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- [00:01]
A
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. 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. Hello, and welcome to the Salmon Legacy edition of Sleep Money, your guide to what is normally the business and finance news of the week. But this week we have a special guest in from the UK, Mr. Thomas Harding. You are my cousin.
- [01:05]
B
I am.
- [01:06]
A
You have written a book about our family.
- [01:10]
B
Yes. It's about the Salmon and Gluckstein family and their businesses, Jay Lyons and the tobacco company Salmon and Gluckstein.
- [01:17]
A
And the book is named Legacy, and it 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 HuffPost, whose own family history we're going to talk a little bit about.
- [01:34]
C
Hello.
- [01:35]
A
We're joined by Anna Shymansky of Breaking Views, who comes from a long line of farmers.
- [01:42]
D
It's very true.
- [01:43]
A
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, you spent, what, two years trying to delve into the history of our mutual family, which, let's just call it the Samhain family, because otherwise it just becomes confusing. It had a kind of crazy, unique financial structure, right?
- [02:27]
B
Yes. So they were immigrants who arrived in Britain in the 1840s 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 1870s, 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.
- [02:57]
A
And there were how many male members of the family back then?
- [03:00]
B
Well, originally, I mean, they had a vote. So in 80. 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. To get through this, to build up our power, our money, you know, what we need to do is to divvy up all the income. And there was. I think there was 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.
- [03:34]
A
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?
- [04:00]
B
Yes. So it didn't really matter where you worked in the business or whether you worked in the business 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 1880s, when Jack the Ripper was going around terrorizing the community, they couldn't leave because they had to have to have enough money to be able to leave East London. All of them together, they all had to buy a number of houses. So actually, at first, it was almost a straight jacket.
- [04:36]
A
And then, just to be clear, they didn't buy the houses, the fund bought the houses. Like, when I was growing up, the house that I lived in was not owned by my parents. It was owned by the fund.
- [04:48]
C
So your father was in the fund?
- [04:50]
A
My father was in the fund.
- [04:51]
C
Oh, interesting.
- [04:52]
A
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 earned at 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.
- [05:07]
C
Did he resent being in the fund, giving all his money away?
- [05:10]
A
And so that. Actually, there were resentment. Now, I'm not gonna say my dad resented it because, like, you know, that's a kind of 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.
- [05:39]
B
So they could actually make more money working outside the family fund, but they were obligated to. To input their money in, which is. Which is interesting now the women, so that my. 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 the fund. It's 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 the 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 Empire clan, you know, they're pretty positive about the fund. But the women, especially my mother's generation, there's a lot of anger. There's an extraordinary amount of anger. They did get some money when they got married.
- [06:33]
A
They got a dowry.
- [06:34]
B
They got a dowry. But key, it was managed by either the brother or their father. They managed. Come on. That's exactly right. Yeah, I know, it's crazy, right?
- [06:44]
C
So your mother would have grown up like within the funds umbrella, but then gets married and like, is essentially disinherited at that point.
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B
It's not disinherited because there was never an expectation.
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A
Also, there's no inheritance.
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B
Right.
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A
This is the weird thing about it is that no one ever inherits anything because all of the money just stays in the fund.
- [07:02]
D
Why did anyone ever agree to this?
- [07:05]
B
Because at the beginning, I think you have to see, I mean, it's interesting, it had different phases. So at the beginning it was a real unifying mechanism. You know, they were in it together.
- [07:12]
A
Well, there was a famous court case.
- [07:14]
B
There was a famous court kit, which was the original family trauma in the 1870s, 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. In the High Court of London, very public. And Monty actually, who was 15 at the time, witnessed it and he was incredibly embarrassed. And during the court case, Samuel said, well, I, I didn't do that. And also, you brother, brother in law and cousin, one of you sexually abused 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, we're never going to be in this situation again where we're going to build up a business and have to break it up. And it lasted from 1870 till 1990, which is extraordinary.
- [08:02]
D
And so there was no way, though, that they could ever, like, modify it, so.
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A
Right.
