Millennials Are Now As Wealthy as Baby Boomers Were at the Same Age

Excellent writing as always Joshua, thank you for taking the time to write this. If I may ask, what is your opinion of the Fourth Turning? It's been on my To Do list for a WHILE.

I think - and I could be misremembering here - that I first encountered the concept about twenty years ago. The problem I have (and please hear me out on this because I know how it is going to sound) is that:

1. I absolutely believe there is something to the idea of generational turnings, both on a small scale and a large scale.

On a small scale, for example, I have long figured out that there is a 7 to 9 year period during which all of the lessons of the stock market - and all the past follow - start to repeat itself. It happens because people who are in their teens join the work force, get jobs, start accumulating capital, and weren't paying attention to, or had no knowledge of, the things that came prior. For example, the average 25 year old in corporate America right - college educated, degree in hand, eagerly tackling their work as they trade in a brokerage account or invest in their new 401k - has no first-hand knowledge of the lessons of the Great Recession. They were in 3rd grade when it happened. It's meaningless to them except to the extent in may have helped or harmed their family.

On a larger scale, you see this with wars, fights against disease, etc. For example, as I mentioned in another comment elsewhere, it isn't an accident you are seeing absolute idiots come out of the woodwork to fight against polio vaccines in schools now that the generation which suffered from polio has passed away. This was a topic that united the most staunch conservatives and liberals but the folks who lived through the horrors are gone so now it's just some sort of idea; some "oh it won't be that bad, don't tell me to do something I don't want to do."

2. That said, on the actual Fourth Turning theory as written is nonsense. Absolutely pseudo-scientific garbage. It takes general patterns, and a generally true idea about generational turnover that I think is useful, and tries to put them into nice little boxes that, I believe, to some degree alleviates anxiety for folks who want to feel like they need or want to know what is coming next. The problem is, it just doesn't work.

As a classification system, it's just not useful. At all. I think it actually is a bit dangerous because it forces complex nuance to attempt to fit into these rigid boxes that are entirely arbitrary and not borne out of any universal truth. For example, just a few cases ...

The "High" period supposedly ended with the Kennedy assassination on November 22nd, 1963. But what if October 27th, 1962 had played out differently? It has been described as the most dangerous day in human history. If civilization had been wiped out with a nuclear weapon then ... what? We just skip a few steps? Go back to the beginning? What good is a classification system treated like scripture if it is so flimsy it doesn't actually work?

How about the two-and-a-half century decline of Rome?

What about societies that have strong institutions but no one outside a minority ruling class agrees with what is happening? More than a few civilizations are hijacked by monarchs or dictators who rule with an iron fist for a long, long time - far beyond generational constraints - despite nearly no one agreeing with it.

Why does the 1960s and 1970s uprisings over segregation count as an "Awakening" but the multi-decade legislative and political fight for LGBT rights, which as a percentage of the population was at least comparable if not larger, fall under the "Unraveling"? (Spoiler alert: There is no logic - no rhyme or reason - because it was written in 1997 and the idea that we'd ever let gays get married was mocked and ridiculous at the time so they assumed all civil rights fights that could be won had been won.)

There is just no substance to it. It's like tabloid sociology. I think it's good for selling books but not for understanding the world.

Thank you for taking the time to reply. Sounds like one book I can cross off my To-Do List!

Very interesting! How would you compare the permanence factor of the wealth that is in the hands of millennials vs. baby boomers?

Generational differences can arise due to pensions, the lived experience of prior stock market crashes, the types of investments held, attitudes towards contracts (such as paying mortgages when temporarily underwater), etc. Given the brevity of prior shocks, there is an argument we've been in a 15 year bull market run and perhaps it is hard to surmise any generation's "grip on wealth" without an extended recession in reasonable memory. If your wealth comes from staying alive each month and collecting a lucrative pension, it's hard to mess that up short of divorce or other legal problem. But if your wealth consists of owning high P/E tech stocks, you can undo almost your entire life by selling when the P/E ratio shifts from 40 to 10. Of course, someone has to be buying that asset at 10x earnings so maybe it would just be an intragenerational transfer.

