Satyajit Das: The Rich Are Different!

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Yves here. Satyajit Das uses a new book, As Gods Among Men: A History of the Rich in the West, as a point of departure for a discussion of the acquisition and uses of wealth. Das makes many incisive observations, but one particularly important one is, contrary to eagerly-promoted mythology, how small a proportion of significant wealth is actually earned, as in a product of individual enterprise.

By Satyajit Das, a former banker and author of numerous works on derivatives and several general titles: Traders, Guns & Money: Knowns and Unknowns in the Dazzling World of Derivatives  (2006 and 2010), Extreme Money: The Masters of the Universe and the Cult of Risk (2011), Fortune’s Fool: Australia’s Choices (2022). His latest book is on ecotourism and man’s relationship with wild animals – Wild Quests (out 1 May 2024)

There is a persistent fascination with wealth and the wealthy. There is curiosity about the individuals and, where relevant, their lifestyles, habits, dramas and scandals. There is interest in their achievements and the source of their wealth. Emulation plays a part. Many study the rich to identity the secrets of their success. There is jealousy and resentment at the inequities of fate and circumstance which favour some people.

Outside of variable biographies which offer hagiographic or slanderous portraits of individuals (self-serving autobiographies should always be avoided), there is surprisingly limited literature on the subject. Guido Alfani, a professor of economic history at Bocconi University, in As Gods Among Men: A History of the Rich in the West(published by Princeton University Press) seeks to address this gap. The title draws on the medieval view that the wealthy would automatically act as “gods among men” and use their wealth to help their communities.

Accessible to the general reader, the book is a history of the rich primarily in Western societies. It looks at the last thousand years with occasional forays into more ancient times. It provides insights into the identity of the rich, the source of their wealth, how they maintained their fortunes and the role they played in their societies.

In the now standard structure of mass-market non-fiction, the book is structured around brief portraits of individuals – some familiar (the Medici of Florence, the Fuggers of Augsburg, Americans such Andrew Carnegie, the Rockefellers and John Pierpont Morgan and recent tech billionaires) and others less well known (William the Conqueror’s companion Alan Rufus who controlled a scarcely comprehensible 7 percent of England’s national income at one time). Alfani complements this with academic research, especially on inequality.

As Gods Among Men’s central argument is that there are similarities in the acquisition of wealth and behaviour of the rich across history. Public attitudes towards wealth are surprisingly interesting constancy. One view tolerates wealth on the basis that the rich deploy this to benefit their society. An alternative view, in part based on religious tenets, is that excessive wealth is evil, sinful, and contrary to the common good.

Alfani poses important questions, some of which he explores deftly but others whose treatment is less satisfactory.

First, there are several possible sources of wealth: high income; invention or business ownership; successful investments; inheritance, or luck.

Wealth deriving from income requires a high paying executive position or profession. While possible, the chances of this are increasingly limited to a few people with the right skills for the times. It also requires the right birth, upbringing and connections.

Social mobility – the ability of a person to change their socio-economic situation, either in relation to their parents (inter-generational mobility) or throughout their lifetime (intra-generational mobility) – requires equality of opportunity. It has diminished over time. In European OECD countries, children with the greatest socio-economic disadvantage grow up to earn as much as 20 percent less as adults than those with more favourable childhoods. Across OECD countries, it takes nearly five generations for children from low-income families to approach the average income in their country.

Innovation or creation of a business – entrepreneurship – is another source of wealth. In the US, close to 90 percent of the nation’s millionaires own businesses.

Successful investment -astute or lucky purchases of shares or real estate- can create wealth. The property price boom since the 1980s has converted many homeowner s and investors into ‘paper millionaires’. Successful investing as a source of wealth effectively piggy-backing on the innovation of others.

Genetic luck can confer great wealth by mere dint of birth. Similarly, pure luck, such as lottery winnings, can also create riches.

Alfani finds that a high proportion of wealth is inherited from families or association with royal dynasties. There are specific historical episodes such as the opening up of global trade and the industrial revolution of the late 19thcentury when adventurous and daring individuals generated wealth. Interestingly, he finds that riches from invention or entrepreneurship is small relative to inheritance.

