree selling their home to live off the income vs selling it ti pass the money to their kid

> Selling assets to offspring for a $1 is as old as money

Some tax authorities frown on this, and require that transactions be conducted "at arm's length": https://en.wikipedia.org/wiki/Arm%27s_length_principle#Examp...

The wealthy people I work for strive towards giving their wealth away as best as they can to maximise their impact. They are also susceptible to health crises and family tragedy like everyone else. All the money in the world can't bring back family members or magically solve incurable health issues. While there must be some bad apples, my experience has led me to believe that it's unfair to categorize all wealthy people as uncaring, greedy and selfish.

My big takeaway from watching how 'the other side' lives, is that money is like a magnifying glass of who you really are. If you're genuinely virtuous--for example generous and caring--the wealth allows you to express that. I'm sure if you're greedy or have an addictive personality, you'll be even more destructive to yourself, those around you, and wider society. I'm extremely lucky to have the ability to not have to work with people like that.

Most of the rich people I have known are actually better people than the average person. I guess the fact they have everything they want allows them to better focus on improving themselves and thinking about their actions than someone who barely have enough to survive. A starving dog is more dangerous than a well fed dog.

There are exceptions of course, some are psychopaths. But I have always been impressed by how nice the rich tend to be in person.

Now about the wealth distribution. In developed countries, the rich are usually not sitting on top of a mountain of gold, mountains of gold are not of much use anyways. Most of their wealth is actually in their businesses, buildings, etc... Businesses get people to work and produce things for people to use, buildings house people, etc... Only a fraction of it is actually used for their luxurious lifestyle, the rest runs the economy.

Now the question would be, wouldn't it be better if money went to the people instead of a few billionaires. Well, yes and no. Yes, for obvious reasons, concentrate wealth too much and that's how you get slavery. But also no, because too much equality is not always a good thing. We need some people with crazy money to do crazy stuff, Elon Musk comes to mind, no billionaire, no SpaceX to do what NASA failed to do.

While it is not about money, another interesting example is the discovery of the Hubble deep field. The director is awarded 10% of the telescope time to use as he sees fit. Kind of like a "telescope billionaire". Robert Williams, the then director, decided to use a substantial fraction of his time looking at an empty patch of sky, discovering many galaxies as a result. It was a bit crazy, and he couldn't have done that if he went through the usual procedures, and it payed of in the end.

That's why I think we need some inequality. Not too much, people deserve to live with a minimum of comfort, but not too little, we need to make large scale personal initiatives possible.

we are way past 'some' inequality. and a lot of that capital sits in places where it doesn't do much to stimulate the economy. then there are the vast swaths of the economy that aren't actually productive or actively detrimental (here's looking at you, financial services, payday lenders, and fossil fuels). further, more inequality means more economic capture (private interests in control of regulation), which decreases our ability to deal with those harms as a society. then you have folks like the koch bros. I like musk as much as the next guy, but I question whether we're at a net positive.

I think it's not a one-dimensional slider, with 'too much' inequality at one end, and 'not enough' at the other end.

I think it has more facets than that, so that it's still possible for everyone to have a decent quality of life (in as much as wealth can help with that), while at the same time, allowing those "big ticket" explorations by a lucky minority of people.

I agree though, with questioning whether we are currently at a net positive. What I described above is more like a Star Trek utopia. Maybe possible, certainly not happening at the moment.

> Bezos could give a 105,000$ bonus to each of his employees and still be as rich as before the pandemic

That’s insane. I can’t even comprehend how big an amount of money that is. But instead amazon nickel and dimes their workforce. What a time to be alive.

This link no longer points to an article with that title.

I actually liked the new one better, but here is the actual video OP presumably meant to link: https://www.bbc.com/reel/video/p07vts5j/the-surprising-psych...

Needs (2019) in the title though.

https://www.bbc.com/reel/video/p07vts5j/the-surprising-psych...

Are rich people heartless? 22 NOVEMBER 2019|HUMANITY According to Christopher Ryan, rich people have the tendency to separate themselves from the rest of the world

*have the means. The desire is probably much more spread among the population.

Once I saw the title of that video I knew they were all nonsense. What an inhumane thing to say, as if how hard you work has anything to do with what kind of person you are. Is there a certain net worth where you cross a line and no longer have a heart? The problem is not inequality, it's poverty.

Rich people are not rich solely because of how hard they worked. THAT is an inhumane thing to say, as if poverty would vanish tomorrow if only the downtrodden masses put in a little effort.

In first world countries yes, the harder you work the more money you make. Especially true over longer periods of time because of the compounding value of hard work.

That is absurd. You could work yourself to death scrubbing dishes and it will never match the returns of inheriting a fortune from your parents. You do not live in a world where wealth is meritocratically distributed.

People are not stupid. No one working a low-skilled, low-wage job is confused about why they don't have more money.

That is not really the whole story, though. My wife and I (self-employed) work around two days a week each and make about as much as other couples where both people work full-time 50+ hour weeks (inc. commute) in professional jobs. We used to work 3-4 days a week and made about 30% less money.

I'm assuming that you're comfortable incomes come from high skilled work, or at least work that is highly valuable. You may no longer be working as much now to earn the same, but you had to put years of hard work in to get there, most likely.

> In first world countries yes, the harder you work the more money you make. Especially true over longer periods of time because of the compounding value of hard work.

This is so unbelievably incorrect that I struggle to put words to it.

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