As an aside, and I know I have said this before, but it is a shame that leading newspapers don't engage with cultural-economic issues with anywhere near the sophistication of your blog.

These are great questions, and excellent points. I think only time will tell. One key factor is that a bunch of wealth will be tied up in homes, which will remain, for a lot of people, their largest single asset. For those whom this is not true - who own, say, a house at 1x but a portfolio at 5x or 10x, the behavior pattern that tended to get them to that point is likely to indicate that they are more rational when it comes to owning and acquiring assets. Exceptions will always exist, but I think on a group level that is true.

One possibility is that we are living through a moment where a lot of these high-tech companies mature and become cash cow dividend machines. Meta Platforms and Alphabet have both started distributing cash recently. The question will be what role with dividend payouts play in retaining investors similar to what we saw with companies like Procter & Gamble, Kimberly-Clark, etc., in the past.

I remember when Microsoft started its first payout back when I was in college decades ago. Let's say a hypothetical investor went back to 2003 and paid, I don't know, $24 per share split-adjusted for the stock. Since then, it's paid $3 in one-time special dividends, $0.24 in annual dividends, and $25.60 in aggregate quarterly dividends for a grand total of $28.84 in cash. So our investor has received all of their money back - they they presumable invested elsewhere and it, itself, has compounded nicely - plus they got an extra $4.84, or 20%+ on their cost, and they still own the stock.

Even better, today, the quarterly dividend is now $0.75, or the equivalent of $3 per annum, so that's like getting 12.5%, or 1/8th, of the initial outlay back in 2003 back every year. Lots of early investors very well may never sell their Microsoft but, rather, pass away with it on the books.

The problem with this scenario is Microsoft didn't experience the type of crash you mention. Instead, the stock went sideways - literally nowhere - for the decade after our hypothetical investor bought it. For some folks, it's easier for things to stay the same whereas a crash causes them panic. (I know you are aware of this but dear lord, the average stock used to fluctuate, on average, by 50%+ more each year. Each year! It was just part and parcel with investing. I think we're returning to that lately. To give you an example yesterday from my own life, on our asset book yesterday, Starbucks was declining by 15% to 17% throughout the day but the overall asset book itself closed the day down something like 0.05%, which was statistically insignificant. It was the third time in the past week something like this has happened with one or more shares going wildly in one direction or another but the general portfolios not changing. I've thought, more than once, that this is seeming much closer to the experience of investors in the 1980s than the 2008-2020 period, give or take.)

Anyway, back to Microsoft. It looked terrible over that time but it's because it was so expensive. The earnings kept catching up as the share price went sideways, compressing the valuation. Folks eventually woke up to the fact it was cheap, the transition to software-as-a-service began, and it increased about 16-fold over the dozen or so years that followed.

So, if the investors you mentioned are sitting on large capital gains, and they start receiving big payouts over time, they may keep the stock as they transition to retirement with the passive income as an inducement to hold. We may someday see future generations talk about their grandparents' bizarre emotional attachment to Google or Facebook like my generation saw folks who held onto their Coca-Cola or McDonald's.

Your example of the times tables hits home. I pulled my kids from CA schools, where they wanted to dumb down math and teach my kids about the problems of their "Whiteness." I have no doubt my 3rd grader nailing 11x12 in that half second (We love flash cards) would have labeled her as a Klanswoman, keeping her darker friends down... somehow. We fled the West Coast, same as you're doing and it was one of the best decisions of my life.

Have you studied the rapidly growing "school choice" movement that is growing in some sub-circles and states today?

It seems like this *could* be related to the education crisis you mention in this article. Either the high-income, high-net worth, and high education elites opting out of the existing school system or seeking an alternative means of educating their children. On the other hand, perhaps it's NOT driven by the high earners because high-income earners have no need for subsidized education outside of the public school system. They can afford it themselves.

Regardless, *IF* this trend grows and multiplies across the country over the coming years, it would seem possible that we see a further bifurcation in education process and perhaps outcomes across groups that opt-in or opt-out of the traditional system.

