The ‘Self-Made Billionaire’ Is A Lie
The myth of the self-made billionaire just won’t die.
This week, Forbes magazine reported that 21-year-old Kylie Jenner was the youngest “self-made billionaire” ever ― as she has pulled in at least $1 billion from her successful makeup company Kylie Cosmetics.
Jenner took pains to say that she’d started her company with her own money ― earned through modeling. “None of my money is inherited,” she said in a recent interview. Forbes clarified that its definition of “self-made” is broad, just meaning that her business hadn’t been directly inherited.
Still, it’s obviously absurd to attach the phrase “self-made” to Jenner, who is part of the wildly successful Jenner-Kardashian clan. While she is clearly savvy about marketing and promotion, Jenner grew up in one of the wealthiest ZIP codes in the world with access to every advantage money could buy ― including years of self-promotion on a successful reality television show. The value of her makeup company lies in the celebrity she accrued via her family.
This isn’t about tearing down Jenner or her popular lip kits, though. She is just the most outlandish example of a bigger problem ― the persistence of the idea that the wealthy succeed because of their own genius, hard work and perseverance. Even Donald Trump, whose parents gave him hundreds of millions of dollars, has managed to promote himself as self-made.
A raft of research says otherwise.
“Wealthy people are mostly wealthy because their parents are wealthy,” says Sandra Black, an economics professor at the University of Texas at Austin.
The correlation between parents’ and children’s wealth is well-established in the research, Black said, but in a recent paper, she tried to pinpoint exactly why.
Are wealthy parents passing on some super-amazing genes to their kids that enable them to go on to great success by virtue of their brilliance? (The Trump theory, let’s say.) Or is the environment a child is raised in the reason for their success as adults?
In her research, Black and her three co-authors found that your chances of becoming wealthy have little to do with your genetic abilities.
The environment you grow up in ― the quality of education your parents can afford to give you, the investments they make in you, the relative affluence of your neighborhood ― is almost twice as important as biology, Black and her coauthors write in a working paper put out this month by the Centre for Economic Policy Research.
For their paper, the researchers looked at the parents of adopted children in Sweden, where there is robust data on both adoption and wealth. They examined kids’ biological and adoptive parents.
Then they looked at the wealth of those adopted children at around age 44 ― old enough to have established themselves as adults, but generally young enough to have not yet inherited their parents’ money. (They only looked at adopted children who still had at least one living parent.)
Black and her cohorts found that the adoptive parents’ wealth was a much better predictor of whether or not their adult child was wealthy.
Academics have done this kind of research before to try to tease out the relationship between, say, education and genetics. And in that case, genes do play a bigger role, she said. With income, a child’s genes play a slight role, too — but their environment is far more important, according to Black.
Wealthy parents have the money available to invest in their children ― in schooling, extracurricular activities, college funds. They also have connections to other wealthy people that the poor simply don’t have ― that means better access to investors in your new company, for example, or a leg up getting into an Ivy League school.
Kids with wealthy parents also have a fabulous safety net. And they’re apt to take more chances, plowing all their money into a lipstick company or overpaying for a piece of New York real estate.
Billionaire Facebook founder Mark Zuckerberg and billionaire Microsoft founder Bill Gates came from relatively well-off families, it’s worth noting. But they’re both considered “self-made.”
Entrepreneurs are much more likely to come from wealthy families, where they likely feel more comfortable gambling for success, research has found.
Trump’s father routinely rescued him from financial collapse. Though Jenner’s parents pushed her to go out on her own, I doubt they’d leave her in the streets to fend for herself if everything went belly-up.
To be sure, Black says, environment isn’t literally the only reason someone like Jenner can make $1 billion. You do need some amount of intelligence or savvy to succeed.
But if you’re growing up in a poor neighborhood to parents who are just scraping by, intelligence and savvy are going to be far more difficult to capitalize on. You’re certainly going to take fewer risks with whatever money you have.
“You might think smarter parents have smarter kids, but clearly, it’s beyond that,” she said.