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I have a new column out in the Sunday Washington Post on the interesting lessons I have learned from people of great wealth. Its titled: “7 life lessons from the very wealthy.”

Here is an excerpt:

“Please excuse the very wealthy for feeling a bit under siege lately.

Taxes for the top 2 percent are very likely to go higher. Uncle Sam’s share of capital gains and dividend income might rise, and means-testing for Social Security and Medicare is probable. In the United States, the very rich hold most of that wealth in dollars, which are worth increasingly less. As income inequality has grown dramatically in the nation, the very wealthy are blamed for all manner of social ills.

Rather than pile on the wealthy, this week I’d like to approach the subject of money a little more philosophically. There are surprising insights to be gleaned from the experiences of the very wealthy regarding their investments and experience with wealth.

Some context: In my day job, I come into contact with very high-net-worth individuals. These include young technologists with modest portfolios to families that measure their wealth in nine and 10 figures. For the math-averse, that’s hundreds of millions to billions of dollars.

Over the years, I have had some fascinating conversations with people who have hospitals and graduate schools named after them. I’d like to share some of the things I have learned from these folks.”

You can find the 7 life lessons from the very wealthy here.

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Source:
7 life lessons from the very wealthy
Barry Ritholtz
Washington Post June 18 Page G6| Updated: Friday, June 17, 9:45 PM
http://www.washingtonpost.com/business/7-life-lessons-from-the-very-wealthy/2011/06/15/AGxw6aaH_story.html

PDF

Category: Apprenticed Investor

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

37 Responses to “Life Lessons from the Ultra Wealthy”

  1. Mike in Nola says:

    Was expecting to hate it but nice read. Not being an HNWI, I have no idea if its true but it all makes sense.

  2. foosion says:

    Excellent column. I’ll add that there’s a lot of research to support the idea that memories are more important than possessions.

    However, regarding your intro “Taxes for the top 2 percent are very likely to go higher. Uncle Sam’s share of capital gains and dividend income might rise, and means-testing for Social Security and Medicare is probable. In the United States, the very rich hold most of that wealth in dollars, which are worth increasingly less.”

    Taxes for the top 2% are at very low levels, compared to US history and to the rest of the world. Means testing SS and Medicare won’t hurt the ultra wealthy in a noticeable way and won’t matter for US finances unless the trigger points for means testing are in the middle class range (in fact the ultra wealthy likely come out ahead with means-testing compared to raising taxes). Dollars may be down a bit compared to some other currencies, but the very rich are much more wealthy than they used to be, even taking this into account.

  3. Hi foosion

    I’ve posted extensively that Taxes at both the individual top rate and the corporate rates are historically low. That line is in the column to flesh out the Wealthy feeling under siege lately. (Please do not assume it means I am in favor of rates so low they contribute to massive deficits)

    If you look at the Taxes & Policy category of posts, you will find lots of good charts about how low taxes are these days.

  4. beaufou says:

    I disagree with your definition of freedom Barry, freedom isn’t achieved with riches otherwise it would be called richdom, you can obtain a certain level of happiness and time is definitely on your side when you are rich, freedom? I’m not sure, money can be a burden too.
    As for spending time with your kids and family, I agree, I’m not rich and I don’t give a toss, I’d rather be a little poorer and spend time with my kids although it is increasingly difficult.
    I know single moms who would love to have that freedom too, but they are too busy working shitty paying jobs, time is their enemy.

    I would have called lessons – observations from the very wealthy.

  5. Bill Wilson says:

    Great article.

    I heard an interview with the founder of Kinkos where he said, “savings equals freedom.”

  6. jackalope129 says:

    I, too, agree with the idea that memories are more important than possessions. My teenage son reminded me of this when my home was burglarized a couple of years ago and all my jewelry taken. He said that if I looked at all my important things as a pie chart, the jewelry would just be a small sliver and that the memories (family photos and videos and framed school artwork around the house) would be a very large section. It helped me see things in the right perspective and move on from the incident.

  7. Greg0658 says:

    highlite’g #4 “Those partnership-track careers? The dirty little secret: Those firms love to get their young employees leveraged up.” * .. slaves into the system .. I used to think (like many American imo) – turn that green into something real – I even madeup a lingering phrase, “money is just green scratchy TP – use it for something (fun, neato, a lasting impression)” .. nowdays I’m happy of my surroundings I’ve accumulated – but – worry of that retention factor- this new age of “too many people making to many problems” – with not enough to go around – with food, shelter, recreation & taxes always in the minds wings

    the stuff TBTF conglomerates can keep in memory and advance the next baby step over eons .. who’s is gonna release the lifes real secrets book for 18 year olds to read thru in a weekend – “Lifes Real Secrets – 36 degrees hijacked from the King & Queens Archives”

    *coda – with to few jobs for the population to go round – this is a fine plan for the TBTF – creates work in the company town (& is now worldwide)

    Ratt – Round And Round(with lyrics)
    http://www.youtube.com/watch?v=fG51nwQsfAA

  8. jonhendry says:

    Another advantage to memories: unlike ‘stuff’, accumulating memories doesn’t fill up your home or encourage you to get a bigger home so you have more room for stuff. Nor do memories require insurance or security systems to protect them. Just a sane offsite backup system for your digital mementoes.

