The Parents of America’s Wealthiest One Percent

An interesting phenomenon in the United States is that, outside of those living in true poverty, nearly all other individuals self-identify as a member of the middle class. Teacher earning $3,500 per month as part of a Teach For America or related program immediately after graduation? That person identifies as a member of the middle class. Pulling down six-figures annually as mid-level investment banker? Identifies as a member of the middle-class.

Small business owner who earns $75,000 per year? Rightly identifies as a member of the middle class. Small business owner who grows that business to earn $300,000 per year? This person now identifies as a member of the middle class who happened to have a successful year.

That is significant.

Why don’t individuals classify themselves according to their economic reality of their earnings? If you are bringing in $15,00 per year, you are not middle-class, you are in the bottom quantile. That is below middle class. Why do individuals bringing in $300,000 per year self-identify as middle class, when that is clearly top 1% of wealth territory in nearly every U.S. state. Is it self delusion? The desire for social conformity?

My view is that it is a product of the upbringing of America’s wealthy. St. Francis Xavier once said, “Give me the boy until he is seven, and I will give you the man” in a nod towards the extreme amount of baseline referential points that we all develop during our young childhood years.

Take a look at the chart of the economic backgrounds of the parents of America’s top 1%. Only 16% of America’s wealthiest top 1% came from households that belonged to the bottom quintile or the top quintile of earnings.

Both those born into poverty and those born into affluence only contribute 8% of America’s wealthiest 1%. Why does extreme advantage and privilege not translate into a higher probability of joining the ranks of America’s richest than that of those born into poverty? The short answer, perhaps best summed up in the Mark Twain quote, is “The man who does not read books has no advantage over the man who cannot.”

Tom Wolfe, in an interview after his release of the Bonfire of the Vanities, said that he believes the motivation to work maniacal hours to achieve extreme financial status is a product of the desire for social status, and alternatively, a desire for material comforts (those two concepts are intertwined as the purchase of consumer goods is a primary means of displaying social status).

For those who are born into the most privileged households, the social status and material comforts are provided at birth. Working insane hours in the pursuit of creating the perfect work cannot byproduct greater than what they already have (in fact, the lifestyle tradeoffs of launching a business or specializing a skill would likely take away from the more leisurely track that is automatically available, meaning that such privileged individuals would have to act their own short-term self interest in order to overachieve the success of their parents).

The supermajority of America’s richest one percent, approximately 84% of them, grew up in households that earned incomes in three quintiles in the middle.

The data point I found most telling? Over 94% of these parents required their children, future members of America’s one percent, to work a menial summer job before the age of 18. Even more telling, approximately 88% of them would not let their children quit the job before their summer’s end, desiring to teach them the value of tenacity in reaching their potential.

Logically, the parental insistence on sticking out and finishing unpleasant tasks must lay the foundation for the business success that awaits these individuals. As anyone who has run a successful business operation knows, a third of the day (at least!) consists of acting as a firehose that puts out fires that you had no idea would arrive. And then, once the fire is put out, and perhaps with all of your day’s energy sapped, you must then trudge on with the day’s original tasks in order to get ahead.

Every business owner can think of a moment of discourage, disappointment, or self-doubt when quitting on the spot would have completely cut off and acted as a complete bar to the success that followed.

The economic success conundrum becomes: How can you show up to fight every single day? That fire in the belly cannot exist, except by artificial or tyrannical means, if you are born into a family of such privilege that you need not fight in order to afford what you desire. However, if you were born into a middle-class household in which no provisions for your generational security ever existed, with a parental mandate of finishing the work on your desk, then you accurately described the fertile soil that facilitates outsized success.

You can point to the parents of the wealthiest 1% to understand why the wealthiest Americans self-describe as middle-class economically when the more precise description would “they are rich economically but have retained the middle-class values from their parents.” Right now, America is more of an aristocracy than it has ever been in its entire history. The wealthiest among us largely came by and large came from households earning between $50,000 and $140,000 per year. And they are taught to never quit. Theodore Roosevelt said that if he could give the children of America one character trait, he would choose “never giving up.” The parents of the modern American wealthy carried out this wish.

Originally posted 2018-09-03 01:20:34.

Like this general content? Join The Conservative Income Investor on Patreon for discussion of specific stocks!