The Salmon Legacy

Audio Length: 00:45:58

Felix Salmon, Emily Peck, and Anna Szymanski are joined by Felix’s cousin Thomas Harding to discuss his book, Legacy: One Family, a Cup of Tea and the Company that Took On the World , on the unusual financial history of the Salmon family, generational wealth, and financial inequality.

And in the Plus segment: more with Thomas Harding.


S1: This ad free podcast is part of your Slate plus membership.

S2: Hello, I am Felix Salmon of Axios and I’m on vacation this week, which is good news for you because this means that you finally get to hear an episode we recorded a couple of months ago, pre covid with my cousin Thomas Harding. This is something which I’ve been hinting at for a little while, but it’s all about family wealth and it is kind of fascinating.

S3: I think you’ll enjoy it. But obviously, if we’re not talking about covid or anything like that, that’s because it hadn’t happened yet. Enjoy it.

S4: Hello. Welcome to the Salmon legacy edition of Sleep and Money, your guide to what it’s normally the business and finance news of the week.

S2: But this week we have a special guest in from the U.K., Mr. Thomas Harding. You are my cousin. I am. You have written a book about our family.

S5: Yes. It’s about the Salmon Gluckstein family and their businesses, Joleen’s and the tobacco company Salmon Gluckstein.

S2: And the book is named Legacy and is available on Amazon, although not from a US publisher yet. We’re holding out hope for that. I am Felix Salmon of Axios and also of the Salmon family. I’m joined by Emily Peck of Huff Post, whose own family history we’re going to talk a little bit about. Hello. We’re joined by Anna Shamansky of Breakingviews, who comes from a long line of farmers. It’s very true. And what we’re going to do is we’re going to talk a little bit about the kind of unique. Salmon family structure, which Anna, for one, is having great difficulty getting her brain around, and then we’re going to talk a little bit more broadly about this whole concept of inheritance, wealth and how it drives society. All of that coming up on Slate money. Thomas, your you spent, what, two years trying to delve into the history of our mutual family, which let’s just call it the sound family, because otherwise it just becomes confusing. It had a kind of crazy, unique financial structure, right?

S5: Yes. So they were immigrants who arrived in Britain in the 40s from Germany with nothing. And in East London, where a lot of the immigrants started. And over the next 20 or 30 years, they built up this tobacco business, first of all, rolling cigars and then cigarettes, pipes and so on. And by the late 70s, they made a decision to unify the family by sharing all the assets and all the revenue, all the income equally amongst the male members of the family. And there were how many male members of the family background? Well, originally, I mean, they had a vote. So it was like 1873, I think. And they got this guy, Monty, who’s he’s like the Steve Jobs of the family. And he brought them all together and said, look, we have to get through this to build up a our power, our money. You know, what we need to do is to divvy up all the income. And there was I think there’s a vote of 10 or 12 people, but only six put their hands up and said, yeah, we’re going to do this. And importantly, it was the men, not the women. Even though women were key to the building of that original tobacco business, only the men were invited to take part.

S2: But from that point on, you created this astonishing structure, which I’ve come across a couple of systems which are similar, but nothing quite like it, where the income of every single member of the family did not. Actually, you didn’t get to keep your own income. Every single penny you earned, you paid into the fund, the family fund, and then the family fund would then pay you out basically according to how old you were, right?

S5: Yes. So it didn’t really matter where you worked in the business or whether you worked or whether you worked in the business, you got paid the same. I mean, there was a slight realignment depending on age, but basically it was the same. But perhaps even more interestingly, the assets were split. So if one person got a horse and cart, everyone got a horse and cart. And it meant that if you were living in East London, which they were in the 1980s, when Jack the Ripper was going around terrorising the community, they couldn’t leave because they had to have enough money to to leave islanded all of them together. They all had to buy a number of houses. So actually, at first it was almost a straitjacket.

S2: And then just to be clear, they didn’t buy the house. It’s the fund bought the house. It’s like when I was growing up, the house that I lived in was not owned by my parents. It was owned by the father. So your father was in the fund? My father was in the family. Interesting. And and we didn’t own our house. The fund owned our house. And my father worked in a bank. And all of the money he worked, he earned the bank got paid into the fund and then he just got paid out of the fund, the same as, you know, someone who was unemployed.

S6: Did he resent being in the fund, giving all his money away and so that there were there were resentment?

S2: I’m not going to say my dad resented it because they you know, that’s a special case. But there were back in the 80s, a couple of bankers, not my dad, who were making a bunch of money in the city of London and who literally said, this is not fair. We want to keep the money that we earn for ourselves. And they basically negotiated a deal where they got cashed out. And that, I think, was kind of the beginning of the end of the fund.

