Salon Money | The reluctant capitalist: What to do with $195 million?

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The reluctant capitalist
By Heather Chaplin
From red to green
(05/15/98)
Baby bulls
By Heather Chaplin
Young turks ride high on the booming stock market
(04/15/98)
Greener pastures
By Jenn Shreve
Out of the growing glut of finance mags, one zine is poised to capture the expanding market of young investors
(04/15/98)
The Quicken and the deadbeat
By Andrew Leonard
How Intuit and Microsoft are saving us all from bankruptcy and crushing personal debt. Or not
(04/09/98)
The Minor league
By Tom McNichol
Can Halsey Minor's "user-driven" publishing empire, CNET, make him the Internet's Ted Turner?
(03/13/98)
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What would you do with $195 million?
YOU PAY YOUR TAXES, MAYBE BUY A SMALL ISLAND. THEN WHAT?

. . . . . . . . . . . . . . . . .
BY HEATHER CHAPLIN
Turning $5 into $195 million in one day: That's got to make you happy. Think of all the friends you're going to make. Sure, you're not in Bill Gates' league, but still, it's a pretty nice chunk of change.
And since you're wondering, here's what I'd do with the money: I'd buy my friends and family members first-class tickets around the world, give 75 percent of the money away, quit my day job and live very comfortably for the rest of my life. Thank you very much.
But back to reality for a second. That $195 million is not actually what the winners of Wednesday night's Powerball lottery -- Frank and Shirley Capaci from Illinois -- get to take home. Quite far from it. The Capacis elected to collect a lump sum payment of $104.3 million rather than get paid about $8 million a year for the next 25 years. That's still a lot of money, you say. But the fact is, after the state of Wisconsin takes its bite -- 6.87 percent -- and the federal government takes its chunk-- a hefty 39.6 percent -- the poor Capacis are left with only $55.83 million.
That's not even one-eighth of what Walt Disney chairman Michael Eisner made in one day when he exercised his stock options at a profit of about $565 million last December. And let's not even discuss that the aforementioned Mr. Gates earned $337 million yesterday alone, according to the multiple Web sites that track the beleaguered cyber-mammon's wealth as it grows. (A little perspective: Gates winning $105 million is equivalent to a person who's worth $90,000 winning $197.)
Had the Capacis taken the $8 million a year, they would at least have been on a par with the country's top chief executives, who last year averaged $8.7 million in annual compensation packages. On the other hand, they probably couldn't have come up with as many tax havens as our eminent CEOs; and besides, having a nest egg of that size makes for some tremendous investment opportunities.
So, what to do with a paltry $55.83 million?
A person could -- Gates considered it -- buy Palmyra Island, 1,000 miles off the coast of Hawaii, currently on the market for $47 million. But he would have to haggle for Howard Hughes' old haunt in Lake Tahoe, a cabin called the Thunderbird Lodge, which is currently on the market for $60 million.
If you wanted to do some good, you could cover the budget of Project Open Hand, which provides meals and groceries for people with HIV and AIDS, for the next eight years. Or, if you're concerned about the nation's children -- and isn't everyone? -- you could pay the cost of educating 10,853 California public school kids for one year.
But you could not afford to pick up the 10-year contract of Boston Celtics coach Rick Pitino, which is $70 million.
Unless you're a shopaholic of titanic proportions, it is quite likely that, in the words of Southern California financial planner Jim Kottra, "You absolutely could live in the lap of luxury for the rest of your life." But it still takes some planning.
Kottra advises breaking up that kind of money into short-term, medium-term and long-term pots. Rather than individual stocks, Kottra recommends that the Capacis go for professionally managed investments. "The key to remember," Kottra says, "is that diversity is your buddy."
He's right. Diversity is important, even when you've got a giant lottery check in your hand. Take the case of a California Big Spin million-dollar winner in 1993. He took his money and bought an appliance shop in the working class town of Clearlake in Northern California. Doesn't sound so bad, you say -- make a little money, buy a little shop, it's the American dream. Problem was, the shop was only a front. All the money went to getting a foothold in the heroin trade.
See where not diversifying got him? Jail.
Now, if Bill Gates were to invest $1 million in marijuana cultivation ...
SALON | May 22, 1998
Heather Chaplin is a freelance business writer in San Francisco. Her Reluctant Capitalist column appears on alternate Fridays in Salon.
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What would you do with $195 million? Join the discussion in the Business and Personal Finance area of Table Talk.




