Giving Pledge = Restart Game of Monopoly?

[nickenumbers]

All,

 

This is a finance question in a roundabout sort of way.  We know that the Giving Pledge is a movement by billionaires to give 50-100% of their wealth to charity before or after they die.

 

Is the Giving Pledge a restart of the game of real world Monopoly? 

 

Said differently, WEB and Bill Gates and others have played the game of life so well, and they have rolled up enormous snowballs of wealth and influence derived from wealth, rather than pass it along to future generations though a family dynasty, lets give it away.  They recognize the principle of "winner take all", how much amazing good that can potentially be done in the present with the capital they have amassed, and that there is an enormous gap between the few billionaires vs. the rest of society.

 

Is it a recognition that ultra rich should give it back, or fear revolutionaries come and take it from them?

 

It seems that WEB is amazingly humble [i don't know if Bill Gates is humble or not], so I think WEB is happy to give all the money away, end the game of monopoly at his death, clean up everything and put it back in the box for the next set of players to show up and enjoy the game.  [i think that is pretty badass decision, compared to giving it to a pack of snobby potentially selfish children and relatives 2-3-4 generations down.  Family that might not be able to find capital allocation if you gave them a map and a footpath.]

 

I know Bill and Melinda are ultra focused on getting good value and effectiveness for the specific initiatives that they have chosen in the Gates Foundation, and capital may help.  But, what do you guys think about the 20-40-60 year prospects of it all?

 

[i have a couple other questions regarding this line of thought, but I will ask them in a couple days.]

 

 

Thanks.

[Cigarbutt]

Potentially useful input for discussion:

https://inequality.org/wp-content/uploads/2018/10/Billionaire-Bonanza-2018-Report-October-2018.pdf

 

Meritocracy is to be cherished. But.

In high school, I did well in a regional speaking contest. The title was: "Excess in anything is a fault".

Voluntary reset does not seem to be on the horizon for the vast majority.

 

 

[gfp]

One thing I've heard is that families with over a billion dollars tend to know other families with huge wealth and they are well acquainted with just how bad it can get - whether it's a few generations down the line or your own kids.  They've heard stories.  Charlie and Warren have talked about it.  They do a lot of 'elephant-bumping' and people like to gossip.

 

There are quite a few 'signers' of the giving pledge that are wealthy enough that this little token 1-10% that does make it to the next generation (tax free) is far from re-setting the monopoly board.  Even the Buffetts will have dynastic wealth (probably practically forever) because there is just so much money sloshing around the family.  And Warren is the poster child for the movement...

--------

 

Cigarbutt, that was an interesting quote on page 5 of your linked document -

 

“The central issue is we’re developing into a plutocracy. We’ve got an enormous number of enormously rich people that have convinced themselves that they’re rich because they’re smart and constructive. And they don’t like government, and they don’t like to pay taxes.”

—Paul Volker, former Chairman of the Federal Reserve

 

Obama said something similar once.  And Warren Buffett says something similar quite often.  Only Obama gets pilloried for the sentiment, primarily by people willfully taking what he said out of context:

 

There are a lot of wealthy, successful Americans who agree with me – because they want to give something back. They know they didn't – look, if you've been successful, you didn't get there on your own. You didn't get there on your own. I'm always struck by people who think, well, it must be because I was just so smart. There are a lot of smart people out there. It must be because I worked harder than everybody else. Let me tell you something – there are a whole bunch of hardworking people out there. (Applause.)

 

If you were successful, somebody along the line gave you some help. There was a great teacher somewhere in your life. Somebody helped to create this unbelievable American system that we have that allowed you to thrive. Somebody invested in roads and bridges. If you've got a business – you didn't build that. Somebody else made that happen. The Internet didn't get invented on its own. Government research created the Internet so that all the companies could make money off the Internet.

 

The point is, is that when we succeed, we succeed because of our individual initiative, but also because we do things together. There are some things, just like fighting fires, we don't do on our own. I mean, imagine if everybody had their own fire service. That would be a hard way to organize fighting fires

[SHDL]

Like globalfinancepartners said, this isn’t enough to “restart the game” completely, and I’m sure Buffett knows that.  It is a step in that direction, however, and it also accomplishes a few other things along the way. 

 

One thing in particular that I think gets less attention than it deserves is that it probably helps reduce the likelihood of something like a communist revolution taking place in the US. 

 

All in all, I think it’s another very smart move by Buffett. 