S5: So they could actually make more money working outside the family fund, but they were obligated to to put their money in, which is which is interesting now the women, so that we have different situations. So my mother was the daughter of a salmon. Her name was Belinda Salmon. And the women weren’t invited to be part of this, really. I mean, when I was doing my research for the book, I found a family tree. It was like something for Margaret Atwood. It was five different generations, about 60 different people. And it was laid out like a family tree with lines and the horizontal lines. And there was just men. There was no women because it was the members of the fund. It was really strange. And so if you talk to the male family members of the of the Salmon and Gluckstein Impaler clan, you know, they’re pretty positive about the fund. But the women, especially in my mother’s generation, there’s a lot of anger. There’s an extraordinary anger. They did get some money when they got married. They got a dowry, they got a dowry. But key, it was managed by their brother or their father. They managed. Come on. That’s exactly right. Yeah, I know. It’s crazy, right.

S6: So your mother would have grown up like within the fund’s umbrella, but then gets married and like is essentially disinherited at that point.

S5: It’s not be disinherited because there’s never an expectation, but also there’s no inheritance.

S2: Right. This is the weird thing about it is that no one ever inherits anything because all of the money just stays.

S1: Why did anyone ever agree to this? Because I think you have to see it.

S5: I mean, it’s interesting. I had different phases at the beginning. It was a real unified. Buying mechanism, you know, they were in it together. Well, there was a famous court case, there was a famous court case, which was the original family trauma in the 70s where Monty’s father, Samuel, was taken to court by his brother and his cousin, saying that he, Samuel, had stolen an insurance bond from the safety box. And this was in the high court in London, very public. And Monte, actually, who was 15 at the time, witnessed it. And he was incredibly embarrassed. And during the court case, Samuel said, well, I didn’t do that. And also you, brother, brother in law and cousin, one of you sexually abuse my teenage daughter. And all of this was out in public, you know, horrendously embarrassing. That’s actually what caused that was the catalyst for bringing about this fund. The idea is, you know, would never give be the situation again. Where are we going to build up a business and have to break it up? And it lasted from 1870 to 1990, which I think is extraordinary.

S1: And so there was no way, though, that they could ever, like, modify it. So because it just seems like you have very misaligned incentives here.

S2: Yeah. So so it’s it’s kind of interesting the way it worked in practice. And the reason why it lasted this long as it did, is that very early on in the history of the fund, we sold Salvinia Gluckstein cigarettes to Nabisco, to Imperial Tobacco, Imperial Tobacco, that was it. And that gave us a large chunk of money which sat in the fund.

S5: You should explain that. And Gluckstein was the biggest tobacco retailer in Europe, maybe even the world at the time. I mean, they were the Starbucks of tobacconists. So, I mean, they had an enormous amount of money in their disposal.

S2: And then in the wake of that, we created a new company called Lions’, which was funded a little bit with the salmon collecting money, but a lot with just public equity offerings. So it was we didn’t own most of the company, but we had we’ve talked about a lot of money, the dual class share structure. We controlled the company and we not only controlled the company, but we had all of the senior management positions were basically held by men who were members of the Salmon family.

S5: There was talk. There were two boards. There was the working board, the them or the people who represent the company. And then there was the Family Board, which always met the day before the working board. And they had they had all the power. I mean, there was there was voting. There was a there was voting shares, a non-voting shares.

S2: And and so the the way the system worked financially was kind of interesting is the salmon men paid themselves quite generously for running Lions’, which was a successful company. And I don’t think the the salaries were crazy out of line, but they got well paid and they didn’t obviously have to compete with anyone else for those jobs. And because they could live on their lions’ salaries and the whole salmon family was basically living on their land salaries, all of that money from S&P, from the S&P sale could just get invested and grow. And you could you could make a bunch of different investment. You never really needed to touch it. And so and you could even use some of the income from that to sort of like pay out extra and to buy houses and that kind of stuff. And so financially, it made a huge it was very attractive to the men to join this system because they got a very well paid job at Lions’ if they wanted it. And then they got be, you know, effectively a share of this huge pool of money that they would otherwise not have a share of. So, you know, you really needed to wait pretty much a century or more than the century before the number of men in the family had grown so big and the amount of money in the family had become diluted across so many people. And also Lions’ had been sold. So we weren’t making those salaries anymore before that. Andrew and his brother or sister now know the two guys who left. Oh, yeah, Paul. Yeah, Andrew and Paul, like, basically said, no, it doesn’t make financial sense to us anymore. We would do better off outside the EU.

