Thomas Piketty deserves credit for pointing out to economists that Family Money is a sizable theme in novels, especially old ones. But there is immensely more that can be learned from stories about Old Money, fictional and real, than can be squeezed into r>g.
For example, consider two opposite cases of how heiresses can marry: assortatively or unassortatively.
A friend points to a couple of stories about rich families:
From the WSJ:
For Richer or Poorer? Rich Families Face a Marriage Problem
Wealthy Families Devise Strategies for ‘Onboarding’ New Members; a Welcome Packet
By LIZ MOYER
Being born to the manor is one thing. Marrying one of its occupants is something else altogether.
Just ask Steven Siig, a self-described “ski bum” and extreme-sports documentary filmmaker who was living near Lake Tahoe, Calif., and scraping by as a landscaper when he met his wife, Melissa, in 2001.
Unbeknown to him, she was the oldest granddaughter of Richard Bloch, the co-founder of the tax-preparation firm H&R Block Inc. Ms. Siig, now 41 years old, didn’t tell him this right away. “We’re very guarded about it,” she said.
“It was kind of intimidating,” said Mr. Siig, 45, when he learned of her background. “I said, ‘Wow, it’s someone I use to do my taxes when I do my taxes.’ I didn’t even know if I had done taxes the last few years.”
The Siigs
The couple was engaged six months after they began dating, and Mr. Siig began a rapid-fire process of education and assimilation into the family—a move some financial consultants call “onboarding.” Bloch family members gave him personal finance and career advice, and the couple later started meeting with a UBS AG financial adviser. Mr. Siig joined the RA Bloch Cancer Foundation board, along with his new wife, and started attending twice-a-year family gatherings in Aspen, Colo., and Puerto Vallarta, Mexico.
… Some families have set up formal committees that help coordinate communication and financial education with new family members. “We’re having this conversation all the time with families,” Mr. Grace said. “The question of how you define your family is huge, and that includes the role of in-laws.”
That, in turn, has created a growing cottage industry of wealth advisers who focus on family dynamics and other nonfinancial issues, such as inclusion for new family members, Mr. Grace said. The goal: to minimize conflict and prevent rifts from forming.
Families often pay a retainer or project fee for this type of advice. Nathan Dungan, a Minneapolis wealth counselor, charges $50,000 to $250,000, depending on the size and complexity of the work at hand, he said. …
The Bloch family, for example, had to accept that as a relative novice around money, Mr. Siig was likely to need some guidance. … Some families have mini-human-resources departments, orienting a new family member the way a business would. Some appoint family-relationship managers, who usually are older and help smooth the transition by introducing the new member to the family’s advisers, Mr. Grace said. Some families put young engaged couples in financial counseling.
Andrew Pitcairn, 45, a descendant of the 19th-century industrialist John Pitcairn (1841-1916, founder of PPG), runs a 13-member family council that includes both bloodline descendants and newcomers and coordinates communication and financial education across both groups.
The 600 living descendants of the Pitcairn patriarch, who made his fortune in railroads and oil before founding Pittsburgh Plate Glass Co. in 1883, now have a family office that manages $3 billion for themselves and outside families.
So, $3 billion is a lot of wealth, but it appears to be divvied among 600 descendants, or an average of $5 million apiece.
The Siig-Bloch kids are likely to do fine. I’d hardly be surprised if one becomes a ski resort developer. But there is a lot of competition in that pleasant business from other rich scions. The children are probably less likely to make it big in some indoor green-eyeshade un-fun business like their great-grandfather did.
Via Credit Bubble Stocks, a NYT article about an opposite, very assortative marriage between scions of two real estate clans:
It was into this [Park Avenue] milieu that Elizabeth and Kent Swig stepped during a season of high financial spirits. That the Swigs managed to scale such heights surprised no one: They were something of a royal couple in property circles. Their marriage, in 1987, had united two of America’s great real estate clans, the Macklowes of New York on her side, and the Swigs of San Francisco on his.
