ONE SUNNY PRE-PANDEMIC MORNING in a pavilion at Concours d’Elegance, the annual classic car week and trillionaire fest at Pebble Beach, I helped myself to a buffet breakfast and sat down at a table next to a couple in their early 50s. The woman, whom I’ll call Sally, told me she grew up middle-class in Michigan. Now she and her husband lived in Silicon Valley, where they ran a small tech consulting firm. This sounded promising. I had come here, after all, to gather color and find sources for Jackpot, my new nonfiction book about how the great American wealth fantasy has veered dangerously off the rails. Days earlier, I’d crashed with friends in Carmel, where the local police shut down the main drag – on a weeknight! – to prevent dudes in $500,000 Lamborghinis from peeling up and down the strip and creating a ruckus.
When I told Sally about the book, she revealed that she and her husband had recently signed a contract with a major new client, resulting in a big bump in earnings: “We just went from solidly ‘middle class’ for the Bay Area – let’s say $400,000 to $500,000 a year – to well above that over the last couple of years,” she told me. Joining them for Car Week was an English couple who – it was clear from their dress and demeanor – had ample financial resources. And thank goodness, Sally said. Most of her old friends could not have afforded this event. Their “club” tickets were $850 a head, and that didn’t include lodgings. If you left your sun hat at home, one vendor was peddling stylish ones at prices ranging from $400 to $4,000.
Sally emailed me later from Disneyland, where she and her husband were vacationing with family and “didn’t blink” when they were offered a signature suite for a “minor up-charge.” This “isn’t a humble brag,” she wrote. “It makes me really really really nervous. The cognitive dissonance of privilege gnaws at me.”
There’s been plenty of cognitive dissonance to spare this the past decade, as top-tier incomes have exploded and our yawning national wealth gap has grown into a seemingly infinite chasm. The pandemic, for the superwealthy, was little more than a speedbump. In fact, since March 2020, when lawmakers first proposed a federal response to the crisis, the collective wealth of America’s billionaires has grown by more than $1.6 trillion – 55 percent. Even the upper middle class has done fairly well. But deeper down in the ranks, where half of the U.S. population owns little to no stock – or even assets, for that matter – there’s been a lot of suffering. The super-rich just weren’t around to see it.
AMONG THE IRONIES OF AMERICA’S LOVE AFFAIR with asset accumulation is the fact that wealth has driven us apart, literally and figuratively. This is true here on the Central Coast and across the nation. Those among us with ballooning financial resources will typically relocate to nicer parts of town – or different towns altogether – that afford us more space and privacy, better schools and infrastructure, lower crime, etc. But the most fortunate also self-segregate for reasons they are less eager to discuss. Namely, the social awkwardness of being a have among the have-nots, of being around people we believe will judge us, and who will feel judged by us in turn.
The higher a person ascends on the socioeconomic food chain, the more deserving of their lot they tend to feel, psychology research suggests. And this tendency, combined with a dash of guilt, helps fuel the clustering instinct. In order to be able to enjoy the fruits of our labor without being reminded constantly of our privilege, we enter the bubble.
“These communities step you up and away from the norm,” says Richard Watts, a Southern California attorney who acts as a consigliere for some of America’s wealthiest families. “It’s kind of a badge a little bit: We’re in this private gated community and we got this famous guy and this famous guy, and we’re all rock stars in here. But we’re left alone. We understand what it’s like having people who always want something from us and here we don’t want anyone to get stuff from us. We want you to stay away.”
The lifestyle in the bubble is pleasant. The yards are well-landscaped, the pools inviting. The roads lack potholes and there are ample options for tennis and golf. But there are psychological ramifications to living in this milieu. Dartmouth College economist Erzo Luttmer has found, for instance, that people’s self-reported happiness decreases as the average income of their neighbors rises. When those around us bring home $5,000 more per year, he told me, the negative effect on our psychological well-being is about the same as if we had experienced a $5,000 pay cut. As the people around us grow richer, interestingly, we become more satisfied with our towns – community wealth begets a nicer commons – but less satisfied with the quality of our friendships and our allotment of free time.“People appear to be giving up leisure, to allow their friendships to suffer, and to work more,” Luttmer wrote, “perhaps in an attempt to mimic the material living standards of their neighbors.”
Sociologists Sean Reardon at Stanford and Kendra Bischoff at Cornell have found that in America’s metropolitan areas, the percentage of families sequestered in either “poor” or “affluent” neighborhoods more than doubled from 1970 to 2012. This “income segregation” varies by region. It more than tripled in greater Philadelphia from 1970 to 2007, at which point 43 percent of families lived either in rich neighborhoods or poor ones. In 2012, in the regions that encompass Dallas and Detroit, more than 45 percent of families lived at one wealth extreme or the other. In one New York/New Jersey metro region, more than half of families were thus segregated. (Their dataset didn’t include Monterey County.)Nationally, the proportion of families living in middle-income areas had declined from 65 percent in 1970 to 44 percent in 2012.
