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naraburns  nihil supernum  1yr ago (text post)   3297 thread views

Small-Scale Question Sunday for April 2, 2023

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When does “new money” become “old money”? How many generations does wealth need to pass before you become the latter?

Rampant speculative thoughtstream:

It becomes 'old' money when the sources of a family's wealth are all but inextricably woven into the fabric of the society in which said family operates, in such a way that their wealth will never disappear without A) an actual revolution or B) the collapse of said society.

This definition makes it easy to declare Saudi money 'old' money despite being relatively young since their oil wealth is the entire backbone of their respective nations.

The Walton Family is now old money insofar as we can't imagine an American Nation that doesn't have a Wal-mart in every single town, and any event that led to Wal-Mart collapsing would probably spell massive doom for huge swaths of the country too. The Gates family may or may not be old money by this definition. Microsoft is woven into the fabric, but I don't think that constitutes most of his wealth and I'm not sure how he has the rest of his money squirreled away.

Elon Musk's fortune is tied directly to the fates of SpaceX, Tesla, now Twitter, and probably a few other companies, He is exposed to risks directly related to the fates of those companies that could succeed or fail irrespective of how well the U.S. as a whole does. That's new money, it isn't 'locked in' yet although it trends that way. One can imagine a mere twenty years in the future where SpaceX is the equivalent of the railroad companies of old, being our primary method of transport into space, Tesla is the largest car manufacturer, and Twitter remains the most-used forum for screaming at your political opponents, and thus Musks descendants enjoy a multi-trillion dollar fortune that is inextricably tied to the U.S. economy. With a bit more diversification, then they would be 'old money' by then.

I think Taleb makes a point about this as well. "Old money" gets insulated from risk by pure attrition. The families that don't store money in incredibly safe places, or that don't properly distribute their risk by effective diversification will ultimately get wiped out, sooner or later, leaving behind the families that are, by definition, good at spreading risk around and thus having a finger in almost every pie.

This definition does imply that any fabulously wealthy individual can become 'old money' regardless of how they earned their wealth simply by hiring a competent financial advisor who puts their money into a carefully chosen portfolio that is unlikely to ever be wiped out absent a civilizational crash.

Old Money has no strict, universally useful meaning. The difference between Old Money and New Money is one of reputation, history, and honor. It is the state at which you don't worry about having cash on hand, because someone somewhere will provide it to you because of who you are. Consider Tolstoy describing such a character and his role in the civil service:

Stepan Arkadyevitch had learned easily at school, thanks to his excellent abilities, but he had been idle and mischievous, and therefore was one of the lowest in his class. But in spite of his habitually dissipated mode of life, his inferior grade in the service, and his comparative youth, he occupied the honorable and lucrative position of president of one of the government boards at Moscow. This post he had received through his sister Anna’s husband, Alexey Alexandrovitch Karenin, who held one of the most important positions in the ministry to whose department the Moscow office belonged. But if Karenin had not got his brother-in-law this berth, then through a hundred other personages—brothers, sisters, cousins, uncles, and aunts—Stiva Oblonsky would have received this post, or some other similar one, together with the salary of six thousand absolutely needful for him, as his affairs, in spite of his wife’s considerable property, were in an embarrassed condition.

Half Moscow and Petersburg were friends and relations of Stepan Arkadyevitch. He was born in the midst of those who had been and are the powerful ones of this world. One-third of the men in the government, the older men, had been friends of his father’s, and had known him in petticoats; another third were his intimate chums, and the remainder were friendly acquaintances. Consequently the distributors of earthly blessings in the shape of places, rents, shares, and such, were all his friends, and could not overlook one of their own set; and Oblonsky had no need to make any special exertion to get a lucrative post. He had only not to refuse things, not to show jealousy, not to be quarrelsome or take offense, all of which from his characteristic good nature he never did. It would have struck him as absurd if he had been told that he would not get a position with the salary he required, especially as he expected nothing out of the way; he only wanted what the men of his own age and standing did get, and he was no worse qualified for performing duties of the kind than any other man.

