All the Money in the World: How the Forbes 400 Make-- and Spend-- Their Fortunes

Book by Bernstein Peter W Swan Annalyn

Introduction

The Forbes 400 is the dominant symbol of wealth in America. It recalls the earlier 400 list of Mrs. Astor but differs from hers in one telling respect. Whereas the original 400 referred to the collection of socially prominent New York families who filled the ballroom of Mrs. Astor in the late nineteenth century, the Forbes index spotlights individual wealth. It measures the size of this or that personal fortune. It asks not where you came from or who you work for, but who’s richer? It’s the big-banana index—simple, primal, direct—and for those reasons irresistible.

Malcolm Forbes, a passionate believer in fortune-making, established the list in 1982. There was nothing elitist in his ebullient approach to wealth. Forbes was unashamed by his fortune; he relished the idiosyncratic (and he knew the value of publicity in promoting his brand). His favorite form of transportation was neither the everyman’s Chevy nor the aristocrat’s polo pony, but a motorcycle and a hot-air balloon—both of which kept him and his eponymous magazine, Forbes, in the news. Several years before the creation of the 400 list, Forbes developed a Cost of Living Extremely Well Index (CLEWI), a cheeky riff on a traditional Cost of Living Index, which measures the price of staples. The CLEWI charted the changing prices of yachts, caviar, cigars, and private planes. Similarly, Forbes presented its 400 as celebrities, treating them the way People treated actors or Sports Illustrated home-run hitters. The reported numbers had a kind of celebrity flash: A fortune was a batting average.

It seems remarkable that the Forbes 400 list, today endlessly quoted around the world, is only twenty-five years old. (B.C. Forbes, Malcolm’s father and the magazine’s founder, published a brief precursor of the list in 1918, naming the thirty richest Americans of the time, but it did not take hold.) The Forbes 400 is a particular product of its era, a living reflection of recent history. It captures a period of extraordinary individual and entrepreneurial energy, a time unlike the extended postwar years, from 1945 to 1982, when American society emphasized the power of corporations. The gross domestic product (GDP) in the United States has more than doubled since 1982, and may soon triple. The size of American personal fortunes has more than kept pace. In 1982 only thirteen billionaires were on the Forbes list, and you needed $75 million to make the cut. Today you must be a billionaire. In 1982 the combined net worth of the 400 represented 2.8 percent of the GDP. By 2006 that figure had risen to 9.5 percent. (The percentage actually reached 12.2 percent of the GDP in 2000, during the Internet boom.) More generally, in 2005 the wealthiest 1 percent of Americans claimed a percentage of the national income not equaled since 1928. Only the Gilded Age, the period from the Civil War to the 1890s, and the 1920s can withstand comparison to the last twenty-five years in terms of wealth accumulation.

For many people (not least, before his death, Malcolm Forbes himself) the Forbes 400 represents a powerful argument—and sometimes a dream— about the social value of wealth in contemporary America. In this view, great wealth does not (at least in the United States) suggest an aristocratic or privileged group of people who inherited their positions. It means enterprising individuals, a marvelous meritocracy of money. Those who make fortunes are an ever-changing, ever-churning group of remarkable people who flourish in the land of opportunity. They bring jobs, energy, ideas, and even joy to their society. They have been responsible, in the late twentieth century, for extraordinary advances in technology, the invention of new financial instruments, and the efficient restructuring of American industry. Money is fluid. Money is restless. In 1982 twenty-four Du Pont heirs were among the four hundred wealthiest Americans. By 1999 no Du Ponts remained on the list. New money was supplanting old. It was wealth’s way.

To be sure, many take the other side of the argument. Why commemorate greed, competition, and dollar one-upmanship? What does it say about America that the wealth of four hundred individuals should, in 2006, equal almost one-tenth of the annual output of a nation of 300 million people? To skeptics, the Forbes 400 symbolizes a period of avarice, excess, and selfishness.

