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Comment by zcw100 | Hacker News Reader

This article has nothing to do with wealthy families losing their wealth after two generations. The 70% number is a complete fabrication, they couldn't even be bothered with coming up with a more believable number like 73%, or even defining what amount is losing it.

This article serves two purposes. Puffing up currently wealthy people as only being that way from pure grit and determination. No inheritance here. If you're wealthy it's because you've worked hard for it because we've already established that inherited wealth is a losing proposition.

Secondly, it tries to establish that there is no generational wealth which reinforces the first premise that all wealth is due to hard work. It's a wonderful bit of circular reasoning. All wealth is gained through hard work, generational wealth might exist but it's fleeting, so the multigenerational wealth that you do see must be due to multigenerational exceptionalism.

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> This article has nothing to do with wealthy families losing their wealth after two generations. The 70% number is a complete fabrication, they couldn't even be bothered with coming up with a more believable number like 73%, or even defining what amount is losing it.

The 70% is said to be an estimate. Now it's true that they don't get into detail about the estimate (and that's a red flag for this kind of article - I'd prefer to hear more details - the article's pretty light on substance as it is), but just to explain: it's considered bad form to give more precision in an estimate than is meaningful. People might be mislead if they said 73.25345% of families for instance, as it gives an undue semblance of certainty and accuracy (even if that's the number that your method of estimation came up with, you'd be better off zeroing the part of the number that's just noise). Giving a round number is considered more honest and a better communication of the uncertainties involved. Though if you're not familiar with these conventions it might seem odd.

> Now it's true that they don't get into detail about the estimate

That's one way to put it. I would say they declare it and offer no basis or detail whatsoever!

I agree with your point that stating 70% vs some made up precision is a (small) sign of integrity in conveying uncertainty, as opposed to the parent's comment coming to the opposite conclusion.

>The 70% is said to be an estimate.

The commenter one up is correct, the number is complete BS which is why no one is ever able to explain how it was estimated or where it came from.

I agree that the 70% figure appears to be BS but I don't think social commentary is the goal here. I believe the article is targeted at wealthy people and is trying to soft-sell scare them into spending more money on preventing future generations from wasting what they built.

Note how it urges them to employ a "Financial Planning Professional" near the end. Googling suggests this puzzlingly capitalized phrase is an umbrella marketing term for CFPs and other people with financial planning certifications.

Source: I work for a company that is constantly marketing to the wealthy and I know it when I see it.

Yeah, the article is focused on what to do about it, not convincing you that it's true.

what's the minimum amount of wealth do you think they are targeting in the article?

Anyone who's going to pass down an estate of $1M or more.

Yep, the article is a "listicle", content-farm triviality. It also doesn't explain what 'wealthy families' are.

A family say of a doctor or small business owner with a shop and three houses in their name (which could easily lose during some economic downturn, family issue, etc, not to mention have to divide to children)?

Someone like Rothchild, Rockefeller, Bezos, etc, or at least, families with 100s of millions in their name?

Those two cases have quite different survining characteristics...

E.g. "The richest families in Florence in 1427 are still the richest families in Florence"

https://qz.com/694340/the-richest-families-in-florence-in-14...

Excellent source. Also mentions persistence of high social status in the UK for eight (!!!) generations, and same in post-Mao China.

Wish there would be more research into this.

Ignoring the number. Unless you take precautions your wealth gets divided if you have children. They usually don't have the same luck/possibilities/grit as their parents so I would not be surprised if the wealth reduces over time. It's kind of hard to squander several 100 million or several billion within a generation though, so they can make plenty of mistakes and still be wealthy.

As soon as money is concentrated a lot, it multiplies much faster, more or less automatically. This is called capitalism. This is the counteracting force to division of inheritance. Exceptional grit and luck is not needed anymore, it is sufficient to just be not exceptionally unlucky.

Also, people in developed nations are having fewer kids. And people are less likely to marry across class lines these days. So the historic trends of dividing wealth up through heirs might be reversed altogether.

Half of Europe has undergone serious upheavals in the 20th century, with much of family wealth confiscated, money devalued through inflation etc. The same risks threaten wealth concentration in developing countries.

The U.S. is fairly exceptional in the fact that it is isolated from the world's woe. This stability is what helps you grow.

The same families that were wealthy three hundred years ago are still wealthy in the UK, roughly speaking.

So the Industrial Revolution didn't shake up the structure of the elite?

In Europe some families are still insanely rich from being rich 500 years ago. There's not much being written about them today as many do not seek publicity.

Thomas Picketty's "Capital in the Twenty-First Century" is best known for central its argument that wealth will concentrate in the long term, but it also extensively documents the European generational wealth that was destroyed in the first half of the 20th century. Two wars, a great depression, inflation, and high taxes were enough to permanently ruin the accumulated capital of many families.

So it's true that some families that were wealthy 500 years ago are still wealthy today, but this was not the norm.

That makes the UK seem pretty corrupt. Do you have any sources for this?

You would need to get a record of who was wealthy 300 years ago, track down their descendents, and see who among those descendants is "wealthy" by some measure today.

You might also need to take into account things like inheritance and birthrights. I imagine first born sons of first born sons might preserve more of the wealth.

Also, what proportion of the rich today are "new rich", and how newly rich are they?

Define it however you like but a lot of UK land has stayed within the same families for generations.

It's not unusual by any means. There was a study on, I think, Genoese families that showed that wealth had more or less stayed within the same families for 300 years.

Inheritance isn't normally a corrupt practice, and the best way to get lots of money is to start with lots of money and accrue it.

I'm not convinced the ultra-wealthy of the 19th century are not, largely, very wealthy today.

https://qz.com/694340/the-richest-families-in-florence-in-14...

> luck/possibilities/grit

It doesn’t take any of that to grow existing wealth. You just invest it. You pay someone to do it, but honestly even just an ETF does the trick.

The article is an ad for the author's financial advisory services. And yeah, I didn't like it either.

Do you have a better estimate for the percentage?

I share your skepticism because there's no source, and indeed the burden should be on the author of such an article, but you seem to be making strong unfounded statements yourself.

Probably Piketty has some relevant data?

Its well known that family companies have difficulty lasting more than three generations exceptions Like Bacardi and Charles Wells are rare.

Also based on my Uncles experience the family Bookkie business (Birmingham UK) did not last to the 3rd Gen - ok the transition to legalization wasn't handled well by generation 2.

The figures (70% for second generation, 90% for third generation) has been reported by media article after media article over the last decade (at least). I see them all the time.

Some articles attribute the source to the Williams Group Wealth Consultancy. Of course, they are selling their wealth management services so they have an incentive to "juice" the numbers by leading questions and nonrandom samples.

I've never seen the actual "study" so their methodology can't be subject to scrutiny. I suspect it's an informal survey of a specific population.

Financial articles in general tend to be extremely low effort and low quality. I wouldn't attribute anything more than shitty writing, which is basically 90% of financial articles.

It’s trivial to identify a statistic to support the authors claim. People inherit money all the time, ranging from sums insufficient to cover funeral costs - to enough money to last 1000 generations.

So coming up with “70% lose their wealth” amounts to choosing a threshold on inheritance where people are inheriting good money, but not extreme sums.

It’s easy to burn a 2 million dollar inheritance, and pretty much impossible to lose a billion dollar inheritance.

Can be done, from at one time 3 billion to not that much: https://en.m.wikipedia.org/wiki/Madeleine_Schickedanz

Chances are that by the time wealth gets passed on a sum in the same order of magnitude has been already saved by the (grand)children. Probably the greatest leverage is at a young age. Of course this requires teaching about personal finance.

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