S5: You ask that question about why it kept going, what was the incentive? So the beginning was it was a unifying system which worked really well. Then it became this incredibly affluent way, this easy way of making money. So that was the incentive. And then after the Second World War, what happened was even though the financial incentive wasn’t there, there was an enormous moral and ethical pressure from the family elders which said, you need to do this for the family. We’re not as appealing, said nobody owns the assets. It was passed down the generations. And so you’re not doing it for yourself. You’re doing it for your grandchildren, your great grandchildren. And so when it finally did break up in the 1980s, 1990s, the emotional turmoil was extreme. They actually had to hire a management consultancy, Tavistock Institute, which helped them with psychological workshops. To work through because they felt they were being disloyal to their heroes, these grandfathers, these great grandfathers, and it really was a very much a male culture. I mean, there were some very notable women in the memy was one lainer was another one who was the sister of the original.

S2: As in many Jewish families, there are a lot of big, you know, powerful matriarchs in the in the family. They just and they there were powers behind the throne, but they didn’t actually have the jobs.

S1: And I’m curious, how is this? How unique is this? Are there other examples of these types of structures?

S5: I mean, you might know I haven’t found anything like it. And even more interestingly, the tax authorities had never seen anything like it, which is one of the reasons no one knows about it.

S2: That’s right. Like, we we kind of had some expensive legal advice saying that it was all legal and we didn’t need to pay any taxes. And I kind of hope we pay income tax on the income we get paid. My next question is that the fund itself wasn’t paying taxes, so there’s no capital gains on owning the assets. So it was it was sitting in this kind of tax limbo for a long moment. And and one of the reasons why why when I was growing up, it was understood that no one talked about the fund. I mean, you were told specifically not to talk about money. And and one of the main reasons for that was that like, well, we had good legal advice saying it was all legal. And finally, no one wanted the tax authorities to start asking any questions because who knows where that might end up. And so it was only after the fund got wound up and, you know, and dissolved and no longer existed that, you know, someone like Thomas was able to come along and write this book.

S6: So there was actually there was so to be clear, no one was paying taxes on any of the money.

S5: Well, we were paying taxes on our income, which was a very minimal amount of money, very small because because remember, your income didn’t even need to cover your mortgage because you didn’t have a mortgage and even owned your home or your medical bills or your schooling or your travel or your painting or your car because they all had chauffeurs and cars. And just give you a scale of this, you know, Life magazine in 1934 described the loans, the catering company as the largest catering company in the world. You know, they were and they were so big that in the 60s and 70s they started going and buying things. They bought Baskin Robbins, they bought Dunkin Donuts. I mean, they went on this kind of buying. They bought it. I mean, they went on this buying spree with pocket change.

S2: I mean, this was a reward. We like a change. We leveraged the company and the amount of leverage wound up killing us. And that’s why we had to sell the company. Yeah, true. So, yeah, that was my grandfather who did the crazy M&A spree, which which in hindsight was ill advised.

S5: So the reason why is because he had seen in America the conglomerate ization, the build as big as you can go to different types of businesses because they were primarily a catering company, but they started going to meet the selling bread and so on and other different lines. And he borrowed the money on the foreign exchange markets. And if you remember, in the 1970s, the British pound collapsed. Well, that was the end.

S2: So we had to sell off our hotels and then we had to sell off the catering business. And then one robbins’ really to Margaret Thatcher. Yes, we employed Margaret Thatcher. She she was remember, she was a chemist and she worked on soft serve ice. She did. And that was really one of the main pillars of joleen’s of the family come from soft serve ice cream and also orange.

S5: The orange juice on a stick was called Orange Made, and they had all these innovations. So after the First World War, they were the first catering company to invest in food laboratories. So they built this giant food laboratory because they were really committed to science. And so they came up with these new techniques for improving foods, developing new types of foods. They invented the food, which is frozen, frozen food.

S2: We also had I mean, it has to be mentioned, we were the first company ever on planet Earth to have a computer. Yeah.

S5: Lions’ Electronic Office, Liow, 1954. They they invented with Cambridge University, the first business computer. So they were the first business on the planet to look how proud was something. It was big. I mean, it was big. And then we sold it to IBM. Yes, exactly. Right. So they process payroll, which is pretty impressive. But they didn’t make any money. I mean, they covered the costs.

S1: I think in the end, I’m just kind of curious, like, so what is the thought now in the family about this, about the fund, about what happened, about the fund dissolving?

S5: Yes. So there’s there’s kind of two camps as one camp, which is it’s just in history. This is like quite a long time ago in 1991, people of my generation can’t really remember going to because they they had some very famous iconic outlets. One was called the teashop, the alliance teashop. There was there were these corner houses. There were all these brands, these ice cream brands, bread, coffee, tea, and a lot of people below a certain age, below 45 or 50 can’t remember. So there’s that. And then the other group, I think there’s some nostalgia for those periods because it was quite a lavish lifestyle. So when you went to Heathrow Airport, first of all, they have the concession for the entire airport that they did catering for the entire airport. But they also had a guy who would meet you at the airport whose permanent job was just to help you get through the airport. He was on staff at the airport, you know, so I think my mother’s from my mother’s generation. They you know, they had a really wonderful lifestyle, you know, there’s no doubt about it.

