Excerpt from The Millionaire Next Door by Thomas J. Stanley, William D. Danko, Ph.D., plus links to reviews, author biography & more

Because they accumulate wealth, the Scottish-ancestry affluent have wealth to pass on to their offspring. Our research reveals that Scottish offspring typically become economically and emotionally independent even as young adults. Thus, they tend not to drain their parents' wealth.

Members of the Scottish-ancestry group have been able to instill their values of thrift, discipline, economic achievement, and financial independence in successive generations. These values are also typical traits among most self-made millionaires.



SMALL POPULATIONS

Often small-population groups are underrepresented in studies of the affluent. Yet many contain high concentrations of wealthy households. What small groups in particular? We estimate that all of the fifteen small-population ancestry groups shown in Table 1-2 have at least twice the proportion of millionaires than the proportion for all U.S. households. Only about 3.5 percent of all U.S. households are in the million-dollar net worth league. All the groups listed in Table 1-2 are estimated to contain at least twice this proportion. (In total, all fifteen account for less than 1 percent of all affluent households.) In fact, there is compelling evidence of an inverse relationship between the size of an ancestry group and the proportion of its members that are wealthy. In other words, larger ancestry groups contain smaller proportions of millionaires on average than smaller groups.

What about the number of years that an average member of an ancestry group has been in America? The longer the time here, the less likely it will produce a disproportionately large percentage of millionaires. Why is this the case? Because we are a consumption-based society. In general, the longer the average member of an ancestry group has been in America, the more likely be or she will become fully socialized to our high-consumption lifestyle. There is another reason. First-generation Americans tend to be self-employed. Self-employment is a major positive correlate of wealth.

This is not to suggest that self-employment and/or being first-generation American ensures membership among the ranks of millionaires. Most self-employed Americans will never accumulate even modest levels of wealth. The same is true for most first-generation Americans. But twenty-three million people in this country today were born elsewhere. That is a large gene pool. Note also that 12 percent of INC. magazine's top five hundred business entrepreneurs are first-generation American.

One might expect that the sons, daughters, grandsons, and granddaughters of these people would automatically become even more successful economically than they. Not really. We will discuss intergenerational transfers in more detail in Chapters 5 and 6, but allow us at this juncture to explain why the "next generation" is often less productive economically than the last.



VICTOR AND HIS CHILDREN

Take the case of Victor, a successful entrepreneur who is first-generation American. Entrepreneurs like him have typically been characterized by their thrift, low status, discipline, low consumption, risk, and very hard work. But after these genetic wonders become financial successes, then what? What do they teach their children? Do they encourage them to follow Dad's lead? Do their children also become roofing contractors, excavation contractors, scrap metal dealers, and so on? The chances are they don't. Fewer than one in five do.

No, Victor wants his children to have a better life. He encourages them to spend many years in college. Victor wants his children to become physicians, lawyers, accountants, executives, and so on. But in so encouraging them, Victor essentially discourages his children from becoming entrepreneurs. He unknowingly encourages them to postpone their entry into the labor market. And, of course, he encourages them to reject his lifestyle of thrift and a self-imposed environment of scarcity.

Copyright © 1996 by Thomas J. Stanley and William D. Danko.