Last week, Forbes magazine reported that 21-year-old Kylie Jenner was the youngest “self-made” billionaire ever. She has pulled in at least $1 billion from her makeup company Kylie Cosmetics.
Jenner bent over backwards to say that she’d started her company with her own money which she earned through modeling. “None of my money is inherited,” she said in a recent interview. It should also be pointed out that Forbes’ definition of “self-made” is farcically broad, meaning simply that her business hadn’t been directly inherited.
It’s still obviously absurd to attach the phrase “self-made” to Jenner, who is part of the wildly rich and famous Jenner-Kardashian clan. While she may be 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 and then some, including years of self-promotion on a successful reality television show. The value of her makeup company lies in the celebrity she inherited from her family if not by direct inheritance of money or assets.
This isn’t just about dunking on 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.”
The fact of the matter is: wealthy people are mostly wealthy because their parents are wealthy. The correlation between parents’ and children’s wealth is well-established in the research.
Are wealthy parents just passing on some super-amazing genes to their kids that enable them to go on to great success by virtue of their brilliance (That’s Trump theory anyway)? Or is the environment a child is raised in the reason for their success as adults?
The environment you grow up in, the quality of education your parents can afford to give you, the investments they can make in you, the relative affluence of your neighborhood, etc. is almost twice as important as biology, economics professor Sandra 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.
The outcome seems obvious, wealthy parents have the money available to invest in their children, in schooling, extracurricular activities, and college funds. They also have connections to other wealthy people that poor and middle-class people simply don’t have. This means better access to investors in your new company, for example, or a leg up getting into an Ivy League school.
Or you know, access to lucrative modeling contracts.
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 for example.
Entrepreneurs are much more likely to come from wealthy families, where they feel more comfortable gambling for success. Trump’s father routinely rescued him from financial collapse. Though Jenner’s parents pushed her to go out on her own, I doubt they would leave her on the streets to fend for herself if things went belly-up.
To be sure, Black says, environment isn’t the only reason someone like Jenner can make $1 billion. You do still need some amount of intelligence or savvy to succeed.
Personally, I think Donald Trump and his ne’er-do-well kids are pretty definitive evidence against that. But I’m not a professor of economics.