Aspire | Action | Acquire
Aspire | Action | Acquire

New Money

A new economic generation creates wealth and only inherits its foundations. This was true of the steamships and railways, electricity and automation, as it is today for telecommunications and the internet. Economist generally accept that a new generation of economic activity occurs every 60-70 years; which has an equivalent timespan between three family generations. Contrary to what is often public perception around seventy percent of the wealthiest people on the Forbes 400 have, since its inception in 1982, did not inherit their wealth.

The true genius of America’s first Gilded Age centi-millionaire, Cornelius “Commodore” Vanderbilt, was leaping from steamships to railways. Many thought he would fail despite they being two forms of transport. The Vanderbilt dynasty followed the Astor’s. John Jacob Astor sold off his international fur trading and shipping business and bought up swathes of New York real estate. The Commodore also entered the fray of international shipping. And a battle it was to build a Nicaraguan canal to create a new trade route across the continent.

The depletion of dynastic family wealth can be traced to quitting the business upon which the fortune was founded. John Jacob Astor’s only son’s increasing of the family fortune would have come from the rise in New York’s real estate values and not hard physical work. That fortune would diminish following the migration of John Jacob’s grandson to England. Similarly, William Henry Vanderbilt’s spectacular rise in fortunes was based on the value of remaining shares after selling out to a syndicate of investors associated with banker J Pierpont Morgan.

Threatened with ruinous taxes on the Central Railroad system, William Henry Vanderbilt was the target of the New York Legislature upon the inheriting of his father’s wealth. To put his wealth into perspective, it was, near to the end of his life, greater than all the Rothschilds and any member of English nobility. Within decades, no member of the family remained amongst the richest in the US. They had been surpassed by the titans of new industries.

The demise of wealth is not unique to America’s gilded era families. Gone too are the Anglo-Dutch “knickerbocker” families whose hereditary family wealth dated back to the seventeenth century. Their very social descendants, including the Stuyvesants, Van Cortlandts, Van Rensselears, De Lanceys, and Morrises, were amongst those invited to an annual gala ball organised by “Mrs Astor”. Caroline Astor (nee Schermerhorn) brought social standing to a third-generation family of immense inherited wealth.

If there is a thesis to this chapter, it is that the accumulation of great individual wealth is a consequence of nurture as opposed to nature. This is true of the guiding hand that Cornelius Vanderbilt, Andrew Carnegie, and J D Rockefeller received from their respective mothers. The sale of their respective businesses removed the need to nurture new wealth. This was also true of the du Pont family whose wealth was three generations in the making. In another article, the observations of Nelson W. Aldrich Jr., fourth-generation “Old Money” confirms this.

Today, the new industrial titans include Amazon, Apple, Facebook, Google, Microsoft, Netflix, Oracle, and Twitter.  A distinguishing feature of these titans is that, unlike Carnegie Steel, Ford Motor Company, and Standard Oil, to name but a few, they were not a lifetime in their founders’ making. Nor are todays titans the progeny of previous industrial titans. As identified in separate studies sponsored by PricewaterhouseCoopers[1] and Merrill Lynch & Co[2], today’s first-generation billionaires overwhelmingly, by a factor of three to one, come from middle-class backgrounds. Only twenty-five percent are from poverty-stricken backgrounds.

More than seventy percent of all billionaires surveyed for a joint study by UBS and PwC did not inherit their wealth.[3]

[1] John Sviokla and Mitch Cohen , The Self-made Billionaire Effect How Extreme Producers Create Massive Value (New York NY: Portfolio/Penguin, 2014), 11.

[2] Martin S. Fridson, How to be a Billionaire: Proven Strategies from the Titans of Wealth (New York: Wiley, 2000).

[3] UBS and PwC, “Billionaires 2015: Master Architects of Great Wealth and Lasting Legacies,” (UBS/PwC, 2015),