Not long ago, I was the speaker at a gathering of owners and executives of large retail and consumer products companies. Also along were the organizers of the event, a team of high-ranking investment bankers from a very big bank.
The event was at a resort attached to a winery in California's Napa Valley. It is my privilege to attend many such events of successful, well-heeled men and women in business. But this one was the best yet. Its attendees were charming, lively, outgoing, incredibly smart and well informed. They talked about how their kids were doing in college, about romantic adventures of their children, and a little bit about their companies.
The setting was serene. The food and drink were perfect.
Many of the men and women in the room had inherited their businesses from their parents or grandparents or even great-grandparents.
As I talked to them, I was mindful of some words said by my brilliant sister many years ago. “It’s great to be pre-med, and it’s great to be pre-law,” Rachel said, “But best of all is pre-Dad.”
I am mindful of that because in the capitalist society, you are never much above a wage earner (even if a well-paid wage earner) unless you have capital.
It is fine for your capital to be in the form of education and good work habits. But close to the best of all is for the capital to be in those forms and in the form of a business that an ancestor founded and left to you.
Alas, we do not get to pick our parents. The great mass of us, above 95 percent, are born to parents who work one way or another rather than living off the proceeds of a business. There is no one to leave us the “pre-Dad” business.
But there is a way to be your own pre-Dad, and it’s incredibly simple and basic: Save keenly and put the money to work in the stock market by buying a highly diversified basket of stocks, including as wide a swath as possible of the whole stock market. (I do not recommend that you try to pick individual stocks unless you have devoted your whole life to the study of that subject.)
That way, little by little, you get to be a small owner of an enormously large business enterprise, the entire business of the United States or America. You can do even more by buying shares of foreign companies and owning a tiny part of the businesses of the world or of Israel or Argentina or Germany or wherever you like.
It is a good deal. You don’t have to stay late at the factory. You don’t have to deal with surly workers. You don’t have to do much paperwork. The corporate executives and Wall Street do that for you. You wind up with a highly diversified business that is there to support you in your old age.
You can take the support in the form of dividends, or you can take it in the form of capital gains. Sometimes, in prolonged market downturns, you cannot get the capital gains at all, but you do usually still get the dividends. If you reinvest the dividends while you are still working, the stream of income gets compounded.
You are in much the same position as a man or woman who owns apartment buildings or a chain of dry cleaners. You are that highest specimen of capitalism — a capitalist.
Again, the great gift of our system is that it allows you to easily acquire capital. In that way, you are not a serf. You have some semblance of dignity and independence.
Perhaps best, if you don’t spend it all before you die, you have a business to leave your children and grandchildren so they can be pre-Dad. You can give it to them so they can play polo all of their lives or study how to cure cancer or be an ambassador to Cameroon.
Pre-Dad. You can make it happen for your own life and your children’s. Thank you, Wall Street. Thank you, capitalism.
Ben Stein is a writer, actor, and lawyer, who served as a speechwriter in the Nixon administration as the Watergate scandal unfolded. He began his unlikely road to stardom when director John Hughes cast him as the numbingly dull economics teacher in the urban comedy, "Ferris Bueller's Day Off." Read more reports from Ben Stein — Click Here Now.
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