By the time the couple arrived on Park Avenue, in 2002, Kent Swig, a charismatic dealmaker with a surfer-dude demeanor, was already starting to build a name for himself with equal parts debt and daring. As the onetime protégé of his father-in-law, Harry B. Macklowe, the powerful New York property developer, Mr. Swig was soon credited with helping transform the dull-as-bond-tables financial district into a fashionable residential address. In a business where there was always revolving credit and a bigger deal, the only way, it seemed, was up. At the peak, his properties were worth an easy $3 billion.
Then Lehman Brothers went bust and the bottom fell out, and the Swigs’ life collapsed beneath them, in a 10-figure version of the great American housing crisis. …
Mr. Swig had reached this lofty perch the old-fashioned way: inheritance. He is the grandson of Benjamin Swig, who, with a Depression-era business partner, Jack D. Weiler, began building a real estate dynasty. At its peak, Swig holdings included stakes in the W. R. Grace Building in Manhattan, dozens of office buildings from San Francisco to Washington and the luxury Fairmont Hotel chain.
Mr. Swig did not intend to go into the family business. He studied Chinese history at Brown University, where he competed as a springboard diver, and then collected a law degree, planning to specialize in international law. But when his father, Melvin Swig, received a diagnosis of cancer in the mid-1980s, Kent took up the mantle. In the late 1980s, he moved to New York and was soon working for Harry Macklowe, with whom the Swigs had partnered on several projects.
It is said that Mr. Macklowe was so taken with the young man that he sought to introduce him to his only daughter, Liz. The night when the two were supposed to meet, each canceled — and then met by happenstance, that very same night, in line at the Saloon, a restaurant near Lincoln Center that has since closed. Fifteen days later, they were engaged.
From Credit Bubble Stocks:
This story touches on some important themes. Reversion to the mean in wealthy families. Hindsight bias, critical of practices that would be praised if they had worked:
“Today, many real estate experts say Mr. Swig stayed too late at the party and paid steep prices for many of his buildings. He also personally borrowed from banks, private investment firms and others to fund his stakes.
‘During the boom, from 2003 to 2006, he was riding high,’ said Jonathan Miller, a real estate appraiser and consultant. ‘But he was still doing deals as the damage was already starting to occur in the market.’”
If it had worked, if the rally had kept going long enough, the articles would be praising his foresight and bravery in levering up to the moon and buying properties.
That is the problem with a lot of business hagiography … a large proportion of people who get really rich speculate on assets with all the leverage they can muster. But not every leveraged speculator gets really rich!!
What do you want to maximize? If you want to simply maximize wealth (which would mean that you oddly do not have diminishing personal utility from wealth) and you can’t or won’t invent something new, you’ll have to use insane leverage and probably go bust at least once.
So, unassortative mating like the first example, where the tax-preparation heiress marries the handsome ski bum who doesn’t care much about money, tends to cause family wealth to slowly dissipate. In contrast, assortative mating, like that between the heirs to San Francisco and New York real estate dynasties, tends to increase the chances of getting even more extremely rich or going broke.
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Unbeknown to him, she was the oldest granddaughter of Richard Bloch, the co-founder of the tax-preparation firm H&R Block Inc. Ms. Siig, now 41 years old, didn’t tell him this right away. “We’re very guarded about it,” she said.











This will take some getting used to…
My old mental image was of Steve reading comments, now I’m seeing Mr. Unz looking over his shoulder, lol!
Right now, on my smartphone, the commenting feature is awkward and the text way too large, but that could be, probably is, me.
http://www.unz.com/isteve/attn-dr-piketty-two-ways-old-money-dwindles/#comment-561000
FFFIIIIRRRRRSSSTTTT!!!!!
Family money and financial deviousness is a big theme in some the novels by James Clavell.
“Old Money” by Nelson Aldrich was a great guidepost to me upon running into members of the inherited wealth classes.
None of the above are the top out of sight people Paul Fussell described. You once mentioned the real model for Daisy in Gatsby, a Chicago heiress. We do not hear too much about her descendants – such people are the ones who really count.