Update No. 272 – 17/06/16

I was given this week to think about beginnings.

My maternal Grandparents were immigrants to Australia in the 1950’s & my Father in the 1960’s. I remain enormously grateful for their respective decisions, for my birth as an Australian in 1977 was enormously improbable, less than a 1/3 of 1% chance. Australians born today are luckier still (Australian per capita GDP has grown by about 8 times in my lifetime, whilst in the US this is less than 6 times), our prosperity has grown faster than most developed countries, and even more improbable, given the global population has grown faster than the Australian population in the intervening period.

But I consider myself even luckier still for having been born to a low-socioeconomic family as it I can enjoy any achievements I’ve made more than if I’d had a more ‘entitled’ start (I’ll explain more later). Both my Parents and Grandparents worked their entire lives, which instilled a work-ethic I value deeply (there are few in our society I pity more than those born into multi-generational welfare recipient families), but they also retired dependant on an aged pension to survive. I made the decision early that to the extent it was possible, I would never ever leave myself dependant on the kindness of strangers for my survival and wellbeing, which is why building a capital base as early as possible was such an important driver for me, along with finding a field I could succeed in.

Ahh, the advantage of a less entitled start… For example Gina Rinehart inherited in the early 1992 an estate at that time that was apparently valued at around $75m at the time. She could very easily have liquidated these assets and lived comfortably off the proceeds, but instead she built on that base. At its recent peak her fortune was apparently about $20 billion, based on the most recent estimates I’ve seen, it is apparently nearer to $6 billion now, given the fall in commodity prices. Think about that for a moment, at $6 billion from a 1992 base of $75 million, it means the after-tax rate of compounding of her assets has been roughly 20% per annum. If a fund manager established in 1992 had the same results, they’d be an industry legend.

My point in respect of this is that you can’t judge someone on much except for what they themselves achieve. If she’d started from near nothing and built assets of $50m or 60m, we’d be lauding her as a great entrepreneur, but the achievements would be roughly comparable.

This thread of thought began with my thinking what an invidious position someone like the British royals are born into. I should point out here, I abhor the idea of royalty primarily because I value meritocracy so much.

But imagine at age 18, Prince William had revoked his prince hood, determined to go it alone and establish himself on his own bonafides. Well no matter what field of endeavour he entered, and what level of achievement his skills delivered, he would have detractors saying the only reason he had risen to whatever level he did was because of who he was. And they would of course be correct, he would likely progress faster in his career because of who he was as much as what he’d achieved. The same can probably be said for children of famous actors or musicians who follow in their parents footsteps; they’ll always be viewed through the prism of what doors their famous parent opened for them. Would you even know who Miley Cyrus was if it wasn’t for Billy Ray (OK, if you read this blog there’s a better than average chance you don’t know who Miley Cyrus is either way…).

Imagine what a horrible feeling that is. Despite how nice the lives of someone born with advantage might be, they will inevitably be stripped of all legitimacy of their efforts due to accusations of ‘privilege’, and virtually nothing they can ever do that will mitigate this.

It’s for that reason that being born poor in a wealthy country is the best thing that can happen to you – Tony Hansen 17/06/2016

EGP Fund No. 1 Pty Ltd. Up by 13.41%, leading the benchmark by 12.89% since July 1^st 2015. Since inception, EGP Fund No. 1 Pty Ltd is Up by 110.58%, leading the benchmark by 73.47% all-time (April 1^st 2011).

^{*1 after a 31 May 2013 dividend of 2.333 cents per share (cps) plus 1.000 cps Franking Credit, a 31 May 2014 Dividend of 7.000 cps plus 3.000 cps Franking Credit and a 31 May 2015 Dividend of 8.6667 cps plus 3.7143 cps Franking Credit and a 31 May 2016 Dividend of 6.0000 cps plus a 2.5714 cps Franking Credit}

^{*2 calculated based on dividends reinvested}