2023 Wealth Facts - Most Will Ignore
Level 1 - NGMI
Welcome Avatar! As our long-term readers know the idea that the only way to get rich is by being born rich is cope. While it is 100% true that it is easier to get ahead if you’re born on third base, the majority of people who get rich are first generation.
How much is first generation? Generally 80%.
If you were born in the United States of America, you’re already on first base. Never forget that if you’re feeling bad for yourself today. It’s the only place in the world where you can blow up multiple times and still make it. You got no shot trying to do this in truly oppressed places like North Korea and many third world countries.
Even Europe is becoming a difficult place for first generation wealth.
On that note, here are some stats that came out for 2023. Some small surveys some large surveys.
Part 1: First Generation Wealth
“As for the source of their wealth, the vast majority (89%) obtained it through tech entrepreneurship, and ownership in a private company. However, a very small percentage made their money primarily in real estate, as an investment manager, or through inheritance.”
Source: 2023 Hampton Wealth Allocation Survey
While this survey shows a number higher than 80%, the point is the same. If you want a real chance at getting rich and were not born into money, the best chance (probability of success) is by building something.
The reason why there is a saying “shirt sleeves to shirt sleeves in three generations” exists is simple. The first generation typically builds wealth and doesn’t pass on creation techniques. The second invests and spends. The third just spends since they don’t know how to create or invest.
If your goal is to create generational wealth beyond just digits on a screen you have to build skills and pass them on. You don’t need to knock the cover off the ball, but you certainly need to know how to generate positive returns.
In short, if you don’t learn how to build anything eventually the price of laziness is paid. May not be in generation one but by generation three it is done.
Part 2: We’re Learning Few Have Significant Value
About 69% of wealth in the USA is held by the top 10% (hilarious that it’s another meme number). That said the trend is clear. If you have a skill you can monetize it quickly. Otherwise we’d see shrinking wealth disparity.
With the internet you don’t have to choose a single form of income.
This is probably one of the least talked about advantages of the internet. Before, if you were good at making videos and financial statement analysis, you’d be forced to choose. With the internet? Not so much. You could get a cushy W-2 staring at spread sheets and you could create videos as a freelancer to see if it reaches scale.
Our guess is that this is the reason why the wealth divide will continue to get bigger. The same guy working two positions could then buy real estate or invest his money. Eventually leading to three streams of income. How long would this take? Our guess is three years.
After three years it would honestly be surprising if the person *didn’t* have three forms of income.
In short, you can be talented in multiple things. Before you were forced to choose but now you can compete in multiple sectors without a significant decline in performance.
Part 3: Rise of Tax Havens
This is an interesting trend. Of the top 5, four are “quasi” tax havens. Australia is well known for having no inheritance tax. Dubai and Singapore are poster children for tax havens. Switzerland is well known for privacy and low taxes. Also, the USA creates millionaires faster than a NFL running back 40 yard dash.
Trend: The general trend suggests that wealthy people are becoming more concerned with future tax hikes and the ability to work remote allows people to choose their tax jurisdiction. The last part is ignored but really took off back in 2012.
If we were to guess, this is going to continue. Governments will need to think about changes to inheritance taxes, capital gains taxes, etc.
Hopefully all of you are forced to deal with this at some point in your life!
The wealthy are voting with their feet and saying that taxes are too high (and worried about future increases).
In short, this might be the last couple of decades (the 2020s/2030s) where it’s quite easy to set up in tax havens.
Part 4: Spending Goes Up But Look Closely
Source: 2023 Hampton Wealth Allocation Survey
This is actually a pretty good guide to spending. As you can see there is essentially a hard cap at $20-50K. The problem with this survey is that this range is too wide compared to the $10-20K prior range.
Either way, it does serve as a rough proxy. You could go ahead and say that even if you end up getting to $100M, it is unlikely you spend ~$500K a year (assumes $41,666 a month). This would be 0.5% of your net worth. Even at 4% interest rates it means the money just grows for the next 30+ years.
Unless you reach the pinnacle of wealth, a $20K burn rate is probably a safe assumption. Unlikely you spend more than that constantly.
In short, unless you make it really big, earmarking $20K a month as rich is a fairly good assumption as of 2023. (rough math this implies liquid $6M earning 4%). For the upper echelon of $50K burn it would be $15M liquid at 4%.
Part 5: No Personal Debt
Source: 2023 Hampton Wealth Allocation Survey
Despite what you hear from normies, the rich don’t really carry personal debt. In fact, a large chunk will carry a small note on their homes to make it appear as if they can’t pay it off (lawsuits).
The truly rich have too many entities and would use loans related to entities vs. any personal guarantee. Personal debt is quite dangerous and most avoid it.
In short, you’ll likely use debt at some point in your life (mortgage, biz loan for inventory etc). Just remember that over the long-term you want it to trend to a meaningless number.
Part 6: USA Crushes the World
Absolute destruction. Combining the next 17 countries and you still wouldn’t reach the USA.
If you can’t make it here, you can’t make it anywhere.
Over the long-term, you will likely find yourself back in the USA if you get big enough. The main draw is the ability to display wealth without worrying about safety.
You wouldn’t drive a Ferrari in Rio De Janeiro. However, if you drive one in Miami Beach no one will even care.
“A further breakdown of the UHNW group reveals 79,490 adults with wealth above USD 100 million at the end of 2022, of which 7,020 are worth more than USD 500 million. The regional breakdown of the UHNW group as a whole is dominated by North America with 128,470 members (53%), while 40,090 (17%) live in Europe, 32,910 (14%) in Mainland China and 27,700 (11%) in Asia-Pacific countries, excluding China and India. Among individual countries, the United States leads by a considerable margin with 123,870 members, equivalent to 51% of the world total (see Figure 6). Mainland China is a clear second with 32,910 UHNW individuals, followed by Germany (9,100), India (5,480) and Canada (4,560). Russia (4,490), the United Kingdom (3,980), Japan (3,930), France (3,890) and Australia (3,780) make up the remaining top ten countries ranked by UHNW numbers.” - 2023 UBS Global Wealth Report
Make it big? You’ll more likely than not end up on US soil and any international venture will be short lived.
Part 7: For Good Measure - Are You Talented?
If the answer is yes and you’re sure. Then this is all you need for motivation.
USA home of the top 10%!
Concluding Items
Despite a multiple decades of proof people will still ignore that the majority of millionaires are first generation
Despite multiple decades of proof, people will focus on one guy who makes $10M off BONK and ignore the hundreds of millions of people who succeed with a business
There is rough cap to monthly burn at $50K for the vast majoirty
Debt isn’t really held by the wealthy despite constant claims as such on Twitter
USA attracts the best of the best and if you’re talented you want to start and build in the states. If you leave for a huge opportunity chances are high you simply come back once you feel comfortable
Caveat: the prior bullet can be impacted by taxes and changes in laws due to recent movement of wealthy people to tax havens
Hope you enjoyed this update and remember, your peers will ignore it just looking for lotto tickets. So be sure to bet on degeneracy.
Disclaimer: None of this is to be deemed legal or financial advice of any kind. These are *opinions* written by an anonymous group of Ex-Wall Street Tech Bankers and software engineers who moved into affiliate marketing and e-commerce. We’re an advisor for Synapse Protocol 2022-2024E.
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Burning the midnight oil. Appreciate you finally turning off the light in your tent so the rest of us can sleep.
Great post.
One point is that the Hampton Survey was a survey of their members (~270 at last count) who are founders with over $1mm in ARR. The respondents are strongly biased toward tech.