The One Sign You Will NOT Be Rich



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This post will not be popular.  This post may not be well received. Why? Because it is not about unicorns and rainbows, and little leprechauns carrying pots of gold to your house, if you just work harder than everyone else.  This post is about reality...but if you keep on reading, this post is also about hope.

Years ago a friend of mine at UC Riverside explained to me that by looking at someone she could tell if they were going to be rich or not.  Apparently, this is a common question in the UC system because the same question was posed in Berkley as well. I thought that was probably the stupidest comment I had ever heard, but I still asked, "Pray tell me oh brilliant economist, who amongst us will be rich and who will not?"

She said, "That's such an easy question to answer.  The people whose parents are already rich. Duh!"

Well first of all,  I felt inclined to give her a friendly punch on the arm because she made fun of me, but secondly the answer did seem pretty obvious.  People with access to capital tend to pass on their wealth to their children, and regardless of whether those children work hard or not.  Wealthy children have access to more resources for earning wealth, such as education, capital, and investment advice.  Do you think the Kardashians worked harder than anyone else to become rich?  Absolutely not, but they did take advantage of opportunities available to them to create even more wealth. 

One of the most recent books which mentions the subject of wealth and inheritance is, "Capital in the Twenty First Century", by Thomas Piketty.  A link to his book online can be found here .  Piketty's book will no doubt be debated by economists, however his conclusions regarding the accumulation of capital by the wealthy and inheritance are very interesting:

"Whenever the rate of return on capital is significantly and durably higher than the growth rate of the economy, it is all but inevitable that inheritance (of fortunes accumulated in the past) predominates over saving (wealth accumulated in the present).... Wealth originating in the past automatically grows more rapidly, even without labor, than wealth stemming from work, which can be saved. Almost inevitably, this tends to give lasting, disproportionate importance to inequalities created in the past, and therefore to inheritance."

I read this and immediately thought, "I need an economic translator". Yet after dusting off my old economic thinking cap, I came to one pretty simple assumption.

One sign that you will NOT be rich, is that you were not born rich.

Yes you can work harder than everyone else, and hope that this will reverse the trend, and you can master a craft and work harder at perfecting it then all the other master craftsman in your market.  But your still fighting against a trend.  To further add insult to injury, in a study done by the Pew Charitable trust in 2013, if you are born into a lower income household, you have a 4% chance of becoming a high income earner.  Just 4 percent! WTF?

As I mentioned before, many of you will not like this post, because the American Dream is for you to be rich.  Not well off, but rich.  However many of you will never be rich...NEVER.  So in light of the increasing economic evidence working against you, should you just give up on your dream?  HECK NO!

"So you're telling me there's a chance!" - Lloyd Christmas

Despite the changing economic landscape and the trend towards the consolidation of wealth, there is a chance, albeit a small one, that you can be rich.  The evidence is somewhat overwhelming, but it doesn't mean you should just give up.  However, it does mean you're going to have to overcome a lot if you want to be rich.  But isn't that really what the American Dream is all about?

Consider all of the dirt poor people who did make it out of poverty to become rich.  People like Howard Schulz, Larry Ellison, Oprah Winfrey, and Harold Simmons.  All these billionaires started out in more humble beginnings than most of us, but they became extremely rich.  For god's sake, Larry Ellison owns an island!  And not just any island, but a tropical island.  How many people do you know who live on their own tropical island but aren't named Gilligan?  It may be improbable for many to become rich, but it's not impossible.

There is not just one sign preventing many of you from becoming rich, there are many.  And despite the best efforts of CEO's to encourage you to work harder than anyone else to become rich, which incidentally helps them become even more rich.  You should focus on working hard for yourself, not anyone else, and ignoring all those signs. 

If you run the red lights of life, you're likely to get where you're going a lot faster than anyone else.

But please be sure not to run over everyone...Have a great day!