S6: So so I don’t know how to ask this without sounding rude, but how wealthy are these people now? What happened?

S5: Yeah, so so so some because I’m the son of a mother. We got I got literally there literally that I mean, I grew up in a house which was bought partly with a dowry that Felix is talking about, which is a lovely house. Felix, how much people to get.

S2: So I never became a member, so I never got anything. One of the reasons that my father was able to wrap up and dissolve the fund was precisely by saying to every of the other members, look, my my son is going to be the big loser here. I don’t feel like a big loser. I feel like I’m perfectly fine. We can talk about that for quite a long time. Does Felix feel like a big loser? I, I tune in. Yeah, I did just fine out of my childhood. So the elder generation, their, their homes and everything wound up continuing to be owned by the fund. They continue to get an income from the fund. Basically nothing changed for them. Everyone else kind of got cashed out in the sense that they had to they got some cash out of the fund, but then they bought they had to buy their homes from the fund and that kind of thing. And so they wound up owning their homes rather than in terms of raw.

S5: Goes, which is what you’re asking about three million each is what they got, and there was about 40 or 50 who benefited. And then the most importantly, the widows of one of the things that was always central to the idea of the fund is you took care of the widows and people unable to work, whether through some medical issue or other problem. They always got the same. So it didn’t matter whether you actually even worked, you were guaranteed. And that’s, of course, a problem from an offensive point of view. So, you know, there are some family members who I know who are always accused of maybe not pulling their weight. And that became actually a cause of tension, you know, and that’s when the fund started to dissolve in the 80s and 90s. There was quite a lot of, you know, angry words between people because, you know, one person said, well, I’m working for this really big law firm and you’re basically unemployed, but you’re being paid the same howzat, that fair, you know, all those kind of issues like little mini socialism, communist experiment.

S2: So when you ask whether it’s the whether there are any similarities, the closest similarity that really exists in that people know about the kibbutz is in Israel and they are very different in many, many ways. But that’s about as close as it comes. And it’s, I guess not a coincidence that they’re both Jewish.

S5: It was like an anarcho syndicalists, is what you’re saying. Like it’s like. But people actually even said, I think Jeffrey Samen, he described it as almost like a communist experiment, except as a very posh like you don’t think.

S1: No kidding. Communist being, you know. Yeah. It’s Communism with chauffeurs.

S6: Yeah, that’s exactly right. Yeah. It sounds like the right way to do communism. Honestly, the original champagne socialist.

S2: So, Emily. Oh, yes, I want to talk about your family now, OK, because you mentioned something a couple of weeks ago, which I didn’t know, but it’s kind of interesting, which is that you were disinherited.

S6: Well, yes, but not on a grand scale. You didn’t miss out on three million? No, I was just written out of my father as well. And he was just a humble professor with a pension. So where was I was shocked to learn after he died that I wasn’t in the world anymore. And so that is the fun fact about me. I was disinherited.

S2: Now, under French law, that’s illegal.

S6: Well, I mean, that’s a bummer. Why don’t they make that illegal in the U.S.?

S2: So this is the question which which I have is that why is it generally understood that people will leave their money to their children? And is it a good thing that people leave their money to their children? And should it, in fact, as in France, be illegal not to leave your money to your children? What, someone who is disinherited or do you feel about this?

S6: I feel that it should not be illegal to you should be able to leave your wealth to your child. And there is an expectation, I think, that your parents are going to take care of you on some level. So to be disinherited is kind of shocking, even though by the time my father died, obviously, it was making my own money and I didn’t need his money or anything like that. It’s just it’s. It’s a hurtful thing to do. I think it was hurtful and do I think it’s good that wealth is passed down generationally? I think actually in the U.S. especially, it’s kind of harmful and it is exacerbating income inequality over over the years. I think it’s actually kind of a destructive thing. And that’s why we have things like wealth tax and or as the conservatives call it, the death tax.

S1: I think the wealth tax and estate tax, estate tax, estate tax and death, tax wealth, taxes and estate tax is a kind of wealth tax.

S2: But it only happens when you die. It happens every year.

S6: Right. So I think having a robust death tax or estate tax is actually a really good thing because I think it is harmful overall for wealth to be handed down and concentrated into families. And we see that now, most obviously in the White House.

