Why it helps to have a rich father

This blog post was incredibly informative. Approximately 40% of men have, at some point in their lives, worked at the same company as their father.

But for fathers in the top 1% of income, sons are 69% likely to have worked at the same company.

All parents want to help their children in whatever way they can. But top earners can do it more than others, and with more consequence: virtually guaranteeing, if not a lifetime of high earnings, at least a great start in life.

Comments

[Vanderbilt]

Well isn't this obvious? Why wouldn't an entrepreneur who takes the risks and succeeds in creating a reputable company have it become a family oriented business and have their sons and relatives keep it that way?

This strategy has certainly worked for the Rothschild, Vanderbilt and Rockefeller households. Its always much easier to trust your genes and blood than a foreign one.

Also there's the legal inheritance aspect including majority stock holdings and ownership rights. It would make sense to want to know how the majority of your net worth is growing.

[Neopolitan]

That is an interesting graph. Rich dads are good. Many mega-rich dads likely own their own business conglomerates (Rupert Murdoch is featured in the photo) so of course junior will work for them. In cases where dad doesn't own the business but is a high-ranking corporate officer, he'll have lots more strings to pull in lots more divisions of the company than lower-middle-management dad does.

[The Secret of NAM]

We need a new bureaucracy to end nepotism in business (headed by Chelsea Clinton or Al Gore?) Surely it will work as well as Fannie Mae did at ending unfair mortgage practices.

There's no way that children are similar to their fathers.

Ron Paul for president. Please send my foodstamps as I am not in the 1%.

[Tom]

Well, it only confirms what many already knew: the economic elite, like the former military elite of the Old World, forms some kind of hereditary supragroup which has no shame to favour its kinship over more competent individuals, and only accepts new members who are extraordinarily deserving a few at a time.

Which confirms your assertion that the rich already form a race apart, and will one day form a species apart from the masses.

Especially when body-enhancing technologies and designer babies become available somewhere in 2030.

[DaveinHackensack]

That seems almost blindingly obvious, but there are two points to consider along with it:

- If you go back far enough (and, in a lot of cases, one generation is far enough) you find a guy who bootstrapped it.

- Even with a father giving you a head start, you've got to be able to carry the ball yourself at some point.

Here's an example that fits both points. My father had a friend who was a stock broker. This is a guy who didn't come from money. He came back from the Army after WWII, went to City College on the GI Bill, and started out as a clerk somewhere on Wall Street. But he was always a guy who made connections -- head of the NCO club in the Army, class president or alumni leader in college (I forget which), etc. So he built a successful business as a broker.

A few decades later, his son was in a rock band or something, and when that didn't lead to global stardom, his father took him under his wing. The son got a job at his father's firm, and his father gave him a few of his smaller accounts. So he got a little boost. But being a broker is a brutal business, and he could have still washed out pretty easily. He didn't though. A couple decades later, the son has a bigger book of business than his father (who still comes into the office, in his 80s).

[Drole Prole]

If a middle class and below person receives money from mommy and daddy it's seen as being spoiled and weak. You should have to do everything all on your own with pride.

If children of rich parents are given millions of dollars or by their parents, it's considered a just inheritance that shouldn't be taxed because it's money that was deserved and hard earned.

Funny thing is, it's the middle class (esp conservatives/libertarians) and below people who are often resentful of people in their class getting money from mommy and daddy but feel it's perfectly okay for rich parents to give their kids millions of dollars. Donald Trumped earned his money fair and square. Ditto all the other wealthy people who had wealthy parents. But for a person of modest means to ask for money, it's seen as asking for a handout.

[Wes]

The point on whether all billionaires deserve every last dollar of their money is an interesting one. I can't answer the question but maybe I can suggest one way to think about it. First, we have to exclude money appropriated by corrupt methods (theft, political connections, fraud). Let's just focus on what most of us would agree was honestly made money.

So, does Bill Gates really deserve the $56 billion he is worth? One way to approach this is to consider all the wealth that has been created and distributed by Microsoft and see if Bill's share seems about right. We can't do a complete analysis, but as a rough proxy, the company is worth about $220B, so Bill's take seems to be approximately 25% (I realize he has other investments, has sold stocks, etc - this is rough).

Now, MSFT has 90,000 employees. How can one man be worth 25% of the company? On the surface it seems implausible. Surely, the legions of high IQ programmers and managers deserve a bigger share (although many became millionaires, but maybe they deserve more). Can Bill Gates alone be worth the equivalent of several thousand really smart people at MSFT?

It seems unlikely that if Gates had stayed at Harvard and become an English professor, we would still be using Apple II computers. Most of us think we would be in roughly the same shape technological shape. So, why should Bill get so much? It seems wrong at that level.

But, perhaps we really would be a few years behind in terms of software and productivity without Bill. Maybe he did provide some key leadership that allowed people to excel beyond what their own ability would allow. I will say this: Countries that have systematically mistreated their upper 1% in terms of IQ and energy, have not fared well.

So for me, the question is this: Is one man truly so key to the development of an industry that he deserves 25% of its leading (second leading?) company? I don't really know for sure, although right now I lean toward keeping the system we have in place. However, I wonder if key producers in a company (I don't mean 10 or 15 people, I mean several hundred to several thousand in this case) shouldn't find a ways to get a bigger of the pie.

