I came to writing about money by accident. After graduating from Trinity College, I went into a PhD program at the University of Chicago to study with the greatest Irish historian of his generation. With his training and mentorship, I thought I was going to become a famous historian, though I would focus on transatlantic immigration. Looking back, I cringe. I knew nothing about fame, the academic job market, or the role of historians in America today. A few weeks into the program, I wised up and realized my aspiration would, at best, land me at a small college somewhere I wouldn’t want to live after spending my twenties in one library or another. I knew then that I didn’t have the love for my subject to pursue it regardless of the outcome. If someone had told me I could return to my alma mater and be a professor there, I would have kept at it. But that would never have happened. By the latter half of the 1990s, historians of the Irish diaspora were not in great demand. So after getting my master’s degree, I moved to New York, where most of my friends from college lived.
It was 1996, a flush time in the U.S. job market, and I landed a job at a financial newsletter. Having taken exactly one economics class in college, I knew the difference between a stock and a bond and macro- and microeconomics, but not much else. That I knew nothing about what I’d be covering—real estate investment trusts and commercial-mortgage-backed securities—didn’t bother my editors; they figured I could ask questions and write down the answers the way others before me had done. And that was what I did, often calling back annoyed bankers and traders two or three times for simple things that I had forgotten to ask the first time around. I hated what I was doing, which made it the perfect first job.
As for money, I was afraid of what it could do to you. This fear started young. It began in my childhood, which I thought about as I listened to the men of Tiger 21 play the humble game. When it came to beginnings, I, too, could trump the professor’s kid. I had started out fine—a father who inherited his father’s small-town businesses—but grew up terrified—bankruptcy, divorced parents, rented duplex that was robbed twice (including once by my only friend on the street), lousy neighborhood, and worse public schools. My childhood was framed by concerns about money and by extension safety and opportunity. We were probably poor, but we clung to that last rung of respectability and called ourselves lower-middle-class. If you listened to my mother tell the story, it shouldn’t have been like this. I was born to a family with money. And if money still flowed freely, we’d have had none of the problems we had then. But I don’t remember any of the things I would associate today with wealth. By the time I was two, the house, the one that meant everything to her but could fit inside my current home twice with room to spare, was gone, sold when my father filed for bankruptcy. That part is pretty much in agreement. The rest is murky. My father says he could have made a go of it in the construction, paving, and trucking businesses he owned had my mother been more supportive. My mother, who hasn’t talked to me in years, used to say it was my father’s fault for not working hard enough. I’m not inclined to side with either of them: I cut off my father for nineteen years, but today he has reappeared as a doting grandfather; and my mother, who I thought would be a wonderful grandmother, goes to extreme lengths to return Christmas cards I send her. I prefer the facts as I remember them.
My memory doesn’t start until I was about five or six. We were living in our third apartment since the house was lost. It was a nice apartment in a rent-with-the-option-to-buy town-house community—nice that is for Ludlow, Massachusetts, which is a town you wouldn’t have heard of unless you had to go to the bathroom around exit 7 on the Mass Pike. Ludlow’s a former mill town struggling to find industries to provide jobs. I don’t have good memories about the town or the people, but I may have grown up there in a time that was a lot better than the present. A childhood friend who still lives nearby said Ludlow was now one of the worst towns for heroin addiction in western Massachusetts. (The drug trade in my day—and this was a town where the dealers, not the buyers, lived—was mostly around pot.) We lived most of my childhood at 73 Motyka Street—our fourth apartment after the move. It was new, but new did not mean nice. Only one other duplex was between us and a subsidized-housing complex; I ran as fast as I could past it to and from the school bus stop. But from there, I got to go to the good elementary school—good being relative.
