As The World Gets Richer, It's Time to Re-Examine The Perils of Generational Wealth

But not for the reasons you think.

This goes well beyond nepotism.

In a pre-entrepenrurial world where families were the only source of wealth and protection, and wealth was achieved primarily by plunder and enslavement, being on the right side of the bullwhip was a critical factor in ensuring one’s happiness and “success” in life.

But even in these “primitive’ cultures, the effects of inherited wealth were the same as they are today: indolent, bored, neglected children who were too little tested by life and too much tested by academia and tutors to ever live up to the glories of those they inherited their wealth from.

From the Last Czar to Hamlet himself, the sons of conquering heroes (in business or in war) are almost always the same. They inherit wealth and power that they themselves did not earn, and 9 times out of 10 they flail professionally and suffer internally from the gnawing sense of what we now call imposter “syndrome,” which is simply a term psychologists use to coax more money out of the imposter class, just like everyone else winds up doing.

These people fell like imposters because they ARE imposters. They live the lives of those who have toiled and torn to get theirs in a cruel and thankless world, except without any of the toil or tearing that built it.

But still, for pre-entrepreneurial people, the security trade-off was mostly worth it because there was no better way to get money, status, and security. If you didn’t inherit it, you would have to war for it, and the most successful conquerors made themselves so by being so victorious in war that there were no enemies left for their sons to fight.

The “aristocracy” has been roundly mocked throughout all of history as being clueless, lazy, cut off from ordinary life, and utterly incompetent. The political class in almost any country fits this stereotype perfectly. In America we call them “career politicians” with a sneer - people who have never done anything productive and simply extract money from working people in order to worsen the quality of citizens’ lives by funneling the people’s hard-earned money to cronies, friends, and big businesses who don’t even need it.

In France, political leadership is a “career track,” taught in school under the laughable rubric of political “science,” something that can be measured - like gravity or the molecular composition of table salt. These politicians are groomed to lead the masses, yet they have never worked a day in their life to create something that wasn’t seized involuntarily by those self same masses. They are rightly viewed as bafoons because their power was granted though insider channels (usually inherited) and not hard won by the successes and failures that lead to mastery of life. Some lower-classmen win positions in universities through intellectual “merit,” but most are simply the heirs of people who couldn’t be bothered to properly raise them.

So the effects both on the individual and society of “unearned wealth” are largely negative.

Inherited wealth people are easily swindled by fake charities, dumb investment schemes, and worse. They have no sense because they have no experience. And their gnawing feelings of ineptitude may be the only thing they have actually *earned* in life.

But for most of history, this was literally “rich people’s problems.” Most people were born poor and would die poor, and so for millennia, they haven’t had to grapple with the real problem of wealth and the next generation.

America is the land where more people than anywhere (besides modern day China) have gone from rags to riches by the sweat of their own brow. And every year there are more nouveau riche whose bootstraps are still raw from the tugging. And good for them. But most of these people who have succeeded in their own lives wind up failing spectacularly when they it comes to the lives of their children.

Many upwardly mobile, because it is not profitable in the grind to riches, lack self reflection. When they see their children, they either want to mold them into carbon replicas of themselves (without allowing the child to earn the experience and wisdom for themselves), or they want to “give them the things I never had growing up,” without realizing that the lack of those exact things is what motivated them to their own greatness. Taking away any ambition from their children, other than academic performance, removes exactly the motivation the child needs to live their own successful life, whatever that turns out to be.

And there are, of course, far worse examples, where parents simply use their children as status accessories, like LA Starlet “purse dogs,” to show off that their kids went to such and such prestigious school or did some other very expensive activity that shows the parents in a “good” light (to other shitty parents) but simply sucks the life and initiative out of their children. One sees this widely in mid- to top- tier academia and even more widely in the performing arts. The children’s lives are sacrificed to bolster the image the parents wish to project of their success, no different than a gaudy McMansion or an ugly (but expensive) designer shirt.

Many parents couch this soft castration of their offspring with vicious statements about preserving “the life to which you have become accustomed.” They spoil and pamper their children beyond all reason, and then subtly threaten to cast them out of the nest into a harsh world for which the parents have completely failed to prepare them - thus preserving the child as indentured servant to the parent’s social standing. It is this cruel cycle to which I seek to draw attention.

