In Defense of A Michigan Student’s Relative Wealth

Jesse Klein, a student at the University of Michigan, recently wrote a school newspaper column titled Relative Wealth that has widely circulated across the internet in the three days since she wrote it. The column became notorious both for its content and style—Ms. Klein argues that she is middle class despite hailing from a Silicon Valley household that makes $250,000 per year, and her writing style was not well received. There 200 comments at the time I started writing this, and I would guess there were about 10 negative comments to every 1 lukewarm/neutral comment. You can read the article here: “Relative Wealth.”

First, I’ll state my concern with Ms. Klein’s column, and my criticism of it also applies to Ms. Klein’s detractors. In one of her paragraphs, she writes: “So even though I have money, I don’t relate to a lot of people here who do. California money is earned and spent in a very different way than a lot of the wealthy families in the Midwest or other parts of the country. It’s almost Gatsby-like. California money is new money, held by software nerds. They don’t dress in suits but in bad dad jeans and fanny packs. Money elsewhere in the country usually means suits and ties and generations of family holdings.”

That last line of her paragraph—money elsewhere in the country usually means suits and ties and generations of family holdings—is demonstrably false. In fact, I would estimate that it played a role in explaining why her column generated so much online hostility in her attempt to dissociate her family’s kind of income from those of…northeastern trust-fund babies? If you read Dr. Thomas Stanley’s book The Millionaire Next Door, you would know that over 90% of millionaires (will millionaires being defined in the traditional assets minus liabilities way) reached that status themselves and not through trust funds. There are 3.5 million millionaire households in the United States, and only 350,000 of them achieved that status through some kind of combination of a trust fund or inheritance. That means that 3.15 million of the 3.5 million millionaire households in this country reached this through a combination of their own labor mixed with long-term personal investing success which involves buying ownership interests in businesses or real estate plus the debt issued into connection to that (e.g. bonds).

This leads to my two-pronged criticism of Ms. Klein’s critics. The first deals with the current fashionableness on college campuses to take down those coming from money and usually possessing white skin by accusing them of having “privilege”. The data suggests that these critics are crusaders searching for ill-defined rights rather than authors of legitimate grievances. That is because of the assumption that privilege is unearned when the data in the United States shows that 9 out of every 10 U.S. millionaire households reached that status on their own rather than being bestowed with riches.

To become a millionaire, you usually need to develop the talent for a specialized skill so that you can charge the highest hourly rate possible (this form of maximizing your personal production is relevant in showing the value others in the world place on your skills). Then, you need to develop the work ethic for a long enough period to earn a meaningful spread between the money you make and the money you spend so you can invest the surplus into passive self-propelling assets that can make money while you sleep. It is usually the growth of these self-propelling assets—Coca-Cola stock, The Vanguard Wellington Fund, a small-cap ETF, maybe a REIT investment or a rental property—that enables to reach millionaire status. Raising the ceiling of your personal skills, working hard, and doing something intelligent with the surplus is all earned, and something that should be praised rather than criticized.

When people have these conversations about privilege, they aren’t reverse engineering the problem. They see a rich guy or girl arrive on campus and drive a $40,000 car and wear designer clothes, and treat it all is unearned. That is the source of the tension. The problem is that they are viewing the narrative only from the perspective of the rich kid they see instead of viewing it as the reward of doing the Increase Personal Skills + Work Hard + Invest Surplus math equation that they mentioned above. Viewed from the perspective of the parents, this is one of the desirable consequences of executing that formula—you are able to facilitate the circumstances through which your own children can execute the three-step formula to a successful economic life.

If you criticize this, you are criticizing the climbing-the-economic-ladder component of the American Dream and choosing to ignore how human beings respond to incentives. I reject nearly all components of the Marxist dialectics, but there is one thing about the human condition that Karl Marx indeed understood well: People generally want to acquire more material goods and services as they go through life. To borrow from my favorite capitalist, Charlie Munger, it should surprise no one that the past twenty years have seen America’s brightest shift from entering med school or becoming engineers and instead pursuing jobs on Wall Street. This, he lamented, is because the economic incentives changed in the civilization, and smart people respond to those changes. When you criticize someone’s relative wealth to your own, you are in fact saying something along the lines of “You and your family are better at the game than me, and I don’t like it.” People who criticize others on the basis of privilege are often themselves seeking more money as they go through life.

