Wealth: Neither Dissipation Nor Abdication

A Review of Leaving a Legacy by Johann Kurtz

I often miss important trends in the intellectual right-wing space. One genus is moral efforts to justify things that are self-evident to me.

Whereas I categorically reject “suicide pacts” smuggled under theological cover and assume anyone reaching such conclusions must be mentally defective in some way, other, more sensitive souls give ear to the earnest pleadings of those who use Scripture to support various self-harms. For example, American Reformer has done influential work correcting pietist rationales for left-wing social policies among Protestant evangelicals. I’m not going to waste my time reading 10,000 words on why it’s ok Biblically to have a rational immigration policy when I reject the premise that religion could ever deny such a thing, but the influence of AmRef and similar efforts shows that I’m the weird one.

I credit my Louisiana cynicism in assuming that anyone attempting to reach into my pocket is actually after my wallet, regardless of moral-sounding language surrounding their molestation; after all, con artists always have a cover story, and no con is more powerful than a religious one. And this saves me a lot of time!

For example, I have never read John Piper, because, as I wrote previously, “[Piper’s] opinions on familial self-defense tell me he’s a pietistic lunatic unworthy of my consideration on any other topic.” Piper likewise forbids remarriage after legitimate divorce, contrary to nearly universal Protestant doctrine. That he’s a talented writer and charismatic speaker makes him more, not less, dangerous, when his reasoning leads to absurd conclusions. His “Christian hedonism,” it turns out, means believers are required to adopt a “wartime lifestyle” where the only legitimate use of wealth beyond bare subsistence — and bare subsistence is all you’re allowed, for Piper is adamant that even a “middle class” lifestyle is spiritually dangerous — is accumulating it strategically for larger acts of giving in the future.

It’s the same song and dance with Francis Chan, Randy Alcorn, crazy-eyed David Platt, and other Christian guilt merchants. “Nice bank balance you’ve got there, be a shame if you went to hell because of it, but you can write a check to my ministry, or to my buddy’s ministry, to take care of the problem.” My rule: be charitable in proportion to your blessings, but never give money to someone who bites the hands that feed them.

The guilt-mongering of wealthy families is hardly limited to the evangelical Christian world, however. Many of our newest billionaires have pledged to give away their fortunes, disinheriting their children. I have always thought this was foolish, arguing in an unpublished manuscript that this is actually more wasteful than keeping it in the family:

Most organizations you might support are entirely incapable of handling a large influx of cash. By growing wealth and tithing consistently, an organization you support can experience slow, sustained growth where funds will be spent more efficiently. Most ministries can put another 10% to good use, but few could double their budget instantly and make the same impact per dollar.

Some wealthy Christians, perhaps sensing the harm and waste that a windfall might produce for a given ministry, are designing estate plans where their heirs will manage a nonprofit Christian foundation that will disburse funds that are donated to it. I would caution against this approach as well. Rare is the great earner, who, upon abdicating their wealth to a nonprofit foundation does not find his intended purposes completely foiled within a generation or two. Mr. Ford and Mr. Rockefeller were very conservative, yet we see today that their foundations are among the most left-wing, radical organizations that one will find. Inevitably, the presence of a large fortune inside the body of a nonprofit inspires individuals to find ways to get access, and before 50 years have passed all board seats will have accrued to those most skilled in politics, not capital management or visionary giving. The problem with large nonprofits is the same as the problem with public restrooms - when something belongs to nobody, it inevitably is not treated with the same respect as if it were privately owned. For this reason I do not think the foundation or nonprofit route is an exception to the problem of abdication - much better for the funds to be in the private hands of your heirs than captive to management by committee members who have neither earned nor possess the wealth they manage. Our children may not be perfect stewards, but the relationship between parent and child, and the uniquely powerful influence we have over our children, makes it much more likely that our vision will continue past our death than relying on what will eventually be strangers on a nonprofit’s board.

I wrote these words circa 2012, but never published them, for at that time it seemed presumptuous given my youth and the gap between my ambition and my accomplishments.

Enter Johann Kurtz, the pen name of a young Englishman whose upper-middle-class family has historically attended to the affairs of the aristocracy, in the grand English nobility tradition of semi-hereditary occupations. I have been aware of Kurtz for some time, but found much of the writing on his Substack to be more aspirational, almost literary, than practical.