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D
Because it just seems like you have very misaligned incentives here.
- [08:12]
A
So it's kind of interesting the way it worked in practice. And the reason why it lasted as long as it did is that very early on in the history of the fund, we sold Salmon and Gluckstein cigarettes to Nabisco, was it to Imperial Tobacco? Imperial Tobacco, that was it. Um, and that gave us a large chunk of money which sat in the fund.
- [08:36]
B
You should explain that. Salmon Gloxin was the biggest tobacco retailer in Europe, maybe even the world at the time. And they were the Starbucks of tobacconists. So, I mean, they had an enormous amount of money in their disposal.
- [08:48]
A
And then in the wake of that, we created a new company called Lions, which was funded a little bit with the Salmon and Gluckstein 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 on Slate 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.
- [09:20]
B
There was talk, there was two boards, there was the working board, 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 all the power. I mean, there was voting shares and non voting shares.
- [09:35]
A
And so the way that the system worked financially was kind of interesting, is that the Salmon men paid themselves quite generously for running Lions, which was a successful company. And I don't think the salaries were crazy out of lion, 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 lion salaries, all of that money from S and G, from the S and G sale, could just get invested and grow and you could. You could make a bunch of different investments. 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 for. Eventually it made a huge. It was very attractive to the men to join this system because they got a. A very well paid job at Lyons if they wanted it, and then they got b, 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 a 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, like, you know, Andrew and his brother. What's his name?
- [11:10]
B
Neil.
- [11:11]
A
No, the two guys who left.
- [11:14]
B
Oh, yeah, Paul.
- [11:15]
A
Yeah. Andrew and Paul like, basically said, no, it doesn't make financial sense for us anymore. We would do better off outside the pun than inside the pond.
- [11:23]
B
You asked 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 Felix said, nobody owned 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, a 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 there. Mimi was one, Lena was another one who was the. The sister of the original Monty.
- [12:26]
A
As in many Jewish families, there are a lot of big, you know, powerful matriarchs in the family. They just. And they were powers behind the throne, but they didn't actually have the jobs.
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D
And I'm curious, how is this. How unique is this? Are there other examples of these types of structures?
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B
You might know something. I haven't found anything like it. And even more interestingly, the tax authorities had never seen anything like it, which.
- [12:49]
A
Is one of the reasons no one knows about it.
- [12:51]
B
That's right.
- [12:52]
A
Like, we kind of had some expensive legal advice saying that it was all legal and we didn't need to pay any taxes. And that kind of. You pay income tax on the income you get paid out. My next question, the fund itself wasn't paying taxes.
- [13:07]
B
So there's no capital gains because nobody's owning the assets.
- [13:11]
A
So it was sitting in this kind of tax limbo for a long time. And one of the reasons why, when I was growing up, it was understood that no one talked about the fundamental.
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B
I mean, you were told specifically not to talk about fund, weren't you?
- [13:25]
A
And one of the main reasons for that was that while we had good legal advice saying it was all legal and fine, 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 dissolved and no longer existed that, you know, someone like Thomas was able to come along and write this book.
- [13:52]
B
So there was actually. There was.
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C
So to be clear, no one was paying taxes on any of the money.
- [13:56]
A
Well, we were paying taxes on our.
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B
Income, which was a very minimal amount of money, very small.
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A
Because. Because, like, remember, your income didn't even need to cover your mortgage because you didn't have a mortgage. You didn't even own your home or.
- [14:07]
B
Your medical bills or your schooling or your travel or your painting or your car, because they all had chauffeurs and cars. And just to give you a scale of this, you know, Life magazine in 1934 described the Jay Lions, the catering company, as the largest catering company in the world. 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 buy and they bought Tetley Tea. I mean, they went on this buying spree with pocket change. I mean, this was a.
- [14:36]
A
It wasn't pocket change. We leveraged up the company and the amount of leverage wound up killing us. And that's why we had to sell the company.
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B
Yeah, that's true.
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A
So, yeah, that was my grandfather who did the crazy M and A' which in hindsight was ill advised.
