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Self-contained world - gated communities, concierge doctors, Netjets
Inflateds expectations - have to have mansions with home theatres, boats etc.
But insecurity - lost friends on way up, raising spoilt and ungrateful kids
For four years Robert Frank has held a curious position on the Wall Street Journal. On the in-house publication of the American money markets Frank is the lifestyle correspondent; his job has been to report on the spending habits of America's New Rich, the top 1 per cent of earners in the wealthiest nation the planet has ever known.
By 2004 this elite was taking home $1.35 trillion a year, a figure in excess of the take-home pay of the whole of France, Italy or Canada. But these people had not just been getting richer during the Bush years, Frank argued, they had been creating for themselves a separate country, a state within a state closed to those with a net worth under $10m. Frank calls this country Richistan. He set out to explore this distant land for his paper in the way that a foreign correspondent might have done, sending back the news from the front. This book is his collected dispatches.
His first port of call is a boot camp for aspiring butlers - or CEOs of MyDomesticLife Inc - in Denver. Dawn Carmichael, one of the star graduate students on the course, knew she was born to this life when she worked briefly as a housekeeper for a ranch owner. 'I loved knowing what made him happy,' she recalls. 'I sectioned his grapefruit every morning just the way he liked it and I always kept the TV tuned to Channel 36, his favourite. I would sometimes ask myself, "Why is it so important for me to get him the right kind of potato chips? Am I sick?" But then I came here and realised there are many others out there like me. I really feel like I found out what I was meant to do.'
Carmichael is not alone. America's Richistanis do not contrive their 'laidback' reiki-loving, chino-wearing, family-focused lifestyle without a good deal of assistance. At one point Frank runs through a few of his average interviewees' annual bills. The expenditure on household staff generally runs to half a million dollars, and in one case well over double that. A similar sum goes on club memberships, and one tally included a quarter of a million dollars spent on beauty treatments. It would be easy to think that such expenditure had a trickle-down effect or, in the words of JK Galbraith, 'If you feed enough oats to the horse, some will pass through to feed the sparrows.' In fact, there is no evidence that the outrageous spending has helped to narrow gaps of inequality. Rather the economy has become skewed to service this group.
When oil prices rose sharply recently it was a source of great surprise among analysts as to why the American economy did not slow more rapidly. One, Ajay Kapur, came up with the notion of a 'plutonomy' to describe this fact. The top 20 per cent of earners in the economy, his model suggested, inhabitants of Greater Richistan, were completely immune from such trifling facts as oil prices. Since they accounted for 70 per cent of consumption, the effect of the squeeze on the vast majority was hardly felt in the figures at all. (Ajay Kapur came up with one other world economy where the inequality gap was so high that the principles of plutonomy had begun to apply: the UK.)
This American plutonomy had also created an unusual inversion in normal market forces. If you were to appeal to the Richistanis with a service or a product, the more you charged for it, the more likely they were to buy it. Cutting prices and margins not only began to seem like an irrelevance in 70 per cent of the market, it threatened to be commercial suicide. The fastest-selling watches in Richistan are not Rolexes - they do not make it into the top 10 brands. The number one sellers are watches made by a newcomer called Franck Muller who had realised that Rolexes were way too cheap. A Muller watch sells for nearly $750,000.
Who wears Muller watches? In most cases they are the men (nearly all of them are men) who have engineered in different ways their share of the enormous glut of stock-option wealth generated by the simultaneous explosion of financial markets and new technologies in the past two decades; either through being in the right corporate place at the right time, or by managing the investment of absurd windfalls. There are many statistics that attach themselves to Richistan. These are two telling ones: Wall Street's five biggest firms paid out $36 billion in bonuses in 2006; and while in the Seventies the average American chief executive typically took home 40 times the wage of his average employee, he now pockets 170 times that of his typical minion.