Even if we don't discuss or pencil out the reason *why* this trend is progressing, it seems clear to me that the impacts are going to be profound. For better or worse, it seems that some groups are opting out of the current system.

I think to really understand what is happening, a person needs to divide the concept of school choice into two different camps.

On one hand, you have the really successful, academically rigorous multi-disciplinary liberal arts educations that are sometimes, but not always, correlated with specific religious denominations such as those established for Catholic families or Jewish families. Many, if not most, families attending these institutions are rational, scientifically-minded, and make decisions based upon data and analysis. They focus on education as a means for self-enrichment and career advancement. The parents are successful and intelligent. They view the tuition as a good investment. Religious instruction is sometimes, but not always, part and parcel of the deal.

On the other hand, you have a growing homeschool movement. Leaving aside traditional homeschoolers - some of whom do much better academically - and looking at what has been occurring since around 2000, there is something fundamentally different at play. My impression based on watching it unfold is that there is a significant correlation with non-denominational religiosity (particularly in the area of creationism) and anti-vaccine sentiment as primary drivers, not educational quality. In other words, it's more akin to having certain groups try to restrict their children from the benefits of basic education in the name of "protecting them" while, paradoxically, harming them long-term as a mechanism for control. (This started long before Covid because it got my attention back before we started the firm and lived in Missouri. Researchers were trying to answer this a dozen years ago - e.g., see Homeschooling parents' practices and beliefs about childhood immunizations, which was published in 2012.)

Those two groups have wildly different motivations and worldviews. The first group is going to consist of children who grow up to run society - they will be well-respected physicians and attorneys, scientists, business owners, etc. The second group is largely going to be self-defeating and not contain a lot of winners as most folks would define that term. They will be, for all intents and purposes, completely non-prepared for the world as they find it and hold no hope against the first group (or students in really good public districts).

The problem is the stupidity of the second group puts us all in danger, partly because the internet has connected them so they are no longer willing to opt-out of society. For example, I've been watching the New Hampshire Republican party in recent weeks as they attempt to change the law in the Granite State to no longer require the polio and measles vaccine. The outcome could be so horrific, so unbelievably evil, that it ends with dead children piled in morgues. As a result, I've been having philosophical discussions with people about what is the moral threshold point at which a violent response is warranted and justified? Seriously, questions our ancestors answered and settled are going to arise again. This is child endangerment far greater than alcohol or drugs. Folks are going to have to bury their children - completely innocent people who had nothing to do with this - and I can't help but think that the generation of polio survivors that is right now passing away as the last who remember would have executed these people. Being anti-polio united even the most fervent Republican or Democrat in generations past. This should be a non-negotiable line in the sand for people. Someone doesn't get to endanger everyone around them with disease, disability, and death because he or she is a moron. And that's what these people are. There is no use sugar coating it.

I absolutely agree with you that the results are going to be profound. The kids in the school districts where parents have created barriers for others to enter (e.g., wealthy districts where the public school is de facto a private school) and/or private schools proper will eat the lunch of the rest of society. A big part of this is that the better institutions have been empowered to fail kids, removing the problems for the sake of the group.

Do you know why there is such a high correlation between those high performing characteristics and Catholic/Jewish families & educations?

As I've pursued the goal of providing maximum advantages to my children, I've considered the options of private schools. In doing so, I've been surprised at how the local private schools of positive reputation in particular are catholic private schools.

As I'm not Catholic, this has been of interest and note to me. The school in particular doesn't limit students to Catholic backgrounds, so it hasn't been eliminated from consideration. Even the religious instruction isn't a limiting factor, but in some ways could be considered a positive, if only for the selection effects associated with peer groups, and such.

I've just recognized that I don't understand much of the history here.

This is a huge question - one I could not possibly do justice to in a comment, but the general conclusion I've come to can be imperfectly summarized as follows:

Not all cultures are equal. Not all cultures are worthy of respect. Some cultures are morally superior. Some cultures are superior in terms of the outcome they achieve. It is possible for certain cultures to be effect and immoral. It is possible for certain cultures to be morally just and superior in terms of outcome.