When I was ten, my parents split, and the divorce that followed knocked us down a bit more. I wasn’t thinking in economic terms then. I was too embarrassed that my parents were not together. I thought it was the defining moment of my life, and it was for a while. My years from ten until fourteen were bleak: I was on subsidized lunch; my clothes were shabby; and I was a participant in or observer of a bus-stop brawl about once a week. The only kids I knew whose parents were divorced were really poor, such as David’s mother, who had a live-in boyfriend and a premium cable-television package. (One way I knew we were not at the bottom of the socioeconomic hierarchy was that we had basic cable; all the really poor kids had HBO, Showtime, and Cinemax, a truism I have never quite figured out.) David, my only friend in the neighborhood, robbed us, an event chock-full of upsides: one, he didn’t kill us with the knives he laid out on the kitchen counter, and two, by laying out those knives and rifling through my mother’s clothes in the basement, he scared the hell out of her and it was the reason we finally moved. I’ve always been perversely grateful to him. Within weeks, my grandfather gave my mother the down payment on a condo, and at sixteen, I moved into something we owned for the first time since I was two. That condo might as well have been a mansion. It made my mother so happy. I was thrilled to be in the clean, managed environment of a condominium complex in a town twenty minutes from where I grew up. That more cracked asphalt was around us than grass, and that our unit had paper-thin walls and a basement that flooded, didn’t matter as much as her owning it.
Life had been getting better for me for a couple of years before the robbery. I had a cousin who had gone to a small private school a couple of towns away, and my grandfather figured I was just as smart and should apply. He was confident that I would get financial aid to go. Fortunately, he was right. My life started to improve: better teachers, classrooms, activities, food. While other kids balked at the dress code—khakis, a navy blazer, and a white or blue shirt with a tie—it thrilled me: there was no way to know who was poor and who wasn’t.
Academically, I thrived. I also stopped worrying about money: my classmates at Wilbraham & Monson Academy were all richer than me, but I was able to differentiate myself in the classroom and the swimming pool. From there, I went to Trinity on financial aid and Chicago on a fellowship. My grandfather made up the occasional shortfalls in the funding of my education. A retired postman who owned his nine-hundred-square-foot house, he was from a generation that saved money and spent it only on what was needed. Without my knowing it then, he was the first person I knew who lived above the thin green line.
At twenty-three, I moved to New York City, but unlike most of my friends, I didn’t have a backstop: it was forward or nowhere. So I never had the option not to work, even when I didn’t like a job. Instead I just tried to be good at what I was doing, and I ended up working my way up as a journalist—newsletters, a wire service, daily and international newspapers, glossy magazines, and finally the New York Times. My life was fun. While my salary rose with each new job, I saved and never spent more than I made. As in never, ever. I kept a running tally in my head of my credit-card charges and never had a balance from one month to the next. If an unexpected cost or purchase cropped up, I’d hold off on buying something nonessential, even if that included going out, until the next month. I wasn’t cheap. I took great vacations to places I’d never imagined visiting when I was growing up—Mexico, Spain, even Hearst Castle. I dated often, if not successfully. Then in 2004, I met the woman I later married. She was working as a recruiter then and now. While her childhood in Atlanta had been a lot better than mine—dad a dentist, mom a government worker, younger brother, dogs, house in the suburbs, a cabin on a lake—she did not come from money. She appreciated how hard it was to make it. She also had far fewer emotional feelings around saving, spending, and giving money away than I did. She made more than I did so her means were greater means, but since I got no pleasure in buying things, we never argued about finances. Three years after meeting—and some twenty-five years after my parents divorced—I got married. I was happy, professionally fulfilled, and financially comfortable. We made enough money to afford a nice life, and we were spending within our means—or so we thought.