T A B L E__T A L K Widening income disparity: What can be done? Weigh in on the growing gap between rich and poor in the Business and Personal Finance area of Table Talk R E C E N T L Y The reluctant capitalist By Heather Chaplin From red to green (05/15/98) Baby bulls By Heather Chaplin Young turks ride high on the booming stock market (04/15/98) Greener pastures By Jenn Shreve Out of the growing glut of finance mags, one zine is poised to capture the expanding market of young investors (04/15/98) The Quicken and the deadbeat By Andrew Leonard How Intuit and Microsoft are saving us all from bankruptcy and crushing personal debt. Or not (04/09/98) The Minor league By Tom McNichol Can Halsey Minor's "user-driven" publishing empire, CNET, make him the Internet's Ted Turner? (03/13/98) - - - - - - - - - - - - - - - - Browse the Money archives		[__T H E__R E L U C T A N T__C A P I T A L I S T__] What would you do with $195 million? YOU PAY YOUR TAXES, MAYBE BUY A SMALL ISLAND. THEN WHAT? . . . . . . . . . . . . . . . . . BY HEATHER CHAPLIN Turning $5 into $195 million in one day: That's got to make you happy. Think of all the friends you're going to make. Sure, you're not in Bill Gates' league, but still, it's a pretty nice chunk of change. And since you're wondering, here's what I'd do with the money: I'd buy my friends and family members first-class tickets around the world, give 75 percent of the money away, quit my day job and live very comfortably for the rest of my life. Thank you very much. But back to reality for a second. That $195 million is not actually what the winners of Wednesday night's Powerball lottery -- Frank and Shirley Capaci from Illinois -- get to take home. Quite far from it. The Capacis elected to collect a lump sum payment of $104.3 million rather than get paid about $8 million a year for the next 25 years. That's still a lot of money, you say. But the fact is, after the state of Wisconsin takes its bite -- 6.87 percent -- and the federal government takes its chunk-- a hefty 39.6 percent -- the poor Capacis are left with only $55.83 million. That's not even one-eighth of what Walt Disney chairman Michael Eisner made in one day when he exercised his stock options at a profit of about $565 million last December. And let's not even discuss that the aforementioned Mr. Gates earned $337 million yesterday alone, according to the multiple Web sites that track the beleaguered cyber-mammon's wealth as it grows. (A little perspective: Gates winning $105 million is equivalent to a person who's worth $90,000 winning $197.) Had the Capacis taken the $8 million a year, they would at least have been on a par with the country's top chief executives, who last year averaged $8.7 million in annual compensation packages. On the other hand, they probably couldn't have come up with as many tax havens as our eminent CEOs; and besides, having a nest egg of that size makes for some tremendous investment opportunities. So, what to do with a paltry $55.83 million? A person could -- Gates considered it -- buy Palmyra Island, 1,000 miles off the coast of Hawaii, currently on the market for $47 million. But he would have to haggle for Howard Hughes' old haunt in Lake Tahoe, a cabin called the Thunderbird Lodge, which is currently on the market for $60 million. If you wanted to do some good, you could cover the budget of Project Open Hand, which provides meals and groceries for people with HIV and AIDS, for the next eight years. Or, if you're concerned about the nation's children -- and isn't everyone? -- you could pay the cost of educating 10,853 California public school kids for one year. But you could not afford to pick up the 10-year contract of Boston Celtics coach Rick Pitino, which is $70 million. Unless you're a shopaholic of titanic proportions, it is quite likely that, in the words of Southern California financial planner Jim Kottra, "You absolutely could live in the lap of luxury for the rest of your life." But it still takes some planning. Kottra advises breaking up that kind of money into short-term, medium-term and long-term pots. Rather than individual stocks, Kottra recommends that the Capacis go for professionally managed investments. "The key to remember," Kottra says, "is that diversity is your buddy." He's right. Diversity is important, even when you've got a giant lottery check in your hand. Take the case of a California Big Spin million-dollar winner in 1993. He took his money and bought an appliance shop in the working class town of Clearlake in Northern California. Doesn't sound so bad, you say -- make a little money, buy a little shop, it's the American dream. Problem was, the shop was only a front. All the money went to getting a foothold in the heroin trade. See where not diversifying got him? Jail. Now, if Bill Gates were to invest $1 million in marijuana cultivation ... SALON \| May 22, 1998 Heather Chaplin is a freelance business writer in San Francisco. Her Reluctant Capitalist column appears on alternate Fridays in Salon. - - - - - - - - - - - - T A B L E++T A L K What would you do with $195 million? Join the discussion in the Business and Personal Finance area of Table Talk.