The American dream is based on the idea that if you work hard enough, you can achieve great success — and great wealth. Many people believe we live in a meritocracy, and they tend to put the superrich on a pedestal, believing they must be smarter and more hardworking than everyone else. In other words, if people just work hard enough, they too can attain riches.
But the truth is more complicated.
“There’s a natural tendency for people to tell the story of their lives, of their success, forgetting all the accident that was involved, all the help they got, all the gratitude they should feel,” said “Moneyball” and “The Big Short” author Michael Lewis on an episode of the Emmy-nominated interview series, “Brief But Spectacular.”
Research supports Lewis’ assertion: A group of researchers led by Alessandro Pluchino — a theoretical physicist who specializes in modeling complex systems — found that, the wealthiest individuals were not the most talented, but the luckiest.
This makes sense intuitively: Some people are more talented than others, some are less talented, but most are about average — and that doesn’t match the way wealth is distributed. The top 1% of U.S. households account for 30% of total net worth. And, as MIT Technology Review pointed out in an article about the research: “Some people work more hours than average and some work less, but nobody works a billion times more hours than anybody else.”
It turns out that the majority of wealthy Americans did not start from scratch. Only a quarter (25%) of wealthy Americans are self-made, according to the 2024 Bank of America Private Bank Study of Wealthy Americans. Almost a third (32%) had both a wealthy upbringing and an inheritance, while 43% had a head start coming from a wealthy upbringing with no inheritance; or a middle-class upbringing; plus some inheritance.
Even if you’re not from an ultra-wealthy family, you can still benefit by learning from successful people’s journeys.
Read more: The long-awaited rate cuts are finally here — here’s what investors need to know, and why commercial real estate may be worth a closer look
If someone is born into an ultra-wealthy family, they could be fast-tracked into an executive position if their family owns the business or knows the top execs. You can recreate some of this advantage by choosing a mentor in your organization who can advocate for you and help you develop skills and strategies to advance. Many executives cite mentors as being important to their progress.
One of the primary ways wealth is transferred between generations is through education. Wealthy people tend to provide their children and grandchildren with the best education possible. But, even if you can’t get into an Ivy League college, getting an education still provides a strong competitive advantage. Researchers estimate that the net lifetime earnings gain from a bachelor’s degree is $1 million. Many on the Forbes World’s Billionaires List made their billions in finance or tech. And, while many notable exceptions exist, these industries typically require advanced degrees to rise in.
Most of the richest people in America started their own business (or businesses) — which is one way to make your own luck. But, to do this, you’ll need to take on some level of risk. About one in five (21.5%) new businesses don’t survive their first year and only about 35% make it to 10 years, according to data from the Bureau of Labor Statistics.
If you don’t want to start your own business, you might want to consider regularly switching jobs. Research by Bank of America shows that, as of May 2024, the median pay raise for job movers was 10%. Do this every couple of years, and this could markedly alter your lifetime earnings trajectory.
It’s also worth examining — and discussing with a financial adviser — whether you should take more risk with your investment portfolio. If you have a long investment horizon, you may be able to afford to take more risk and potentially earn higher gains than you are now.
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
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