
How MacArthur Geniuses Handle Their Windfalls - evanb
http://www.nytimes.com/2015/09/26/your-money/how-macarthur-geniuses-handle-their-money-windfalls.html
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peterhadlaw
My father worked for a MacArthur. That woman was ruthless in her search for
perfection. She did so out of love. I just want to come here and say as
someone with an immigrant childhood and where my family was doing whatever we
could to move up - she made my child self so happy. She personally picked out
3 industrial sized bags of Christmas presents that my dad took home to me.
They filled our apartment floor.

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Animats
The MacArthur awards are amusing if you know who John MacArthur was. He made
his money selling mail order life insurance and stalling on paying claims.[1]

[1] William Hoffman, "The Stockholder", 1969, ASIN: B001HS4R58.

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peterhadlaw
This is the very reason the foundation was created. The family wanted to give
back to the community for his actions - basically forcing him to do so.

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teddyh
Most people who randomly get a windfall of money were previously poor. If
you’re poor and suddenly get lots of money, you most probably can’t handle it;
“ _#4. Extra Money Has to Be Spent Right Goddamn Now!_ ”:
[http://www.cracked.com/blog/the-5-stupidest-habits-you-
devel...](http://www.cracked.com/blog/the-5-stupidest-habits-you-develop-
growing-up-poor/)

MacArthur winners have two advantages: First, they are probably good at
something, and therefore are likely not poor. Secondly, even if they _are_
poor, they are probably _very_ focused on their thing which made them get the
prize, and any money goes to _their thing_ , not to themselves, which makes
most people a little more rational when deciding things.

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notjack
Additionally the MacArthur grants are divided into quarterly payments over
five years, so you're not getting 625k all at once, you're getting 20 payments
of $31,250, one every three months. That makes it pretty much impossible to
blow all of it within half a year.

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teddyh
People could still get into debt because they know that the money is coming.
Look at how many people buy things and assess the price based on the _size of
the monthly payments_ instead of the actual total price.

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eli
You could literally go into debt by using the structured payments as
collateral for a loan for something close to the full amount up front.

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defen
Cormac McCarthy used his windfall to research and write the greatest (IMO)
novel of the 20th century _Blood Meridian, or the Evening Redness in the West_

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puranjay
Try as I might, I can't bring myself to love Blood Meridian more than The
Road.

But I would definitely place it among my top 20 books of the last century.
Perhaps even in the top 10

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zaroth
What programs are out there like a MacArthur for coders? I know a bit about
Google's Summer of Code, but it's not really the same...

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airza
Okay, I don't want to sound like I'm making fun of you, but you're on a
website run by a company that gives large amounts of free money away to coders
to explore ideas...

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nmrm2
Comparing MacArthur Genius Grants and similar awards to venture capital isn't
particularly apt. YCR or the fellowship might be slightly more comparable, but
still pretty off mark.

To the parent: MacArthur Genius Grants have been given to computer
scientists... IDK about "coder"; ostensibly, that code should be pretty
remarkable if you're getting that kind of windfall. And if the code is so
remarkable, there's probably some science or engineering behind it that is the
_actual_ reason for the award. In other words, by the time code is doing
something that is societally significant, there are probably ideas extant in
that code that are worth codifying and explaining in something other than a
programming language. And probably those ideas/results have impacts that go
far beyond a particular implementation.

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zaroth
I think that there's a lot of "boring" code that could be written which could
have a tremendous positive impact for the world. Some of it I think, if it
actually saw real adoption, which would collapse the market caps of some
fairly big companies.

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hugh4
Why not just simplify it down to MacArthur Fellows are smart, and smart people
are smart enough to solve the rather simple problem of not wasting a large
windfall?

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mattdw
Because poor people are not stupid. They're often actually pretty damn
rational within their constraints. Smarts alone does not equip one to handle a
windfall.