Because the worst part of this jail-described-as-a-palace for children is that they become terrified of failure. Their success is validation of their parents’ success, and they are mere performance pieces to bolster their parents’ image of themselves as successful. The kids are nothing more than the means to this end. And they are acutely aware of it.

So they fail to do the one thing required for success in life: They fail to fail.

Note: This symptom has been greatly exacerbated by the rise of “mommy culture,” which has cropped up in recent decades, particularly of mommies who themselves (like their children) achieve unearned wealth through inheritance or, the far more popular model, divorce (and no, a decade of Birthday Blowjobs is not “earning”). But it can also be exacerbated by married mommies who run their husbands just as hard as their kids.

Women are far more status obsessed than men because their sexual status is largely something out of their control. So status failure for women is far more “personal” than it is for men, who eventually understand that their status is earned and not given. For women it is the opposite. So women are ever more ruthless in its pursuit.

And as more wealthy mommies seek to bolster their bona infides by having their children’s fake perfection compensate for their own fake status, the problem compounds even further.

Academia of course is the worst cauldron for this kind of useless perforative perfectionism. Getting an A on a paper teaches you nothing about life , but it DOES teach you to be afraid of failing or failing out. Academia, particularly ‘high” academia, has nothing to do with “getting a good job” or putting yourself in the right class of people anymore - particularly not for the entrepreneurial class who will drive almost all the growth in the coming century. It is a status booster through and through for the vainglory of the parents. And beyond the crushing debt it imposes on its graduates, the psychological and opportunity costs are simply immeasurable, both to the young and to the society they will grow up to impotently criticize as anti-entrepreneurial socialists.

So why am I griping about this?

I’m glad you asked.

We live in a world where millions - and hopefully soon billions - of people will achieve wealth and status undreamed of by their ancestors. This is something we should all celebrate.

And to boot, these billions will not achieve their lucre (primarily) through plunder as the kings of old did, but by seizing peaceful and productive opportunities and creating a world and wealth pot of their own.

But because of this mad dash to global wealth that we are experiencing, more people than ever will have to grapple with the problem of how to not fuck up their children in the process. And for this task, they are woefully unprepared.

How will the newly global rich give enough room for their children to earn their own place in the world, to feel good about their accomplishments (extraordinary or otherwise), and to build savvy, self-responsible selves who are secure about their abilities internally and able to serve the world according to their best gifts and talents externally?

In other words, how do we not kneecap our children with the best intentions and the worst excesses of our wealth?

Do we stand a chance of breaking the cycle of Weak Men Making Bad Times for every second generation of self-made men and women?

The obvious answer is no. We are dumb animals and unconsciously repeat the failures of our previous generations, occasionally rescued by super hero men who pull us out of our self-made death spiral. Ok, maybe.

But the same qualities that allow the new self-made men to self make (discipline, restraint, making hard choices for larger gains), may be just the stuff needed to save the next generation from turning into a global generation of Hipster Hamlets ready to sink the civilization in their own despair.

Here are some solutions:

1) The Sting Method - Don’t give your kids anything. Sting was famous at one point for publicly declaring that he would be donating all of his wealth to charity. He had apparently seen enough of the results in the torpid lives of wealthy children, and so loved his children that he spared them the same fate. How he managed the transition from dining at Sting’s golden table at home to dining on Ramen noodles in college is something I have not researched, but ‘the life to which you have become accustomed” is a problem that needs to be grappled with even when it isn’t maliciously applied. You can’t expect wealthy people to live in a cardboard shack just so their kids don’t get used to running water. In the Sting Method, this needs to be addressed in a realistic way.

2) The Death Tax Method. Megan McArdle, the famous (erstwhile) libertarian economist instinctively hates the inheritance tax. It is a giant fuck you to a nation’s most powerless citizens: the dead. Having worked all of their lives to earn something worth taking, they are posthumously unmanned and their wealth halved for the gluttony of the state. Yet even McArdle confessed that after seeing the effect of large inheritances on her rich kid college friends, she almost believed that rather than the normally obscene 40-50%, it should be 100%. Stealing money from productive people to prop up a wasteful government would be a price worth paying to save these kids from the fate of unearned wealth.