His new book, Leaving a Legacy, offers a more systematic framework: a principled defense of inherited wealth, data on its overstated moral dangers, and advice on how to steward it for multi-generational faithfulness. My blind spot in not requiring moral justification to not feel guilty about wealth (good things are good, right?) caused me to initially miss the significance of his work.

Once again, I’m the outlier. Through mutual connections and without revealing too much detail, I have verified that Kurtz’s work has struck a nerve with many wealthy families, who very much desire a theological warrant for resisting the spiritual and secular trend of disinheriting one’s children.

The Philanthropy Racket

Kurtz opens his book with similar arguments to mine on the foolishness of donating fortunes to nonprofits. While he focuses on the dangers of charities, ministries, and the like, ignoring donor intent in their continual lurching leftward, even those who remain faithful to a donor-supported mission are largely incompetent to handle large endowments.

Managing such is a skill gained only by hard experience and skin in the game. Nothing teaches one not to be a damn fool faster than paying tuition to real-life business school with five and six-figure mistakes. And while the philanthropy sector bemoans the consumption of the rich that competes with their fundraising arms, the wealth owner at least faces a dilemma with each decision: every dollar of conspicuous consumption burns both principal and, conservatively, 5-10% of annual income in perpetuity. Nonprofits face no such tradeoff, since no one owns the endowment, and the internal pressure to expand staff, compensate management “competitively,” occupy nice office space, and travel to conferences is as wasteful, in the end, as billionaires’ yachts.

As I stated in my article on Bitcoin, “The cartoon vision of wealth is Scrooge McDuck swimming in his vault of gold coins and cash. Wealthy people and firms, however, tend to hold very few dollars relative to total assets, usually just a buffer of working capital for expenses. Any large windfalls of dollars are reinvested in productive assets that produce income, whether debt or equity.” Managing such income-producing assets is a vocation worthy of compensation. The question is, who is best to steward them?

A non-profit will take a billion-dollar gift and give it to some politically-connected finance bro to manage, who will rake fees off of it in perpetuity while working half the year in Vail hiking with his golden retrievers (they all love hiking, and pampering multiple large animals that belong outdoors). If it’s ok for their guy to rake fees, why not the donor’s heirs? Because the finance bro works for them and they want control to build sinecures outside of donor accountability.

Setting aside the desire for control, large windfalls funding endowments managed by committees may be worse overall for the nonprofit sector. One study, based on comprehensive IRS data, found that the untimely death of a non-elderly owner-manager resulted in a decline in firm profits of 82% relative to longitudinal peers. Note this study only included businesses exceeding $1MM in (tax-reported) earnings, eliminating most “key man” businesses like attorneys and other professionals operating in corporate shells. “Giving it all away,” long-term, means less income to support charity work.

Kurtz tells the tragic story of Edsel Ford, who, due to FDR’s 70% inheritance taxes, realized that the only way for his family to maintain control of Ford Motor Company was to donate their non-voting shares to the newly formed Ford Foundation to continue the Fords’ legacy of treating their workers well and supporting their local community in Detroit. Edsel’s premature death led to the promotion of his son, Henry Ford II, to leadership of both the company and the foundation. Ford II was unable to resist calls to “democratize” the foundation and follow “best practices” of allowing non-family members to control a majority of its board¹. The Ford Foundation left Detroit and refused any direction from the Ford family as to its activities, eventually becoming outright Marxist, 180 degrees from the conservatism of the Fords. Henry II later lamented his choice to “democratize” the board: “At the time, I did it on purpose because I thought it was the right thing to do. Now I think I have made a mistake. I should have kept control.”

The book emphasizes that, Biblically, charity is primarily a personal calling to bless those in physical proximity to the donor. Because it is a spiritual benefit to both parties, to abdicate to an impersonal third-party charity is to dilute its good. Kurtz further shows how nonprofits are tempted to address problems “at scale” and tend to turn into political advocacy organizations over time, which, of course, has the benefit of cloistering their workers in white-collar milieus of politics and academic analysis, and further from the difficult work of assessing the actual needs of the poor, which are complex and non-obvious.

