Morgan Housel on Billionaires, Money, Kids & What Money to Give To them
I was listening to a podcast episode with Morgan Housel, who has managed to write two of the best personal finance books I’ve ever read.
I wrote out his response to how he’s seen the people with the most money raise kids who still have a proper respect for money, ambition, and value…and how we should manage giving money to our kids.
Money messes kids up. Give your kids less money – always. However, as a parent, all you want to do is provide more for your kids. So the hypothetical is – If you were a billionaire – how would you give money to kids.
- Give Them The Best Education
- Make Sure They Never Worry about Healthcare
- Make Sure They Never Worry about Housing or Safety
- Let Them Have a Few Nice Vacations
- Maybe Provide a Nice Wedding
That’s it. Don’t do anything beyond those five things.
Morgan Housel at the 35 minute mark of #702 of The Tim Ferriss Show
Three Notes on That Advice
First, it sounds like great advice. As a parent, it’s hard (really impossible, I guess) to find a balance between providing for them while slowly letting them learn how to earn their own way. Provide them with everything, and you’ve stolen achievement and meaning from them. Provide them with nothing, and you’ve set them up for failure and resentment. I think these five rules are right on and achieve that balance.
Second, here’s the really weird, insane thing in 2024. Every child in America could have those five things – no billionaire parent required. We have the money as a society. And both political parties have solid, smart plans to provide all five things…we just don’t universally provide them yet.
We even have the programs in place for all five (public schools; extend Medicaid / Medicare; lots of housing programs; police / fire / EPA / safety bureaucracies; State & National Parks; public event spaces) – we just keep getting distracted by ridiculous cultural issues. It’s the boring, basic liberal, equal opportunity American dream of the 20th century* – actually, sorry, not 20th century, here’s Thomas Jefferson from 1811 discussing taxes supporting a future for all American children.
The rich alone use imported articles, and on these alone the whole taxes of the general government are levied. the poor man who uses nothing but what is made in his own farm or family, or within his own country, pays not a farthing of tax to the general government, but on his salt: & should we go into that manufacture also, as is probable, he will pay nothing. our revenues liberated by the discharge of the public debt, & its surplus applied to canals roads, schools Etc. the farmer will see his government supported, his children educated, and the face of his country made a paradise, by the contributions of the rich alone, without his being called on to spare a cent from his earnings.
Thomas Jefferson
Third, the real hypothetical question that Morgan Housel never addressed was – “if giving money to kids doesn’t work…and giving to philanthropies also creates unhealthy incentives…what are the billionaires supposed to do with all the rest?”
Well, there’s an all-American, red-blooded capitalist solution here. It’s approved by Thomas Jefferson, Thomas Paine, and Theodore Roosevelt.
It’s called an inheritance tax. An estate tax. A death tax.
Whatever you want to call it. It’s the reinvestment fee the wealthy pay at the end of their life back to the society that encouraged them to create so much wealth in the first place. It’s the only way to prevent an aristocracy of lazy, idle rich kids and an upside down economy of non-profits.
But there’s still an issue of evasion…even though weirdly, if you can’t donate it, can’t spend it, and don’t want to spoil your kids with it…and you really want status & legacy more than anything…what’s one to do?
Congress should reinstate the tax with a twist that I am totally stealing from the ancient Khmer civilization (and found out about via the excellent Fall of Civilizations podcast).
The wealthy landowners would use these taxes to support the functioning of their own lands, paying their labourers and soldiers, and supporting their own luxurious lifestyles, but anything left over would then be funneled back to the royal treasury in Angkor. The status of these families depended on how much money they could send to the king, and so they competed bitterly to swell the royal funds.
Fall of Civilizations Podcast
Congress should create a Congressional Medal of Wealth. It will establish a permanent record of those Americans who spent their lives playing the Game of Capitalism and won by creating wealth, jobs, and economic success that powers the rest of our society. It will be a permanent legacy that only those who pay an inheritance tax can get.
Is it a bit weird, cringe, and potentially very awkward?
Yes.
But so is leaving your kids with more money than they know what to do with.