All the Money in the World does not join in these arguments. Instead it recounts a more nuanced and personal story. At times anecdotal, at times analytical, All the Money in the World tells the story of the individuals who actually made the money, many of whom were interviewed for the book. Taken together, their stories illuminate how fortunes are made, lost, and spent today. The book is organized into three sections. The first, What It Takes, examines the character of fortune-makers, looking at such factors as risk taking, luck, and education in helping them get ahead. The second, Making It, explores how their money was made, with particular emphasis given to the booming fields of technology, finance, and entertainment and media (while also reporting on the more traditional, so-called blue-collar fortunes). The third, Spending It, looks at what the wealthy do with their money, focusing on conspicuous consumption, heirs, family feuds, and philanthropic and political activities.

All the Money in the World also contains a rich collection of charts and graphs that detail intriguing facts about wealth (many analyzed here for the first time) gleaned from the twenty-five years of the list. A few of the highlights:

· In the first Forbes 400, oil was the source of 22.8 percent of the fortunes, manufacturing 15.3 percent, finance 9 percent, and technology 3 percent. By 2006 oil had fallen to 8.5 percent and manufacturing to 8.5 percent. Technology, however, had risen to 11.75 percent and finance to an extraordinary 24.5 percent.

· With the emergence of new technology-based and financial fortunes, the geography of American wealth has changed. In 1982 New York had 77 members on the list, California 48. Today California has 89 members. (At its peak, before the Internet bubble burst in 2000, California had 107 people on the list.) New York now has 56 members, a decline of 27 percent over the life of the index. But New York City has more 400 members (45) than any other American city. Texas had 65 members on the list in 1982 and 36 in 2006. The flow of fresh money to California is mostly concentrated in Silicon Valley, near San Francisco. In the last twenty-five years, Silicon Valley has joined Wall Street, Hollywood, and the Texas oil patch as a storied and almost mythical source of American riches.

· In the last twenty-five years, 97 immigrants have made the list. Only 13 working women have made the cut, and this small number includes several who began life with substantial advantages, such as Katharine Graham and Abigail Johnson, each of whom inherited a large fortune. (The fortunes of Oprah Winfrey; Martha Stewart; Pleasant Rowland, founder of the American Girl doll empire; and Meg Whitman, the chief executive officer of eBay, are entirely self-made.)

· The average net worth in 2006 of Forbes 400 members without a college degree was $5.96 billion; those with a degree averaged $3.14 billion. Four of the five richest Americans—Bill Gates, casino owner Sheldon Adelson, Oracle’s Larry Ellison, and Microsoft cofounder Paul Allen (whose combined net worth was $110 billion in 2006)—are college dropouts. The fifth, Warren Buffett, has an undergraduate degree from the University of Nebraska—and subsequently got a master’s degree in economics from Columbia University. A broader study of the Forbes 400 over the last twenty-five years indicates that in any given year about 10 percent of the members dropped out of high school, possess only a high school diploma, or never completed college.
While Ronald Reagan wasn’t solely responsible for the historic economic boom reflected in the Forbes 400, there can be little doubt that he created the environment in which the list took root and flourished. Elected to the presidency in 1980, two years before the list was invented, Reagan was in certain respects a characteristic voice of the corporate fifties: After his movie career faded, he became well-known as a spokesman for General Electric (GE) and as the genial program host for its hit television show, General Electric Theater. The United States was developing at this time into a mass society with a vigorous consumer culture. The country had united as never before during World War II, marshaling its industry to defeat a common enemy. In the postwar period its energetic corporations defined what was meant by economic success. The company man (and shareholder) came into his own; it would have seemed selfish, with the Cold War intensifying and memories of the Depression and World War II still fresh, to overemphasize individual riches. The chief executive officers (CEOs) of IBM, General Motors (GM), and AT&T were kings of the American hill.

Nobody better symbolized corporate America than Robert McNamara, a man driven less by his belief in individual glory than by his faith in rational planning and the social utility of institutions. Ford Motor Company had, of course, been founded by the industrialist Henry Ford. That McNamara rather than a Ford heir rose to the top of this legendary family company symbolized the ascendancy of a corporate ideal that appeared to many people of the time at once sensible and visionary. It seemed natural that the young, newly elected president John F. Kennedy would, in 1960, ask a man of the new forward thinking to modernize the military as he might a corporation. What happened to McNamara as secretary of defense during the 1960s—as American culture was shocked in turn by the assassination of a president, a failed war, and the ris...