You can (not) get rich
An example against the myth of ‘self-made’ wealth
Some super-rich people like to paint themselves as “self-made”, meaning they claim to have amassed their wealth through hard work and smart decisions. This narrative on attractive because it opens up the imagined possibility that anyone could become a multi-millionaire, maybe even billionaire. And while there’s a non-zero chance that some very few will actually do that, for nearly every single person it’s a fantasy.
I won’t go too much into the ethics of being super-rich is in itself. If you know me, you can guess where I stand on that. Instead I want to provide a straightforward example on how initial wealth (e.g. coming from a rich family) makes increasing that wealth easy while the same methods don’t transfer over to low wealth.
Let’s say I have 1000€ (or $US for that matter), in my actual current living situation that’ll roughly pay for a month of rent, electricity, internet and my mobile phone plan. It won’t cover food, clothing, transportation, any entertainment, education, etc. And I’ll need those 1000€ and more again next month. These are fixed costs that don’t go away. I can’t just “invest” those 1000€ as seed capital into something that generates a return. And to cover my costs I need to have income, either from a job or social security programs. If I have savings I can live off those for a while but not indefinitely.
Now, if I had 1 million €, maybe from an inheritance, even after subtracting my cost of living for a few months, I do have enough to invest. I could for example buy two small apartments. One to live in and not pay rent anymore and the other to rent out to someone else. Now, these apartments will still require some upkeep but that’s is far below the level of rent in most areas, especially where small apartments cost half a million €. The rent from the second one will easily cover the upkeep for both and the rest is income for me. And the work required to manage this arrangement is minimal. This income may or may not be enough to cover all my other fixed costs like electricity and food, but even a part time job will easily fix that.
And my initial investment isn’t lost or used up at all. I still own two apartments.
This way, I successfully put myself in a situation where I can leech off money from someone else and I can dedicate my time to other things. I could work full-time but save up the income from that since I don’t need it to survive anymore, I could get a substantial bank loan with the real estate I can provide as collateral and use that to start a business, or since I’m already an economic parasite, just buy more apartments to rent out.
All of this is impossible if I don’t have a substantial amount of money as seed capital.
This is just one example how existing wealth makes it easy to accumulate more while the same mechanics are just unavailable for people who need their income to cover their fixed costs. And the amount of initial capital required to break into this passive mode of generating wealth is substantial, not something you can just save up even on a very good salary.
This is why self-made wealth is a myth.