S1: Yeah, and I agree with that. And I think the other issue you have in the United States is the is that, you know, if you inherit money, you then don’t have to pay the capital gains taxes on it. And that that’s another big issue. Yeah. And I think I agree with you that I, I don’t necessarily think the government should force you to give your money to any one person. But I do think it is in the benefit of the overall country for wealth. You want to encourage wealth to be created, but then you do want it to eventually be spread around and not just concentrated in the same family.

S6: So that construction is actually wealth. Destruction is actually a creative force. Like you see that in in the early in the 20th century in the United States. Right. The the Great Depression blew up a lot of wealth and it helps. Well, the wars, especially in the war, got redistributed and created more wealth like it’s a good thing.

S2: So I guess there are two different questions here. One is the optimal taxation of wealth, which we have talked about a lot on on state money. And we can maybe put to one side. The second question, is the idea the norm, I guess, which is generally understood among I think most families in most cultures around the world that insofar as you have wealth, it then gets left to your children. Where does that norm come from, because it does seem to be quite universal and is a good one.

S1: I mean, I think I’ve heard, you know, that and it’s true that the fundamental unit of society throughout essentially all of history that we know of has been the family. And so the idea is that when people are earning money, when people are building wealth, they aren’t just doing it for themselves. They are doing it for their family unit.

S3: So so one of the things we we see in the United States is this massive gap in wealth between blacks and whites and the median. Black household net worth is zero and will be for many decades to come, and the median white household net wealth is substantially positive. And the reason for this is entirely because obviously back in during the days of slavery, blacks basically had no wealth until they weren’t even allowed to own anything. And then the dynamics of wealth getting passed down within families rather than across society has meant that there’s remained basically no wealth among the majority of black households.

S5: There was I’m sorry, there’s something else going on, which was that the African-Americans were the assets, you know, during slavery times. They were they were the the foundation of the capitalist society. So, you know, one of my family friends ran a bank back in the 19th century, the bearings where they used to use the asset of the slaves as the collateral to start mortgaging and come up with securities where the slaves themselves were then used only on the market, whether it be not only just in those days, but also in Britain. So, you know, I think you’ve got to look at the assets themselves in the history of the United States, which is so interesting how it’s tied up with, you know, human capital. You know, then you have to ask yourself about if you took about estate tax and death tax or whatever. What about reparations? You know, how do you actually remedy some of those massive asset gaps on the back of what was slavery in this country?

S1: Well, and interestingly, I believe that there were slaveholders who were like slaveholders were paid, I believe, also in the UK for the value of their slaves. But there were never reparations to the actual slaves.

S5: So so in 1833 in Britain, it’s different in America. At 1833, abolition took place in Britain. And the compromise because the the debate population was going on for 10, 20 years, starting at age No.7 with the first abolition in 1833 in Britain where slavery was abolished. The compromise for the slaveholders was not only do your slaves have to work up, work out the slavery for five years as an apprentice in the sugar plantations in the West Indies, but as a slave owner, you got paid for your slave. So one of the owners of slaves, John Gladstone, he was the father of William Gladstone. He was paid the of 87 million pounds in today’s money for his slaves.

S2: Unbelievable wealth has now trickled down within his white family.

S6: And so and so this is another reason for the for the black white wealth gap in the United States is a lot of white people were able to accumulate wealth in the New Deal. Right. With federal policies and housing policies, let white people into the system to move up to buy homes, to accumulate wealth. And black people were shut out of that.

S1: Yeah, that was like another injunction. The housing issue is huge.

S2: And again, the difference between black and white, the housing and one of the one of the things which is more intuitive, at least to me, is the if you are a family unit living in a home and then the owner of the home who’s often the parent winds up dying, then on some level, it just makes intuitive sense that people who have been living there should continue to be able to live to live there. And so they inherit the home. And when and when wealth was basically coterminous with land and housing, this idea of inheritance of like, well, we have always owned this land. We’ve always owned this house. We’re going to continue to own this land and continue to own the house. And it’s just continuity makes more sense. But when everything becomes financial ised and wealth becomes something which isn’t just land and housing, but it becomes stocks and bonds and securities and something much more liquid, then this idea of inheritance becomes an actual transfer of liquidity from an individual to another individual who’s mostly at that point, you know, a grown adult with their own income. And they get this windfall and and it’s, you know, the the the the way the system works is that the richest members of society get the biggest windfalls in terms of inheritances. And that just seems deeply unfair to me, but is deeply unfair.

S6: It’s even unfair to the people getting the money, the the inheritors, because I think they lose out on the opportunity to work and realise their full humanity. Right. I mean, it’s actually like, well, it depends how much you inherit these these heiresses and heirs. It just seems like, ah, I mean, maybe I’m prejudiced against them because I wasn’t able to become an heiress with my college, as a college professor, as daughter. But yeah, it seems like these are like toxic members of society. Is that do do we not agree?

