Lion of the Blogosphere

The working rich

Commenter “Alex” writes:

I always thought rich was limited to people who don’t have to work for a living.

As I’ve written before, that’s an old-fashioned definition of rich. Today, it’s considered low class to not have some kind of job. And the thing about the top out-of-sight rich is that because of their high social capital, in addition to their inherited financial capital, they tend to get paid a lot more money than you think relative to their actual value-creating contributions to the economy. So a top out-of-sight lifestyle can be maintained with less inherited wealth because it’s supplemented with a six-figure salary.

Furthermore, as I’ve also written before, non-transferable capital (what might be called human capital) has become a more important component of being rich. Mere ownership of assets have become a declining source of income. The dividend yield on stocks, the interest rates paid on corporate debt, have never been lower. If you’re just sitting on your assets, then your wealth is declining. I believe that the money which used to go to stockholders is now being transferred to C-level executives, investment bankers and other finance types, and to a lesser extent overpaid corporate helpers like BIGLAW partners and management consultants.

This could change in the future when robots replace all human workers, and at that point, owning the means of robot production (let’s call it robot capital) might be more important than any sort of human capital.

Written by Lion of the Blogosphere

September 11, 2017 at 9:30 am

Posted in Wealth

9 Responses

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  1. Again, dollar reserve status and passive investing (index fund, mutual fund) are the causes of these problems. These things won’t last forever and so the problems they cause won’t either.

    Andrew E.

    September 11, 2017 at 9:44 am

  2. I’ll bet you labeled the woman in that article you previously referenced as “out of sight rich” and not “top out of sight” because you know that she doesn’t meet the definition of what Paul Fussell had in mind for the latter, the old-money heirs like Jamie Johnson who live on private estates off of investment income alone. No matter how much you want to consider that woman rich, she’s not living that lifestyle with a household income of $250,000 a year in New York. I think your envy is getting the better of you here, because the article said she had inherited wealth of “several million dollars.” But “several million” could mean three million. And it doesn’t say what she’s doing with that money. If the $250,000 is investment income and the several million is the principal, then she can’t touch it. On the other hand, if she and her husband are both working and earning $250,000 year combined, unless they have significant investment income from the several million on top of that, they’re not exactly living an “out of sight” lifestyle in New York.

    Hermes

    September 11, 2017 at 10:28 am

  3. Surely in the past there were many rich who were idle, but some produced a lot of our great science, literature, archaeological breakthroughs, military leaders etc. Where are the rich who devote themselves to science and the humanities? The TOOS of today working at some non-profit are an embarrassment.

    stilicho

    September 11, 2017 at 10:45 am

    • Is it because America has no high culture?

      JS

      September 11, 2017 at 11:21 am

      • ding ding ding.

        Blame the Protestant Work Ethic! An immaterial spirituality breeds high culture.

        A Dilettante

        September 13, 2017 at 6:39 pm

      • It’s funny how Americans have a great work ethic, but they no discipline when it comes to saving. Worse, they raid their retirement accounts so they can consume frivolously.

        About 60% of the American population have less than $1K saved up for emergencies. Scary if you think about it.

        A Frenchman under 30, working here in the states, bragged about his fat savings account with amounts in the 6 figures. And I’ve seen it increased throughout the years. He makes 6 figures and his savings is 6 figures. That’s pretty impressive.

        JS

        September 14, 2017 at 8:45 pm

  4. The old fashioned rich’s devotion to “society” was a full time job in itself. Everything from grooming, dressing, managing a social schedule, shopping for the right accoutrements, managing household help, etc. was an exhausting effort. I recall reading the obituary of some main line Philadelphia swell years ago. The dude and his wife lived into their late 90s. Their son stated that neither of them worked a day in their lives and spent their entire lives devoted to social functions and obligations and were as happy, content, and as untroubled as could be.

    We don’t even have old fashioned playboys like Porfiro Rubirosa anymore. Being a classic playboy was a full time and demanding job. One had to be handsome, fit, alpha, poised, impeccably dressed and groomed, a sportsman, unemployed, an unabashed mooch off of wealthy women, and – most importantly – a swell guy. The one man whom everybody – man an woman – was glad to see show up for the evening. This was not an easy job, except for a natural. Most men would find it easer trying their luck at making a billion on wall street than making it as a playboy.

    Daniel

    September 11, 2017 at 7:34 pm

  5. Having an income in the six figures won’t cut it with a co-op board on Park Avenue, nor on Fifth Avenue above 57th Street. Even if you can pay cash for the apartment.

    Anthony

    September 12, 2017 at 3:56 pm


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