- [14:50]
B
So the reason why is because he had seen in America the conglomeratization. The idea you build as big as you can going to different types of businesses because they were primarily a catering company. But they started going to Meat. They started going to 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.
- [15:12]
A
So we had to sell off our hotels and then we had to sell off the catering business. And then once.
- [15:19]
C
Really?
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D
Didn't you employ Margaret Thatcher?
- [15:21]
A
Yes, we employed Margaret Thatcher. Remember, she was a chemist and she worked on soft serve ice cream.
- [15:29]
B
She did.
- [15:29]
A
And that was really one of the main pillars of Jay Lyons of the family company was soft serve ice cream.
- [15:36]
B
And also orange, the orange juice on a stick. It was called Orange Maid. 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 fruit, which is frozen food.
- [16:01]
A
We also had, I mean, it has to be mentioned, we were the first company ever on planet Earth to have a computer.
- [16:09]
B
Yeah. Lyons Electronic Office, Leo, 1954, they invented, with Cambridge University, the first business computer. So they were the first business on the planet to. Look how proud we're sounding.
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A
It was big.
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B
I mean, it was big.
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A
And then we sold it to IBM in the end.
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B
Yes, exactly right. So they process payroll, which is pretty impressive. They didn't make any money. I mean, they covered the costs. I think in the end, I'm just.
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D
Kind of curious, like. So what is the thought now in the family about this, about the fundamental. About what happened about the fund dissolving?
- [16:38]
B
Yeah, so there's. There's kind of two camps. There's one camp which is. It's just in history. This is like quite a long time ago, 1991. People of my generation can't really remember going to. Because they. They had some very famous iconic outlets. One was called the Tea Shop, the Alliance Tea Shop. There was. There were these corner houses, there were all these brands, these ice cream brands, bread, coffee, tea. And a lot of people, you know, below a certain age, below, I don't know, 45 or 50, can't actually 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 had the concession for the entire airport. They're 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 to help you get through the airport, you know, so I think, you know, for my mother's. For my mother's generation, they, you know, they had a really wonderful lifestyle. You know, there's. There's no doubt about it.
- [17:33]
C
So there. So I don't know how to ask this without sounding rude, but how wealthy are these people now? What happened?
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B
Yeah, so, so I, So, so, because I'm the son of a mother, we got. I got literally zip. Literally zip. I mean, I grew up in a house which was bought partly with a dowry that Felix was talking about, which is a lovely house, Felix, how much people to get.
- [17:56]
A
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 all of the other members, look, my son is going to be like the big loser here. I don't feel like a big loser. I feel like I'm perfectly fine.
- [18:17]
B
We could talk about that for quite a long time. Does Felix feel like a big loser?
- [18:21]
A
Tune in. On the contrary, I did just fine out of my childhood. So the elder generation, their homes and everything, wound up continuing to be owned by the fund. They continued 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. So 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, yeah, they wound up owning their homes rather than.
- [18:50]
B
I mean, in terms of raw figures, which is what you're asking, about 3 million each is what they got. And there was about 40 or 50 who benefited, and then the most importantly, the widows. So 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 incentive 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. How's that fair? You know, all those kind of issues.
- [19:37]
C
Like little mini socialism, communist experiment.
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A
So when you ask whether it's whether there are any similarities, the closest similarity that really exists in the people know about are the kibbutzes 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.
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B
It's like an anarcho syndicalist is what you're saying. It's like, it's like far. No, but people actually even said. I think Jeffrey Salmon, he described it as almost like a communist experiment, except.
- [20:10]
C
As a very posh like you don't think of.
- [20:12]
B
No kidding.
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C
Communists being, you know.
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A
Yeah, it's communism with chauffeur Y.
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B
That's exactly right.
- [20:19]
A
Yeah.
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C
It sounds like the right way to do communism, honestly.
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A
The original champagne socialist. So, Emily. Oh, yes, I want to talk about your family now.
- [20:31]
C
Okay.
- [20:32]
A
Because you mentioned something a couple of weeks ago which I didn't know, but is kind of interesting, which is that you were disinherited.