S1: Well, I mean, I, I do think that, yes, there is the argument that when people are putting in the effort to build wealth themselves, they are partly doing that because they want to take care of their family. And that is one thing. And I think perhaps paying for your children’s education, perhaps helping them with a down payment. But then I think once it gets beyond that and it becomes supporting them perhaps for the rest of their life, then I do actually think that isn’t just bad morally. I actually think it’s kind of bad for capitalism.

S6: Yeah. And we should note that there are some notable capitalists that aren’t passing down all of their wealth like Warren Buffett famously is. And isn’t he not passing the Bill Gates?

S2: And Bill, I mean, Howard Buffett, who’s Warren’s son, is just fine. He’s he has millions and millions of dollars. He’s you know, he has his own philanthropy. And, you know, and actually one of the interesting ways that this sort of like late capitalist ways of getting your children to inherit your wealth is to create a family foundation and then put your children in charge of the family foundation, that they still control the money and they can still pay themselves a salary out of that money. But then they also have a purpose to their life, which is giving away all of this money to good causes, but probably not very much of it, maybe only five percent a year, because they want to make sure it lasts in perpetuity and they can give it on to their children and so on.

S5: And I can talk a little bit in terms of our family, if you’ll allow me, because I think it has been a problem for some of the members of the family. You know, there’s one member of the family who decided that he had to prove his chops in the entrepreneurial field like other members of of like his cousins. And so he set up a drug business. He made illegal drugs in a in a drugs factory in Scotland. He was making speed in his bathtub, spill, his bathtub, and he got put away for eight years or something. And I think that I think his the context it’s not just the wealth. It’s also that soft wealth, isn’t it? Because he never had to really earn his way and this is his way. I think slightly dysfunctional method of proving his own abilities are, look, he did his time and he’s very sorry for it. But I think that is an illustration. And there’s many other members of the family as well who haven’t, I don’t think, done that successfully. You know, they’ve had some money and they’ve squandered it, you know, which I think to your point, I think is because other people could have done that really well. I don’t think all do use your words. I don’t think all heirs and heiresses, a toxic Minmi there. I don’t I don’t really think. No, I’m sure you don’t. But, you know, but I think it is a I agree with it. It is a fundamental problem. Society’s and then the question is how much you know, how much is is the right amount and then how do you do with the wealth tax or what are what are the mechanisms or I mean, on some level, even if you don’t legislate it, what’s a good societal norm?

S3: You know, if you talk to private bankers, they’ll the you know, they will talk forever and ever about how to bring up your children in a in the context of wealth without having that wealth be harmful. And, you know, but it’s I mean, the easy way to do it is to just not give them any money. But even then and this is something which I want to move on to. If you grow up in a rich family, as we had a long conversation with Daniel Markovits about this, if you grow up in a rich family, you have so many advantages in life. And I feel like this is one hundred percent like my situation, that if I inherit nothing from my father, I have so many advantages in terms of wealth and privilege that. I would never have had had I not grown up in a rich family, and when I say rich family, I don’t mean my parents were rich because they didn’t actually own anything at that point. But, you know, it was I was in this rich family and the the advantage advantages you get real even without any financial inheritance at all, you could even see that.

S6: And if you look at like social mobility data in the U.S., even beyond the context of the family, you grew up in, being rich or not, but the context of like the neighborhood you grew up in, if you grew up in another like a wealthy neighborhood where families are more intact, you’re more likely to move up your income and your wealth. But if you grew up in a lousy neighborhood, you’re more likely to move down. So it’s kind of like the context that you grow up in is so powerful.

S2: And so especially in the United States where schools are locally funded.

S1: I find this really interesting in looking at the mid century context, because I think of my family where, you know, my dad was a doctor, my mom was a teacher. Their parents, you know, worked at Ford or worked at this department store called Hutson’s. You know, their parents didn’t go to college. The parents before them, pretty much everyone was just farmer, you know, like they didn’t grow up with money at all, but they were able to really move up. And I think the reason is because of the time that they grew up and there was a time where they had access to very good schools, my dad was able to put himself through medical school by painting houses. You know, the types of things that you could do at that time, if you were white were just the type of things that almost no other period in history were possible.

S6: Right. The the circumstance of the the family you grew up in affords you the privileges long term and determines like your trajectory, whether you inherit the wealth or not. That is that’s the typical situation. And there was this like bubble post-war bubble here in the U.S. at least, where you could, like, bust out of that where there was social mobility.