Has this outrageous fortune spread happiness in Richistan? The emergence of 'wealth support groups' suggests not. 'Ten years ago I used to think $5m was enough to stay above the water line,' one anxious member of plutocrats' anonymous suggests. 'Now is it $10m? Is it $50m ?' Worse, the new American elite frets about its kids. About '$15 trillion' will be handed down from the current caste of multi-millionaires. How will the next generation cope? To help answer that question a growing number of lucrative programmes have grown up to help the children of the super-rich understand the value of money. In some, children as young as seven are made to understand the ins and outs of cost-benefit analysis. Even so, the fears of Richistani parents won't go away. These fears can, Frank suggests, towards the end of his occasionally jaw-dropping book, be boiled down into two words: Paris Hilton.
All good journalism is really travel writing. You prepare for a serious story the way a foreign correspondent would. You buy the maps, you learn the language, you hang out with the locals — not just the taxi drivers! — and then you write.
That’s what Robert Frank has done. He writes the Wealth Report column for The Wall Street Journal. (Who writes the Euchred by Capitalism column, I wonder?) In his new book, “Richistan,” he posits the existence of a little-known country within our country. This “parallel country of the rich was once just a village, he argues, but now it’s an entire nation.
The data bear Frank out. It was a huge deal when John D. Rockefeller became the country’s first billionaire. Adjusted for inflation, he had $14 billion — less than the net worth of each of Sam Walton’s five children today. There were an estimated 13 American billionaires in 1985. Now there are more than 1,000. In 2005, America minted 227,000 new financial millionaires, men and women with more than $1 million in investible assets. There are as many millionaires in North Carolina as there are in India. And so on.
Frank argues that the rich are “financial foreigners” within their own country. They have their own health care system, staffed by “concierge doctors.” They have their own travel network of timeshare (or private) jets and destination clubs. For her birthday, one 11-year-old “aristokid” pleads to fly commercial, “to ride on a big plane with other people. I want to see what an airport looks like on the inside.”
Like an anthropologist in the Amazon basin, Frank goes native. Except instead of a loincloth, he dons a white tuxedo to attend the International Red Cross Ball in Palm Beach, where he meets “Jackie Bradley, a buxom blonde squeezed into a jewel-encrusted Joy Cherry gown.” Bradley is chatting up her new book, “The Bombshell Bible.” “It’s really more about my inner life,” she says. “I’m hoping to use it to help other women like me.”
And Frank learns the lingo. Most Richistanis earn their citizenship through a “liquidity event,” when someone buys out their company, rather than through inheritance. Hedge fundies prowl the nether regions of Manhattan for trendy paintings, or “noncorrelated assets.” “Affluent” is Richistani code for “not really rich.” According to Frank, you need about $10 million to be considered entry-level rich.
Frank also plumbs Richistan’s secret status codes. You might have thought that a Mercedes SLK or a Rolex were flash possessions. Wrong! In Richistan, they are reverse status symbols. The affluent drive Mercedes; the rich drive Maybachs. Franck Muller hardly advertises their bejeweled watches, which top out around $600,000, because they might attract the wrong kind of attention. Like yours.
If you experience status anxiety, this book isn’t for you. You can’t avoid the conclusion that everyone is a lot richer than you are, whether he deserves to be or not. Here’s a guy, Ed Bazinet, who got rich making little ceramic villages with light bulbs inside them. How hard can that be?
On a more reassuring note, it’s nice to learn that the rich suffer status anxiety, too. When Richistanis are asked how much money would make them feel secure, they inevitably choose a figure that is double their own net worth. Because so many newly enriched entrepreneurs hail from middle-class backgrounds, they hate being called rich. Chauffeurs, for instance, are out. Rolls-Royce says 95 per cent of its customers drive the cars themselves. Tim Blixseth, the founder of the Yellowstone Club and other gated hideaways, tells Frank: “I don’t like most rich people. They can be arrogant.” This from a man who owns two Shih Tzus named Learjet and G2. As in Gulfstream G2. If you were rich, you would get it.
These aren’t people who spend a lot of time looking in the mirror. Because if they did, they would see, as Frank does, the contradictions behind their middle-class protestations and high-profile philanthropic ventures on the one hand, and their ordering alligator-skin toilet seats for their private jets on the other. Frank is not a flashy writer, but he is smart enough to let the material come to him. When he sits down with the inflatable-pool-toy magnate Simon Fireman for lunch at the Mar-a-Lago Club in Palm Beach, Fireman pulls “from his jacket pocket a two-page spreadsheet of all his charitable donations for over a decade, which he said I was free to publish.”
