Reflections on a windfall
About a year ago, my wife and I received a windfall inheritance. To us, and to almost anyone else, it’s a huge amount of money. It’s not Bill Gates huge or Warren Buffet huge, but it’s close to the amount that a couple can hope to have by their 60s if they don’t have kids, are fortunate enough to be employed full-time in well-paying jobs for their productive years, have no major illnesses or suffer any other costly calamities, and save a lot and invest wisely and luckily. We are in our 40s now, so we got this money 20 years sooner. It’s windfall by that measure alone.
It’s also a windfall because we weren’t expecting it and did nothing to earn it. I won’t go into details, but a strange and unlikely sequence of events, of the sort that you might read about in a poorly written nineteenth-century novel, led to us getting this money.
And thanks to the laws on financial trusts and to politicians’ reluctance to enact “death taxes,” we haven’t had to pay a dime to the government for receiving the money. The money came from a trust, and one of the “structural” reasons that that trust existed for us is that so many people who would otherwise support taxing large inheritances would raise bloody hell to taxing the financial tools that protect the legacy wealthy and trust-fund babies among whom, it now appears, I am now numbered. But my glass house is looking mighty fine at the moment, and I better put my stone down.
Still, in one way it’s not a windfall. It’s more like an addition to a good thing we already had going. We already had resources before the inheritance. And while those resources were only a fraction of what the inheritance amounts to, they were a sizeable fraction. If we’re very comfortable now, we were still comfortable enough before.
I originally called the following reflections “lessons,” but I realized that with a couple of exceptions, these weren’t things I learned, but thoughts I already had about money and worldly wealth. I have chosen to let this windfall buttress my priors and not challenge my worldview.
Reflection #1: Worldly wealth is tied to the economy and the political order
About 90% of the inheritance is in stocks. While I’m not particularly astute about investments (my spouse handles that), the portfolio seems to me “diverse” and well-balanced among the economic sectors. (We realize, of course, that it’s not “diverse” in the sense that very few of our holdings are in non-stock items.) This diversity offers a seeming paradox. On the one hand, it seems at least somewhat protected from swings in the economy. On the other hand, it’s sensitive to to the rules the United States and non-US states use to enforce the rights of property holders.
I already knew all this. But seeing it on paper just drives it home. I remember reading the trust document that transferred the money to us. It had all the legalese you might expect, and I couldn’t help thinking that that legalese, and the rules and laws it represented, were part of a vast legal and political infrastructure designed to protect those who already have resources to begin with. Of course, I can’t deny this infrastructure also supposedly protects those who work hard to earn their own living. But the deck seems to be stacked, and in this case it’s stacked in our favor, and seeing that in the trust document’s legal language is sobering.
The recent tax law, to the extent I understand it, stacks the deck even more. My spouse and I benefit in at least three ways. The first is that we’ll simply pay less in federal taxes. The second is that the decrease in the corporate tax will probably lead to a short term gain among many of the companies in which our portfolio is invested. The third, less obvious, benefit is that with the resources we have, we’re more likely to weather the longer term results from the tax bill, such as any increase in local taxes, a decrease in government-provided services, or inflation.
Reflection #2: It could all end tomorrow, or sooner
I could get sick, or my wife could get sick, and the resulting expenditures, after insurance, etc., could take it all away. Or I could die unexpectedly. I can’t take it with me, at any rate. The economy could collapse. Maybe all the specific stocks the portfolio is invested in will tank and we’ll lose it all.
Of course, we now have a lot further to fall than most people. We have choices. Someone with much less, or with almost nothing, would suffer much worse and more quickly if they get sick or the economy tanked. And while I don’t have the stats in front of me, it’s probably the case that people in poverty tend to die unexpectedly more often and in greater numbers than richer people.
Even knowing that, there’s a weird sense of insecurity and vulnerability. Even though we are much better placed than most people and even though if we lost 99% of what we received, we’d still have that 1% more than we had before, there’s a sense, for me (I don’t necessarily speak for my spouse), that we could lose it all, and quickly.
I suppose that’s the essence of greed, seeing only the scarcity from what you have instead of the abundance.
Reflection #3: There is no such thing as moral investing
With the help of a financial planner, we’re still trying to figure out what exactly we’re invested in (and how to diversify so we don’t hold so much in stocks). We’ve uncovered some distressing things.
One investment is in that Big Tobacco Company you have all heard of. Another is in a company that provides a lot of things you and I probably enjoy and depend on everyday, but one of its divisions sells materials used by the US military (not weapons exactly, but engines that go on the machines that deliver the weapons). A couple companies extract fossil fuels and while I don’t know a lot about these companies and I’m no tree-hugger, I assume they’re pretty bad for the environment. One company is in cosmetics, and I strongly suspect it conducts research on animals. Those are all things I feel very uneasy getting rich off of.