A nation typically has an overriding culture (in some cases, this is not true). Then, within that nation you have multiple interacting sub-cultures. For example, there is some fairly convincing argument that the 19th century progress seen in terms of economic prosperity and civil rights moving forward so dramatically in the United States was the result of a unique mix of Calvinistic protestant work ethic and the aftermath of the Age of Enlightenment as the nation's founding was still a fairly recent memory. In other words, a scientific bent combined with the idea that God Almighty was on His throne and required a person to work and better himself - that idleness and recreation itself contained the seeds of sin - had a unique chemistry in terms of turning the United States into a nation of workaholics that simply outproduced the rest of the world. I am grossly oversimplifying it, but there is substance there.

Given historical patterns of discrimination, a certain portion of Catholic and Jewish families that wanted a better life for their children understood that educational attainment was the primary way to achieve economic security. Keep in mind this was a world where Benjamin Graham, the father of Value Investing, was offered three different jobs at Columbia University upon graduating given his brilliance but he had to start his own firm because he couldn't get hired on Wall Street because he was Jewish. Catholics in much of the country faced similar discrimination. The by-product was that the stakes were higher and the better schools tended to then create a feedback effect. There was also an element of discipline available that was not present in other educational environments. If you were disrupting the class or causing problems, they'd simply kick you out, sacrificing you or the good of the group. That has become increasingly impossible at public schools.

It is particularly relevant that a substantial portion of both American Catholics and American Jews were culturally these things but not fundamentalists. (It was not, in other words, the Orthodox that were leading to these better life outcomes. Quite the contrary. What occurs in certain Orthodox communities even in the year 2024 is outright child abuse and the authorities have failed by not intervening out of a desire to appear neutral on religion. There is a not-insignificant portion of 12, 15, or 18 year old Orthodox young people in New York and New Jersey that are essentially illiterate.) Many believed in God, certainly, but they did not ascribe to notions they felt could not be supported by evidence. They didn't reject the lessons of Darwinian evolution. They weren't socially conservative unless there was a logical reason to be so. You thus got the best of religion combined with secularism. Strong families. An emphasis on education. An enlightenment world view but with the belief that there was a Creator and not everything could be reduced to materialism in the physical world; that the concept of a soul did, in fact, exist and some things were eternal. Social liberalism tempered with a requirement for self-sufficiency and accountability. Other groups emerge in certain time periods where sub-groups within these cohorts exhibit similar characteristics and success. In Early America, you had the Quakers, for example. The Fred Rogers school of Protestantism that has been subsumed by Evangelicalism in recent decades. In non-religious contexts, immigrants from certain countries tend to belong to family and social groups with similar benefits, as well. Indian Americans. Chinese Americans. Korean Americans. Russian Americans. Taiwanese Americans. Iranian Americans.

I suspect that much of this comes down to the willingness of some groups to say, "That's not good enough. You're not doing good enough. This is failure. Do better." The entire concept has, in some ways, become almost unthinkable in the United States. Schools simply do not fail kids any more. You can literally turn in nothing - zero homework - and you're going to get at least 50% credit in a lot of school districts. It's madness.

In other words, I think there is a multi-century long history that involves historical discrimination patterns against minorities, a willingness of certain cultures and belief systems to call out failure and condemn (which has social utility even if it isn't nice), and then a self-reinforcing effect where success led others who valued the same thing to seek out those institutions because of their reputation.

I hope I'm somewhat communicating clearly. It's about 1:30 a.m. here so I should be going to bed but I still have a bunch of work to get done before the markets open tomorrow.

Thank you. I appreciate the detailed response. It's helped clarify a few things in my mind. Ideally, it will help me make better decisions in the future as well.

Josh,

Curious if you've got some good reading available on the benefits to higher cognitive function to be had by improving memorization. My own experience learning to read was vastly transformed by visual memory training when I was a kid, and I can 100% say that without it, I do not feel that my life would have turned out the way it has, from career choice to ability to function in a modern society, though I haven't really found any follow up studies to measure the effect.