Neither Dissipation Nor Abdication

Kurtz’s core message is that neither dissipation nor abdication of wealth is a legitimate moral option. While the ultra-wealthy sign giving pledges, increasing numbers of moderately prosperous Boomers seek to “die broke”, pursuing “total life enjoyment.” Not a few seem unable to empathize with the struggles of younger people, whose financial situations do not benefit from the unique historical conditions of post-WWII prosperity, notably low asset prices the Boomers enjoyed. In a conversation with a recent college graduate, I shared that, in the early ‘00s, I was able to buy a home within six months of my employment on an engineer’s salary. She responded that owning a home that soon is so rare among her peers that everyone would assume such a person had family money helping them out.

This, however, as Kurtz demonstrates, is the historical norm in most periods. Parents had to help their married children get established with a home and other basic capital expenses necessary for a new household. He recently cited evidence, for example, that early modern dowries, awarded at a daughter’s marriage as separate funds for her support, were equal to half of the eventual inheritance received by sons upon their father’s death. Thus, on a net present value basis, dowries, awarded in the late teens or twenties upon marriage, often exceeded the value of an inheritance².

Most of these Boomers make excuses about their children needing to make it on their own as they did, and how they want their kids to work hard, when in reality their own modest fortunes are hardly enough to prevent anyone from working, but significant enough to ease the major transitions of life. But for the ultra-wealthy, it seems like a legitimate concern. Kurtz thus spends an entire chapter debunking the cult of “meritocracy.”

This can be especially confusing because most American wealth is first-generation. Conservatives (and sane liberals, at least secretly) do generally believe in hiring on merit, and while it is not deterministic, in conditions of uncertainty, indicators of merit are the best bet. Not a few wealthy individuals played the meritocracy game well, but to demand the same of their own children, that they make it as they did, is to lose the thread, for there is a confusing paradox to consider. All extreme wealth that endures requires high skill to not lose it, but making it requires both skill and some degree of luck. The entire point of wealth is to escape the meritocracy treadmill, to own first-class assets that produce income independent of one’s intrinsic merit, to make money while one sleeps. No honest wealthy person can deny that they themselves are compensated beyond strict merit relative to their talents.

To say that one’s children should not benefit from one’s luck is to be a socialist with an asterisk: the original recipient’s luck in business is legitimate, but luck in birth is not. And it is, fundamentally, to confuse categories. Merit and talent are the primary criteria for hiring, yes, but not necessarily for ownership³. Only an owner, insulated from the demands of short-term performance and the pressure of “merit,” can take the long view for any enterprise. Kurtz cites evidence from MIT’s John Davis on the superior returns of family-owned businesses.

Kurtz further shows the benefits of wealth in insulating one’s children from the character-deforming rituals of American meritocracy. Getting into the “Ivy Plus” schools is so competitive that it requires ruining childhood, and the schools are full of soulless grinds, the products of professional-class neurosis. What the Ivy League used to be — a self-confident, reasonably talented, energetic, well-connected elite that didn’t pursue academics above all else — is now emerging among out-of-state students flocking to the flagships of the SEC, where many families of wealth are finding a more balanced social environment away from extreme performative pressure that deforms young people’s development⁴.

One thing relevant that Kurtz does not mention is that the temptations of wealth in modern Western countries are not all that different than those of “poverty.” Basic needs for shelter, clothing, and food are nearly universally met, and idleness is more common today among the poor than the rich. The key for both, Kurtz identifies, is strong, sincere religious faith, lived out in the life of the parents, and a strong family culture. Wealth without transcendence destroys, but in our era of mass abundance, it destroys all equally. Whether children are disinherited or not, sloth and dissipation are always an option. These are among the best middle chapters of the book, though the ideas presented can be overwhelming in their scope and best seen as a menu rather than a to-do list.

Quibbles

I did find some areas of minor disagreement, summarized below.

• Kurtz believes liquid wealth is dangerous and seems to recommend assets that are harder to sell and less prone to management error, like real estate. Anything can be liquidated, however, which just returns us to the duty to develop character and virtue in heirs. I do agree that directly-owned real estate is a unique “first-class” asset that is hard to mismanage. It also avoids idleness in giving heirs something to do if self-managed, not to mention the insights of Henry George showing its superior returns over time. George’s work, however, implies that one must have good timing in buying such assets, and while one should own and control some things outright, it need not be the majority of a portfolio. Often, as Buffett says, buying a piece of a great business on the stock exchange is a better value than owning a mediocre business outright, that you can never buy whole businesses as cheap as stocks sometimes become. Or as T. Boone Pickens put it, sometimes the best place to drill for oil is on the floor of the New York Stock Exchange.