You’ve heard of white flight. This is wealth flight.
IT’S NOT HARD TO SEE HOW WE GOT HERE. In 1965, according to the Economic Policy Institute, the CEOs of the 350 largest public companies got about 21 times as much compensation as the typical worker, on average. That’s a big difference, but people could still relate to one another. By 2019, the ratio was 320-to-1. You won’t find CEOs today living near their workers. Rich families in high-inequality areas, Reardon and Bischoff found, were far less likely to live in mixed-wealth neighborhoods than poor families were. We hit the jackpot and bail. And this has broader consequences, for it turns out that regions characterized by concentrated wealth and concentrated poverty have lower economic mobility than places where rich and poor commingle.
Wealth and social status also dictate whom we associate with on a daily basis. One character in the book, a successful Black executive named Erwin Raphael, had been living with his wife in a luxury condo in Southern California – a “like-minded” community where the average income, he estimated, was $500,000 to $700,000 a year. “They’re Asian, they’re Middle Eastern – and that could be Persian or Jewish or whatnot. They’re white, they’re Black… ” He paused. “Not very many Black. There’s probably 1 percent Black. But one of them happens to be the head coach of the Chargers!”
Another source, James Everingham, hit the Netscape jackpot as a young coder and is now VP of engineering for Novi, Facebook’s cryptocurrency division. Everingham was raised lower middle class in Pennsylvania, but after 26 years living in Santa Cruz, he pulled up stakes and moved to Ross, a wealthy enclave in Marin County. Sitting in the den of his $10 million home, he joked that there was a house for sale at $85 million half a mile down the road – “if you’re in the market!” But seriously, everyone’s rich here, he said, so “there’s not awkwardness.” Back in Santa Cruz “your neighbor next door might be worth 10 times you or be struggling. A block up, you’ve got people who got put in jail for robbing banks.” Santa Cruz locals knew of his Netscape IPO jackpot, too, and he’d started feeling a bit vulnerable.
WEALTH PERHAPS SHOULDN’T MATTER in our neighborly interactions, but it does. Talking about our personal finances is taboo, but we drop little hints all the time. We bring up pesky landlords and mortgage payments, kitchen remodels and landscaping projects, modes of transport, careers and alma maters, hobbies and vacation destinations, schools and camps, our children’s plans for after high school. We glean information from nonverbal cues, clothing, possessions, physical traits. We use all of these observations to compare people – to judge others, and ourselves.
Succumbing to the bubble helps ease some of the social tensions. Then again, it can seriously mess with a person’s perspective. “It’s something I’m explicitly pushing back against,” says Bruce Jackson, a former tech executive whose surname I’ve changed at his request. Jackson, who lives in Seattle, is an avid cyclist. “The number of dinners I go to which focus on people talking about their travel plans are legion. Guilty! Not like I’m holier-than-thou, but I don’t want to hang out with people talking about how nice it was to bike through the South of France.”
The downside to Ross, Everingham told me, is that it looks like Mayberry. It’s akin to Carmel in that way: safe and clean. Almost entirely white. Few visible social ills (well, besides the Lamborghinis). “Out of sight, out of mind, and that’s not necessarily a good thing,” he said. Especially given his job. “I mean, building good software is an act of empathy, you need to see pain and feel pain. You lose career-useful perspective when you’re not around those problems.”
These are the things that come to mind when a well-meaning person like Sally describes herself as middle class. I don’t doubt that she and her husband embrace the values on which they were raised, but characterizing a half-million-dollar income as middle class? That’s the bubble talking. Even in Silicon Valley, a household income of $450,000 would have put them within top 7 percent of earners.
As one young inheritor had told me, “Everyone wants to be middle class!” But they really don’t. They just don’t want to be stereotyped as rich people. They want to be seen as authentic. Most middle-class Americans clean their own toilets, do their own yard work, cook their own meals. They worry about credit card bills, and how their kids will be able to afford college. They avoid expensive plane trips and $15 cocktails. They struggle, authentically. Which is one reason we hear wealthy politicians, even including Elizabeth Warren, reminiscing a lot about their humble family roots. The upper-class bank balance they can live with.
ECONOMISTS EMMANUEL SAEZ AND GABRIEL ZUCKMAN at UC Berkeley define a middle-class income as one within the 50th – to 90th-percentile range. In 2019, that was about $30,000 to $136,500 for an individual, while middle-class wealth ranged from roughly $58,000 to $790,000. Should you break into the top 1 percent, which in 2019 required a minimum household income of $481,000 or net assets north of $5.6 million – your relationships with actual middle-class friends and relations may require extra care and feeding, because wealth differentials can create all sorts of issues between people.
