I am sure you have heard my rant about how the middle class people literally teach their children to make more middle class people, by paying the right kind of attention to them, and giving them certain experiences, so that in turn they can make more successful middle class children. (If not, see past posts)
There is a good TED lecture by Deb Roy, providing an example of how tightly coupled we are as children to our carers and environment, which gives a nice data orientated view of this process.
And there is the obvious flip side to that, which is that poor people literally teach their children to be poor by passing on experiences and behaviours at an unintentional subconscious level.
It is obviously not a particularly original observation, that there is a difference that is not just the amount of money you have, or the size of your house, its something profound that is part of your mind and body ("poor people more likely to get diabetes" [2]) and in the clothes you wear. (was shells suits, now burberry etc).
This idea is as old as the hills, but its interesting to look for examples.
So on that subject it was interesting to read a letter sent by Warren Buffett's grandfather Ernest to his children. I've pasted the thing here in full [3], because I can't see how I could summarise it without losing some of the sense.
Obviously, the first thing to mention for context (if you live in some strange world that doesn't have the internet) is that Warren Buffett is a very wealthy man. "He is widely regarded as one of the most successful investors in the world." [4] Was the worlds richest person in 2008, and is currently 3rd with a new worth of est 44 billion USD.
Dear Fred & Catherine:
Over a period of a good many years I have known a great many people who at some time or another have suffered in various ways simply because they did not have ready cash. I have known people how have had to sacrifice some of their holdings in order to have money that was necessary at that time.
For a good many years your grandfather kept a certain amount of money where he could put his hands on it in very short notice.
For a number of years I have made it a point to keep a reserve, should some occasion come up where I would need money quickly, without disturbing the money that I have in my business. There have been a couple occasions when I found it very convenient to go to this fund.
Thus, I feel that everyone should have a reserve. I hope it never happens to you, but the chances are that some day you will need money, and need it badly, and with this thought in view, I started a fund by placing $200.00 in an envelope, with your name on it, when you were married. Each year I added something to it, until there is now $1000.00 in the fund.
Ten years have elapsed since you were married, and this fund is now completed.
It is my wish that you place this envelope in your safety deposit box, and keep it for the purpose that it was created for. Should the time come when you need part, I would suggest that you use as little as possible, and replace it as soon as possible.
You might feel that this should be invested and bring you an income. Forget it — the mental satisfaction of having $1000.00 laid away where you can put your hands on it, is worth more than what interest it might bring, especially if you have the investment in something that you could not realize on quickly.
If in after years you feel this has been a good idea, you might repeat it with your own children.
For your information, I might mention that there has never been a Buffet who ever left a very large estate, but there has never been one that did not leave something. They never spent all they made, but always saved part of what they made, and it has all worked out pretty well.
This letter is being written at the expiration of ten years after you were married.
(Signed)
It is clear that Warrens grandfather Ernest handed down some very useful advice, which in turn was passed on to Warren. But I would like to go a step further and suggest that the Buffett family, literally imbued Warren with the sense and tools necessary to become the worlds greatest investor.
Its also worth noting that in 1940, 1000USD would have been a lot of money now. A quick check using a historical GBP calculator suggests approximately 15,000-51,360.00 [5,6]
I guess the take away point is that Ernest gave his children a lot more than the 1000 dollars that was in that envelope.
On the subject of giving, its worth mentioning that he has pledged "the equivalent of 10 million Berkshire Hathaway Class B shares to the Bill & Melinda Gates Foundation (worth approximately US$30.7 billion as of June 23, 2006), making it the largest charitable donation in history" [7]
This week (17 Apr 2012) Warren buffett revealed to the shareholders of his company Berkshire Hathaway that he has stage 1 prostate cancer, which he describes as "not remotely life-threatening or even debilitating in any meaningful way", but I am sure that his shareholders will join me in hoping for a successful and speedy recovery from treatment.
[1] Deb Roy on how his daughter learned to speak
http://www.ted.com/talks/deb_roy_the_birth_of_a_word.html
[2] "Low income appears to be associated with a higher prevalence of diabetes and diabetes related complications, however, little is known about how income influences access to diabetes care. The objective of the present study was to determine whether income is associated with referral to a diabetes centre within a universal health care system. "
http://www.biomedcentral.com/1472-6963/6/124
[3] www.lettersofnote.com/2011/10/everyone-should-have-reserve.html
[4] wikipedia http://en.wikipedia.org/wiki/Warren_Buffett
[5] this is money, historical money calculator
http://www.thisismoney.co.uk/money/bills/article-1633409/Historic-inflation-calculator-value-money-changed-1900.html
[6] The inflation calculator
http://www.westegg.com/inflation/infl.cgi
[7] http://en.wikipedia.org/wiki/Warren_Buffett#Philanthropy
[8] http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/9210501/Warren-Buffett-has-prostate-cancer-letter-to-Berkshire-Hathaway-shareholders.html
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