Rich Uncle Theory
Mr. Monopoly Man Fancam
Recently, I was talking to a friend of mine. His grandparents have gotten older, and need something close to full-time care. Fortunately, his uncle has a really well-paid job, and can supplement their social security payments to live somewhere nice.
Now, this uncle isn’t fabulously wealthy, and didn’t swoop down to pitch in for random stuff all the time. But when an urgent family need came up, he was there, turning what would have been a no-win scenario into a smooth transition.
I think there’s a significant social divide between people who have someone like that in their lives, and people who don’t. This is true up and down the socioeconomic spectrum; desperately poor people with a single middle class relative (who can give them $200 in a pinch to get out of payday loans) are significantly better off than desperately poor people with no such relative. But also, upper-middle class parents with a magnate cousin who’d help with Harvard tuition are better off than upper-middle class parents who’d have to foot the bill themselves.
In a lot of social dimensions involving money, people are incentivized to conceal the truth. Poor people often go to a lot of trouble to hide being poor, since it might limit their opportunities. Rich people, meanwhile, downplay their riches, so as not to invite envy or theft. But the rich uncle dimension is interesting in that most of the time, people hide it from themselves. Or, to be more precise, the fact that you’ve got a rich uncle is not at all salient, until it matters.
To some degree, I’m just reinventing the concept of privilege. But I think this is more specific: the simple binary fact of having at least one rich relative is relevant on its own.
Case Study: Me
My dad has a PhD, and my mom has a Master’s degree. My dad was still in grad school when I was little, so we were broke, but our long-term material prospects were never really in doubt. It rarely comes up, but when I contemplate my family of origin, I have a hard time placing us on the class spectrum. In terms of educational attainment, probably upper-middle class is about right. But we didn’t have much of a safety net, at least compared to a typical upper-middle class family. Like:
Our vacations were generally long road trips, often to a mobile-home style cabin that my grandparents owned in another state
My parents never really fought in front of us, and in fact have a generally harmonious marriage, but there was a fair bit of stress about money when we were little
Which school gave me the best scholarships was a major factor for me in choosing what college to go to
Upper-middle class families, as I imagine them, are always gallivanting off to Europe, rarely if ever have occasion to stress about money (unless it’s some complex financial restructuring to make their great situation even better), and their college funds are so flush that their kids can go anywhere debt-free. We didn’t check any of those boxes.
I think a lot of our specific financial shape was simple: we didn’t have any rich uncles. I suspect that if we’d had a really rich person in our extended family, during the broke times:
Visiting them would have been a go-to vacation, or staying in one of their extra properties, or joining them on a broader international trip
A generous, interest-free loan would have been offered during the grad school period, which even if not accepted would have eased a lot of stress
If I got into Harvard or something (I didn’t), there would have been a payor of last resort in case the cost was too high
Implications
The presence (or absence) of rich uncles has pretty strong implications about socioeconomic stickiness, in ways that are unlikely to show up in aggregate data. People who move up an economic rung from their family of origin are by definition better off than their families, so they’re less likely to have rich uncles. Meanwhile, people who fall are still likely, by virtue of coming from money, to have someone to bail them out if things get really bad. This is a well-studied phenomenon in terms of parents - trust fund babies are frequently maligned. But there’s a weaker and important version even when the nest egg is theoretical; you can take more risks and pursue more opportunities when someone’s out there to help in a pinch.
The rich uncle effect also explains some of the difference between having deep roots and travelling to a new, big city. Someone who’s been in the same area for a long time is more likely to have a strong connection with the most successful members of their family, which they can leverage when the time comes. Meanwhile, someone who moves to opportunity is more likely to stand alone. (The causality goes both ways, too - if your aunt is a county commissioner, you have a stronger material incentive to seek opportunities in that county.)
Finally, rich uncle theory suggests there’s some merit to having a big family. If you only have one first cousin by blood (like I do), there just aren’t that many people who might strike it rich and buoy you up. But if you have dozens, at least somebody will probably do a standard deviation better than the rest of you.1
It’s also an extra incentive to do well yourself. A lot of the rich uncle’s value is simply in being available; the rest of the family can sleep easy, knowing that if a great opportunity came (or a catastrophe arrived), there’d be a friendly source of material help. In fact, this is one of the best reasons I can think of to try and strike it rich.
There’s also the “emotional black hole uncle” situation, of course, where some random person in your family needs constant support and drains everybody else. So having a bigger family isn’t an unalloyed good, even just on this one axis. But in practice I think an emotional black hole relative often ends up being taken care of by just one or two people, while a rich uncle can help everybody out a little bit.