Being able to short term memorize an entire chapter of a textbook as I read it, and then analyze and parse it once I have all of the available information presented to me, was one of the biggest factors in getting me a university degree. I legitimately don't know how other people do it without an hour or two of working memory "in the memory bank" so to speak.

On the neo-aristocracy topic, do you think that national cohesion might be at risk as brain drain enters a third full generation? It seems like cross state mobility of people with university degrees is only rising over time. What kind of risks does this create for national politics as the left behind places increasingly cannot read the "left behind" book series that was all too common where you and I grew up? I'm guilty myself by the way, relocating me and my family across the country for exactly the reasons you outlined, and I do not see an end to it. How might the country avoid the development of a neo-aristocracy, that despite you and most of your readers being a part of (I used to love your reader analytics posts, and hope you can bring them back some day), would undoubtedly lead to long term negative outcomes as social cohesion breaks down in a way that was likely all too well depicted in the Altered Carbon Netflix series?

To answer your first question, I don't have anything I can recommend per se that deals with the topic despite its obvious importance. For me it falls into the category Charlie Munger would call "testable fluency" where you get the basics down to the point they require no cognition - whether playing the piano, typing, building an engine, coding software - so then your brain can really be free to think about the creative higher-order stuff. In other words, the basics come first. Creativity and self-expression only happen thereafter.

To answer the second question, I just don't know. If you forced me to guess, I think the only solution is forced zoning changes at the state level (which isn't even possible in all states) and a requirement, like some other countries, to outlaw homeschooling and private school entirely so you have mixed communities of different income levels and force all parents to have a vested interest in the quality of the local school district. I don't think that is compatible with America's psyche, though. Even if it led to better outcomes - higher wealth, lower crime, happier families - I think you'd get so much pushback it'd be violent.

I also think you need to have substantial state-funded increases in community colleges and universities. However, some of the colleges and universities need to be rebuilt from the ground up given the absolute insanity that has taken them over (I started really worrying about it around 2015 or 2016 and it's become visible to the wider world). They need to be about academic rigor, universally accessible (so completely blind to personal characteristics) and far more willing to fail people.

What I really worry about is the reaction-to-possibility effect. For example, as I've become more and more convinced that a neo-feudalistic aristocracy is forming, I've felt compelled to create dynastic forms of wealth for my future grandchildren, who aren't even born, yet, to help protect them and secure their place in a society where upward mobility may no longer be possible. Aaron and I have literally had discussions about houses we may buy and put in trust to permanently secure shelter for each branch of our family tree, making sure they have a nice place to live that has maintenance and operating expenses covered. This reactionary desire in turn fuels the very thing we would like to avoid so there is an element of a prisoner's dilemma here. How likely do we think this future is? Tax reform alone will not solve it. At all. The problems are far more deeply ingrained. A good portion of the bottom half of society is linguistically and mathematically illiterate in a world that has been hurtling towards a greater and greater knowledge-based economic system.

Stated another way, if the upward mobility that existed when I was growing up becomes impossible, isn't it a moral duty to build a structure of wealth that makes it impossible for your family to stay economically prosperous far beyond your own lifetime? If hard work won't be rewarded, then that must be included in the analysis of disposition of assets for any reasonably compassionate person.

Interesting thoughts on phonics. Our daughter was well behind in reading in kindergarten when the pandemic hit. After seeing the ridiculous whole reading curriculum the next year we pulled her out to homeschool. After a year of phonics based language lessons she was reading Harry Potter at a 7 year old. I still don't understand why in the world they were teaching that, but I'm glad that we got our daughters away early enough. Fortunately it sounds like the school district is changing course.

It really is something, isn't it? You have a system that has demonstrated the single greatest success of any reading system in human history. You can make someone literate in next to no time. It doesn't require huge funding - you can teach it on a blackboard in the middle of a one-room school house in a field and folks can still learn. Yet, despite its wild success, it was discarded.

