Monday, July 30, 2012

Horatio Alger Stories

Horatio Alger Stories were characterized as "rags to riches" stories.  Some folks claim they are a myth - that you can't leave the social strata you are born in.  Is this true, and is it true today?

Horatio Alger wrote a number of stories for young men, around the turn of the last Century.  The plots of the stories, varied, but inevitably, the protagonist, usually a young man ("Ragged Dick" being the first of the lot) ends up, by virtue of thrift, hard work, and clean living, to get ahead in the world.

Many folks laugh at these stories today, and argue that they sold a false set of expectations - that it was impossible back then - and even today - to move up from ones social class or caste, by mere hard work or thrift.

But of course, this is not true, on a number of levels.  First of all, many, if not all, of the Alger stories were not "rags to riches" stories, but more "rags to middle-class" stories, where young men, though hard work and thrift, end up doing well in life, if not exactly living like Montgomery Burns.

The popular stereotype of the Alger story exaggerates the outcome, in an attempt, I think, to discredit it.  By making the stories sound ludicrous or improbable, they can be more easily dismissed.  You can't become the next Bill Gates merely by working hard and saving money, they argue, so you might as well not bother even trying.  This is, of course, flawed thinking - weak thinking - at its worst.

Moreover, some of the stories really were not about working hard and saving money, but were more along the lines of Dickens' Great Expectations, where young Pip succeeds by virtue of a mysterious benefactor.   Actually, if you read Dickens' stories, they are all pretty creepy.  Young boys go off to London and end up being aided by the help of wealthier, older men.   Oliver Twist falls along these lines, for example.    Creepy.

But getting back to Alger, were his stories unrealistic back then - or even today?  I think not, and let me tell you why.

As I have noted time and again, the point of this blog is not how to get-rich-quick, or even get "rich" at all, but how to become comfortably middle-class (which ain't so bad) in an era where the middle-class has seem to have lost its way - drowning in a sea of debt to have cars, smart phones, cable TV, and granite counter-tops.

It is possible to improve your lot in life, no matter what level of the social and economic strata you come from, if you use a little hard work and thrift.

On the other hand, just saying, "fuck it, why bother trying?" and then smoking pot or crack and taking out payday loans, is one sure way to race to the bottom - again at any social level.   For middle-class people, the road to the poorhouse is paved with new-car payments, cable TV bills, and smart-phone plans.

Failing to save is the first way to fall down the economic ladder.  The next rung is debt, following closely by owning things and subscription services.  Spending more than you make - or most all of what you make - to have "stuff" and electronic subscriptions, ends up making you a little poorer all the time.

On the other hand, if you can figure out what you really want out of life - and live with less of these things - you can accumulate wealth and become wealthier.

And this is not an option for the middle-class today.   We have to save for our retirement through a 401(k) plan.  And in order to have a $40,000 income from our 401(k) we would need to save a million dollars by retirement.   And yet, few have.   Most middle-class people I know are living for today, have not saved for tomorrow, and look down their noses at me because I don't have cable TV, a new smart phone, or a leased Acura.

They are making a choice that ordinarily, or at least in the past, only people in the poor ghettos made - living for today, without thinking of tomorrow.   The very poor tend to do this - squander money on drugs and alcohol, and spend very unwisely (using check-cashing stores, for example).   This is to be expected of the poor - that is why they are poor.  It is disturbing when "live for today" becomes the mantra of the middle class.

But there is another reason the Horatio Alger story is not a myth.  And that reason is simple:  There are people, who, through thrift, hard work, and dedication, have improved their status and stature in life, far beyond that of their parents and ancestors.   And chances are, you may know some of these people, and in fact, they may be in your family.

For example, I wrote before about my Grandfather, Platt Kissam Wiggins.  His Father, according to my Mother, had killed himself, which was quite a scandal back in turn-of-the-Century America.  His family came from Brooklyn, when it was originally farm land.   The family homestead had been sold off and the family fell on hard times.   His Mother, now a widow, struggled to support the family by cleverly buying and selling second mortgages.  She survived and was able to put her children through college.

Platt went to City College and then to Law School.  He got a job with a Brooklyn firm (still in existence today, albeit a Real Estate Firm) that represented The National City Bank of New York (today, Citibank).  He rose rapidly in the firm, and moved to Larchmont, New York, and was later elected Mayor of that City - and became Partner in the firm shortly thereafter.  A long-time Democrat and New-Dealer, he was also head of the banking section of the New York State Bar and was involved in establishing many of the banking regulations that were promulgated during the Great Depression (laws which were repealed about a decade ago, with predictable consequences).  Oddly enough, a former Citibank head now calls for these laws to be reinstated.

So, right there in my family, in the not-too-recent past, is an example of a "rags to middle-class" story.  And I don't have to look too much further to find another.  My Father, for example, came from a fairly lower-middle-class family in New Jersey.    His Mother's family started out as servants on the Steinway Estate on Long Island, and saved up enough to buy a farm in Little Silver.   The next generation, however, was content to sell off this land for building lots and live off the proceeds.   His Father's family had a vague background, the family roots being lost in the fog of the Irish and Scotch immigration of the 1800's.