Old Money is when a lack of liquidity, or even obvious wealth, wouldn't stand in the way of one being extended credit, a loan, a job opportunity, a business partnership, a friendship. You know you'll get your money or your favor paid back from such a person, because there is money and power somewhere in the family, or another connection will come through and help him through this rough patch, etc. It is an inevitability that a person such as this will succeed, so by doing them a favor you secure yourself a favor/influence/power in the future from him or his family. This of course is self-perpetuating, when everyone around you is doing you favors you probably succeed, and even if you don't you can borrow from Peter to pay Paul for quite a while before it catches up to you. You know that no matter what happens this person and their family will be around; and the fact that you know it balls-to-bones makes it true. New Money is simply the lack of such a widely-shared social certainty in your wealth's permanence. In God We Trust, all others bring cash.

Obviously this exists on a spectrum, your money isn't Old, or New; it is Old Enough that someone would X or it isn't Old Enough. Your family reputation is large enough that it is known to your interlocutor, or it isn't. The Windsors would be the most extreme example, the closest we get to universal Old Money, so we'll use them for a hypothetical, assuming that I am absolutely certain of the identity of the man I am talking to and no fraud or mistake is possible.

If I ran into Prince William on the Jersey Shore this summer, and he came up to me and said "FiveHour, old chap, I'm a little out of money right now, lost it all in Atlantic City at a craps table I think was crooked, could I borrow $1,000 cash to sort out some things, and give me a ride to the airport, I'll get it all back to you just as soon as I'm in London." I've never met the man in my life, but I would lend him the money without hesitation. Because I'm fairly certain that someone will lend him the money, or that he'll get out of this jam somehow, it's an inevitability, and whoever does will get the little bump of social credit for having done him a solid, and that might as well be me, why let that opportunity to do the heir a favor go to someone else? If the opportunity to lend him $1,000 and give him a ride to the airport were broadly offered, people would be crawling over each other to be the one to provide it.

At a less extreme and more local level, there are family names in my hometown where no local small business would ask for a credit check, where any local contractor would give any payment terms, because even if they didn't pay up you could go to their father/uncle/etc. and get the money. The family patriarch might take it out on the wayward son/nephew/etc.; but there is absolute certainty that you as a vendor will get your money from someone in the family. You might as well do the favor, you'll get your money back and curry favor with the family. That scales up to job offers, business partnerships, college admissions, everything. That is old money.

*The family must act to maintain this reputation, or it dissipates quickly, one dissolute cousin can tank the reputation of the whole clan. You have to be committed as a family to spending resources to prop up weaker members, getting them jobs or lending them resources, and those weaker members themselves can't be too dissolute or they will burn through reputation faster than stronger members can build it. It's a whole family commitment to respectability, it is rare in today's world but it can still happen in limited circumstances.

There was a (possibly fake) AMA years back on Reddit with an old timer who was in a 1%er biker gang, in answer to a question something like "How do you become a 1%er?" he said "Put a 1%er patch on your jacket, walk into a biker bar where other 1%ers hang out, beat the hell out of anyone who tries to take the patch off you." Nobility, or old money status, is the same way: you declare yourself Old Money and you defend yourself from any allegation that you aren't. When allegations against your family succeed, when someone lends money to your cousin and never gets it back, when they offer your nephew a salesman job and he doesn't deliver on using connections to secure sales, your family loses status. Lose enough status, the whole aura is dissipated.

This is mostly hype that has no basis in reality IMO, look at who the daughters of William Gates the III are dating or married to. Also the general huge rate of exogamy at old money schools is clear evidence that the difference is contrived. Old money has been fucking and befriending new money since the Rothschilds

Yeah, British peers marrying American tycoons was a trope in the Victorian era.

The second generation that has never had to work for a living and went to the "right" school is "old money".

Fred Trump worked for a living, Donald Trump was born into a rich family and went to UPenn, he's the first generation. Donald Trump Jr. is the second generation and is old enough money for the US.

When it gets the same culture as old money by going to the same schools and saying the same things.

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