I'm really convinced the "action bias" hurts society far more than we realize. People need to feel like they do something every day to justify their job to others, yet a lot of the time, doing nothing is the right decision. Keeping what works. Being patient. Thinking long-term. It seems like the education complex felt like it needed some new breakthrough, or novelty, and it just spun out of control with horrific human consequences. I've been saying the same thing about the board which governs GAAP accounting standards for the past six or seven years. They've lost their minds. Some of the new rules are so unbelievably stupid they make financial statements worse, not better. It's like they needed to feel they left their stamp on something rather than saying, "Oh, that rule that's been in place is perfectly fine and has served society well for the past half-century." Instead, they just keep doing things that are going to create worse and worse implosion risks when another Great Recession hits because they ignore the consequences of contagion.

Honestly, I'm a bit weary of it all. It seems like a lot of folly and madness came home to roost at the same time so we, as a civilization, are fighting it off with sticks in all directions.

Hi Josh, great to see you posting more regularly again! I suspect you've probably read this book, but if you haven't I recommend "Coming Apart" by Charles Murray. I'm not near my bookshelf but I believe it was published about a decade ago (so similar to your original articles which I am absolutely giving a re-read to). In the book he compares the differing lives of the Top 20% and Bottom 20%, focusing specifically on white America to show that regardless of race those at the bottom of the income spectrum lead radically different lives to those of us at the top, and how as you said the tendancy of college-educated adults to prefer marriage to someone of a similar background is only going to exaccebate this problem as the children of said indeviduals continue along the same path. It really opened my eyes when I read it back then, and my experiences since reading the book have only seem to be reinforcing what he talks about.

This is the content I have been missing for the past few years. Thank you!

Thomas Sowell

So there's a bit of nuance to your question in that you asked specifically about following these wider societal patterns, which is different than news in general. So in terms of that question - these forces in particular - I'd be looking at the top 20% distribution compared to everyone else over time in specific data sets. Namely ...

#1 - Keep an eye on net migration patterns on a zip code level, particularly among high earners. You're looking for the SOI Tax Stats from the IRS.

#2 - Watch the tri-annual Survey of Consumer Finances by the Federal Reserve Board.

#3 - Keep track of the Distribution of Household Wealth in the U.S. Since 1989 buried in the Federal Reserve data sets. Make sure you are viewing the share (%) and then by different attributes. For example, if looking at the distribution of household wealth (the data goes back to 1989 as mentioned in the data series title):

- In 1989, the Top 10% held 16.6% of wealth and the next decile (the top 80% to 90%) held 43.9%. Combined, they held 60.5% of the nation's wealth.

- As of 4th quarter last year, the top 10% held 23.2%, the next quintile held 47.4% so combined they own 70.6% of the nation's wealth.

Not only that, but the sheer amount of real (inflation-adjusted) wealth has increased so dramatically that the top 20% together is not just taking more of the pie, the pie is massively, unfathomably larger than it was.

The data set for college graduate is even more shocking. In 1989, those who graduated from college held 48.6% of the nation's wealth. As of the final quarter of last year, it's 74.2% of the nation's wealth. And, again, that pie is much, much larger in real terms. [Edit: As Aaron points out, there are significantly more college graduates today than there were so this is not entirely surprising and does require a per capita adjustment to account for it, but even factoring that in the trend is still there.]

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#4 - Watch the same types of data sets from the Fed (as in #3) for income distribution, not wealth.

#5 - Watch marriage rates by educational attainment and, separately, income quintile. Do the same for out-of-wedlock marriages, teenage pregnancies, and divorce rates. Compare the experience of the top 20% with everyone else. Those factors drive income and wealth significantly. Of course, there are always exceptions - plenty of divorced people are successful and rich, lots of single parents went on to build fortunes, but we're talking about general statistical relationships here on a large population set. All else equal, any group that has a higher percentage of people who follow the golden rule for wealth accumulation in modern society - go to high school, graduate, go to college, graduate, get a job, get married, have children in that order - will blow past everyone else as they reach their 30s, 40s, 50s, and beyond. Again, lots of exceptions exist but at the societal level it's true.