[LC]

Cute concept but will never happen without enforcement. The human spirit has both good and bad and for every Buffett and Munger there's five more guys who will hide and hoard their great-great-great-great-grandaddy's fortune.

[SharperDingaan]

Nature is very good at thining out the herd.

A good chunk of the nouveau rich will blow themselves up well before they get to be old money, and a good chunk of old money will not successfully transfer accross generations. Drugs, drink, depression, family dysfunctiion, revolution, etc. will thin the population further.

 

Time is a bitch, you cannot take it with you.

As soon as you're dead your stash will be looted, and there is little you can do about it (ie: Egyptian Pharoahs)

And as Ramses (Egyptian pharoah) demonstrated, your 'statues' will also be repossessed and 'attributed' to someone else!

 

SD

 

 

[Cigarbutt]

Nature is very good at thining out the herd.

A good chunk of the nouveau rich will blow themselves up well before they get to be old money, and a good chunk of old money will not successfully transfer accross generations. Drugs, drink, depression, family dysfunctiion, revolution, etc. will thin the population further.

 

Time is a bitch, you cannot take it with you.

As soon as you're dead your stash will be looted, and there is little you can do about it (ie: Egyptian Pharoahs)

And as Ramses (Egyptian pharoah) demonstrated, your 'statues' will also be repossessed and 'attributed' to someone else!

 

SD

Fair enough. To maintain is as difficult as to accumulate. You may also consider the possibility that concentration of wealth may have been a factor behind the decline of the pharaonic Egyptian dynasties.

 

But if you try to quantify the rates of change and the more recent trends like Ray Dalio does, the concentration at the top and the resistance to bringing new blood seem to be reaching plutocratic levels. And the cavalier attitude too. The let them eat cake persona.

https://www.bloomberg.com/opinion/articles/2018-07-10/rich-kids-inheritances-will-last-many-generations

 

Especially since the great bailout crisis, have you looked at statistics related to family offices? There are many motivations behind a family office but one of the basic aspects of this growing phenomenon is to systematize a retention program, ie prevent Junior III from doing too much damage too rapidly. The deal comes with multi-generational wealth management and has a component of philanthropic activity to give the whole thing a veneer of respectability.

https://www.capgemini.com/wp-content/uploads/2017/07/The_Global_State_of_Family_Offices.pdf

 

Swamps come in different varieties and an argument can be made that a certain amount of wetlands is inherent to any semi-organized ecosystem. In hunger games type scenarios, the biggest swamps are not the most visible and are typically inhabited by people wearing suites who know the rules of rulers. Capitalism and free markets need sufficient mobility, otherwise the transporting medium becomes stale and murky.

 

I would submit that self-regulation should be considered because the historical pendulum does swing.

 

The present level of concentration and immobility is based on a trickle-down philosophy. One day, the harvest will be poor. Looking at recent historical trends and being a relative contrarian, under certain scenarios, one has to wonder if the Barbarians at the gates of the gated-communities may be, one day, looking more than to accomplish a plain vanilla hostile takeover. There are many ways to “deal” with a cartel and heads don’t need to fall. I would tend to see it like an investment with a negative initial cash flow.

[SharperDingaan]

It's usefull to take a more 'numbers' approach .....

Of every 100 super-wealthy; how many got wealthy via a questionable source (75%?), and then how many used questionable practices (offshore accounts, charities, legal/tax accountants) to maintain it (90%?). You may be the angel, but you operate in a dirty ship - & soot on the wings is enevitable.

 

If you made your money 'the old fashioned way' (stole it!), you've additional problems.

Preventing your friends from stealing your money, and staying alive to enjoy it. Pillage is straightfoward, but you're only usefull so long as the pillaging remains good; after which you'll have a medical/flying accident just before the money vanishes from your offshore account. As 'inheritance'  depends on how skilled your successors are - it's a self correcting merit based system, and pretty hard to fault!

 

The wealthier you get, the smaller your gilded cage becomes.

And if you're forced to procreate out of a steadily diminishing gene pool, it's not long before the hillbilly 'syndromes' start making themselves felt. Everybody thinking the same way, us versus them 'tone' deafness, rapidly diminishing 'street smarts' etc. It takes a while, but its no different to cooking frogs - do it slowly and you'll eat well, as they will not jump out of the pot.

 

History shows that all civilizations eventually fail - but if they were ALL good enough to BECOME civilizations, what did they ALL do that caused them to fail? We would suggest that it was the corrupting influence of extreme wealth.

'Nature' at work.

 

SD