Tuesday, July 25, 2017

Does Inherited Money Ruin Lives?

Quora is a social media website founded by two former Facebook employees. According to Wikipedia:

Quora is a question-and-answer website where questions are created, answered, edited and organized by its community of users. The company was founded in June 2009, and the website was made available to the public on June 21, 2010.[3] Quora aggregates questions and answers to topics. Users can collaborate by editing questions and suggesting edits to other users' answers.[4]

You can also reply to other users’ answers.

Recently from Quora: “What are the advantages of growing up wealthy (in the top 1%)?: Also what are the cons of growing up rich?”

A good answer came from Jenny Hawkins, speaking of her two cousins, each of whom inherited $1 million at age 21. I left this comment on her answer:

I like this essay, and I agree with much of it. But I must challenge this one statement—“I have seen that money ruin their lives.”

Did the money really ruin their lives? Or did these two kids squander the opportunity the money gave them? I think the latter.

I have a friend who inherited a well-established, thriving engineering business from his father. He had all the “advantages” of wealth. He went to an elite private school, then on to Princeton University. Far from squandering the opportunity, or even resting on his laurels, my friend worked hard and built the business into a size many times what he inherited. My friend eventually sold the business and retired a wealthy man. But to this day is an unspoiled, “down-to-Earth” guy with good values.

Or consider David and Charles Koch. They inherited a business worth $23 million. Did they squander the opportunity? No. Over a period of half a century, they built Koch Industries into a $100 billion dynamo. Did they lose their middle class values? No.

Most people I know started with little or nothing and achieved some level of economic success.

Here’s the key: “Middle class” is not defined in dollars. It’s defined in values. As Jenny observes, American freedom provides maximum opportunity for self-direction and self-fulfillment. But it is up to each of us to seize the opportunity that freedom provides. The same goes for money. Self-reliance is the hallmark of the American middle class. Did those two cousins make a mess of their lives? Apparently. Do a lot of rich kids squander the opportunity they’re handed? Probably. Blame the parenting. Blame the kids. But you shouldn’t blame the money any more than you should blame the freedom. As a character in Atlas Shrugged observed about inherited wealth, “

[M]oney is only a tool. It will take you wherever you wish, but it will not replace you as the driver. It will give you the means for the satisfaction of your desires, but it will not provide you with desires. . . .Money will not purchase happiness for the man who has no concept of what he wants: money will not give him a code of values . . . and it will not provide him with a purpose. . . . Money will not buy intelligence for the fool, or admiration for the coward, or respect for the incompetent.

Only the man who does not need it, is fit to inherit wealth–the man who would make his own fortune no matter where he started. If an heir is equal to his money, it serves him; if not, it destroys him. But you look on and you cry that money corrupted him. Did it? Or did he corrupt his money?

I believe that if we continue to enjoy substantial political and economic freedom—and that’s a big if—it is up to each one of us, whether we are born into wealth, poverty, the “1%,” or whatever we conceptualize as “the middle class,” to make the most of whatever “hand we are dealt.”

Related Reading:

Francisco’s Money Speech—originally published in Atlas Shrugged, © Copyright, 1957, by Ayn Rand, reprinted in Capitalism Magazine.

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