Those sources are going to show the story as it unfolds. I'd also want to look at the median household income in specific school districts across the major metropolitan areas of the United States - say the big 50 that have taken all of the real GDP gains over the past couple of decades. You're going to see more and more concentration of income and wealth in specific school districts versus other schools districts more than anything else, I think.

Yes and no. This is a place where different academics and economists just have to keep at it and try to make their best guesses. For example, it's clear from a wide range of data inputs that inheritance plays a smaller role now than at almost (if not entirely) any time in human history - and has fallen dramatically in importance since 1980 - but if you wanted to have the specificity of, say, comparing the total intergenerational wealth transfers in 2017 similarly to how you can get rough figures (even if imprecise) for aggregate income by quintile or something, then no.

For example, there is some information from things like IRS returns (e.g., estate taxes, gift taxes, etc.) but through the use of trusts and inter vivos transfers handled specific ways demonstrate the low utility value of that data in a lot of cases based on what I think you are asking. I mean, imagine you had a block of $50,000,000 worth of Nvidia stock with next to no cost basis on it. You decide you want to gift it to your kids. You setup a charitable remainder trust and name your children as beneficiaries with a 5% payout for 20 years assuming they are young enough that is the more intelligent decision. The tax savings on the capital gain are enormous. Depending upon the performance of the investments in the trust, you're probably going to end up gifting your kids more than $50,000,000 and the accumulated remaining net worth of the trust at the end of the period is going to charity to benefit society.

Sure, some of this will show up in IRS data sets but there is no way to tell if the transfer was to your spouse ... your kids ... friends ... family ... yourself. Was it an inter-generational transfer or not?

What about cash subsidies below the gift tax disclosure limits? College education paid directly and therefore not subject to gift tax limits? Medical bills covered? Swimming lessons? Vacations abroad? A credit card for emergencies that shows up as your own spending to the credit bureaus?

You really have to come at it from the perspective of trying to answer a specific question then figuring it out that way. For example, researchers have found that wealthy families pre-civil war who lost all of their money were, in fact, largely wealthy again in a generation or two and remained the dominant families in the South. How? Inheritance took on different forms including social connections that were not a direct transfer of property, but rather, access to institutions, capital, relationships, knowledge, networks of people who cared for you and who wanted to see you "restored" even if only for the sake of vengeance against a perceived shared enemy. It's a really fascinating area of study.

How do you consider the balances and trade-offs to the patterns you noted in your last paragraph? Specifically, as a parent, your overriding responsibility for your own children / grand-children and their well-being versus a general societal obligation?

As a parent, it seems to me, that besides my personal wants, I'm morally obligated to ensure the best possible outcomes and advantages for my family. It's not just a desire but a duty. Yet, if one begins with advantages and those advantages are increased into the next generation, it seems that you eventually have societal risks as each family makes choices to their particular benefit.

A multi-generational meritocracy could thus create a more aristocratic type outcome on a long enough time scale.

Thank you for taking the time to provide that comprehensive explanation! I join everyone else is saying that it's great that you are writing again.

Reading your website over the years reminds me of this quote from Charlie Munger...

"The best thing a human being can do is to help another human being know more."

You have helped me know more, a lot more through your writings. Thank You for that.

That is exceedingly kind. It made my night. Thank you.

Don't know why but I get Downton Abbey vibes when you say "dynastic forms of wealth".

Yes and no in the sense that I think there are a lot of levers we aren't pulling. I still maintain - and Aaron is obsessively passionate about this topic - that the single greatest opportunity governments have to solve this is the use of vertical towers that include bio-diversity for different strains of food crops to diversify against disease and weather. The technology is within grasp to someday imagine a future where cocoa is grown in the middle of Michigan or Idaho.

I mean, what does cocoa need? Stable temperatures, high humidity, a ton of moisture, rich soil, and isolation from wind damage. Cargill has been testing different technologies in this area (and not just limited to hydroponics but aeroponics, as well). You can read a lot about their efforts and others in this excellent article.

