How You Lucked Into Your High Net Worth

Alexander Green
by Alexander Green, Chief Investment Strategist, The Oxford Club
How You Lucked Into Your High Net Worth

Editor’s Note: As we write, Alex is on his way to speak at our annual Investment U Conference. There, he’ll join regular Investment U contributors Marc Lichtenfeld, Matthew Carr and David Fessler, as well as Forecasts & Strategies editor Mark Skousen, Early Investing Co-Founders Adam Sharp and Andy Gordon, former president of Shell Oil John Hofmeister and more. They’re gathering to discuss the latest and greatest investment opportunities - for 2017 and beyond. And you can join them...

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Over the last five columns, I’ve examined New York Times columnist Robert Frank’s contention that the primary factor in achieving great financial success in this country is not talent, hard work or persistence... but luck.

(I’ll be debating Mr. Frank at FreedomFest at the Paris Resort in Las Vegas, July 19-22. For more information, click here.)

Although I disagree with Frank’s thesis, I have found several points of agreement.

Virtually everyone reading this was lucky to be born in the West in the modern era, with its many cultural, technological, medical, economic and political advantages.

And if you were born more than 50 years ago and are white and male, you are also fortunate not to have suffered from formal discrimination in your early years.

I conceded that many men and women have failed to achieve economic success due to circumstances beyond their control. They may have suffered from lousy (or absent) parents, poverty, disease, mental or physical disabilities, or some other set of unfortunate circumstances.

If you were born to a crack-addicted mother in inner-city Baltimore, you probably aren’t sitting there wondering how to put that cash in your portfolio to work.

So, yes, bad luck and fateful turns prevent some from achieving their financial dreams.

But still, the question remains... is luck - good genes, strong family, fortunate breaks and fortuitous circumstances - really what separates great achievers from everyone else?

I would argue no. Plenty of people come from prestigious families and plenty of resources and achieve little. (Although let’s not discount these advantages either.) Others come from hugely disadvantaged backgrounds and achieve great economic success.

Forbes reports that approximately 70% of the members of the Forbes 400 are first-generation billionaires who earned their fortunes themselves.

Of course, we wouldn’t even be having this discussion if the subject weren’t business and investing.

We realize that the great financial success achieved by athletes, entertainers, artists and most other well-known celebrities could never have been achieved without unusual focus and dedication.

We know that we can’t shoot the ball like Stephen Curry or play the violin like Itzhak Perlman. Yet we can easily delude ourselves that we could run Boeing or IBM - and wouldn’t object to the salary and benefits.

Folks who insist that luck is the true mother of success will often claim that they care more about the downtrodden - the unfortunate - than the rest of us.

But let’s test that claim. Take a moment to consider the people you almost certainly care about the most: your family.

When I reflect on my spouse, my parents, my siblings, my children, my aunts and uncles, my nieces and nephews, and my closest cousins, I’m thinking about not just the people I know best, but also the ones who matter most.

Some of these folks have been quite successful economically, others not nearly so much. (Some, in fact, never gave a tinker’s damn about money and have lived simple, happy and successful lives.)

However, knowing (and loving) these people as I do, it would be impossible to claim that - in most cases - the difference between the highest achievers and the rest was simply a matter of luck.

Your experience may differ. But, in mine, the family members who enjoyed the greatest economic success aimed the highest, worked the hardest, risked the most, and made the greatest commitment of time and effort to achieving their goals.

That doesn’t mean they led the best or most interesting lives, incidentally. Some family members were too busy enjoying life to be consumed by financial matters.

In any event, luck is unquantifiable, so we will never know with certainty just how much of someone’s economic success is due to chance meetings, favorable circumstances and lucky breaks.

Dumb luck has played a part in all of our lives from time to time.

Yet, in my view, there are good reasons to oppose Mr. Frank’s line of thinking. For starters, it demeans the people who dedicated so much of their time and effort to achieving their goals.

When Mr. Frank writes that people with “an inclination to work hard are extremely fortunate,” he is giving intellectual cover to able-bodied people who haven’t worked and aren’t about to.

It’s tough to believe that those who don’t have drive, ambition or a good work ethic are just unlucky. (Here we could dive off into arguments about free will, but alas, this is not Philosophy U.)

When people on one side of the aisle refer to successful entrepreneurs, business owners and investors as “society’s lottery winners,” it’s a slap in the face to those who have sacrificed a great deal - including, perhaps, the best years of their lives - to serving customers, training and rewarding employees, and meeting our economic wants and needs.

Winning a lottery doesn’t make anyone worthy of respect. It doesn’t inspire anyone.

A lottery winner makes a crazy bet and, if lightning strikes and he wins, collects what others lost. This is the opposite of our free market system where every transaction is voluntary, and thus a win-win for both parties.

It will come as no surprise - after all, Mr. Frank does write for The New York Times - to learn that he favors sharply higher taxes on the economically successful.

(I’ll note here - for those who believe that the wealthy “don’t pay their fair share” - that, according to the IRS, the top 2.5% of income earners in this country pay more in income taxes than the other 97.5% of us combined.)

It’s not hard to see why Mr. Frank argues for more progressive taxes. If luck is the ultimate factor responsible for economic success, you didn’t really earn your money and don’t deserve to keep it.

So doesn’t it make sense for Uncle Sam to take it away and spread it around among the - you guessed it - unlucky ones, many of whom didn’t educate themselves, work hard, persist in the face of hardship or take risks?

Hmm. I’m starting to get political here, and that generally means it’s time to sign off.

However, I’d advise affluent readers not to inadvertently give aid and comfort to the redistributionists by humbly confessing that you’ve been “incredibly fortunate,” or “completely blessed,” and you feel a strong desire to “give back.” (After all, you can give all you want. But you can “give back” only what you took that wasn’t yours.)

I know some folks who agreed with President Obama’s pronouncement that “If you’ve got a business, you didn’t build that. Somebody else made that happen.”

But none of them were business owners or economic risk takers.

And I suspect Mr. Frank isn’t one either.

Good investing,

Alex

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