His Dad was an alcoholic and by all accounts a cruel man.  What little money he came into, he spent lavishly - living for the moment.  He was partnered with his brothers in a Buick dealership (no relation to the present-day one by the same name) and they apparently threw him out.  He re-entered the Army, having no other job offers.  He died of lung cancer in his 50's, nearly penniless, leaving his widow to eke out a living for the next 40 years as a school teacher (back when school teachers made bubkis).

But he wanted my Dad to go on to better things, and Dad went to college, which was interrupted by the war, and eventually graduated from MIT.  He had a bit of a shaky start, but managed to get some good jobs in management, and, over the years, work his way up the corporate ladder, albeit with the occasional setback.   While he never "struck it rich" as I think he hoped to do (his dream, he once told me, was to be President of a company and have a Lincoln Continental) he ended up not doing too badly (V.P. and a Mercury Marquis).  He retired comfortably middle-class, unlike his Dad.  Social mobility is possible.

Of course, there are others in my family - from the present generation to generations back, who were socially mobile in the other direction, often squandering educations and money, due to alcoholism and drug use - or simple laziness or the desire to "have it all, now!"  It is tempting, and we all are prone to this tendency now and then - the desire to spend, rather than save, and the willingness to engage in weak thinking now and again.

But outside my family, I also know examples of other folks who did the "rags to middle class" deal - sometimes upper-middle-class.  The professions have always been a good vehicle for this, although in recent years, being a Doctor or a Lawyer isn't as good-paying a job as it used to be.  But many of my bosses in the legal profession came from very poor backgrounds and yet rose to the top of their firms.

One boss of mine, a nice Italian fellow and an excellent lawyer, grew up in Old Greenwich, Connecticut, as I did.  While I was the son of a young executive who took the train into the city every day to work, he lived over his parents' Italian grocery store.  Needless to say, we were in different social castes and classes.  But again, he applied himself and went to college in law school, and 30 years later, the son of Italian immigrants is a partner in his own law firm.  Social Mobility is possible.

In fact, not only is social mobility possible it is inevitable.  As I have alluded to in other posts, many of my friends from "rich" families ended up being downwardly mobile rather than upwardly.  And much of this has to do with being raised with money (being given it, instead of earning it) and also simple mathematics. 

For example, Andrew Carnegie makes millions of dollars.  He gives a big chunk to his family, who builds ludicrous mansions on an abandoned island off the coast of Georgia.  Their children each inherit fractional shares of this money.  Their children receive even smaller shares.  Within a few generations, a family fortune fizzles and dies out.  Maybe, somewhere along the line a young scion picks up the torch of his forebearers and uses some of the remaining dough to start back up again.   But not often.

So, if so many of the very wealthy end up falling down the economic ladder over time - who takes up the slack?   Well, new people come along and become the new generation of wealth in this country.  And wealth is very dynamic in this country, over time.  Each generation has its own share of the wealthy social set.  And in a generation or two, that set is pretty much gone.

The old Dutch families from New York, that Louis Auchincloss wrote about, were already losing their wealth (but not yet their social position) by the turn of the 19th Century.   By the 20th, new wealth, in the form of industrialists.  The Magnificent Ambersons is another example of a story that follows this social development.

But since then, even that wealth has moved on.  There are no Steel Barons anymore, except in Ayn Rand books.  And while Joseph Kennedy may have made billions in the stock market, no one really gives a rat's ass about the Kennedy family, since Teddy died.  The remaining relatives and hangers-on are a pathetic shadow of the original dynasty.  Within another generation, they will be all but forgettable.  ("Really, you are related to John F. Kennedy?  How fascinating!  Yawn!").

Wealth in this country is more Dynamic than Dynastic, which is one reason I don't spend too much time worrying about the very wealthy (although I have little sympathy for them, either) and concentrate on my own business.

And that is the problem, again.  That weak thinking bugaboo.  People hear that Mitt Romney makes $22 million a year and think, "shit, I'd be lucky to save up one million in my lifetime" and just give up on trying, or call for "redistributing the wealth" as an answer to their personal problems.  A better approach is, I think, to realize which candidate is best aligned with your goals and needs, and to me, a guy like Romney really doesn't "connect" with the median American making $51,000 a year.

But again, the fact that a small few make so very much is no reason to simply give up.  You can improve your lot in life, but it does take hard work, thrift, and a little luck, to get ahead.  Horatio Alger was not wrong - but the parodied and exaggerated version of Horatio Alger perhaps is. 

No, you won't be the next Bill Gates by saving money in your 401(k).  But trust me when I say that when you turn 60, you'll be glad you put money into that account.   You can "get ahead" in our society, but it does require some work, and some sacrifices.

Many folks choose not to sacrifice.  They prefer to spend $150 a month on Cable TV or a smart phone.  They prefer to lease new cars and eat out in restaurants five nights a week.  They prefer to buy things on credit cards - and not worry about "carrying a balance".

These are choices - and choices that a lot of people make, perhaps most.  The protagonists in the Horatio Alger stories get ahead simply by making different choices.   And that is as true today as it was back then.