My meeting with Tiger 21 had left me feeling insecure about financial decisions, for sure. But it had also left me more curious than before about other people’s thinking about money. That fall, the Occupy Wall Street protests began. Seeing people set up encampments against really rich people—Tiger 21–type members, I thought—sent me to the IRS website to find out what it took to be a One Percenter. I knew we lived among rich people, but we certainly did not consider ourselves rich. About 50 percent of Americans, rich or poor, think they’re middle-class, a number that is remarkably constant, and we were no different. I might have said upper-middle-class, either hopefully or sheepishly depending on the audience. But the data told me otherwise. It said that being in the One Percent by earnings meant you made about $345,000 a year. My wife and I, it turned out, were the One Percent. (To make it into that category by wealth, it took the Tiger 21 minimum of $10 million in savings, which we did not have.) This revelation should have been great news, but it shocked me. When you make more money than 99 percent of America, you can’t pretend you’re middle-class. You probably can’t say you’re upper-middle-class after you hit the 95th percentile. Nope, we were the One Percent. The reviled One Percent, to many.
Having grown up poor, I knew better than most middle- and upper-middle-class kids that having more money rather than less was always a great thing. But I didn’t feel that I should be the subject of protests.That should have been reserved for some of the parents in my daughter’s preschool class, such as the father who bragged to another father about taking a week off to go puma hunting in Argentina— right after mentioning he had a putting green installed on the lawn of his waterfront home. He was the One Percent, or probably the one-tenth of One Percent. Still, that my daughter once went to school with a puma-hunting, putting-green-building hedge-fund manager’s son says something about where we live—which is among rich people, some of whom may also be wealthy. I’m okay with that. Living here offers far more advantages than where I grew up. The streets are safer, for one. The houses, while big and expensive to heat, are attractive. In the summer, when the trees fill in, I can’t see my neighbors, and since no one mows his or her own lawn, my weekends are quiet. The schools are top-notch. And we all have seven hundred channels of cable television to choose from. The gigantic downside is that this is not how most of the country—or the world—lives. I worry not for my wife or me but for our children. I suspected during my childhood that the world wasn’t as grim as Ludlow, Massachusetts, but will they grow up thinking everything is as rosy as Fairfield County?
As the effects of my afternoon with Tiger 21 wore off, what still intrigued me was that in the banter and the conversations with the broader group, I realized that for all their money they were not any more secure in some of their decisions than most people I knew. In many ways, they were less secure, something that perhaps came from seeing many of their equally smart or smarter friends achieve less, or maybe from having failed at other businesses along the way to wealth. They came with questions. I admired that. Instead of being over-confident, a state that could have been brought about by the fortunes they had amassed, they were seeking guidance: they didn’t want to get fleeced out of the money they had made, and they didn’t want their kids to be screwed up. Why didn’t the rest of us think that way? Why did we talk about the hot stock tip we got from a friend the way some of us bragged (or lied) about sex in high school? Why didn’t we work through the calculations for what we would need later in life? Why didn’t we think about the benefits of education and the dangers of lying to ourselves about our level of security, financial and otherwise? If there was any reassurance, it might be that the members of Tiger 21 seemed to be asking probing questions of themselves and accepting uncomfortable answers. They weren’t hiding from what they didn’t know. Of course, the flip side of this was that if these men who had amassed tens, if not hundreds, of millions of dollars were asking rudimentary questions about charity and raising their kids—with the best advisers money could buy—was there hope for anyone else?
The unsatisfying answer, I found, is, it depends. Boston College’s Center on Wealth and Philanthropy has polled the super-rich on how they feel about money—and non-rich people’s thoughts about it. Their work goes to the heart of one of our biggest problems surrounding wealth: like sex, it can make us happy, but it can also mess us up. Money can be painfully difficult to talk about with our friends, probably more so than sex and certainly more so than disease. Even people with a healthy attitude toward money can find it hard to assess when they’re rich and when they’re wealthy. Paul Schervish, who runs the Center on Wealth and Philanthropy, found a direct correlation between people’s feelings about their financial situation and giving. This wasn’t a raw number; it was how they looked at what they had. Before the financial crash, individual giving ticked up noticeably when a person’s income crossed $300,000. Families making less than $300,000, which is pretty much everyone not in the One Percent, gave away 2.3 percent of their income; families making more gave away 4.4 percent. One inference from this is that those with earnings that place them in the One Percent feel more secure about their wealth. Yet in another piece of research, Schervish asked respondents for a raw number that would give them financial security: the median response was $20 million. Feeling wealthy, in other words, is fluid.
