Hacker News Reader

Comment by ravenstine | Hacker News Reader

That's just one part of the equation, and it's not even a requirement. The rich can get richer once they have reached what I call "escape velocity", where they have reached a level of wealth that their way of living will always be taken care of, hence they are free to throw their excess wealth at things in a way that an ordinary person wouldn't necessarily tolerate in terms of risk.

Then there's things like inheritance, foundations, access to better financial advisors and portfolio managers, access to social networks of other wealthy people, etc.

View on HN

Good term, "escape velocity". Agree with everything except:

>access to better financial advisors and portfolio managers

If anything, active wealth management usually ends up yielding less than a broad market index fund.

Financial advisors aren't just investment brokers, but can help you optimize your finances to get the max of your local tax regulations or maybe even recommend some foreign jurisdictions as well with more benefits.

Almost every country in the world has some undocumented open loopholes that the rich or the system savvy can exploit to reduce their tax burden, and get a lot more back from the state (or avoid paying in the first place), and the people not knowing them can loose a lot in the long run by not knowing how to play the game in their favor.

For example, in Germany and Austria, there's an insane amount of wealth built on the tax fraud of cash-only businesses, especially for small family businesses in more rural areas where strict audits are less likely. It's not legal, it's fraud, but the people who know the game, know how to exploit it without ever getting caught, that's why flashing and discussing wealth there is socially frowned upon (because many have it obtained through inheritance of a "dark past™" or tax fraud, and it's tough to explain to everyone and the tax man how you bought a new Porsche and a villa in the south of Europe just by selling sausages on the weekend, so everyone flies under the radar by driving old cars and dressing modestly, while sitting on small empires on the side without anyone being the wiser).

The majority ~70% of wealthy people in the US are self made and didn’t get an inheritance. Also financial advisors, wealth managers, portfolio managers whatever you want to call them are a scam. They aren’t going to get you higher returns. What they will give you perhaps is more free time if you reach a point where you no longer want to manage your own financial affairs and are willing to accept lower returns to not think about finances.

That is true today. Will it be true 50 years from now?

The majority of wealthy people today grew up in the 1970s, which was a very different environment from today.

“That is true today. Will it be true 50 years from now?”

Almost certainly, unless the “we prefer everyone equally poor” brand of politics succeeds. The most insidious belief is that the system is some how rigged against you no matter what you do. It just isn’t true.

>The most insidious belief is that the system is some how rigged against you no matter what you do. It just isn’t true.

The system IS rigged against you, aka the working class, and in favor of the asset/capital owning class.

Moving up from the former category, to the latter, considering the wage stagnation and the interest rate and CoL increases, is very VERY difficult, so scoffing it off as if it's something trivial that anyone can do and if they don't the it must be their fault, is just laughable.

Tax policies which favour investment in property encourage those with funds to buy and lease homes to those who (now) can't afford to buy and will instead spend years funneling their minimal wealth into the pockets of the already-wealthy. Not rigged though. /s

You're making it sound like landlords are doing god's work and renting is in your favor. That's just feudalism with extra steps.

I always assume my sarcasm cuts through enough not to warrant the /s - my bad! Edited it to be a little more obvious.

You were sarcastic and I didn't get it because one time, one guy here wrote un-sarcastically, that him renting out his inherited home in a collage town means he's doing a public service because that college town has a housing shortage. I can't even.

So, you see, it's difficult to know these days what's sarcasm and what's not as so many people, especially here, are completely detached from the reality of the average person and live in a bubble of their own farts.

> The majority ~70% of wealthy people in the US are self made and didn’t get an inheritance.

Not sure if where you got that number, but even if 30% got their initial wealth from inheritance, that's still a substantial fraction. I've witnessed the phenomenon in person, though unfortunately it wasn't I who was receiving the money!

Even if the majority are self made, that doesn't take away from the point that there is more than one way to wealth, and that it doesn't just boil down to compound interest.

> Also financial advisors, wealth managers, portfolio managers whatever you want to call them are a scam.

They are, and they aren't. Many people, even those "smart enough" to get rich, need someone to manage their finances, and are barely capable of doing it themselves. However, they aren't better off with a housefly as their financial professional. Many financial professionals are bozos, but some do their job well, and when you not only have the wealth to acquire a competent one, but possibly a social network that can connect you to one with a reputation among other wealthy people, then you have a good chance of being better off than a non-rich person picking an off-the-shelf financial advisor.

Reply on news.ycombinator.com