Trust Fund Kids and Their Money

• Posted by Jeff Carter
• on April 25th, 2010

Since America was created, the world has seen dramatic wealth creation.  It wasn’t luck.  It was the entrepreneurial spirit of America.  The government culture also fostered this entrepreneurial culture.  Low taxes, low regulation, government stayed out of the way of business.  More wealth was created in the 200 years of the American experiment than anywhere else in the history of mankind.  Where crony capitialism and actual capitalism competed-actual capitalism won. Today, that tax culture is gone.

Much of this wealth in America has spawned generation after generation of people that have been able to live at what most would consider a wealthy standard of living. In my life, I have had the pleasure of meeting some people that have been recipients of “generational wealth”. It is interesting to see what a lot of them have done with it.

A large percentage of the time, they have used their wealth to work with many different kinds of charities. Many of them are quite liberal politically. Hence coining of the phrase, “I am not rich enough to be a Democrat, but hope to be someday.” I don’t know who coined it, but in a lot of cases, it makes sense.

I am not saying that these efforts are not worthy causes, but I am saying that their resources could be put to different uses to achieve the same goals. Framing the problem; we want to help the poor lift themselves out of poverty and become productive members of society. How do we do that?

Currently, we have government welfare and many charity organizations dedicated to their plight. Government welfare is a disaster. Not only has it failed since its inception in 1965, but it has torn through the fabric of family life in the poorest of neighborhoods. We have seen little or no improvement in poverty from the result of government intervention.

Organized charities, while their heart is in the right place, have only put a tourniquet on a deeper problem. Charity is a worthwhile endeavor, but not a sustainable endeavor when you want to move big blocks of something.

When you look at statistics on violence, none of the studies I could dig up were meaningful. They list deaths by state-unsuprisingly states with the most population had the most deaths! The NRA has stats, liberal sites have stats-but I couldn’t find any that tracked death by income demographic. Some sharp sociology major ought to do a study not on who commits the crimes (plenty of those), but on what income demographic becomes a victim of a crime. My intuition tells me that it will be a poorer neighborhood.

One answer is to do something economically rather than a band aid for social ills.

This brings me back to the trust fund kids.  Generally they are well educated, and very aware.  They have social and professional connections that they inherited or worked on themselves.  They also have a nice pool of independent capital.  They can assume some risk.  If they lose on an investment, it’s not going to make a difference in their everyday life.  These are the people that should be seeding the next wave of entrepreneurial business.  Successful entrepreneurial businesses will do a lot more to lift the poor out of their situation than any legal fund, government transfer payment, or charitable organization will.

Friday, I went and listened to a talk by J.B. Pritzker at TIE Midwest.  Mr. Pritzker and I could probably not be more divergent in our political choices!  However, his talk, and the give and take after were very impressive.  J.B. spoke passionately about entrepreneurs, start ups, and the economic ecosystem needed to nurture them.  On these points, we wholeheartedly agree.  J.B. also made the point that we need to cheerlead for each other-and right now I am waving my pompons for him. Mr. Pritzker is no shrinking violet.  He walks the walk and talks the talk.  He has funded many start ups, and even pledged money for the i2A fund.  He is heavily involved, and you can tell that he is not only passionate about it-but he actually loves it.

If we look at the make up of angels today, most are entrepreneurs themselves.   They built companies, and have a pool of capital to invest. The “trustifarians” can afford to take risk too.  As Andrew Carnegie said, the wealthy have a responsibility to get into the game. They will do more “good” by judiciously investing capital in start ups, than they will sending it to organizations like moveon.org. Save a life, fund a business.

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