Interesting perception and advice from the Robert Shiller of the Case-Shiller Home Price Index:
Robert Shiller, perhaps best known for co-inventing the Case-Shiller Home Price Index, says the American dream of building wealth through homeownership is a fallacy.
“I’ve documented that home prices in real terms didn’t increase from 1890 to 1990,” he says. “That was the bubble thinking, but it’s still fresh in our minds.”
How do you get rich, then?
“Go into finance or a related field. It’s a lifetime decision,” advises Shiller. “Finance is the technology for making things happen. Accountant, auditor, marketmaker … these are big occupations.” Shiller lectures his students that mathematics, astronomy, sociology are all very appealing, but there are no jobs in them.
Shiller says his thesis supervisor, MIT economist Franco Modigliani, who won the Nobel Prize in Economics in 1985, taught him not to trust market efficiency because it was only a half-truth. He says Modigliani’s papers on how inflation distorts markets prompted him to invest all his money in the stock market in the early 1980s as Paul Volcker’s rate hikes kiboshed inflation and sent the stock market soaring.
Shiller tells his Yale students: “If you are wealthy that means you are powerful, and you have to care about others.” He then requires them to read Andrew Carnegie’s 1889 essay, “The Gospel of Wealth,” which instructs the rich to recirculate their wealth through philanthropy.