If “Richistan” is travel journalism, then ... do we want to go there? Not much. The people sound dreadful and not very happy, to boot. But consider the alternative. Frank gets a glimpse of the world outside when he attends Fort Lauderdale’s International Boat Show, right after Hurricane Wilma has plowed through town. “Thousands of residents in the poorer sections of Fort Lauderdale (most of them black or Hispanic) were left homeless,” Frank writes, “sweating through the tropical heat, without electricity.” Meanwhile, at the Bahia Mar Marina, a chocolate fountain gurgled and the $20 million yachts and vendor pavilions were “perfectly chilled.”
Look out the window: It’s Pooristan. Hmmm. I wonder who lives there. And will anyone be writing a book about them?
It’s a land where butlers make six-figure salaries because demand is so high, and where super-rich kids learn how to manage wealth by applying cost-benefit analysis to a lemonade stand. Robert Frank is the guide for a thought-provoking, entertaining, sometimes eye-popping journey into this fast-growing segment of America.
Never before have so many Americans gotten so rich so quickly, says Frank, the first Wall Street Journal reporter whose full-time beat focuses on the new rich. He begins the journey with questions: Who are all these people? How are they getting rich, why is it happening, how is the wealth changing their lives — and how is it changing life for the rest of us? The answers are intriguing.
Frank backs up his conclusions with plenty of data, but this is no dull tome. The descriptions make Richistan easy to picture: the mansion where towels and staffers’ uniforms are all adorned with the house’s own logo. The man who says his 100-foot yacht feels like a dinghy in the shadow of pleasure crafts like Paul Allen’s $250 million Octopus, which stretches more than 400 feet and has its own submarine. The 30,000-square-foot house with an ice rink and a gabled cottage for the Zamboni. The Mercer Island home with an indoor saltwater pool and a $40 million price tag.
Together, the data and the colorful anecdotes create passages so telling that readers will want to say “Wow, listen to this … ” to anyone within range.
Frank is occasionally derisive — the title of one chapter, “Barbarians in the Ballroom,” hints at what he thinks of a clash between new rich and old rich — but the details of life in Richistan can be so ludicrous that his approach generally doesn’t feel unfair.
Frank takes readers into a world where the wealth seems to come almost overnight. Ed Bazinet, for example, sold his company that makes miniature ceramic villages and ended up with a fortune worth more than $100 million. “The river of cash flowing around the world is so large that it’s spilled into areas of the economy that most of us have never even heard of. For all the talk of flashy dot.comers, celebrities and Wall Streeters, many of today’s Richistanis made their money from arcane, oddball products,” writes Frank (not to be confused with Robert H. Frank, a professor whose book about rising inequality and the middle class will be published next month).
Richistanis, as Frank sees them, are tireless innovators who don’t stop working just because they’ve made millions or billions. If they’re not doing business deals, they’re turning their creative approach toward redefining philanthropy and politics.
Among some of the new rich, politics is seen as another form of philanthropy. Rather than spending cash on campaigns that would help preserve their wealth, Frank writes, the super-rich are often spending to advance agendas that tend to be liberal. He points out that while many of the wealthy are Republicans, many of the superwealthy are Democrats who made their millions in such “liberal knowledge capitals” as Seattle. (Among them: Former RealNetworks executive Maria Cantwell, who spent $10 million of her own money in her 2000 Senate race.)
Some people benefit from their proximity to Richistanis — the well-paid household help, for example. But “much of America is being left behind,” Frank writes. The growing gap between the super-rich and the rest of us can affect everything from our role in the political process to the quality of our health care as Richistanis abandon the system.
Will Richistan ultimately have a positive influence on the world because its citizens will decide to use their money wisely and altruistically? Or will the new rich misuse their political power and tempt the rest of us into trouble with their love of living large? That’s for readers to weigh, but meanwhile, the journey through this land is certainly an eye-opening one.
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