According to global investment banking and financial services company UBS, a total of 137 new billionaires sprang onto the scene this year. Hamilton, Isobel Asher, “Billionaires Inherit More Wealth Than They Make” (November 30, 2023 – The Daily Upside). As you can guess from the title of the article, the amount inherited by a number of nepo billionaires (i.e., nepotism billionaires) outweighed the amount made by self-made billionaires.
Here are the facts:
- The amassed wealth of new inheritance billionaires added up to $150.8 billion, whereas self-made billionaires locked in at a mere $140.7 billion.
- The average wealth of an individual nepo billionaire was $2.8 billion, while a self-made billionaire had an average vault worth just $1.7 billion.
The number of nepo billionaires will only grow as baby boomers pass on and transfer a tremendous amount of wealth never before seen in the history of the U.S. or the world. I bet most of those nepo billionaires will blow their fortunes, though. My bet is that the fortunes of the self-made billionaires will outlast the fortunes of the nepo billionaires. Why? History, and because nepo billionaires were never taught to work. While the self-made billionaires were busy working, nepo billionaires were busy traveling the world and spending money, all the while showing off their parents’ wealth on TikTok.
CNN’s Anderson Cooper was not a nepo billionaire, despite his wealthy and colorful family’s past. Not many people know Cooper’s family history other than his mother, the late famous fashion designer and socialite Gloria Vanderbilt. But his famous family history goes much further back and is much more interesting.
Gloria Vanderbilt, whose great-grandfather Cornelius Vanderbilt II was the grandson of the “original” Cornelius, whose shipping and railroad empires made him one of the richest men in American history.
Known as “the Commodore,” Cornelius (1794–1877) had, at the time of his death, an estimated net worth of $105 million, more money than the U.S. Treasury, or approximately $205 billion in current U.S. dollars. Colon, Beatriz, “Anderson Cooper’s family was once worth $200 billion, but what is his net worth today?” (19 Sept. 2023 – Hello! Magazine).
The Vanderbilt’s were once the wealthiest family in the United States, but over the generations, the family squandered it all on mansions, parties, and gambling. By the 1970s, at a reunion of Vanderbilt descendants, there was not one millionaire among the bunch. Cooper maintains that none of the Commodore’s fortune made it to him, even recounting that his mother once asked to borrow money from him. Cooper’s net worth is estimated at around $200 million, almost all of it self-made from his work in broadcasting and investments.
In a CBS interview, Cooper shares his opinion on why family fortunes like those passed on to nepo billionaires don’t last:
“I view the money as kind of a pathology that infected subsequent generations, because I think they all grew up with this idea that there would always be money there, and there was no need for them to actually work.”
$200 billion seems like a lot of money to squander, but it’s possible. Just look at other rich heirs and lottery winners who squander hundreds of millions or billions of dollars in a short amount of time.
If you don’t work or put your money to work, your money will dwindle until it’s gone. That’s because anything you acquire that doesn’t pay for itself will only take away more cash over time. Toys, clothes, vacations, gambling, giving money to family leeches, and even a house are all money vampires that will only suck your wallet dry.
The family fortunes that last are the ones where the progenitor of the wealth taught subsequent generations how to work and how to make their money work for them.
John D. Rockefeller, the progenitor of the Rockefeller fortune and whose life intersected that of Vanderbilt’s at one point, put in place measures to preserve his family fortune, which has endured to this day. The current Rockefeller family’s wealth is estimated to be in the billions.
How did Rockefeller manage to preserve his family’s fortune while Vanderbilt failed? Unlike Vanderbilt, Rockefeller passed his investment knowledge and financial sophistication onto his heirs, with an emphasis on investing in cash-flowing assets like real estate. In fact, the family trust has owned valuable real estate properties in New York City and around the world, including the World Trade Center and the Rockefeller Center, at one time.
Ultra-high-net-worth investors (UHNWIs), the self-made ones, know how to make money and make their money work for them, and the lesson for the rest of us is that unless you put your money to work for you, money capable of working 24 hours a day, it’s just a matter of time before your own cash runs out.
Building and maintaining multigenerational wealth—wealth that will last many lifetimes—requires assets that not only pay for themselves but also generate income and appreciate over time. Assets like commercial real estate and income-producing businesses (i.e., private businesses or private equity) are the two types of assets favored by smart and financially sophisticated ultra-wealthy investors.
History is not on the side of nepo billionaires, who will most likely squander their wealth. Learn from the self-made billionaires who preserve their wealth through productive assets that give back more than they take.