Essentially, this is an area in which I think capitalism works its magic. Price drives incentives. If the price changes, at some point, the investment case becomes much more justified. The global chocolate market is exceedingly lucrative. Executives, shareholders, farmers ... they are not going to let it go gently into the night.

The biggest problem is the farm lobby. Congress is going to have to solve it with massive tax breaks, I think, essentially enriching giant corporate farmers to force the change on the scale of some of the things society saw during the New Deal era post-Depression.

One problem, of course, is that the towers themselves are more likely to become a terrorist target. But if you can solve that ... this technology changes everything. It is transformative. The idea of being subject to natural resources to grow a specific plant is absurd given the resources and knowledge we have as a species. We simply aren't taking advantage of it in the way, and with the scale, necessary to enjoy the fruits. Literally, in this case.

My fear is that your last paragraph may be prescient. The big problem is that so much capital arises, or is generated, as a by-product of ability in today's world.

That is, generally speaking, doctors, attorneys, accountants, professors, engineers, scientists, programmers tend to be vastly more intelligent and knowledgeable than the typical citizen - note that does not mean they are morally superior, which is something American society wrongly conflates - and to have them withdrawal, so to speak, into insular communities causes a lot of social institutions collapse because the Pareto distribution means they were carrying much of the burden on their shoulders. (Sometimes, this has benefited the United States as a whole. There is a joke in recent years that the Canadian dream for truly high performing individuals is to emigrate to the U.S. where they can enjoy far higher standards of living and lower taxes. It's dark humor but there is truth there.) If you put a lot of really intelligent, hard-working people together, good things are likely to happen. Schools and libraries are going to be built and funded. Money will be spent on things like civic statues and art that are considered "frivolous" but are what actually give a place beauty and culture.

I am simply at an impasse to solve it because the things we need to do are mostly cultural. They have little to do with funding. It needs to start by simply failing kids. School is not a babysitting service. Teachers are not there for childcare. The expectations of what lazy parents demand of educators is insane these days. A teacher is not a parent. It is not their job to be a parent. If you kids goes to kindergarten at 5 or 6 years old and isn't potty trained, or doesn't know the alphabet or whatnot, you failed. You, as a parent, failed. Full stop. It's your primary responsibility. You.

We can't even have these conversations, it seems, without people freaking out about blaming or shaming. Yeah, well ... those parents have failed their kids and they need to do better. It takes next to no time to teach most children their letters and numbers by the time they are two or three. It takes little effort to read a book or two a day to your kids. My schedule, like most people in my situation and a huge number of the people in this community, is not normal. I mean - it's almost 2 a.m. and I am catching up on my personal blog after finishing 140 pages of contract reading for a partnership buy-in someone asked my advice regarding. I have a bunch of new fiduciary contracts I need to finalize and send out. I have trades I need to prepare for tomorrow morning. And I still find time to sit down and read to my kids. Even if it isn't something they'd understand, yet. This evening, Aaron ran into the grocery store and so I read to them in their car seats as we sat in the parking lot, going over provisions of an investment opportunity I was analyzing. Even though only a small portion gets through, it all matters. (Usually, after listening in silence, Graham looks at me intently and says, "Dada ... what are you talking about?" so I then re-summarize it in age appropriate language.) Kids listen. A word here, a phrase there. They are constantly building their vocabulary and understanding of the world.

I mean ... sure I probably I take it too far sometimes. Today, I had to try to make Chernobyl and radiation poisoning kid friendly after Dorian asked me if it was safe to dig with a shovel in the woods (following me telling him about buried power lines and how you can't dig in neighborhoods). I said, "Generally, yes." Then, me being me, had to offer disclaimers and caveats telling him there was one place called the Red Forest that it was not safe to dig in under any condition. I didn't want to scare them after I was halfway through my explanation of what excess radiation could do to a person so I dialed it back quickly and said I would explain more when they were older.

Gosh, I'm tired. I'm rambling at this point. I'm probably going to just call it a night soon. I'll have to pick back up at work in the morning.