S5: So how is there a lot of people are saying because of the shift since the mid century where people could go up and social mobility and if that has stopped and if that’s and if there is a change, which is what we’ve just been talking about, some kind of mechanism to stop, you know, how do you deal with the inevitable backlash, the political backlash of angry people who you said, you know, this is what we expected. We expect that we could work, we could give our money to our children. You know, now we can’t. How would you deal?

S2: How does this deal with that transition? But yes. So let’s let’s let’s talk about the social mobility aspect of it and the fairness aspect of it.

S3: You know, especially when, you know, I mean, to take the extreme example, you get couples like Jared Kushner and the banker Trump, who, you know, both of them in their own right are. Well, Kushner’s is probably a billionaire in his own right, Ivanka is worth probably hundreds of millions and they. Got that wealth entirely by being born into a rich family, and now they’re sitting in the White House making public policy for everyone else. And there’s something in that entirely unelected, but even among elected, if you look at the net worth of the Senate, super high, if you look at the, you know, Roosevelts and the Kennedys and the kind of people who get elected in history, they tend to be quite rich.

S1: Johnson wasn’t became wealthy through the radio and TV is always exceptions.

S2: Yeah. I mean, there are people who are not super rich when they become elected, but the rich are overrepresented.

S3: And and there is this way in which the power is is in large part held by the.

S5: People who have done the best out of this unfair system of family inheritance, I mean, you see that also again with our family where, you know, they came to Britain in 1840, but by 1820, the non members of parliament, the now, you know, chairmans of various nonprofits and foundations, you know, they’re taking part in the higher levels of society. And they couldn’t have done that without that privilege. There’s no question those are the benefits. And now they can now pull the levers of power to to whether it’s their interest or the family’s interest or the business interest. And that’s exactly what they did. And you can see that over the next eight years, you know how they use their advantages to directly benefit the family.

S2: And I always say that it’s a lot easier to turn power into money than it is to turn money into power. But that was, I think, for a Jewish immigrant family, even more important that once you start getting the money, you work very, very hard to try and turn that money into positions of authority within the broader culture in places like the parliament and the law, because that’s that’s a way of really like entrenching yourself in society in a way that money can be confiscated.

S6: Yeah, I mean, money gives you the opportunity to do a lot of things that people with less money just can’t do. Like most entrepreneurs are people with money, you know, and it’s not about a mindset. It’s about the freedom to take risks when, you know, you have a soft landing behind you. And I think it’s probably the same a little bit with politics. You know, it’s not cheap to run for office, especially in the States. And if, you know, you have that soft cushion behind you, you can accumulate. You have the money to do it and to accumulate the power.

S1: You know, I mean, I will say, you know, just so it’s not all doom and gloom that, you know, throughout American history, we certainly have had leaders who may have come for money themselves, yet still pushed through policies that benefited everyone. And and often that was also because we had a democracy where people were pushing for those things, because at a certain point, you can have all the money in the power in the world. But if if you have, you know, people picketing in the street like that shifts things. So I don’t think it’s necessarily. Always going to be the case that, you know, from this moment on, we will only have more and more concentrated wealth and nothing will ever change in politics.

S2: I don’t think that is going to, although I think I think historically, if you look at social mobility, it has been going down steadily for, what, 60 years and.

S1: Well, and it’s also the 80s at least. It’s also complicated because it’s a little bit it depends on where you’re looking in the United States, because different cities and states have vastly different levels of social mobility, some that are closer to Sweden, some that are closer to South Africa. So but yeah, I mean, I agree with you.

S2: I think that directionally they’re all moving down. Right. I don’t necessarily think some are moving.

S5: I believe so. OK, can I ask a question? Because you guys have thought about this stuff a lot, you know, over the next 30 or 40 years, do you think that income or wealth inequality is going to increase or will it decrease? Do you think?

S6: I mean, it’s been increasing and I don’t see why it wouldn’t continue to increase, barring some catastrophic.

S2: The the slogan, as coined by Thomas Piketty, is always greater than the like the amount of wealth that people have grows faster than the economy as a whole and so long, as always greater than G. And he says the only times that I was ever less energy is basically wartime. If we have a major war, then that will help equalize things. But in the absence of a major war, it looks like inequality generally goes up.

S1: Yeah, I mean, the only thing I would say is that, you know, there are, though, a lot of economists and people in the market who say kind of looking forward, that the what you are going to earn on capital is going to decline significantly. So, yeah, I mean, that’s entirely possible.

S2: And look, I’m not I’m not saying that in the big picture of this great big thing, if you look at it on a sort of maybe not like annual basis, but like a decade basis, I think is is hard to see how wealth will increase more slowly than the economy as a whole.