  9. toddie.g says:

    Not to nitpick, BR, but I find it hard to believe the top 2% will feel “under siege” anytime soon, regardless of tax changes. You could have worded that better. Under siege can be ascribed to the financial situation of most middle class Americans, not the uberwealthy. The absurdly low effective tax rates of 16.6% on the 400 highest earning Americans is the closest thing to a free lunch in this economy. Oh sorry, I forgot about GE paying 0% and Google paying 2.4%.

    Maybe we should start passing the tin cup around for the Koch Brothers in advance? I have something different to offer that cup than money, however.

  10. Chief Tomahawk says:

    That’s good stuff about the golden handcuffs, BR. To avoid them, a wealth manager may need to do something unusual, like move to Omaha and set up shop…

    Speaking of which, this struck a chromatic chord: “As income inequality has grown dramatically in the nation, the very wealthy are blamed for all manner of social ills.” I recall Buffett taking out a full page ad in a major newspaper to protest against the proposed dividend tax cut of 2003 because his effective tax rate would be less than that of his secretary. For someone as knowledgeable about the compounding of money (Buffett refused to spend for a crib for his first born because he felt the money could become so much more down the road… so a dresser drawer was used), coupled with the leverage handcuffs having been applied to so much of the rest of the population, the wealthy should bear some responsibility for sound management of the country (well, Buffett did step forward and give Goldman Sachs a payday loan to save the financial system … then they went right back to ginormous bonuses, *probably* buying oil long and sending it to $4+ a gallon at the pump while getting the money from Uncle Ben for a near 0% interest rate …)

  11. crutcher says:

    Hopefully the chicken soup for the soul tone is building up goodwill at the WP for later bomb throwing at those who most deserve it.

  12. Peter Pan says:

    “…but it buys many other important things. Like financial security…”

    There’s no such thing as financial security. It’s a marketing phrase of Wall St banks and money managers that used to sell you their services. It is an illusion.

    Don’t believe me? How about the multimillionaire that files for bankruptcy. Like former U.S. Secretary of the Treasury John Connaly. Like the big lottery winner that goes belly up financially.

    ~~~

    BR: Given a choice between more money versus less money, you will find that more $ gives you more options.

    I don’t know what Connaly did to blow himself up, but it is not that hard to avoid ruin.

  13. Some of my best marketing successes were due to ‘luck’ but that luck came of trying something and usually trying something new and different

    You won’t always sink a battleship when you fire a gun at it but sometimes you will if you hit it just right. On the other hand, if you don’t fire, you definitely won’t sink it

    This may apply more to the non wealthy but I learned a great lesson when I started looking at the price tags on items and asked myself: “Do I really want to work X hours for this?” Most times that would work my answer into a resounding NO!

  14. ZenRazor says:

    My clients all reside in the 8- to 10-digit wealth neighborhood and I’ve noticed a huge difference in philosophy and values between those that have made the money themselves and those that have inherited it. The former category would seem to generally conform to the lessons from this column, but the latter much less so.

    A couple of the ultra-wealthy entrepreneurs I’ve worked with will take extraordinary steps to avoid a marginal dollar of taxes while at the same time giving away millions. Their mindset seems to be that they wouldn’t mind paying more in taxes, but they are deeply offended by how their tax dollars are wasted. As a result, even the Democrat in my sample of two has a “starve the beast” attitude toward government. He demands and gets a high level of accountability from the charities he gives money to and they are rewarded with more cash when they perform their mission efficiently. I wish we could figure out how to apply the same principle to government.

  15. DL says:

    A lot of philosophy in that article. But I can find nothing that I would want to disagree with.

  16. MayorQuimby says:

    I will quote Mickey Rourke in Barfly here:

    “Hey baby. NOBODY suffers like the poor.”

  17. Nuggz says:

    Fascinating article, but where does that leave the Mellon Scaifes, Bushes, Helmsleys, and Koch Brothers of the world?

  18. willid3 says:

    maybe its these
    http://www.washingtonpost.com/business/economy/with-executive-pay-rich-pull-away-from-rest-of-america/2011/06/13/AGKG9jaH_story_2.html
    http://www.nytimes.com/2011/06/19/business/19gret.html?ref=business

    we might begrudge the high pay if the results were so much better. and if the rest of us were also gaining. but as it is, the lower 98% have been in a holding pattern since the 70s.

