| By Bill Bonner Some people, notably Warren Buffett, believe society is better off if each generation has to earn its own way. Buffett believes people who prove they can earn wealth should be the ones who have it and control it – not those members of what he calls “the lucky sperm club,” who inherit it. Presumably, this meritocracy of wealth producers would lead to better decisions, faster GDP growth, and a more prosperous world. But to achieve this brave new world, Buffett suggests that the government tax the wealth of each dying generation so members of the next one can begin on a level playing field. You can see the nonsense of this immediately. The wealth that passes to the government doesn’t just sit there until the brightest young entrepreneur or the sharpest new investor claims it. Instead, it is allocated to whatever cockamamie project the government favors at the time. It will not be the wealth producers who get the loot; it will be the cronies, the insiders, the privileged elite and their client classes that get it. That is, it will go to the consumers of capital, not the creators of it. The Habit of Wealth The world is probably a better place when productive capital is not drained away by the government. Families trained to invest wisely and to preserve their wealth are almost certainly better custodians. They are much more likely to retain and enhance their capital over generations. Why? Because the skills necessary for building wealth – including the habits and the customs that allow you to hold onto it and pass it along to the next generation – can take a long time to accumulate. Why are the Swiss so wealthy, for example, and the Bolivians… or the Zimbabweans… or the Albanians… or the Baltimoreans… so poor? The Swiss have the habit of wealth; the others do not. What is the "1170" Investment Account? There are some skills that take more than a generation to acquire. Great hotel chains, for example, are often in the hands of a single family for many generations. A young man who grows up in such a family works in the hotel from an early age. He sits at the dinner table when important issues are discussed. He learns from his parents and grandparents. He has the hotel industry “in his blood.” That is also true in the publishing industry (in which my family has an enterprise). Or the entertainment industry. In Hollywood, there are some skills that can take years of technical training. Lighting. Sound. Camerawork. There are also many habits and attitudes that make showbiz different from other businesses. Some are subtle and almost invisible to outsiders. Some are matters of traditions and connections that “open doors” for young people. People who grow up in the milieu – in showbiz families – understand the codes. They are more likely to have the skills and contacts necessary to succeed than new arrivals. | Recommended Link | | The 32-Second Trading Method That Helped Jeff Clark Retire at 42 (Live Demo Below) Hi, my name is Jeff Clark. For the past 36 years, I've helped people from all walks of life retire wealthy. School teachers… doctors… even the occasional pro athlete. But I haven't done it the usual way… My method is different. It's unlike anything you've probably ever seen before. We're unveiling it right now for just $19. Want to see how it works? | | | -- | No Such Thing as a Level Playing Field In America and France, there is a surprising (to me) movement against homework for schoolchildren. At first, I thought it was a joke. But my wife Elizabeth explained that it was motivated by the same desire for fairness that makes Warren Buffett want higher inheritance taxes. Children of certain parents get a lot of help with their homework and do better in school. Other children do not. They may get no help and are likely to do worse. The levelers want to eliminate the homework advantage – by eliminating homework altogether. Then, all children will be able to compete on a level playing field. None will get help with homework, because there won’t be any homework. They misunderstand how life works. There is no such thing as a level playing field. Every field is tilted in one direction or another. If you take away the homework, you do not level the playing field. You just tilt it in another direction. The most successful children will be those who understand things quickly and easily, rather than those who work hard on their homework. Viral: 1.3 Million Folks have Already Seen This Message. Of course, it wouldn’t be that simple. The marginally engaged parents may welcome the absence of homework. They won’t have to spend hours helping their children. But the typical “Asian tiger” mother will not stop trying to push her children forward. The unintended consequence of such legislation would probably be that parents who ignore the ban on homework and find ways to help their children after school – math camp! – would give their children an even greater advantage over the “no homework” children. Everybody enters life with some advantages and disadvantages. Some you see and some you don’t. Like tiger mothers, our goal is to give our children and grandchildren whatever advantages we can. And one way of doing that is by helping them understand how wealth is made… and kept. We are not really trying to make the world a better place. We are just hoping that our world will be better if we and our children and grandchildren are able to control capital and use it well. Primum, Non Nocere An old friend set up a family foundation. He gave it a modest motto: Primum, non nocere. “First, do no harm.” He is not naive enough to think that just because he intends to do good, good will inevitably result. We’ve seen over and over – in foreign aid programs, in domestic social welfare, and in rich families – that giving money to people is not necessarily a good thing. Foreign aid undermines local businesses. Social welfare programs remove the incentive to work. Inheritances often have the same effect: The children become “trustafarians,” with few skills, little self-confidence, and even less self-esteem. So my friend undertakes his own do-good programs very carefully, with his eyes wide open. We do the same. But we also recognize that since all wealth ultimately must be owned by someone – no matter what we do – our wealth will change hands. If it goes into the pockets of welfare recipients or foreign aid programs, we will not see the damage it does. But that is comfort only to a scoundrel. Instead, we take the responsibility that my friend takes to direct our wealth to people who will not be harmed by it. We hope to make them stronger. That is a large burden… but it is one we cannot escape. We will try to do the best we can… Regards, Bill Managing Editor’s Note: The essay above is an excerpt from Family Fortunes, a book Bill wrote a few years back on the subject of preserving family wealth. If you liked today’s essay, I encourage you to consider Bill’s latest book, Win-Win or Lose… Bill says it’s the last book he ever intends to write. He also believes it’s his most important book. It’s a history book, a psychology book, an investment manual, a business book, a self-help book, and a novel of the future – all in one. His book will help you make sense of what’s really happening in 2020 (and beyond). Go here to find out how you can get a limited-edition hardback copy.
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