The book does not examine, in detail, an important shift in wealth creation – the rise of financialisation. 19th century innovation focused on the real economy – the internal combustion engine, energy sources especially hydrocarbons and electricity, telecommunications, industrial chemistry, pharmaceuticals, and entertainment. In contrast,  late 20thcentury innovation – digitisation – has focused on marketing, selling and delivering existing goods and services. Most who have generated wealth from these developments have used financial techniques to extract value assisted by venture capital and early stage funding.

Second, Alfani does not explore the motivations of the rich. Originally, many acquired great wealth as a by-product of service to monarchs or regime, often in service of god and country. Some even believed that their work benefitted mankind. Today a high portion of the rich set out to be rich. The means are increasingly less important than the end.

Competition between the rich is evidenced by keenly studied rankings of the richest. Having more money than you can conceivably spend is insufficient if your perceived peers have a dollar more. One billionaires simple instruction to his boatbuilder was: “I want a super-yacht bigger than his.”

There is an apocryphal story about Vanguard founder John Bogle, a billionaire. When a neighbour tried to impress him with his possessions, the down-to-earth advocate of index funds answered that he had one thing that his rich neighbour did not have: “Enough!

Third, the wealthy exert their power and influence to preserve their riches. Alfani confirms that they maintain a strong grip on their money by actions – political donations and lobbying- to shape policy. He finds that avoiding taxes and finding ways to make economic gains in volatile times, such as a recession or a pandemic, is a key part of riches.

Fourth, Alfani’s justification of wealth on the basis of spending and philanthropy is unconvincing. The Medici did enhance the civic life of Florence. Millionaires Leland Stanford and Herbert Hoover provided much-needed help during the Great Depression personally financing many social benefit programs. More recently, some of the work of the Gates foundation has helped the disadvantaged.

However, for the most part the spending of the rich and their philanthropy has serious contradictions. It is opaque about the source of the wealth which may derive from exploitation, operating in jurisdictions with poor pay and working conditions or inadequate environmental controls.

Few individuals or corporation ‘give away’ their money which is placed in tax efficient trusts or foundations, with the donor retaining substantial control. The structures are generally tax deductible or provide protection from death, inheritance or estate duties. The trust or foundation also provides employment and status for the donor, his or her family and associates and confers business advantages.

To borrow from Shakespeare’s The Merchant of Venice: “[Philanthropy] is twice blessed. It blesseth him that gives and him that takes.” It is the worst of trickle-down economics as humourist Will Rogers observed during the Great Depression: “money was all appropriated for the top in hopes that it would trickle down to the needy.”

Fifth, Alfani chooses not to address the peculiarly modern tendency of the rich to provide unsought advice how to run the world and generally many think beyond their expertise. Peter Theil and Elon Musk, with their strong espoused if poorly formed libertarian leanings (true believers would not accept them as one of their tribe!)) are prime examples. Stateless and virtual internet based firms claim that in minimising tax they are engaged in “self-taxation”, substituting philanthropic contribution for taxes. This allows targeting specific areas of interest to their owners. In effect, private interests rather than elected governments determine how taxes should be spent. Such influence is unhealthy in a democracy.

Wealth and the wealthy have grown since the beginning of time. Alfani finds that there have been brief periods when this tendency has been checked – primarily the 14th century Black Death and the two world wars. The underlying reason is shortages of labour and also the broader environment, such as the sacrifices necessitated by wars, led to modest redistribution of wealth and income. Depressingly, the concentration of wealth has inevitably resumed. The 2007/08 financial crisis and the Covid pandemic did not halt the inexorable gains by the rich. This primarily reflects their ownership of real estate and financial assets which have benefitted from state largesse and ultra-low interest rates.

Many societies today to extol the wealthy especially in ‘how-to-get-rich-quick’ books. Idowu Koyenikan in Wealth for All: Living a Life of Success at the Edge of Your Ability eulogises: “When money realizes that it is in good hands, it wants to stay and multiply in those hands.” In Think Your way to Success: Let Your Dreams Run Free, Stephen Richards castigates those not rich: “The discontent and frustration that you feel is entirely your own creation.” The conclusions of As Gods Among Men are at odds with a culture which sees the rich as merely reaping the results of hard work.