Some of the companies, it’s hard to know what exactly they do, and others seem innocuous or even positive. But they all, the good, the bad, and the opaque, mask certain relations. Any for-profit company has an interest in getting more out of their workers for the same or less money, and a goodly number of those workers are much less well off than I am, now or before the windfall. Even if the company produces things people need and want, that relation is still there.
Or take the stock we have in Big Soda Beverage Company. Its product is sugary and caffeinated and therefore bad for people’s health and in some measure addictive. How exactly is it better than Big Tobacco Company? (Actually, I can’t blame this one on the inheritance. I believe we were invested in Big Soda Beverage Company beforehand.)
Even if the portfolio were more heavily invested in mutual funds or index funds or exchange traded funds, we wouldn’t be out of the mix. I understand such things poorly, but those types of funds to my knowledge support a mix of companies at least some of which do some very bad or questionable things.
My freer market proclivities tell me that in the long run, such investment, conducted by thousands of people, is part of how the economy serves (almost) everybody and creates wealth that gets spread around. The cost of necessaries of life over the last 200 years or so have declined in the developed world and I believe we owe that decline to the market-friendly liberalization the developed world has, with interruptions (some good, some harmful), pursued during that time. But if others benefit, people like me benefit disproportionately more.
Reflection #4: Divestment is hard (but not really that hard) (but I probably won’t do it as much as I could)
I have long believed that if we look closely enough at what we do, even when we’re doing good, we’ll find ourselves doing a little bit of bad. But some things are less bad than others, and maybe I should, like Dr. Rieux, focus on doing the least amount of evil possible.
So maybe treasury bonds and CD’s would be a way, if a less profitable one, to go. Even in that case, we’d still be enmeshed with banks that profit from a system that supports businesses that do questionable things, and we’d have a stake in a government the interests of whose leaders don’t necessarily match the interests of the rest of the people. (That’s obvious now, but it’s always been thus.) The taint applies to anyone who has a bank account or a US savings bond. But it scales the more one has, if only because one benefits more.
When it comes to redirecting our resources to that elusive goal called “socially responsible investing,” one thing to keep in mind is that selling off stocks is a “taxable event.” And selling everything off in one swoop–be it fell or unfell–can be costly. We are taxed on the gains from the original purchase.
But maybe not that costly. We should remember that gains are taxed at a lower rate than regular income, and we can offset gains by selling other things that had losses. These are examples of what I noted above about how the political system stacks the deck in our favor. Even if we focus only on losses, the cost by itself need not be an insurmountable concern. If I receive a $100 from a tainted source and can disband myself from (some of) the taint by paying, say, $30 in extra taxes, I’d still have $70 that I didn’t before. Increase the $100 by some amount, however, and the decision seems much more difficult because the loss is greater in nominal terms.
Difficult, but not impossible, though. One of the first things we did after receiving the inheritance was sell off the Big Tobacco Company stock, tax consequences be damned. And yet we didn’t do an obvious move. We could have donated the money from the sale of Big Tobacco Company stock to, say, an organization that fights lung cancer or to smoking-prevention programs. Or if not all the money from the sale, we could have donated the gain. We have not done that.
Reflection #5: I’m more dishonest than I used to be
It’s not surprising that person A will treat person B differently after finding out that person B has more money. What is mildly surprising, is how much I treat people differently.
What I mean is, it’s not so much how people treat me, but how I expect them to treat me. I am reluctant about telling people of my windfall. In part, that’s just me keeping my business to myself and nothing to apologize for. But in part, that reflects my own apprehension about how I will be seen.
The rich are derided as part of the problem in our society. And I do believe we are indeed part of the problem, know on some level we are part of the problem, and yet even if we support reforms of the system, most of us (me included) still hold tight to what we got. A healthy way to look at this is, the price one pays for having more than others is that others will resent you for it and that you’ll never win a pissing contest about how bad off you are.
I’m cagey in a way I wasn’t before. When coworkers talk about certain financial troubles, or what they’d do if they had X amount of dollars, I lie by omission about my windfall. Or in casual conversation, I talk about how I save money on mass transit by walking to work,or how I buy olive oil and coffee from cheap discount grocery store. Those are true statements, and I am truly price conscious about many everyday purchases, though not about as many I used to be. But they’re also lies because I know that I’m giving false impressions through humble bragging.
Reflection #6: I’m no longer working class (if I ever was)
And yet, despite my reluctance to disclose the windfall, I’m writing a blog post about it. I do so for two reasons. The first is that I’m protected by my relative pseudonymity. I’m not under many illusions about how secure my identity is, but I’m under enough illusions to make me comfortable blogging about all this.
The second reason is that on this site, and elsewhere, I have often identified myself as working class, and now I feel the need to be upfront about my resources so that if I dare again make the claim to being working class, others will have more information to evaluate and engage that claim.