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notjack
This is a very crucial point. The so called "stupid" financial behavior of
people in (first world) poverty is anything but, it's a series of carefully
calculated and measured responses to extreme inflexibility. Almost all means
of establishing long term financial stability involve either a) put away some
money now, wait for some time, then receive more money or b) risk losing some
money for the chance to gain more money in a way that averages to a net
positive over time. _Neither of these are possible when you do not have
flexibility_ , you can't afford to put away money when doing so means not
eating for a week, and you can't afford to risk money for more money when
coming out on the losing end of that deal means becoming homeless. You have to
have a completely different approach to managing money when in poverty, and it
sticks with you mentally even after escaping to a more stable situation.

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teddyh
Yes, that was exactly my point.

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rokhayakebe
People always say winning the jackpot will change their lives, but from what I
have seen $50,000 will change a LOT of lives for ever. In Am.Me.Ri.Ca.

Give a person $200,000 and that may be just enough that they know they cannot
make a mistake. Give them north of $500,000 and now they feel they can spend
freely without a worry. Give them north of $1.5M and now they may literally
think this money is a bottomless well.

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zaroth
Different scales and different 'changes'. You can give $50,000 to someone who
has $10k/yr living expenses and it might change their life. But people with
$10k/yr living expenses probably don't typically have the work experience and
skill sets of your target demographic. When MacArthur finds someone who meets
both criteria, well, that's great and a smaller award might even have more
impact.

But if you are giving an award to someone with 6-figure salary and 5-figure
annual living expenses, no $50,000 isn't going to make as much of a difference
in their lives. If you want to seriously free that person from thinking about
money for a significant period of time, it better be 7 figures. And anyway,
$1.5M is not all that far from a bottomless well (i.e. 5% per year).

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rokhayakebe
Correct, but remember that even in the US 4 out of 5 people make less than 6
figures yearly (Before tax).

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dghughes
Is grant or award money taxed?

I've read stories about people in the US who win a not huge but not small
lottery prize of say $1 million don't do so well.

By the time they pay all the taxes and get bumped up a tax bracket or two
spend a few hundred thousand they probably owe even more.

In Canada lottery wins are not taxed but the interest is. But even so many
"poor" people and that's a broad term end up blowing it all.

I've seen fishermen who made $30,000 a year go work in oil fields and seem to
treat $100,000 like it's play money.

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notjack
Note that because of the way tax brackets work, it is not possible for a small
increase in income to increase your taxes to the point that it's a net
decrease (due to tax brackets anyway). If you're just below the next tax
bracket, and you get a ten dollar raise, _only those ten dollars are taxed at
the higher rate_. All of your previous income remains taxed the same as it was
before.

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vidanay
That's not how tax brackets work, but it is how some brain-dead payroll
systems work! I have seen first hand a broken payroll system that simply
extrapolates the current pay period out into the full calendar year and then
deducts taxes at that rate. This has the result of a small gross increase
(usually due to intermittent overtime pay) resulting in a net decrease in pay
for that pay period. This is very much an edge condition of an already broken
model, but I have definitely seen it happen.

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repiret
> extrapolates the current pay period out into the full calendar year and then
> deducts taxes at that rate

For US Federal taxes, thats generally how its supposed to work - see [1], and
for some exceptions [2].

> small gross increase [...] resulting in a net decrease in pay for that pay
> period

If a payroll system is doing that, its not for the reason you cite. US tax
rates are such that an increase in gross pay always results in an increase in
net pay, and that doesn't change when you divide gross and net by 24 (or
however many pay periods you have each year).

[1]:
[https://www.irs.gov/publications/p15/ar02.html#en_US_2015_pu...](https://www.irs.gov/publications/p15/ar02.html#en_US_2015_publink1000254685)

[2]:
[https://www.irs.gov/publications/p15a/ar02.html#en_US_2015_p...](https://www.irs.gov/publications/p15a/ar02.html#en_US_2015_publink1000236700)

