Thomas Piketty Said – Then Rich Americans lost $600 Million On Theranos

One of Thomas Piketty’s central contentions was that r>g, that wealth accumulates to those who already have it faster than the economy grows. Thus the wealth of the plutocrats grows like Topsy until it swallows the entire economy. That this doesn’t happen is obvious for it hasn’t. And why it doesn’t isn’t for the reason that Piketty advanced, that we’ve had two world wars and all that. Rather, it’s encapsulated in that old saying, clogs to clogs in three generations.

Grandpa makes the money, the kiddies preserve it, the grandchildren splurge it.

Now, obviously, we can prefer to believe a Frenchman with a theory to sell or we can appeal to the accumulated wisdom of our forebears by noting the proverbs in which that wisdom is passed on to us. Our choice, entirely so, but one of the two options is likely to lead to a happier life and a closer accord with reality.

An interesting example of which to choose, which might accord better with that universe outside the window, is this story of who lost money on Theranos:

A who’s who of government, business and international finance lost a total of more than $600 million they had invested in scandal-plagued Theranos Inc., according to previously sealed documents made public in a lawsuit.

High on the list is Education Secretary Betsy DeVos, whose family invested $100 million in the Silicon Valley blood-testing company, the documents show. Mrs. DeVos had previously disclosed that her family was a Theranos investor in a government filing, but the size of the investment wasn’t known.

Note who didn’t lose money in this. The VC funds specialising in this area of investment. The reason they didn’t is that none of them invested in this dog of a company. The people who did were the rather more gullible who thought they’d found something the experts had missed:

Documents unsealed in a lawsuit brought against Theranos reveal a number of the high profile investors who had a stake in the nearly worthless start-up: The Waltons, founders of Walmart, with $150 million; Rupert Murdoch, with $125 million; and the DeVos family, including Education Secretary Betsy DeVos, with $100 million. The investments were made between 2013 and 2015, according to the Journal.

Do note something that Piketty asserted. Not only that r>g, but that richer people get a better return on their investments than poorer people. He specifically insists upon the idea that because such rich families can hire the best to run family investment offices and the like that they will gain better investment returns than the average on the market. So, not only does capital swallow the economy but the more you’ve to to start with the higher the pile of moolah you sit upon at the end.

Well, yes, and aren’t we just seeing the testing of that idea against objective reality?

Perhaps the most notable individual on the list is Education Secretary Betsy DeVos, whose family invested $100 million—literally 100 times the lifetime earnings of the average American—in Theranos between 2013 and 2015.

Spanking 100 lifetimes of average income away on a fraud is just a great way for capital to concentrate, isn’t it?

From this example it is still possible that r>g of course, even if that’s not something actually evident in any extant society. The further contention that the rich gain even higher investment returns does rather seem to be dented though. Because those who inherit have been known to splurge on some pretty fantabulous frauds over the generations.

Another way to make much the same point is that the Queen of England, Elizabeth II, is the product of 1,000 years, an entire millennium, of being at the top of that wealth and privilege tree. Her personal fortune, not the Crown Estate nor the art collection etc, is put at £100 million or so. Hey, whatever, a few times that perhaps, less possibly. After one fifth, one sixth, of recorded history or so as top beings, her family has less than one thousandth the fortune of Jeff Bezos, who started out with nowt but a door on two trestles 30 years ago. Brenda is rather the proof that the rich don’t gain better investment returns than everyone else. Or perhaps you’d prefer the examples of Betsy, Rupert and whatever the hell the Waltons are called in this generation?

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