Colin Barry

Bessemer Trust (CMC, Thursday, Week 12)


Andrew Carnegie and Henry Phipps made some steel and got really rich. Carnegie built 3,000 libraries (and a lake for Princeton's crew team). Phipps started a trust to pay dividends to his descendants. Who did the most for America? (Carnegie, duh.)

The Carnegie philosophy
Society benefits from wealth accumulation => rich people have smarts and wherewithal to do "great things" for the community with lots of money. And they have a responsibility to do those things.
Rich people shouldn't live lavishly; some proportion should stay in family (maybe)
Pro-estate tax => enforcement mechanism to ensure that the wealthy use their money for the betterment of the community. No "landed gentry."
In sum: noblesse oblige (with more than a hint of rich-guy paternalism)

Nice sentiment, hard to implement (hi Donald Trump) --- objectively, mega-rich people tend to buy more yachts than libraries
Ignores aspirational element of wealth accumulation (people get rich to pass on nice things to their children)
For whom should wealthy people do good? How should they allocate their wealth?

The Phipps philosophy
Creates intricate trust; wealth for consumption and administration/investment --- in perpetuity.
Preaches moderation in consumption; behavioral guidelines for family
"Stewards of capital;" creates professional wealth management organization
Bessemer Investment Company funds creation of dozens of firms; invests in the future of America; supports economic growth

Persistent income disparity; increasing concentration of capital
No mention of society --- don't rich people have an obligation to give back?
Arbitrary capture of massive asset-base by a single family --- is this "American?"