  19. keithpiccirillo says:

    It was refreshing to hear on Zaccaria’s show today on CNN between David Stockman and Robert Reich that Stockman agrees top rates are going to rise, unlike so many in Congress unwilling to admit to this.

  20. Clem Stone says:

    I tend to think it’s 95% pure luck, determined mostly by the wiring in your brain at birth, combined with your social environment during the first 5 years of life. Or maybe I’m just making excuses for my shortcomings.

  21. socaljoe says:

    None of the wealthy people I know “hold most of their wealth in dollars”… they typically own investments which do well in spite of a declining dollar… often because of a declining dollar. Not a single one feels the slightest bit “under siege”.

    ~~~

    BR: Well, that anecdotal example has me convinced! I’ll ask the Post to print a retraction.

  22. Sunny129 says:

    My favorites:

    -Chance favors the who is prepared.

    -Success is 99% perspiration and 1% inspiration. Harder you work luckier you get (I guess most of the times!)

    -There is ‘ENOUGH’ between NEED and WANT, beyond that lies misery and discontentment

    There is ENOUGH for every one’s NEED but not enough for every one’s GREED – M.K.Gandhi

  23. DSS10 says:

    I am guilty of being a manager using #4 on my staff but then I only got to the position of using it by avoiding letting my company use it on me. Ironic, no?

  24. Mr.-Vix-It says:

    Check out this article in WaPo: http://www.washingtonpost.com/business/economy/with-executive-pay-rich-pull-away-from-rest-of-america/2011/06/13/AGKG9jaH_story.html

    The ultra wealthy are greedy and will bring down this country. There is no doubt in my mind that there will be a breaking point as the middle class is eviscerated and many head lower into poverty oblivion. The ultra wealthy should be taxed at 90% and if they don’t like it they can get the hell out of America and go somewhere else. It’s absolutely ridiculous that anyone should be supporting any viewpoint of the ultra wealthy. They will always want more and it won’t stop until the breaking point is reached where you will get rioting and revolution. No one thinks it is possible as if America is above having another revolution.

    This country has become 5% Haves and 95% Have-Nots. Capitalism by nature promotes inequality but this sort of distorted capitalism will promote violence when the masses have had enough and throughout history there is always a point when they have had enough. Study your history people.

  25. ynotgoal says:

    From BR:
    <>
    Here’s a great chart showing top marginal tax rates since 1916.
    http://visualizingeconomics.com/2011/04/14/top-marginal-tax-rates-1916-2010/?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+VisualizingEconomics+%28Visualizing+Economics%29

    From ZenRazor:
    <>
    I agree that I wish all government was as efficient as possible and that many of the wealthy have worked hard to get their wealth and deserve all of it. There are also many who got it by luck, manipulating the rules or just being connected and actually made their organizations worse rather than better but still get the big payoff in stock options and such. I wish we could apply the same principle you speak of to both government and the private sector.

  26. ynotgoal says:

    Ok, so it didn’t like copying the quotes in brackets but here are the quotes from BR and ZenRazor referenced in the previous post.

    BR: If you look at the Taxes & Policy category of posts, you will find lots of good charts about how low taxes are these days.

    ZenRazor: Their mindset seems to be that they wouldn’t mind paying more in taxes, but they are deeply offended by how their tax dollars are wasted. As a result, even the Democrat in my sample of two has a “starve the beast” attitude toward government. He demands and gets a high level of accountability from the charities he gives money to and they are rewarded with more cash when they perform their mission efficiently. I wish we could figure out how to apply the same principle to government.

  27. ravenchris says:

    BR
    Congratulations on your new column.
    Keep up the good work. We need it.

  28. bman says:

    This is all just common sense, I think I could have gotten versions of this wisdom working on a factory line.
    Maybe these aren’t insights of the rich, it’s just insights of an older genreation…

  29. zenospinoza says:

    Not really interested in the world view of the uber wealthy. Their taxes need to go way up to pay the American people back for plundering the public coffers (e.g. AIG), and to keep running the machinery of state which supports the system which is rigged in their favor. Raising taxes on the very wealthy does not increase unemployment, it decreases it, because the government spending it finances has a higher multiplier effect than extra cash in the pockets of the rich. This is not debatable from an economic perspective, but the greedy rich are putting up a political fight – they are waging a preemptive class war. If an enlightened faction of the rich is unable to muster the will to rekindle the spirit of the New Deal, things are going to get messy.

