In richistan, all millionaires are not equal

If a million dollars sounds like a lot of money to you … if you think "household manager" is a synonym for Mom … if your idea of a cool set of wheels is a Mercedes-Benz convertible … then you probably don't live in Richistan. For several years, Robert Frank, who writes "The Wealth Report," a Wall Street Journal weekly column and daily blog, has analyzed the phenomenon of the "new rich." Frank's book, "Richistan: A Journey Through the American Wealth Boom and the Lives of the New Rich" is an eye-opening, educational and at times amusing examination of what the author refers to as "the new Gilded Age."

If a million dollars sounds like a lot of money to you … if you think "household manager" is a synonym for Mom … if your idea of a cool set of wheels is a Mercedes-Benz convertible … then you probably don't live in Richistan. Robert Frank writes "The Wealth Report," a Wall Street Journal weekly column and daily blog.

For years he has analyzed the "new rich," a phenomenon that came to his attention in 2003 when he noticed that statistics from the Federal Reserve Board showed a curious pattern: the number of millionaire households in the U.S. had doubled since 1995 and showed no sign of slowing. Frank's book, "Richistan: A Journey Through the American Wealth Boom and the Lives of the New Rich" is an eye-opening, educational and at times amusing summary of Frank's work in the years since he began "The Wealth Report."

It is, according to Wired editor Chris Anderson, "a field guide to the new rich." Frank invents the metaphor of a virtual country, Richistan, populated entirely by millionaires, most of whom acquired their wealth in what the author refers to as "the new Gilded Age."

The haves and the have-mores

Frank begins his travelogue with a quick history lesson in which he describes the wealthy classes from the time of the first Gilded Age and Old Money. For many years this community of bluebloods constituted the wealthy in America. But in the late 1980s came the tech boom and a new kind of wealth — Wall Street investors, corporate raiders, tech pioneers. After the tech bubble burst there followed CEOs, money managers and entrepreneurs.

When Frank began researching the new surge of wealth in America, he discovered there are some startling and significant changes in lifestyle and demographics. Even the concept of "rich" has changed. "Most Americans think $1 million would make them rich," he writes. "Yet in Richistan, $1 million just gets you in the door."

Being a millionaire can even be considered somewhat common; after all, there are 9 million of them today. An interesting study Frank cites finds that along the vast spectrum of Richistanis, there is a disconnect and a surprising level of insecurity. When polled, most millionaires say it would take double their wealth to make them feel financially secure. Frank presents a stark divide in the nation of Richistan, which he breaks down thus:

1. Lower Richistan — The chief source of wealth in this group ($1 million to $10 million) is salary, small business and/or equity. The group comprises approximately 7.5 million households with a typical home value of $810,000.
2. Middle Richistan — Source of wealth ($10 million to $100 million) is business ownership, equity and/or salary. There are 2 million of these households with a typical home value of $3.2 million.
3. Upper Richistan — Sources of wealth ($100 million to $1 billion) are business ownership and/or equity; number of households are in the thousands and residences are valued at $16 million.

Woes of the wealthy

While life in Richistan can be grand, there is trouble in paradise. As households grow both in size and technological complexity, the wealthy are dependent on "household managers," professionally trained persons who may command staffs in the hundreds. Frank takes the reader to butlers' academies where graduates educated in everything from accounting spreadsheets to travel agent skills can boast starting salaries of $100,000.

Some of us like to daydream about owning a boat but wonder about the hassles of maintenance. Only in Richistan can a 100-foot yacht be considered a dinghy. Imagine contracting for a craft big enough to house hundreds of guests, a helipad and state-of-the-art technology aboard. And even well-heeled families can be subject to anxiety when it comes to the cost of educating their children these days.

Frank visits a special class for rich kids whose parents worry (and rightly so) about the skills, character and self-discipline required to manage the money they stand to inherit. And although the thought of a "support group" for Richistanis who have trouble coping emotionally with the problems inherent in their wealthy lifestyle does have its funny aspects, the reader is made to feel somewhat sympathetic toward those profiled here. After all, who wants their child to grow up to be Paris Hilton?

Special delivery: Ben & Jerry's

The occasional anecdote Frank offers may add comic relief to the book — could it really be true that one Richistani called for Ben & Jerry's Chunky Monkey ice cream to be delivered to his yacht in the middle of the Caribbean at 3 a.m.? — Frank, for the most part, doesn't pass judgment on his subjects' sometimes eccentric peccadilloes.

He examines the Richistani phenomenon from a variety of angles, some scholarly and others anecdotal, but essentially to prove his point that here, in our midst, exist people who might as well be a separate nation for all they have in common with 99 percent of us.

Overriding all of this is the nagging fact that, as the number of millionaires continues to soar, the phenomenon ultimately exists at the expense of the middle class — this during a time when technology enables and encourages society at large to view the excesses of the wealthy. Frank's book raises the specter of increasing discontent, envy and awareness of entitlement — especially among young people who can only stand outside the gates, looking in.

Bottom Line:

Less than 10 percent of Richistanis are from Old Money, and only 3 percent are celebrities. Where do the Richistanis come from?

1. Founders: This category includes the Big Enchiladas we hear about every day in the Media — the Bill Gateses, Michael Dells and Ted Turners. They are entrepreneurs who started their own companies and sold their shares to investors through an initial public offering.
2. Stakeholders: These are the lucky executives and employees who are not founders but have stakes in a private company, then cash out when it goes public — the "Microsoft millionaires," for example.
3. The Acquired: Companies have made more than 108,000 acquisitions totaling $11 trillion since 1985 and these are the executives who benefit by selling their firms to another buyer for stocks or cash.
4. Money Movers: Today's hedge-fund managers, Frank says, "make investment bankers look middle class (or Middle Richistani) by comparison." The money movers direct and invest the vast river of cash flowing throughout the world and keep a share for themselves.
5. Salaried Rich: Executives of established companies can now amass the kind of wealth once reserved for risk-taking entrepreneurs. That's because the pay of U.S. CEOs has ballooned to more than 170 times the average worker's pay (up from 40 times in the 1970s), Frank notes. Even managers two or three levels down the corporate ladder are racking up millions in pay.