S1: I mean, I agree with you that I think it can’t just be a market mechanism. I mean, I do think there need to be policies that, you know, are shifting money and not even just I mean, yes, I think for ethical reasons, but also because of the health of the economy at a certain point when especially when you’re in places like the United States or the U.K. that have so much capital going into them, that is not actually helpful because you you have too much money in parts of the economy, whether you’re not consuming. So when you’re talking about wealth concentration, it’s not just an ethical issue, it’s also an actual economic issue.

S2: And I think the thing which, you know, I’m trying to understand here is like is wealth inequality in particular, almost inextricably tied up with almost the same thing as inheritance. Like without inheritance, there would basically be no wealth inequality. And so underneath all of the conversations that we have about wealth inequality is this kind of unexamined assumption that, well, of course, people are going to leave all of their money to their kids. And I just find that fascinating.

S6: And you don’t understand why people would want to leave money to their children?

S2: Well, I’m not I’m not saying well, I don’t entirely understand why, but I think that what’s more interesting to me is not why they do it, but the fact that that one kind of unexamined assumption that we just kind of assume is true. And I think we assume it’s true for good reason because it is true kind of underpins all of the bigger problematic aspects of wealth inequality.

S1: Well, and I also think. When you’re talking about wealth inequality, it is also important to think about not just the high end, but also the lower end in the idea of, well, you also want to be you have policies that can kind of help people on the lower end. So then even if you still have people that are wealthy, if they’re slightly less wealthy and that’s making a better life for everyone else, then that’s fine. You don’t need to get to a place where you have no wealth inequality or no income inequality.

S6: Well, there are places like Cory Booker’s wanted to do baby bonds, right, where you would just when you’re born, you just get a few thousand dollars for your children and they get to use that money and build wealth, you know, the way other people, the higher income people just naturally do. And there have been and I guess you could say universal basic income is kind of like a way of doing that also without saying you can’t have inheritance anymore.

S2: But giving people at the on the on the lower end their own sort of inheritance, just UBI is deep down a redistribution mechanism.

S5: So I think that’s what’s going to happen. I think you’re going to get massive inequality, growth, and then you can have a universal basic income to keep people happy and is going to be much more than a kind of welfare income must be sufficient to have an OK life, but the people living at the top are just total different stratosphere of wealth.

S6: You know, the other thing I was going to mention was in the United States, there’s just still a very powerful we all think that here you can bootstrap your way up like people don’t realize. How constrained is this myth? It’s very powerful. Yeah. And I was looking at some survey and Americans are more likely to believe in the American dream and the idea of social mobility than people in the UK or Canada, where actually social mobility is higher right now than in the U.S. because our ideals about this are so strong and we’re so we’re so dumb about this. One wants to start everything to kind of status quo to exist because we think it’s we don’t understand the status quo.

S2: Well, one of the things that really fascinates me about the about income taxes rather than wealth taxes is the people who are earning way, way lower than like 250000 people who are earning forty fifty sixty thousand dollars a year, oppose raising taxes on people earning more than 250000 because on some level, they believe that they will be one of those people sooner rather than later. Like, I am going to be earning two hundred fifty thousand dollars myself in a couple of years. And I don’t want higher taxes. They think that the social mobility is not just something which exists in theory, but is something that exists in practice for them. And they believe in this dream that they will be rich and they want and they want their future selves, the rich future selves, not to have higher taxes.

S1: Although I would say, though, that if you actually look at polls, most people are pretty much in favor of taxes on wealthier people. It’s just the politicians that are the ones who don’t.

S5: What is the difference of wealth in this country in terms of gender, you know, is it is it is a is a great difference between it’s very hard to I mean, most of the billionaires are are men.

S2: If you look at the if you look at like the Bloomberg billionaire index, the women on the billionaire index are mostly the spouses of you know, entrepreneurship is the classic way for a woman to become a billionaire is to get married to a billionaire and it happens or be the daughter of a billionaire. Right. But interestingly, marriage is is the way is one of the foremost forms of social mobility in the United States. If you marry someone who if you marry into a family that’s much richer than your family, then overnight you become a rich person.

S1: And that’s actually also interesting because that’s something that’s increasingly happening. Less. Yes, a sort of meeting.

S6: Yeah. Yeah. Women used to marry up, I think, up, meaning an income more often. And now it’s more like college educated men and women meet each other, men, men or women and women anyway, and they marry. And so there’s more income inequality that way, too.

S2: OK, I think that’s a magnificent episode on family wealth.

S4: Thomas, thank you for coming in to talk about all of this and maybe, hopefully will have your book come out in the United States. Fingers crossed. Wouldn’t that be a fine thing? That would be brilliant. So thank you, Thomas, for coming in. Thank you for just making money for producing. And we will talk to you next week on money.

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