As Alfani argues the position of the rich and super-rich in Western society has always been intrinsically fragile. This is rising as the wealthy are increasingly reluctant to contribute to the common good in times of crisis, rejecting even such stopgap measures as temporary tax increases. Today, the wealthy instead see themselves as victims of persecution. They argue that the attacks on them are politically motivated, playing to populist sentiments, encouraging envy and jealousy. Stephen Schwarzman, founder of fund manager Blackstone, drew parallels between America’s class war and Nazi Germany’s war on its 1 percent, the Jews.

In 2014, Nick Hanauer, whose family were forced to flee Nazi Germany, heard the sound of tumbrels and guillotines: “The pitchforks are going to come for us. No society can sustain this kind of rising inequality. In fact, there is no example in human history where wealth accumulated like this and the pitchforks didn’t eventually come out. You show me a highly unequal society, and I will show you a police state. Or an uprising. There are no counterexamples. None. It’s not if, it’s when.” As. President John F. Kennedy set out in his Inaugural Address on 20 January 1961: “If a free society cannot help the many who are poor, it cannot save the few who are rich”.

The essential question about wealth is: what does it buy? For most of us who are slaves in all but name and free only within narrowly circumscribed limits, it about modest freedoms perhaps to enjoy small luxuries without having to look at the price label for fear that it is outside our reach. As Fyodor Dostoevsky knew money is “coined liberty”. Yet today, the greed of a few and the alignment of riches with power is gradually eroding the consensus that holds our fragile communities together.

© 2024 Satyajit Das All Rights Reserved

A version of this piece was published in the New Indian Express

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21 comments

  1. Cervantes

    Note, John Bogle was not a billionaire. His net worth is estimated to have been around the border of eight and nine digits. While he may have used the “enough” line–he wrote a book with that title–the story of a figure who responds to one with more money by observing they have enough is first attributed to novelist Kurt Vonnegut, who is said to have delivered the line at a New York cocktail hour in comparison to an early hedge fund manager.

    Reply
    1. eg

      Vonnegut wrote about the incident on the yacht in a valedictory poem/obituary for his friend and fellow author Joseph Heller. The Bogle connection comes later when Jack included the poem in his Enough:True Measures of Money, Business and Life

      JOE HELLER

      True story, Word of Honor:
      Joseph Heller, an important and funny writer
      now dead,
      and I were at a party given by a billionaire
      on Shelter Island.

      I said, “Joe, how does it make you feel
      to know that our host only yesterday
      may have made more money
      than your novel ‘Catch-22’
      has earned in its entire history?”
      And Joe said, “I’ve got something he can never have.”
      And I said, “What on earth could that be, Joe?”
      And Joe said, “The knowledge that I’ve got enough.”
      Not bad! Rest in peace!

      Reply
  2. John Wright

    Perhaps the ” I have enough” quote is also traceable to John Bogle, but the quote does have some traceability to Joseph Heller via Kurt Vonnegut:

    Kurt Vonnegut wrote this obituary/poem for The New Yorker in May 16, 2005.

    “True story, Word of Honor:
    Joseph Heller, an important and funny writer
    now dead,
    and I were at a party given by a billionaire
    on Shelter Island.
    I said, “Joe, how does it make you feel
    to know that our host only yesterday
    may have made more money
    than your novel ‘Catch-22’
    has earned in its entire history?”
    And Joe said, “I’ve got something he can never have.”
    And I said, “What on earth could that be, Joe?”
    And Joe said, “The knowledge that I’ve got enough.”
    Not bad! Rest in peace!”

    — Kurt Vonnegut”

    https://medium.com/@bobsutton/kurt-vonnegut-joe-heller-and-a-thanksgiving-message-8a31ca397888

    Reply
    1. Henry Moon Pie

      The greatest evil: wanting more.
      The worst luck: discontent.
      Greed’s the curse of life.

      To know enough’s enough
      is enough to know.

      Tao te Ching # 46 (Le Guin version)

      Reply
  3. Limbet

    Stephen Schwarzman, founder of fund manager Blackstone, drew parallels between America’s class war and Nazi Germany’s war on its 1 percent, the Jews

    Can someone provide a source for this!?

    Reply
    1. Yves Smith Post author

      Do not make requests like this again. We are a thinly resourced site and don’t have time to prove anecdotes that were widely reported, hence easy to find on a search engine. It is only reasonable to do so if you looked for it and were NOT able to locate it.

