

Investment Manager Explains Why 99.5% Of Americans Can Never Win - rfreytag
http://www.businessinsider.com/an-investment-managers-view-2013-11

======
api
One thing I've believed for a very long time (based on some first hand
observations) and that this article backs up:

Super-rich people who got that way by doing productive things or
entrepreneurial things -- people like Jeff Bezos, Elon Musk, Mark Zuckerberg,
Peter Thiel, etc. -- are statistically rare. They are simply the most visible
members of the superclass. The majority of people with net worth in the top of
the 1% are financial or governmental profiteers who have obtained that wealth
by playing financial games or profiting off the public.

In other words: the majority, but not all, of the mega-rich are parasites.

This I think has important political consequences. It's one of the reasons I
am skeptical of populist "tax the rich!" schemes.

My strong speculation would be that the productivity of the mega-rich is
inversely proportional to their political pull. I base that on the fact that
this rule of thumb holds lower in the hierarchy-- those who are of the highest
merit are rarely those with the most political skill and influence since few
people have time to invest in both. People tend to be good politicians or good
producers but not both.

As a result, soak-the-rich schemes are likely to thin the ranks of the
productive elite and the recent entrants to the elite ("neuvo riche") while
leaving the true oligarchy largely untouched. In fact, the true oligarchy
would likely find ways to profit from it. In the long run it would impose a
stronger glass ceiling between the superclass and the rest, making them even
more like a true feudal nobility. It would make the situation worse.

I am not sure what, if anything, can change this situation in the short term.

I do have one weird suggestion: make it easier to become super-rich. Create
some mechanism, possibly in tax law, that vaults people up through the last
two or three glass ceilings... maybe something like a mildly progressive tax
with sharp dips or fluctuations at major milestone points in the wealth
distribution curve. So once you hit a point where there would otherwise be a
glass ceiling, your tax rate drops precipitously for a while. It would be of
paramount importance that this mechanism be impartial -- that it exclude
political gamesmanship as a factor.

This is both counter-intuitive and unfair, so why would it be a good idea?
Because it would bum-rush the country club with neuvo riche folks with new
ideas. Some of these new ideas might change the system in ways that would
benefit the rest of us. Even if there was no direct benefit to the lower
99.5%, it would prevent the ultimate nightmare scenario: the calcification of
this elite into a true closed feudal nobility presiding over some kind of new
dark age.

Edit:

I realized that while I've never read the idea above anywhere before, I have
heard a similar idea in the realm of representative democracy... namely to
vastly increase the number of representatives. The idea is to have a Congress
made up of 30,000 delegates and a Senate made of up 5000 or something similar.
It's basically the same concept... make the system more democratic by making
the pyramid fatter at the top.