To be sure, I have always, or almost always, been clear that while I was working class, my family was relatively affluent. My parents had steady enough employment and my father was unionized so that at least when I was growing up, I never had to worry about whether we’d be evicted from our home or whether my parents could afford to feed me. I always had new clothes when I needed them and each school year I had fresh school supplies. When I lettered in cross-country, my parents bought me a letter jacket. At close to $100 (in 1989), most of my friends’ parents couldn’t afford that kind of purchase. I didn’t qualify for the reduced-price or free lunches like many (most?) of my classmates, and unlike one of my friends, I didn’t live in public housing. When I got my first job, at 16, I found that many of my coworkers who were the same age or just a little bit older had to contribute a portion of their paychecks to their parents for rent while I got to keep everything. During my early to mid to (ahem) late twenties, I knew I could always go home if I lost my job or couldn’t afford to live on my own.
Being working class is not just about having money. And I still have, and probably will always have, a “working class attitude” about some things. For example, I’ll probably always be temperamentally opposed to mixing my leisure and work time in that exhausting practice known as “networking,” even though I have benefited from networking and even though working-class people also do networking in a way. I’ll also always be proud that I’ve worked a lot of service jobs and that I worked my way through college and grad school, even though that process was in many ways demoralizing, even though I wouldn’t want to (and probably wouldn’t be able to) do it again, and even though I got a lot of assistance along the way.
But money and what money confers is a big factor in class identity and class belonging. And having a lot of money, especially money that I or my immediate family members did not earn from our own labor, probably takes me out of the working class.
Reflection #7: I have no right to judge others
I have for a long time held a chip on my shoulder against trust fund babies, especially those who complain about how hard life is for them or who rail against corporate greed, and yet don’t recognize or don’t acknowledge how much they benefit from the way things are.
I’ve held that chip with an awareness that it was wrong to do so. I’m also aware that if I look at my own attitudes and at some of the things I’ve complained about, I’d find many, many instances where I don’t recognize or acknowledge the many advantages I’ve enjoyed, even before the windfall. I have the usual reservations about “show your privilege” retorts, but I’ve always had almost the full suite of unearned advantages someone in the United States could hope for.
While I probably have the right and duty to judge actions and to discern motivations, I take it as a imperative that I mustn’t judge another person’s moral worth. Maybe the wealthy person has had a very difficult life in ways I don’t know about. Or if I do know, I don’t understand the depths of that person’s challenges. Any person can suffer and while I don’t really believe all suffering is equal, I am acquainted with and partially agree with the argument that suffering is not quantifiable and not comparable.
Not that I have actually followed, or followed consistently, the imperative not to judge. Some of what I’ve written in this blog post strays into judgment territory. But I believe the imperative ought to bind me. That was true before the windfall. It is true now. I stated above that I worry how people see me. Even if others impose on me the sorts of judgment of which I have been guilty, that would not give me the authority to reciprocate.
The rich person’s conceit
One conceit among rich people is that their riches create problems that poorer people don’t have and can’t understand. As EcclesBC Tweeted a while ago,
The sleep of a labouring man is sweet, whether he eat little or much: but the abundance of the rich will not suffer him to sleep.
It’s not that the conceit is wholly wrong. Most of my “reflections” above are about the challenges of having money. And not having something means not having to worry about losing it. Some things in my life which I have lost have in retrospect turned out not to be worth the worry, or not worth as much worry as I had assigned to them.
In a larger sense, though, the sleep of the laborer is probably often “sweet” only because his or her waking life is so exhausting. I strongly suspect that it’s often not “sweet” at all, but filled with worry. And frankly, it probably does matter whether that laborer “eat little or much.”
I don’t wish to sentimentalize suffering or the goodness and simplicity of the poor. If you’re doing or saying something in the name of “THE POOR,” that’s a sign you’re probably doing something self-serving. But the fact that it’s so hard not to sentimentalize or to lapse into the rich person’s conceit is a warning signal that something is amiss. If I fear losing everything I have, why wouldn’t a poorer person have similar fears, only magnified? Maybe a person can come to a point where they no longer let insecurity rule them. That’s a good point to come to, and maybe in an abstract sense enduring real poverty hastens one to that enlightenment. But that’s no argument for poverty.
At any rate, I am spared, if briefly, certain insecurities others must endure, and I have choices others do not. Much of what I’ve written above is about the challenges of wealth. I have not stressed the very good things about it. Everyday purchases are no longer the concerns they once were. My spouse and I now have the resources to indulge in luxuries we could not, or not as much, before the windfall. We’re able to give more to charity (my spouse always gave, I’ve just started) and while I have mixed feelings about “the relations of charitable giving,” it feels good to give. We’ve paid off our student loans. While we still need and are grateful for our jobs, we’re less dependent on them than we were before. It’s easy to exaggerate the independence we now have, but it’s a real independence. It behooves me to remember my good fortune and to try to do less evil with it than I already do.