I read Capital Without Borders by Brooke Harrington on July 3, 2023

I really liked this book from a few different angles.

This is a part of the same ideological circle as Piketty’s Capital and Saez & Zucman’s Triumph of Injustice. But where they made their case with unusually simple and robust fundamental economics, Harrington is a Sociologist.

I think, for me, this book was one of the best arguments for sociology I’ve come across. It’s an example of someone practicing in the field and doing everything right: using the research techniques, asking the right questions, figuring out how to structure their involvement in the world of wealth advisors so they could get access. It’s low on jargon and precise.

It also excels in being so even-handed. She doesn’t spend anytime expounding on how rich people or wealth managers are bad or try to villify them with anecdotes. I think that makes its conclusions so much more powerful: this isn’t glomming onto some war of identity or politics. It’s just showing you how this part of the world works, what it considers its purpose to be, and how it affects the rest of our lives.

This book changed my mind, too. Despite rallying for wealth taxes and general modern progressive (in the taxation sense) politices, I was undecided about wealth management. If you follow how the Bogleheads think about it, wealth management is often a bad deal - for the people with the wealth.

Your average person who makes a small fortune and invests it with Edward Jones ends up paying them too much for an overcomplicated and inferior portfolio. Similarly, they’ll invest in hedge funds or venture capital - two categories that consistently underperform the market. They’d be better off just buying a total-market index fund.

But this book really made it clear why wealth managers really are useful for the truly wealthy because:

1. Wealthy families very often have wealth concentrated in companies, which is much harder to manage, and easier to fumble, than typical equities.
2. Multi-generational wealth means that the custody of family wealth is all over the place. The first generation is probably smart enough to earn it, but three or four generations later, you’ll have descendents without any knowledge, intuition, or self-control necessary not to blow it.
3. Wealth managers spend a lot of time managing not what people own, but where it is. Hence the ‘without borders’ part - their product is the ability to move some money to the US Virgin Islands, other chunks to Switzerland, and so on. This is not only of questionable legality when people try to disclose as little as possible, but it’s also an unfair advantage over the average person who obviously can’t move wealth overseas.

So, the storyline is more that wealth managers protect the family wealth, not necessarily any member of the family. And their effect on society is that dynastic multi-generational wealth is more likely to live on thanks to their involvement. And that, combined with Piketty’s observation that wealth is more powerful than income and many, many wealthy people inherit, is a convincing case that the business of wealth management should probably be curtailed in some way to make it harder to preserve and hide all that money.