The Glade 4.0

What Is Wealth in America?



Bill Gates once told me that The Forbes 400 issue is "capitalism in a box, a petri dish of success and failure." That's true. Most of us will never make The Forbes 400 list, of course. A billion dollars, even in Ben Bernanke bucks, is still a high bar--a gold standard of gold. Consider this: There are more Olympic athletes, baseball players on Major League rosters, professional symphony musicians in large cities and doctors who perform organ transplants than there are members of The Forbes 400.

Short of $1 billion, what net worth would make you happy? Let's work our way down from a billion.

Half a billion is only halfway to The Forbes 400, but you get most of a billionaire's perks and a lot more anonymity. It's a nice number, $500 million. It will keep you in several homes in great places--New York, Aspen and Maui, say--and fund a midsize private jet like a Citation X to get you there. I'd really, really like to be worth $500 million.

Descend to a net worth of a mere $100 million--the bottom of the ninefigure club--and you'll have to watch your budget. That's because $100 million is really a 'tweener number: You can be Richie Rich among your upper-middle-class friends or a hanger-on in the superrich crowd. Choose the latter and prepare to have your ego smashed. You'd surely have to give up the Aspen and Maui homes or replace the Citation X with a fractional jet-ownership. Personally, I'd keep the jet and sell the extra homes. The Hotel Jerome in Aspen is quite lovely.

Fifty million dollars is a very common net worth in my back yard, Silicon Valley. These anonymous rich get there by being part of a founding team--e.g., the chief technology officer but not the CEO--of a tech startup sold to Google for $2 billion. The $50 million crowd typically owns a $5 million house--that's only 4,000 square feet on one acre in Atherton or Los Altos Hills--and a $2 million vacation place near, but not on, Lake Tahoe. They might own a golf membership or two at fancy clubs, costing $300,000 each, or perhaps sail around the world in their Hunter 50 cruising yacht or fly around the world in their Pilatus PC-12 turboprop. And now and then they make angel investments in technology startups.

The word "millionaire" gained popular currency a century ago. A million dollars then would be about $20 million today, which is, interestingly, $1 million a year at a 5% aftertax return. That's right: You need $1 million a year to be a millionaire in the original meaning of the word. I really do like that number, $20 million. For most lawyers, commercial real estate brokers and CFOs--smart people who work for preexisting firms--$20 million is a good number to shoot for. The long climb up the slippery pole is worth it for $20 million.

But $10 million ain't so bad, either. Commonplace in New York, Boston, Chicago, Dallas, Los Angeles and San Francisco, a ten-bagger net worth makes you minor royalty in most other towns across the U.S. Ten million bucks is the heart surgeon who got divorced only once or the car dealer who lives in the big house at the end of the street, owns a nice summer home on the lake and always has a shiny Cadillac Escalade. The local charities and IRS auditors will certainly find you after you hit eight figures.

Just the same, $5 million is nothing to sneeze at. A lot of Americans who'd expected to be worth $5 million are no closer to it in 2011 than they were in 2001. However, they're ten years older and a bit worried. Five million, free and clear and invested at 5% (aftertax), buys an upper-middle-class life of good health care, a club membership, a wine collection, a BMW 3 Series convertible and a couple of vacations per year. Albeit, this is true only if the house is paid off and the kids are finished with college. If not, you'd better keep your day job, in addition to your $5 million.

Two million bucks is the great dividing line between middle-class comfort and worry in America right now. That $2 million is $100,000 in income, if you base it on an aftertax 5%. It's also the battle line for state and local pensions. That's because a pension income of $100,000--common for police and firefighters in big states--assumes a $2 million (or greater) portfolio at today's low interest rates. The $2 million portfolio isn't actually there, of course. It's only assumed, which is to say fabricated and unfunded. Therefore, it must be taxed from today's workforce. The tax debate roiling the country boils down to who is more deserving of the $2 million--those trying to earn and save it versus those who depend on the promises of fools.