  30. ottnott says:

    With a couple exceptions, this article could just as easily have been called “Life Lessons FOR the Ultra Wealthy”

    I only wish that #3 “Memories are better than material objects” was a lesson coming FROM the ultra wealthy and having an impact on those aspiring to become wealthy.

  31. ottnott says:

    #8 You can ignore all lists of life lessons.

    “The long-running drama over the sale of the highest-priced home in the U.S. appears to be heading to its finale.

    The 57,000-square foot Los Angeles mansion built by the late TV producer Aaron Spelling is slated for sale to a 22-year-old heiress to a Formula One racing fortune. The home on five acres of property in Holmby Hills has a bowling alley, beauty salon, several gift-wrapping rooms and parking for 100 cars.”

    http://online.wsj.com/article/SB10001424052702303714704576384013798228854.html

  32. martin says:

    BR,

    Your loose use of words hit a sore spot with me. You start out with “Please excuse the very wealthy…” which is a matter of net worth, which you show you recognize by saying “I come into contact with very high-net-worth individuals…”.
    But then you write about statistics on “Taxes for the top 2 percent…”. In the context of discussing the very wealthy, that means the top 2 percent of those with high net worth – but all statistics of this nature refer to the top income for that year. And then in the comments you mention the top marginal tax rate, as if it applies to those of top net worth when it really just applies to the top income for that year. And it is income after various adjustments, deductions, definitions, etc have been applied. Someone with a net worth of negative 10 million who makes 1 million the past year is not among the wealthy, but is in the top 2% as far as federal income tax is concerned. Warren Buffet is among the wealthy, but maybe with all the accounting tricks he may not be in the top 2% for federal income tax statistics.
    Also, you refer to “taxes” comprehensively, when you are apparently just discussing federal income taxes. Not Social Security or Medicare taxes, which actually have a decreasing marginal tax rate relative to income as income increases, and is zero for the very wealthy living off of rents and dividends and interest from their various holdings.
    This mixing of apples and oranges when it comes to terms like “wealthy” and “taxes” is all too common and I hope you refrain from this in the future.

    ~~~

    BR: Way to miss the main point of the column!

    Let me see you address a complex subject in an engaging way in 1000 words, then we can discuss.

  33. VennData says:

    Companies Push for Tax Break on Foreign Cash

    “…But that’s not how it worked last time. Congress and the Bush administration offered companies a similar tax incentive, in 2005, in hopes of spurring domestic hiring and investment, and 800 took advantage. Though the tax break lured them into bringing $312 billion back to the United States, 92 percent of that money was returned to shareholders in the form of dividends and stock buybacks, according to a study by the nonpartisan National Bureau of Economic Research…”

    They’ll do it this time…

    If they had opportunities to i’invest” to create jobs, wouldn’t they borrow the money anyway? …and why not borrow it from your foreign sub? or swap with someone else’s foreign sub?

    http://www.nytimes.com/2011/06/20/business/20tax.htm

    I remember when foreign subs used to be the bad guys, now even THEY demand tax cuts.

    Tax cuts for the Taliban! If they got tax cuts, they wouldn’t have to be against us. Tax cuts for Ahmadinejad! Tax cuts for Terrorists!

  34. Vergennes - VT says:

    Nice and friendly piece for the Washington Post. Always good to beef up the PR for your clients.

    Now… how about some real lessons learned from the wealthy for your loyal readers.

  35. [...] excerpted it yesterday. Rather than run yet another excerpt, I’d rather a) Point you to “7 life lessons from [...]

  36. gd says:

    It took me two days to sort this out. I offer it to purge myself of it, not because anyone’s still reading this thread. The original article would have been better without two sentences: the first, and “There are surprising insights to be gleaned…”. They set an uncomfortable tone. The article made this commoner feel like a hillbilly with an outhouse, listening to some CEO extoll the virtues of his rustic mountain hideaway. Consider the other angle, offered for your amusement:

    Memories are better? That old lady’s ceramic kitty cat, painted plate and picture of somebody in a tarnished frame are on display not just because of bad taste, that’s all she’s got from her life. Devoting all your waking hours to making money is a problem? Yes, particularly when it doesn’t result in enough to live on. Must live in the here and now? Yes, just consider the crazy guy next door who never does. Family and friends are important? Yes, they help each other to survive. Planning? Goals? Yes, since the SS check usually runs out a week before the next comes in. Helps to be incredibly lucky? Yes, particularly when lotteries are the leading investment strategy.

  37. [...] Lessons from the insanely rich: Taxes for the top 2 percent are very likely to go higher. Uncle Sam’s share of capital gains and dividend income might rise, and means-testing for Social Security and Medicare is probable. In the United States, the very rich hold most of that wealth in dollars, which are worth increasingly less. As income inequality has grown dramatically in the nation, the very wealthy are blamed for all manner of social ills. [...]