3) Talk it out with your kids and tailor your approach to them directly. This is for the thoughtful parents. The ones who don’t need to read this article, who have real relationships with their children, and who really raise them - one way or the other. The trust in this sort of relationship, along with the genuine one for each other so often lacking in wealthy families, is enough to guide a private decision that makes sense for them. And it’s none of my business what it looks like or how they come to it.

4) Matching inheritance. I don’t like this one at all, but it’s least worse than a flat out grant at death. The idea is that as the kids earn their own money, the estate kicks in matching funds at a given multiple. To me this gives us the worst of both worlds between the brdensome inheritance and none at all. Because if you inherit $1 for every dollar you earn beside your colleagues, then those people never become your colleagues. You will always be twice as rich as them, and you will earn all the resentment without the independence and insularity that real wealth can provide. It is also a means to micromanage the lives of your children from beyond the grave, maintaining your hold over them even as they are forced to toil to continuously earn your “approval.” It is a horrible model, but still one worth condisernig for our purposes. (Note: this model is a kissing cousin to the staged out inheritance where greater amounts are available simply as time goes by. This has a similar ill effect of creating arbitrary life bench marks. If one knows that Fuck You money will show up in your account in 5 or 10 years, then simply waiting out the clock seems like a much better option that grinding it out at Starbucks or risking the humiliation of trying and failing to launch an independent enterprise. It is a scheduled hamstringing of the child’s ambition and a terrible model.

5) Forget “Generational Wealth”: Teach generational entrepreneurship. Instead of passing along mere money, pass along - while they are still alive - the skills and attitudes that you eared you your wealth. But don’t just regale your kids with stories about how awesome you are. MENTOR them and let them earn the fruits of their labors, not the scraps from your table.

The biggest real risk here is that your kids may actually usurp you - and quicker than you think. Classical mythology is filled with stories of fathers literally eating their children out of fear of their own irrelevance. And this fear is real. There is nothing easier for a parent than to maim their children’s success - without even leaving a bruise. It is up to the parents to allow their love of their children to overcome the very real ego woes of investing decades in a life that is superseded by someone in their first decade of life. Perhaps a profit share model is the best in these cases to align the incentives of parent and child to make sure the parent continues to outearn the child until a certain point - just to maintain order in the household and as recompense for the overall investment the parent makes in the child. This solution lies somewhere between unsentimental and outright ugly, but incentives do matter, and if we don’t want parents to unconsioclulsy sabotage their own children behind their backs, some sort of mitigation strat4gy should be in place.

But for the health of society, having innovative, free, and forward looking kids driving the wealth of the culture would lead both to stratospheric growth and also the staving off of the indolent “weak men” phenomenon that crushes societies passively from within. By preserving and passing along entrepreneurialism rather than mere dollars, we encourage the former to the point that the latter may barely make a difference. And this solves the problem for children, parents, and society as a whole.

6) Which leaves into the very best solution, but the one that most of us are powerless to achieve on our own. Do away with child labor laws and compulsory schooling. Let the kids start earning money when they are younger and still under their parents’ protection. As in the above example, this is the greatest gift you can give your children - the gift of structured failure, or in layman’s terms: play. This works for wealthy families and even more so for poor families, where the opportunity costs (to say nothing of physical danger and exposure to gang culture, which itself ignores child labor laws,) of wasting years in school without earning money (again, other than by whoring or drug dealing) sets children up for even greater life failure than their impoverished surroundings would have otherwise. Erasing child labor and mandatory schooling laws gives children a real shot at becoming financially independent in their 20s because as soon as they were weened from the teat, they can start working productively for themselves, not serving as chattel for teachers union pensions.

Long gone are the days when working options for the young were limited to dangerous factory work or being chimney sweeps. Heck, most modern factories are barely dangerous at all, and there are billions of dollars available for the earning in completely safe fields at which kids naturally excel, from gaming to programming to educating geezers on the latest technology in which they are naturally fluent. There are zero good arguments anymore for keeping children out of the labor force and for forcing the to waste way their childhoods osmosing loser behaviors from the risk averse teacher class and self destructive behaviors from their peers. Free the young and watch society flourish.