@balajis.eth

Does “generational wealth” even exist? And should it? I am not so sure. (1) First, if you have 2 children and 4 grandchildren and 8 great grandchildren and so on (let alone more!), then your fortune is divided by 2^n, and so are your genes. So your bloodline isn’t set forever. Indeed, unless there’s extreme levels of consanguinity, it’s diluted quite quickly. (2) Second, very few tactics for wealth compounding get you a reliable 2X every 25 years. What happens instead is that in most jurisdictions (save the UK), you have some titanic war, inflation, or the like every several decades. That zeros out the ledger, interrupts compounding, and has everyone start from scratch. (3) Third, many children (and especially grandchildren) who inherit wealth tend to fritter it away. The documentary Born Rich shows how the J&J heir essentially became a socialist (for others of course) because he felt so much guilt over his unearned wealth. There is a saying: shirtsleeves to shirtsleeves in three generations. It’s much easier to spend a fortune than to make one. (4) Fourth, and relatedly, it’s not obvious that great fortune is even that huge an asset in the modern era. China and India came up from nothing in one lifetime. Startups do this even more quickly. I’m not saying capital has *no* use, but it’s much less of a moat in the Information Age than many think. (5) Next, outside the West, we are in the age of hyperdeflation. China is making everything in the physical world extraordinarily cheap, while the Internet has made everything digital extremely inexpensive. This is the opposite of what American Anarchy represents, with cars set on fire and money printed, but China and the Internet are crashing prices for everything. (6) Next, many of these new huge fortunes in the West are a function of the debasement of the dollar rather than genuine wealth creation. $100M just isn’t what it was even 10 years ago, perhaps not even 5 years ago. (7) Finally, generational wealth is a vision of stasis. Secure the bag and chill out. But that’s just not what humanity is about. It’s about constant, relentless, technological progress over generations. A big pile of cash by itself won’t get us eternal life, won’t get us the infinite frontier. If you want to see the stars, and touch Mars — only technology will do that. Hence: generational progress over generational wealth. The former is about production, the latter is about consumption.

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