      And Schwarzman is known for being a nutter as far as pet cases of the rich are concerned. Or rather both a nutter and loud about it.

      See:

      https://www.businessinsider.com/steve-schwarzman-taxes-hitler-invaded-poland-2010-8

      Reply
      1. Limbet

        Thanks!
        Sorry for the bother, I see the quote was about an invasion of Poland, not using the keyword Jews which is why it didn’t come up.

        Reply
    2. Carolinian

      I believe he said proposed financial regulations were a kind of Holocaust. I would use my search engine but then you have one too, right?

      Reply
  4. t

    Most who have generated wealth from these developments have used financial techniques to extract value assisted by venture capital and early stage funding.

    There’s a history of steam power that is mostly a history of the state or church funding and paving the way for those lucky enough to win favor. There’s no Henry Ford, but perhaps that style of competition was whitewashed out of the story.

    In that quote, financial techniques seems to include laws and treaties and government assist a la United Fruit and what have you.

    Reply
  5. Emma

    “More recently, some of the work of the Gates foundation has helped the disadvantaged.”

    I’m straining to find any examples where they actually helped. While a lot of their initiatives were trumpeted as innovative approaches to problems of poverty ten years ago, I don’t think any serious person can still believe that today.

    My few direct encounters with the very rich lead me to believe that they are very very very much not like the rest of us. Even when they are nice and seemingly well intentioned, there is a vast sea of money between them and the rest of us. The presence felt alien.

    The world and maybe even the rich themselves, would be much better off if they didn’t have their exorbitant wealth. About the only positive they really contributed to the world are some beautiful art collections, public gardens, supporting some major artists/philosophers/writers, and maybe some public works in cases where the national governments persistently failed to step up. We can get beyond them, easily.

    Reply
  6. eduardo

    Forbes maintains an yearly list of world billionaires. The share of wealth grabbed by these super-rich is staggering. From constant US$1.8 trillion in 1996 or 3.3% of GWP (gross world product), it climbed to US$12.7 or 12.8% of GWP in 2022. Nothing seems able to stop their growth : 7.7% average annual growth, against 2.3% for GWP, both in constant dollars. Quite a show.

    Could that be a symptom of a social disease? The emergence of a ponderous and fast bulging entity is often a symptom of a serious disorder. In natural ecology, the presence of a thriving predator ruins the balance of the milieu and leads ultimately to the downfall of the predator itself. In physiology, cancers feature an abnormal growth of certain cells that spread to other parts of the body and unmercifully destroy the host organism. In astronomy, black holes can grow further by absorbing mass from its surroundings, including other stars, and evolve into super massive black holes. In urban sociology, the sprawling of a great city into a thickly populated megalopolis entails a dramatic deterioration of life conditions, the disruption of the ecological environment, massive immigration, and the eventual collapse of the social fabric.

    It is surprising that standard economists pretend that there is nothing wrong with a system of which two functions grow, one at a 7.7% annual rate, and the other at a 2.3% rate. They are likely so engrossed with their linear arithmomania that they gleefully devise everlasting growth – and yet “sustainable”, they claim – models to assuage any concerns that the predators might have about the soundness of their insatiable greediness.

    As the rich get richer, they contend, the wealth trickles down to the gratified poor. In their minds, the discipline of economics is exempt from the laws that rule growth and change in the science realm. The philanthropic alibi, by which the economist advocators try to rationalize the extravagant wealth, reminds me of the aphorism by Bernard Shaw : “The philanthropist is a parasite on misery as the doctor is on disease.”

    Ancient Greek mythology contains an ominous warning against greed. Tantalus was extremely rich and favored by the gods, at which table he sat. His arrogance made him behave eerily. Zeus would not take it, and sentenced him to suffer from unquenchable thirst and unappeasable hunger, with fruits hanging above his head and freshwater flowing under his chin but out of reach. Temptation without satisfaction.

    The 2008 global financial debacle prompted many rationalizations about the end of speculative finance, unruly capitalism, privatization of gains and nationalization of losses, and unbridled inequality. The old, wild financial capitalism seemed doomed. In 2021, thirteen years and another major crisis later (the 2019 pandemic), it reached new heights! Nothing seems to threaten its irresistible ascent. Until Zeus awakes from his peaceful slumber and decides that enough is enough.

