Chrystia Freeland has a solid piece in this week's New Yorker about aggrieved billionaires and their perceived persecution under Obama's reign of terror.
The most telling part comes midway through, when Leon Cooperman, Freeland's de facto protagonist and author of the open letter to President Obama that sparked the awakening of a "sleeper cell" of pissed-off hedge-fund managers, is talking about an acquaintance. This acquaintance, a "seventy-two-year-old world-renowned cardiologist" married to another medical expert, had a net worth of roughly $10 million but still felt squeezed.
“I’m just saying that it’s not an impressive amount of capital for two people that were leading physicians for their entire work life,” Cooperman went on. “You know, I lost more today than they spent a lifetime accumulating.”
The gap Cooperman identifies — between the rich and the ultra-ultrarich — is one that's been probed before. But it's striking when you actually hear a member of the latter group describe the predicament of the former.
What Cooperman is saying, with remarkable candor, is that non-financial professionals — even if they're the best practitioners their fields have ever known — will never accumulate the kind of wealth that a moderately talented financier can create. There are "rich" athletes, actors, and Fortune 500 CEOs, none of whom will ever approach Cooperman and his ilk in terms of actual wealth. (For more on the "rich" vs. "wealthy" dichotomy, see Professor Chris Rock's famous colloquy on the subject.)
To his credit, Cooperman admits that he's a classic case of "right place, right time" wealth. He got a job at Goldman Sachs one day after graduating from Columbia Business School, right as the bank was transforming from a small partnership to a multinational firm. He rode the up escalator at Goldman, and when he felt he'd learned enough, he launched his own hedge fund, Omega Advisors.
As big hedge funds go, Omega is solidly middle-of-the-pack — it's made double-digit returns some years, but it's lost badly in other years, and it's rarely mentioned in the same breath as legendary funds like Tiger Management and SAC Capital. But the structure of hedge-fund fees — 2 percent of assets under management, and 20 percent of gains, or thereabouts — means that Cooperman could have become a billionaire even if Omega had never beaten the S&P 500. Just by showing up and continuing to raise money, his 2 percent take guarantees a certain level of lifelong comfort.
Compare Cooperman's financial outlook to this week's New York cover story about Grizzly Bear, a band that — at present — ranks among its musical peers at least as well as Cooperman ranks among his fellow hedge-fund managers. Despite selling out a concert at Radio City, some of Grizzly Bear's members don't even have health insurance. One lives in a 450-square-foot apartment, probably smaller than one of Cooperman's walk-in closets.
Here, Cooperman might argue that his work ethic sets him apart. "He rarely gets home before 9 p.m., and most evenings he has a business dinner after leaving the office," Freeland writes. But successful people in all industries (and, for that matter, people making minimum wage) also work 100-hour weeks.
What's different is that Grizzly Bear's financial comfort is directly correlated to its hard work. If the band stops touring and never produces another hit song again, its members will run out of money. But even when Cooperman screws up — like, say, in 1998, when Omega put more than $100 million into an ill-fated takeover bid for the state-owned oil company of Azerbaijan — he still makes money hand over fist.
That, to my mind, is one of the most striking realities about income inequality in America. If you're a member of any other profession, you have to be in the top one percent by talent, at least, to have a chance of creating wealth — the true, generational kind that is passed down to heirs and used to start philanthropic empires.