One of my characters, a private equity partner, told me about a relative who had fallen way behind on her bills. He offered to pay off her debt. It would be a gift, he said, but the relative insisted she wanted to pay him back. So they made a repayment schedule: $100 a month. She never even made the first payment, and then they didn’t speak to one another for 15 years. The whole situation, he said, was “unbelievably stupid!”
Another source, who had founded a thriving technology company back in the 1980s, has had relatives approach him for loans on many occasions. “Almost always I do it, because I can and I’m happy to, and almost always I know it’s not going to get paid back.” He doesn’t care about the money. “It’s a rounding error,” he said. “My reluctance is I’m afraid of losing this person as a family member that I’m close to and that I can be comfortable with.”
If he says no, the person will feel resentment. If he says yes and there’s a problem, the borrower will feel awkward around him: “It’s a lose-lose situation,” he said.
Everingham is no longer on speaking terms with one sibling. Their conflict isn’t only about money, “but my means definitely exacerbated the situation.” For one, he spent millions of dollars on a compound near Santa Cruz for his close family members – “a beautiful place, on 14 acres.” But they found the Central Coast too liberal, and had other complaints to boot. Sick of listening to their griping, Everingham eventually just signed everything over to them. His family members ended up selling the property and moving to South Carolina, where they bought a house and “subsequently burned through all that money and mortgaged the house, and now I’m the asshole that won’t lend them money again.”
DURING MY BOOK RESEARCH, I also met Martha, who has inherited so much money that she could afford butlers and private jets, but she has no desire for that sort of life. In fact, she does her best to avoid the bubble, and truth be told, her wealth mainly brings her anxiety. But it’s not as though she can go crying about it to her less-wealthy friends. I asked Martha whether she’s ever been tempted to bail out struggling peers. “That is a can of worms,” she said. “I’ve only very occasionally found ways of doing that that have not created rifts.” One friend had injured her shoulder, so Martha offered to treat her to a professional massage, which was fine. Another friend had a kid accepted to a private school, but the family couldn’t afford the tuition. Martha cut a secret deal with the school: She would pay the tab and the administrators would pretend they had come up with some way to make things work.
As these tales illustrate, the part of our wealth fantasies that involve helping out friends and loved ones is trickier than it may seem at first glance. Even inviting your old acquaintances to join you in your fabulous new adventures can be fraught. Assuming the excursion is pricey, you’ll need to pick up the tab, and one can do that only so many times before your guests’ pride intervenes. Things get weird fast.
That’s partially because, despite our best intentions, wealth differences among friends make all involved acutely aware of their position in the pecking order. Not long ago, I ran into a musician I knew from my punk rock days. He used to be close with another Bay Area musician who had become an internationally known rock star – and fabulously wealthy. The two still talk on occasion, the “poor” musician said, but things are awkward now. He’s reluctant to reach out because “I feel like he’ll think I want something from him.”
As we move into our upscale neighborhoods, pursue new friendships and expensive hobbies, and put more time into exotic travels and high-status careers, our old lives and acquaintances may fade away in the rearview. It’s nothing deliberate, Jackson told me. It’s just, for instance, your kids and their kids attend different schools now, so there are fewer chance social encounters. (For a time, his children attended Lakeside, where the Ballmers and Bezoses and Gateses all sent their children; “Somebody flew a private plane to one of the soccer games.”) Physical proximity is also a factor. “We stay in touch with some of the same folks, but they’re not in the same hood,” Jackson said. “That’s just a reality. It’s not like we’ve said, ‘OK, let’s drop them – they don’t have a Mercedes!’” Conversely, “I have never seen somebody go, ‘Oh, you’re rich. I hate you. I’m not going to be your friend anymore’ – maybe it happened and I don’t know about it.”
ONE CURIOUS THING ABOUT GREAT WEALTH is that the differences within the 1 percent are as stark as those between the 1 percent and the rest of us – bubbles within bubbles. “If you have only millions, you are not a B person. You don’t get invited to the billionaire parties,” Watts said.
There are events all around the world where the wealthiest of the wealthy connect, and “if you don’t have a great big yacht, I mean a big yacht, you’re just not there. You’re kind of segregated from the group.”
Playing this game of thrones has a price. The 0.0001 percent is such a tiny pool, its inhabitants so protected and bound with so many obligations, that a person in this milieu might wake up one day to realize that all of his relationships are transactional. The billionaires throw their parties and schmooze with celebrities and politicians and other big fish, Watts told me, “and then they come to me and say, ‘God, I just didn’t realize this would take away my friends. It’s like a movie star: I’ve elevated myself to this place where the people around me all want something. And if they don’t want something, then they’re grading me for what I’ve got.’”