[Felix]

My dad was a teacher and I worked as a lawyer for the federal department of education for a while. Does that count?

[dearieme]

I worked in my father's firm for my schoolboy jobs, and once in a university vacation job. If your father owns a firm it's pretty likely he can wangle you a job there, isn't it?

The downside was that since it was my father's firm I couldn't slack for a moment, because I had to put my back into it to Show The Men A Fine Example.

The upside was that I learnt a bit about the world of work, made a few bob, and formed a higher estimation of my father - he was obviously good at hiring, since his men were a good bunch of blokes who teased me no more than I deserved.

[Sarah]

The main advantage of having a rich father is you get most of the genes that made him smart and able to get rich.

"Anti-nepotism" is yet another way where the progressives use sanctimonious moralizing to price normal people out of doing what progressives do.

If nepotism is bad, only the very top people in a company can get away with it.

[Sarah]

Also (sorry for double comment)

The idea of a "perfect" "meritocracy" is stupid.

Many of your readers/commenters could probably outperform you at your job after basic on the job training. There is always an "unfair" element in hiring, because in truth most of the time it doesn't matter exactly who is doing the job. The difference between having the absolute best person and the best-5,000 person is just not that noticeable. So if the "unfair" element happens to be who someone's father is, how is that any worse than anything else

[Ivan]

Sarah: you obviously don't know much about computer programming. It is very hard to find a really good programmer, and I assure you that the difference between him and 5,000-best will be noticeable.

[alonzo portfolio]

This is a dumb post. A much bigger problem right now is featherbedding in public employment. The question for OWS'ers is, why aren't you angry at this?

[Florida resident]

Somehow this post
by Half Sigma (by the way, very much respected by me)
ignores hereditary property of IQ and its influence upon subsequent income and life position.
See Charles Murray’s statement about 51 % level of heredity of IQ, as he wrote recently,
adding this 1% to the order-of-magnitude estimate 50%, to sound more persuasive:
http://blog.american.com/2011/11/maybe-it%e2%80%99s-journalists-who-have-an-iq-problem/
and Murray’s book “Income inequality and IQ”:
http://www.mega.nu/ampp/murray_income_iq.pdf

Respectfully, Florida resident.

[HS: NOthing is being ignored here. If you have a high IQ but your dad works in a blue collar job, then he can't do much to help you. But if you have a high IQ and your dad is a Bigwig on Wall Street, he can help you get into a high-paying Wall Street career (which are difficult to get into otherwise, no matter how smart you might be).]

[Florida resident]

As my late brother-in-law taught me,
each of us at some stage of our lives has been helped, by a relative or by a friend.
The critical moral question is not whether you have been helped,
but whether your present-day work justifies your position in an organisation, and in life in general.

Your truly, Florida resident.

[Commander Shepard]

@ wes

Bill Gates is an interesting example. Much like Zuckerberg he created something of value (which is good) but both came from families of wealth and privilege. Gates has even said that without his elite upbringing he never would have founded Microsoft. So while the upper classes are necessary and often good for society can we stop pretending their success came magically. That appears to be the point Half Sigma is trying to underscore. I myself used to wonder why some had it so easy in life while others struggled. This blog is enlightening and made me aware of the class/status system.

[Davver]

Does the current class system lead to the most happiness. I think there are a few flaws.

1) the easiest way to advance to or remain in the highest class is to be a value transferer. Creating value is difficult, and self interested people do what is easiest. Unless you have a societal system that rewards value creation over value transference the upper class will be a parasite on the lower rather then a benefit. In our society value transference now surpasses value creation for the upper class.

2) since IQ and other heritable characteristics are not 100% heritable people are often borne in a different class then they belong. Our system for matching ability with class is flawed and incomplete. Compared to other countries I'd say it has it's pluses and minuses.

[Drole Prole]

We should strive to encourage high IQ people to pursue jobs that benefit them and society most. Allowing their IQ go to waste is detrimental for society. Our current system doesn't help high IQ proles much. Heck, even high IQ middle class talents are being squandered in the name of the so-called free-market.

[Dan]

Agreed that Dad is an important influence on one's career. However, being able to help your children is a very strong non-monetary incentive to get ahead.

If we banned all money transfers between parents and children, how much work would people do? Would the effect be positive or negative for our economy?

[Sheila Tone]

I think it's important to note that the study sampled Canadians, not Americans.

I agreed with the basic premise, but thought the 40 percent seemed too high simply for the reason that there are so many fathers who don't work in America or work marginally. I was right -- the sample excluded poor people:

"To remain in the sample the father
must have positive earnings in each of the five years the son was 15 to 19 years old, and must have been born between 1908 and 1952 inclusive. Sons must have positive earnings in each of three years, 1994 to 1996, and the earnings of both sons and fathers must be above the bottom percentile thereby avoiding some suspected measurement errors in the data. "

[Twain]

". Gates has even said that without his elite upbringing he never would have founded Microsoft"

Without the govt subsidizing the computer industry he wouldn't have either. I think that is why Gates' dad is for keeping the inheritance tax. Gates didn't do it in a vacuum.

[Wes]

Gates didn't do it in a vacuum, but then, neither did the government. Governments don't exist in nature, they only spring up once humans have reached a certain level of sophistication. But I can't see that any of that is an argument that Gates should get less money.

[Jefferson Raskin]

This was a post for Captain Obvious.