• The book recommends that families invest in “great estates” for family identity and social purposes. This strikes me as potentially outdated. The country estates of the British nobility have been, to my knowledge, a source of their ruin in their constant upkeep⁵. Urbanization means the wealthy’s natural peers are often found where large tracts of land are impossible to procure. The modern equivalent of this is perhaps the vacation home, owned for family and friends’ exclusive use⁶ throughout the year, and providing an always-available escape, particularly for regularly reuniting a family of origin as children leave the home. To benefit the community, funding semi-private “third places” that are insulated from the degeneracy of the general public but open to morally aligned families and business associates, like churches, schools, and recreational facilities, seems a higher value than a country estate that might host a party a few times a year. All of these, however, including personal residences, are consumption items with ongoing expenses rather than assets that produce income, and should be sized appropriately.

• He makes a big deal of supporting estates, art, and culture, but says little about political giving, perhaps because elections are publicly funded in his native England. Given the pittance spent on politics relative to the value of sovereign power, this is a key oversight. Nothing about mass democratic elections is ennobling, and it’s a dirty, but presently necessary, business. Voters are anything but rational, have real cognitive limitations, and political money seeks to manipulate them to desired outcomes in ways that are crass, which I think is why many keep their distance. But if good people back away and do not engage in the regrettable business, bad people will fill the vacuum. Finding proxies to do the dirty work and achieve desirable policy outcomes, while staying personally removed from most politicians, is an art the virtuous wealthy must master. I believe we are stuck with democracy, despite its vulgarity, as a legitimizing technology for modern technological states. As I wrote in the coda to my piece on Napoleon:

  As much as Hoppe yearns for a political vision of a Europe consisting of “1,000 Liechtensteins,” actual Liechtenstein is merely tolerated, not truly sovereign without the large standing armies and propaganda-powered support base of a mass democracy. Democracy can’t be beat, and as much as it feels wrong, it is necessary to get about the business of mass manipulation and persuasion of voters to elect leaders ready to rule with power than pine for a return to the political equivalent of the horse and buggy.

  Further, conservatives must use the extractive power of democracy to reward friends and punish enemies, to consolidate power like the Left by creating a clientele of its own counter-regime, rather than tilt at the windmills of “limited government” and dream of a return to the vapor of the early American republic. If the homogenous and more virtuous colonists could not maintain a “republic, if you can keep it,” it is fantasy to think we restore it again today, unless we also restore the initial conditions of an electorate consisting of a classically educated, mostly Christian landed gentry, which seems more fantastical in the domain of the “art of the possible” than convincing government clients to embrace classical liberalism. The trappings of the American republic remain, and must be used, in the mold of the Roman emperors, as a skin-suit to sell things politically, but our strategists must not believe their own propaganda.

  Conservatives must use power, like the Left, to marginalize the enemies of civilization, and build coalitions with an interest in supporting our power structures, lest we bring knives to a gunfight. That elements of the New Right have moved beyond conventional conservatism and are beginning to understand the true nature of power is among the most encouraging developments of the post-Trump era. Like Napoleon, who rejected the simplistic moral narratives of both the “people’s” revolution and the divine right of the spent, decadent Bourbons, and rightly saw himself as most capable of restoring order to France, modern conservatives must be practical and willing to rule once democratic chaos reaches its fated end.

• Kurtz still uses language surrounding charity that implies a certain Catholic, pietistic view. “Any surplus wealth you cannot find a noble purpose for — the creating of beautiful and uplifting estates and families — you should find a way to give away.” For someone of considerable means, Kurtz’s dictum here, taken literally, would be mathematically indistinguishable from The Giving Pledge in terms of the family’s balance sheet. I think a better moral safe harbor is the tithe, or giving away ~10%⁷ of realized income each year, the general equity thereof being a reasonable divine guideline that balances enjoying and growing providential blessing with meeting needs. If one takes personal responsibility for one’s giving, it will often be difficult to find enough good causes where one’s knowledge of the need is adequate to know one is doing actual good, versus contributing to a professional fundraiser’s money pit.

Overall, an excellent read and especially helpful for readers who take more seriously the surface arguments of those who would use guilt to separate a family from their legitimate wealth. Fake guilt from fake sins can be as ruinous as blindness to real ones, and Kurtz’s vision is a needed corrective.

