The Donald is Rich. But is it intelligence or luck (advantages he received)?

the donald

We hear from the Donald basically three things about himself: 1) he is extremely good looking (pass on this one); 2) he is incredibly, vastly wealthy (he says $10 billion, Forbes says around $3 billion—either way a lot of cash); and 3) he is very smart, which explains his vast wealth.

He is very rich, but regarding item three, he confuses privilege and inherited advantage with intelligence.  This is a fairly common thing, as can be seen from the work of Paul Piff of UC Berkley. All of his studies are worth the time to read, but here, I am primarily thinking of his work involving rigged games ofg monopoly, (See the study here.) where one player is given more cash to begin with, or more cash every time Go is passed, or with significant properties at the start of the game, which pretty much fits the Donald. In 1974, it is estimated he received between $40 million and $200 million from his father—great and good for him (yes, I am a little jealous)—and because of his business savvy and intelligence, grew that to his current $3 billion to $10 billion.

Problem is, if he had done no real estate investing at all, if he had just put the money in the stock market index funds or into money market funds, he would have done better. To make this statement, I assumed that he drew 10% of the funds accumulated each year to live on.  This means in 1975, he had between $4 million and $20 million for his lifestyle.  At $3 billion to $10 billion today, he would have between $300 million to $1 billion a year to live on. Then, for investment return, I used the historical returns by year of large and small company stocks and the 10-year treasury bonds.

The results are:

Large company stocks Small company stocks 10 Year Treasury Rate
 $ 40 Million start $2.3 Billion $9.8 Billion $1.3 Billion
 $ 200 Million start $11.8 Billion $49.2 Billion $6.6 Billion

From my viewpoint, rather than being smart with his investments, he was at best average and at worst, pathetic.

Other rich conservatives are better.  The Koch brothers, who inherited $40, million dollars have grown this to nearly $100 Billion today. Using the same assumptions as above, had they put the money in large company stocks, their net worth today would be  about $3.5 Billion; Small company stocks, $8.6 Billion,; and the 10 Year Treasury, about $2.3 Billion. Yes, they started out with a lot, but they significantly beat the market

People like Trump—and most, but  not all,  people who have made a lot of money—cannot see that at least a part of their success was due to favorable circumstances or assistance from others (Trump’s father was helped significantly by post-war government programs, which he did have the foresight to take advantage of, and the Donald avoided becoming penniless through the assistance of his lenders in 1990. See a summary here.)

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