- [20:41]
C
Well, yes, but not on a grand scale.
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A
You didn't miss out on £3 million.
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C
No, I was just written out of my father's will and he was just a humble professor with a pension. So I was shocked to learn after he died that I wasn't in the will anymore. And so that is the fun fact about me, I was disinherited.
- [21:00]
A
Now, under French law, that's illegal.
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C
Well, I mean, that's a bummer. Why don't they make that illegal in.
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A
The US So this is the question 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? As someone who is disinherited, what do you feel about this?
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C
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 was making my own money and I didn't like, 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 US 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.
- [22:17]
D
I think the death actually wealth tax and estate tax.
- [22:19]
C
Estate tax. Thank you.
- [22:20]
D
I'm sorry. Estate tax and death tax. Wealth tax is something different.
- [22:22]
B
Okay.
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A
And estate tax is a kind of wealth tax, but it only happens when you die. A wealth tax happens every year.
- [22:28]
C
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.
- [22:41]
D
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.
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C
So my question 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 Great Depression blew up a lot of wealth and it helped.
- [23:25]
D
Well, the war is essentially.
- [23:26]
C
The war got redistributed and created more wealth. It's a good thing.
- [23:31]
A
So I guess there are two different questions here. One is the optimal taxation of wealth, which we have talked about a lot on Slate money. And we can maybe put to one side. The second question is 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 it a good one?
- [24:10]
D
I mean, I think I've heard, you know, that and 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.
- [24:29]
A
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 at all. 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.
- [25:20]
B
I'm sorry, there was something else going on which was that the African Americans were the assets, you know, during the slavery times. They were, they were the, the foundation rock of the capitalist society. So you know, one of my family friends run, 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, the, the slaves themselves were then used on the, on the markets, whether it be not only just in, in United States but also in Britain. So you know, I think you've got to look at the, the, the assets themselves and 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're talking 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?
- [26:16]
D
Well, and interestingly, I believe that there were slaveholders who were like, slaveholders were paid out, I believe also in the UK for the value of their slaves, but there were never reparations to the actual slaves.
- [26:27]
B
So, so in 1833 in Britain, it's different in America. In 1833, abolition took place in, in, in Britain and the compromise because the, the debate about abolition was going on for 10, 20 years. It started in 1807, Abolition act in 1833 in Britain where slavery was abolished. The compromise for the slaveholders was not only do your slaves have to work out, work out their 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 equivalent of £87 million in today's money for his slaves.
- [27:09]
C
Unbelievable.
- [27:10]
A
And wealth has now trickled down within his white family. And so this is, and another reason.
- [27:17]
C
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. To move up, to buy homes, to accumulate wealth. And black people were shut out of that. Yeah, that was like another huge injunction.
- [27:34]
D
The housing issue is huge. Look at the difference in wealth between black and white, the housing issue.
- [27:39]
A
And one of the. One of the things which is more intuitive, at least to me, is that if you are a family unit living in a home and then the owner of the home, you know, 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 there, and so they inherit the home. 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 financialized 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 it's, you know, 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.
- [29:04]
C
Well, it is deeply unfair. It's even unfair to the people getting the money, the inheritors, because I think they lose out on the opportunity to work and realize their full humanity. Right. I mean, it's actually like, well, it.
- [29:20]
A
Depends how much you inherit.
- [29:21]
C
These heiresses and heirs, it just seems like are. I mean, maybe I'm prejudiced against them because I wasn't able to become an heiress with my college, as a college professor's daughter. But yeah, it seems like these are like toxic members of society. Is that. Do we, do we not agree?
- [29:41]
D
Well, yeah, 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 cause 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 the 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.
- [30:08]
C
Yeah. And we should note that there are some notable capitalists that aren't passing down all of their wealth. Like Warren Buffett famously. Isn't. Isn't he not passing on to Bill Gates?