1. Ford II’s weakness here is demonstrative of why wealthy, conservative families must have alternative status networks for their children outside the orbit of upper-middle-class strivers and facile academics. He couldn’t tell these people to go to hell because he was socialized to respect their opinions and want their approval. Better the SEC than the Ivy League, as I cover later in this column. All it takes is one heir to get the brainworm, and the entire family legacy is blown. The Ivy League is a much better path for middle-class conservatives to bootstrap elite status through networks than those with something to lose if their kids go native. This conditioning starts early, so elite urban private schools are best avoided as well. Classical, Christian education serves to some extent as an alternative status-laundering pathway for affluent conservative parents to avoid both the downmarket liabilities of fundamentalists and elite liberal acculturation in their heirs.

2. Note the effects of such a system on incentivizing marriage and children. The fastest way for men and women to access wealth was to marry well and marry young. Unmarried sons received income but nothing of the principal until the father’s death.

3. Sufficient talent is certainly necessary, but family firms need not search the world for the most qualified CEO when a reasonably smart family member with skin in the game, a family legacy to protect, and aligned incentives is empirically better. In marriage, however, recent merit ought to play some role. Ossified genes of long-past merit seem dangerous. As I wrote in a footnote on the Boomer succession crisis:

“I am reminded of the brilliant but realistically profane HBO series Succession, which features an aging rags-to-riches Boomer media mogul, Logan Roy, who is at death’s door but cannot in good conscience turn the keys over to his Gen X children, all afflicted with various cultural pathologies. The least defective heir is Kendall Roy, who, besides having a recurring drug problem, is a pathetic man, who, unlike the elder, high-gravitas Roy, has to hype himself up with the low-class braggadocio chants of gangsta rap before entering business negotiations. The winner of the story ends up being Tom Wambsgans, Logan’s son-in-law, who is relentlessly mocked by the other characters for his déclassé’ upper middle class upbringing in, can you believe it, Minneapolis. Only Tom, with his fresh blood from the hinterland, eventually shows the necessary amorality and cunning to tame the patriarch’s wild daughter and eventually take over Logan’s empire.”

This depiction of degenerating wealth is a striking contrast to the children of Donald Trump, who all seem well-adjusted despite social circumstances — a philandering father, a lifetime of insanity-inducing fame — that should be harmful. Trump himself would likely answer that it’s all a function of genes. Whereas Logan Roy married an aristocratic woman to launder his humble origins, Trump’s famous penchant for beauty queens, instead of degenerating, frigid women of East Coast inherited privilege, as mothers of his children was likely ameliorative, as facial symmetry is a reliable indicator of low mutational load, and whatever else one may say morally about that world, it also requires, for those who rise to the top, not only beauty but extraordinary self-control and smarts. His wives were also of more hot-blooded Eastern European or Southern stock, and thus less prone psychologically to the self-loathing endemic to descendants of Puritan-descended WASPs. Wealthy families interested in maintaining genetic capital ought to focus on bringing in fresh blood of rising demonstrated merit rather than marrying only among the coasting upper class of inherited wealth.

4. Note my wording here on extreme performative pressure, emphasis extreme. SEC schools are not devoid of struggles for elite students. Bama Rush, for example, is pretty intense, even pathologically so, but at least competes in a directionally correct domain, being sociable and attractive, rather than Ivy League domains of perceived victimhood. Likewise, weed-out classes at these schools can be more competitive than the Ivy League, which fails students much less often than the SEC flagships. Many 1500+ SAT students cherish escaping certain classes with a B and no repeats.

5. The beautiful plantation homes of my native Louisiana famously change hands every thirty years when some new-money Texas centimillionaire looking for trophy property must pay millions to fix accumulated maintenance problems.

6. Renting out a vacation house is just a bad investment, not a home. Nothing feels like home that strangers routinely occupy, so you might as well rent someone else’s bad investment for a fraction of one month’s mortgage payment.

7. My moral instinct on this is that ~10%, with some significant annual variance as obvious needs ebb and flow, is a minimum after all capital necessaries of life are provided. The Biblical tithe on produce presumes, for example, a homestead owned free and clear. I do not believe people who must borrow money and service debt, or pay rent, for life essentials like a home or transportation are obliged to tithe at the full level until those necessaries are covered.