    Reply
  7. Carolinian

    Shorter Bezos: “I think I am becoming a god.”

    Oh wait that was Caligula.

    Seems like from a Darwinian aspect capitalism may be an epic fail since we are hurtling toward a destruction demanded by “markets” or rather the flawed individuals who make up the markets. Perhaps it’s all those legacies. Huge inheritance taxes needed? Last night PBS had a show about Grizzly Bears and once her cubs are weaned–takes about two years–the mother drives them off to sink or swim on their own. All they really get from mom is nutrition and a good or bad example.

    Those who promote social Darwinism should perhaps look and learn. But then nature wants species to prove their worth and survive whereas the rich would rather be gods.

    Reply
  8. Chris Cosmos

    Being “super-rich” (rather than merely rich) is really the point here. The rich are not that different than the average upper-middle-class type they just have more money to play with but aren’t another species. The super-rich, in contrast are really, really different because they have political power that allows them to maintain and expand their empires and hire hit men (both in the real and symbolic sense) if you annoy them too much. For many of these people the richer they get the richer they will get ad infinitum because nothing can touch them other than other super-rich people. Even the lower levels of the super-rich are vulnerable to those higher up as Trump has discovered–they haven’t killed him yet but may well do so if elected and he actually goes his own way (don’t worry, he will consult with the oligarchs and avoid getting killed).

    Reply
  9. jrkrideau

    Oh wait that was Caligula.

    Are you sure about that? I thought it was Vespasian. Vespasian, as a tough as boot leather old soldier and reputedly rather miserly emperor, seems a better, cynical, candidate.

    Still Caligula was enough of an iconoclast that he may well have said it.

    Reply
    1. Carolinian

      Think this line is from I, Claudius but I only know the BBC version where Caligula pretends to be Zeus. As history neither version is likely very reliable.

      So Vespasian then.

      Reply
  10. Adam Eran

    I knew someone in philanthropy (that “self tax” above) who met lots of wealthy people. He told me “Ninety percent of these guys were born on third base, but they all want to act like they hit a triple.”

    Reply
  11. Wukchumni

    I drive a Tacoma with 211k miles, they drive a Ferrari Testarossa…

    You really can’t go all that fast on the roads, especially in LA or SF where the Testarossa driver likely lives, we end up getting there the same time. There’s a lot of Tacomas on the road, but not many Testarossas. Edge goes to exclusivity.

    I have a 873 foot long ship which I share with 4,000 others and 1,200 crew, they have a 417 foot yacht.

    Nobody is really in a hurry to get anywhere on the ocean, and the yacht has it all over the cruise ship in maneuverability, and looks for that matter. Edge goes to exclusivity.

    I fly in a large jet with hundreds of passengers, none of us typically know one another, they fly in small jets and everybody knows each other.

    They get to the destinations certainly within a day of one another, typically only hours separate arrival times between both ways of flying. Edge goes to exclusivity.

    Our lives aren’t all that different, aside from that exclusivity thing.

    Reply
  12. Victor Sciamarelli

    “The essential question about wealth is: what does it buy?” I think the super rich want to buy recognition, acclaim, and admiration. You get to put your name on buildings, endow a professorship, and become a public celebrity. And, of course, you gain political influence and power.
    For example, when entering a room of the Guggenheim Museum a few years ago, I noticed the name of the donor for which the room was named was much larger than any of the artists I came to view.
    The NY Philharmonic Orchestra plays at the David Geffen Hall named after a record entrepreneur who donated $100 million.
    The medical school at Johns Hopkins was renamed the Johns Hopkins Bloomberg School of Public of Public Health in recognition of Michael Bloomberg’s financial support.
    Not for those who advance art, music, or medicine do we name institutions but for the wealthy.
    Today’s billionaires, for example in NYC, grew up in the shadow of landmarks like Carnegie Hall and Rockefeller Center. They want their names to live forever too, and there’s no such thing as having too much money.
    I think the very rich are addicted to money and that makes them more dull than most other people. Human progress comes from people who marry their intelligence with creativity and share a passion for improving the human condition.
    Do most members of the super wealthy have a vision of the future that most of humanity supports: lower taxes, market solutions, and smaller government are not very exciting.

    Reply

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