- [30:17]
A
And Bill Gates, I mean, Howard Buffett, who's Warren's son, is just fine. He has millions and millions of dollars. He's, you know, he has his own philanthropies. And, you know, and actually, one of the interesting ways that the 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. 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 5% a year because they want to make sure that it lasts in perpetuity and they can give it onto their children and so on and so forth.
- [31:00]
B
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 was one member of the family who decided that he had to prove his chops in the entrepreneurial field like other members of, of his, like his cousins. And so he set up a drug business. He made illegal drugs in a, in a drugs factory in Scotland.
- [31:21]
A
He was making speed in his bathtub.
- [31:22]
B
Yeah, speed in his bathtub. And he got put away for, I don't know, 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. 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, you know, because other people could have done with that really. Well, I don't think all, to use your words, I don't think all heirs and heiresses are toxic.
- [32:05]
C
Me neither. I don't, I don't really think.
- [32:06]
B
No, I'm sure you don't. But, you know, but I think it is a. I agree with that it's a fundamental problem societies. And then the question is how much, you know, how much isn't, is the right amount. And then how do you do it? You do it through wealth tax or what are, what are the kind of, the mechanisms?
- [32:19]
A
Or, I mean, on some level, even if you don't legislate it, what's a good societal norm? You know, if you talk to private bankers, they'll, they'll, you know, they will talk forever and ever about how to bring up your children in the con, in, 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, you know, not give them any money. But, 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 Markovitz about this, if you grow up in a rich family, you have so many advantages in life. And I feel like this is 100% 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 advantages you get are real, even without any financial inheritance at all.
- [33:36]
C
You could even see that in, if you look at like social mobility data in the US 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. So if you grew up in like a wealthy neighborhood where families are more intact, you're more likely to move up your income and your wealth. But if you grow 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 in terms of, especially in the.
- [34:04]
A
United States where schools are locally funded.
- [34:07]
D
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, worked at Ford or worked at this department store called Hudson's. You know, their parents didn't go to college, their 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 in. 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, they're the type of things that almost no other period in history were possible.
- [34:50]
C
Right. The circumstance of 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 US at least, where you could like bust out.
- [35:08]
A
Of that, at least temporarily, where there was social mobility.
- [35:10]
C
Yeah.
- [35:11]
B
So how long of people are saying, because of the shift since the mid century, where people could go up in 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, who 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, how does society deal with that transition?
- [35:39]
A
But, yeah, so let's, let's, let's talk about the social mobility aspect of it and the fairness aspect of it, especially when, I mean, to take the extreme example, you get couples like Jared Kushner and Ivanka Trump, who both of them in their own rights are. Well, Kushner's probably a billionaire on his own. Right. Ivanka's 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. And they're entirely unelected. But even among electeds, if you look at the net worth of the Senate is super high. If you look at the, you know, Roosevelt's and the Kennedys and the kind of people who get elected in history, they tend to be quite rich, although Johnson wasn't.
- [36:40]
D
He became wealthy through the radio and TV show.
- [36:43]
C
There's always exceptions.
- [36:44]
A
Yeah. I mean, there are people who are not super rich when they become elected, but the rich are overrepresented. And there is this way in which the power is in large part held by the people who have done the best out of this unfair system of family inheritance.
- [37:06]
B
I mean, you see that also again with our family, where, you know, they came to Britain in 1840, but by 1820. They're now members of Parliament. They're 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. And those are the benefits. And now they can now pull the levers of power 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 80 years, you know, how they use their advantages to directly benefit the family.
- [37:40]
A
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, the broader culture in places like Parliament and the law, because that's. That's a way of really, like, entrenching yourself in society in a way that, you know, money can be confiscated. Okay. I think. I think that's a magnificent episode on family wealth. Thomas, thank you for coming in.
- [38:19]
B
Thank you.
- [38:19]
A
To talk about all of this. And maybe, hopefully, we'll have your book come out in the United States. Fingers crossed.
- [38:26]
B
Wouldn't that be a fine thing?
- [38:26]
A
That would be brilliant. So thank you, Thomas, for coming in. Thank you, Jessamine, Molly, for producing. And we will talk to you next week on Sleep Money.