This leads me to my most substantive criticism of Ms. Klein’s detractors. She was absolutely correct in her insight—hit the bullseye!—in recognizing that human beings respond to relative wealth. Her argument is that, based on her social conditioning near Silicon Valley, making $250,000 per year feels normal and is not an extravagant lifestyle. When she took that attitude to Ann Arbor, she quickly became the subject of mockery.

Why? Because the undergraduate students reading the Michigan Daily felt that Ms. Klein came from a household with significantly more purchasing power than her, they rejected her middle class arguments because they consider her family’s purchasing power economically superior to theirs. In other words, they scoffed at her middle-class claims because her background had more relative wealth than them.

Now, let’s do a thought experiment: Imagine if you spoke to someone earning wages near the American poverty line and said, “See that computer you have; you have access to more information than the mighty Croesus of Lydia.” Or, if you went up to someone drinking bottled water, and said, “You are so wealthy; you have a better water supply than Julius Caesar himself.” Or, if you saw someone getting by in a Ford Pinto, and said, “Sweet ride; not even Henry Ford could drive something that nice.” If you talked to people like that, the popular reaction that you would receive would be along the lines of—Okay, you slimy conservative, enough sunlight for you—you can go back under that bridge you came from.

But yet, the statements between Ms. Klein and her detractors all capture the same point: people take into consideration relative wealth based upon their social conditioning. When someone lives at the poverty line today, they are not usually grateful for a higher standard of living than the kings of centuries past because it is irrelevant to them—their social network applies different standards. Ms. Klein was making the same point—based upon her social conditioning in Silicon Valley, she has different standards applied through her social networks that makes the standards expected by Ann Arbor students irrelevant to her. You normalize your environments, and that is why these tensions arise when people talk about relative wealth.

She felt middle-class in Silicon Valley because she didn’t possess economic superiority to her Silicon Valley peers. Prior to attending Michigan, she didn’t consider herself better off than the Ann Arborians for the same reason that Ann Arborians laid off from work don’t rise in the morning and express thanks for not being in a Syrian war zone—it is irrelevant and has nothing to do with their personal world. The degrees are different, but the principle is the same.

As a side issue, the most bothersome part of the comment section is the often-repeated assertion that Ms. Klein’s piece shouldn’t have been published in the first place—some said The Michigan Daily should have refused to publish the endorsement of privilege, and others suggested that a supervisor for the school paper should have sat down with Ms. Klein and discussed her piece and not published it. The calls for censorship, and the seeming popularity of that ideal, is the most troublesome of all. If you are a true conservative on most college campuses, you are probably not going to win many popularity contests. That comes with the territory. But calling to censor someone’s viewpoint simply because you don’t like it suggests that you have something to hide—if the idea is so bad, people will reason through it and realize it. And if it is not, then you are merely trying to use a position of power to clamp down upon someone who may be more persuasive and influential than you. At least, that was James Madison’s premise behind the appeal of robust speech.

Perhaps the great tragedy in all of this is that the public blowback against Ms. Klein will make her a less dynamic individual going forward and may encourage her to self-censor her viewpoints in future Michigan Daily columns because of the angry e-mails and comments she received. Note: This is something I consider a problem without an authoritative solution—I also support the ability of her harshest critics (many of whom chose to engage in name-calling) to say their pieces as well. Everyone should be the beneficiary of the Madison Principle.

Instead, the solution would involve college-aged adults using restraint and realizing that just because they have the right to be vicious to those with whom they disagree, it likely violates the golden rule to do so. It is a case of technology outstripping human decorum—college is a time where you should feel comfortable to float ideas out there to facilitate developing your own systems of thought, and the Facebook/Twitter/social media blowback acts as a social restraint on that ability. Still, social pressure is much less invidious than a formal policy of censorship—an action much more harmful to our nation’s fabric than the musings of a rich girl that doesn’t realize it, no?