We live right now in a culture of unprecedented, voluptuous wealth. It can be measured in all kinds of gonzo indices (the length of Larry Ellison’s yacht, the square-footage of Ira Rennert’s home, the price of Berkshire Hathaway stock, which opened the new year at $141,800 per single share), but the most incontrovertible index, obviously, is the raw economic data from the Federal Reserve, which Boston College’s Center on Wealth and Philanthropy has analyzed: In 2000, there were 7,000 American households worth $100 million or more; in 2003, there were 10,000; and today, though the data isn’t yet in, Boston College estimates that the number will be 14,000 or 15,000, or double what it was at the beginning of the millennium. If you pare back the standard from eight zeroes to seven, the numbers are even more surprising: Boston College has calculated that in 2004, the last time the Fed provided data, there were 649,000 American households worth $10 million or more, a nearly 300 percent jump since 1992. In his recently published book, Richistan, The Wall Street Journal’s Robert Frank observes that the wealthiest Americans have effectively built their own country within a country, “complete with their own health-care system (concierge doctors), travel networks (Net Jets, destination clubs), separate economy (double-digit income gains and double-digit inflation), and language (‘Who’s your household manager?’).” By 2004, he notes, the richest one percent of Americans were earning more than the total national income of France or Italy.
At some point, the offspring of this charmed class will be the stewards of the dollhouse nation their parents have created—and, more important, the caretakers of its treasury. Already, Boston College projects that inheritances received between 2003 and 2007 will be 50 percent larger than those received between 1998 and 2002, and that’s after adjusting for inflation. In Manhattan, one might argue we’ve already evolved from a borough of aspirational wealth to one of inherited wealth—if the average price of an apartment is $1.3 million, who besides investment bankers can afford one without parental assistance? “There are already examples of whole societies out there like this,” says Dalton Conley, chairman of the sociology department at NYU and author of the forthcoming The Elsewhere Society. “Like the Gulf states. I’ve compared Manhattan to the United Arab Emirates before. They have a nonnative working class that comes in and does all the labor, and the natives don’t have to do anything.”
American blue bloods, perhaps, have a strategy for coping with their inherited wealth—wearing the ratty sweaters, pursuing the eccentric hobbies—namely, pretending it doesn’t exist. But this strategy is hardly applicable to any generation that makes its fortune. Members of that generation almost always believe it’s their right to flaunt it, to savor it—they’ve earned it, haven’t they, through ingenuity and hard labor? Yet the newly rich inevitably discover that it’s very hard to have your cake and eat it while raising healthy, hardworking children. “I just met this morning with a very sharp 48-year-old,” says Charles Collier, author of Wealth in Families and senior philanthropic adviser at Harvard University. “And he said to me, ‘I don’t want my children to be entitled, but I want to have a jet. I came from nothing. Haven’t I earned my jet?’” (Family advisers to the megarich say you’d be amazed how often this comes up, this question about private jets. Anxious business executives raise their hands in almost every seminar about it, seeking expiation.)
And perhaps this fellow has earned his jet. But his children haven’t. The problem with money, as he doubtless discovered, is that it sets up its own paradox: Hard work may yield it, but growing up with it often discourages hard work. The aphorism “Shirtsleeves to shirtsleeves in three generations,” commonly attributed to Andrew Carnegie, has proved prophetically true not just here but across cultures (in fact, the same aphorism exists in a variety of other cultures—the Irish say “Clogs to clogs.”)
“The dramatic growth in the number of people who are serious wealth holders has set into motion a new set of questions,” says Paul Schervish, director of the Center on Wealth and Philanthropy, “and the one facing us presently—and it will become more important as this trend continues—will be, what is the quality of choice that wealth holders will make? Will they choose consumption? Or will they choose a more productive use of their wealth?” He wonders what it would take, what subtle swing of “the moral compass,” to make people weight their choices toward the productive distribution of their money—which might mean giving less to their heirs and more to charity. “We can go in either direction,” Schervish says. “In society, in the family, and in the heart of each person.”
Clearly, it says something that Bill Gates, currently worth $59 billion, has proclaimed his intention to leave each of his children only about $10 million (a fine sum, but what financial planners quaintly call “junior wealth”), and Warren Buffett, worth $52 billion, has said, “I want to give my kids enough so that they could feel that they could do anything, but not so much that they could do nothing.” It suggests that two of the three richest men on the planet see their own fortunes as a ticking time bomb—and potentially corrosive to their children’s future well-being. “That quote of Warren Buffett’s has become the major formulation, either implicitly or explicitly, of many wealth holders,” says Schervish. “You don’t want a whole culture of kids who will be unreliable.”
The prospect of a new, expanded generation of unprepared heirs has spawned an entire industry, a shadow world of financial advisers and estate planners and psychotherapists who work for newly minted organizations with self-explanatory names: Wealthbridge Partners (for families whose net worths exceed $200 million), Family Wealth Alliance (which helps ultrahigh-net-worth families find the right kinds of staffing), Relative Solutions (which helps heirs make sure their relationships don’t destroy family-run businesses, and vice versa), the Sudden Money Institute (counseling exactly the population the name suggests—those who stumbled abruptly into vast sums). Most of these organizations didn’t exist so much as a decade ago. All share one long-term aim, which is to assure that their clients never succumb to Carnegie’s supposed prediction. But what that often means, in the short term, isn’t simply coming up with succession plans or preventing financial innumeracy in the poet and boatbuilder sons of the superwealthy. It means helping families cope with the many psychological distortions—and moral questions, responsibilities, and obligations—that come from having lots of money. Just as poverty produces its own pathologies, so too does inherited wealth.