Todd Nemet's Reviews > Richistan: A Journey Through the American Wealth Boom and the Lives of the New Rich

Richistan by Robert    Frank
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's review
May 19, 11

it was amazing
bookshelves: finance
Read in May, 2011

I have always been fascinated by wealth and social status, or maybe it would be more accurate to say that I am fascinated by my twisted understanding of wealth and social status since I don't have any direct experience with either.

This book, a very quick and light read, provides some good long (almost voyeuristic) looks into the wealthy, how they got there, and what they are thinking. Mr. Frank reports on "wealth" for the Wall Street Journal. He apparently knows his beat very well, though I wondered at times how much his objectivity has been corrupted by long-term exposure to such staggering luxury.

My only complaint about this book is not Mr. Frank's fault: It came out in 2007, so we don't get to see how everyone held up during the big crash of 2008 and the Bernie Madoff scandal. Like Warren Buffett said, you never know who's wearing a bathing suit until the tide goes out.

A few of the surprising facts that I learned from the book:
- In 1890 half of wealth in the US was held by the top 1%; it was only 20% in the 1970s; 30% in the 1980s; it was about 33% in the mid-2000s.
- As of 2005, the US has more millionaires than Europe.
- India has about as many millionaires as North Carolina: 83,000.
- Half of America's wealth has been created over the past 10 years.
- Each of Sam Walton's five kids are worth more than Rockefeller, even adjusted for today's dollars.
- The total stock market in 1980: $3T. The total stock market in 2007: $17T (plus $1.5T in hedge funds and private equity).

When you consider this, it makes sense that only 9% of the wealth of America's top 1% is inherited wealth (vs. 23% in 1989) and only one-third of them inherited any money at all (vs. over 50% in 1989).

So today's rich is a new kind of rich: Generally speaking they are younger, from middle- or upper middle-class backgrounds, more liberal (at least those with over $10M are), and weirdly don't consider themselves all that rich. Many of the people featured in the book got rich due to a weird type of restlessness is only exacerbated by the resources and freedom that comes with being super-rich.

Since we are all playing the same game, and the name of the game is Try Not To Die Alone And Broke On A Grate, it's nice to read about people who have pretty much won.

[[[Aside: To extend this idea of The Game, if I may: The Republicans believe that the game is completely fair and if you lose it is all your fault, and the Democrats feel that if only we gave the government enough power, no one would ever lose the game again. Obviously, only a dangerously insane person would believe either lie.]]]

One other interesting and surprising thing in this book is that the wealthy meet in support groups to help each other out with their peculiar wealthy problems. One group has a minimum of $10M to join, another requires $100M, and yet another requires being female and CEO.

I have never heard of the middle class getting together similarly to share what they've learned, though I can't think of a group more desperately in need of pulling together in an attempt to withstand this systematic assault on their lifestyle. It seems like all the "common knowledge" that we grew up with (like "Buy as much house as you can afford." "You can't spend too much on college for your kids." "I'm a white collar knowledge worker. I have no need for a union.") has been thoroughly disproven and discredited in the past few years. Maybe it's time to bring back investment clubs like Beardstown Ladies minus the idiotic stock picking.

So I believe that this is a very important book to read, if only to find out that the two people in the book who got un-wealthy did so by overextending themselves on margin. (This is in line with what I saw during the Internet boom. I knew people who would rather be 2-digit millionaires on margin than 1-digit millionaires with no debt. Of course, most of them are now divorced and living in apartments in the East Bay.)

I can't think of another book with a similar, judgement-free look at the lifestyles of the wealthy, which is weird given the amount of effort many people put into being one of them.
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