Today the more popular topic to discuss is income inequality, usually spoken of as the gap between the top earners in America, whose incomes and wealth continued to grow after the Great Recession, and everyone else, whose incomes stagnated or declined and who have little wealth, in terms of investments. The topic gets people riled up because it strikes at the core of what it means to be an American: a level playing field where anyone has the chance to rise to greatness on his or her own merit. But what if income inequality is not an aberration but the norm and we are returning to it? What if more responsibility for what we have or don’t have is falling on us? Two economists among more liberal thinkers—Emmanuel Saez of the University of California, Berkeley, and Thomas Piketty of the Paris School of Economics—have created a fascinating compendium of income around the world that goes by an unwieldy name, the World Top Incomes Database. In 2010, the top One Percent of earners in America had 17.42 percent of the wealth in the country, which was just about the same percentage they had in 1936. It was down from the 18.42 percent they had on the eve of the Great Depression in 1929, which in turn was slightly higher than what they had in 2007 (18.33 percent), when the Great Recession began.The highest percentage was in 1916, at 18.57 percent. If one looks for a time of income equality, or at least less income in the hands of the One Percent, it would be the 1970s, a decade remembered more for economic stagnation, high gas prices, and lack of political leadership than equality. In contrast, the One Percent in France, where the economists were raised, had 20.65 percent of the wealth in 1916 but only 8.94 percent in 2006, the last year for which they had data.
The conservative take on inequality looks at different metrics to make its case. Kevin Hassett and Aparna Mathur of the American Enterprise Institute wrote about what they said were two more accurate measures of inequality: the Consumption Expenditure Survey, which measures what households spend, and the Residential Energy Consumption Survey, which tracks how much people run appliances such as dishwashers and washing machines, if they have them. By the first measure, consumption has been stable since the 1980s and lower-income households are better off. They found that the rich also consume less in recessions, which periodically narrows the gap. By the second measure, poorer people are not only running their washing machines with abandon but they own them (even if they used credit cards to buy them).
I found both of these takes to be coming at the key issue of income inequality with ingrained biases. Saez and Piketty have the very French view of rectifying distortions by taxing higher earners—with Piketty going so far as to call for a global wealth tax. This idea, if ever adopted, would simply put more money in the hands of federal and state bureaucracies that have generally been inept at managing their own budgets. It also fails to account for the propensity of the children and grandchildren of the wealthy to spend their family’s fortune quite quickly, putting all that money back into the economy. On the other side, Hassett and Mathur are looking at superficial indicators of how poor people consume and wealthy people cut back in bad times: Who cares about someone’s washing-machine usage?
I prefer another economist, Ronald M. Schmidt, at the University of Rochester’s business school, who took the analysis of inequality in a different direction. He looked at how educational choices impacted earnings. In comments on a Congressional Budget Office report, he argued that incomes began to diverge greatly from 1979 to 1986, and the gap had actually started to close in the years after the Great Recession. He wrote that income inequality had been declining since 2000—the year after the dot-com bubble burst. What was more compelling to me, though, was his exposition of three male workers who made different educational choices but all finished high school in 1980. One stopped at high school, another got a college degree, and the third went on to graduate school. “In 1987, when these three were between the ages of 25 and 34, the average high school graduate earned $22,595, while a college graduate earned $31,631 and a holder of a graduate degree earned $36,667,” Schmidt wrote. “But 20 years later, in 2007, the corresponding averages for male full-time workers ages 45 to 54 were $46,667, $88,242, and $120,391.” Here was his key point: “Unequal? Yes. But the increase in inequality arose because these individuals made different decisions about their education, not because tax policy favors the rich. In essence, economic inequality is another term for incentives that encourage investment in education—or, for that matter, starting a new business.” He went on to argue against raising taxes on the wealthy, but he also made the case for people to realize that the choices they make in life have economic consequences. If you look at data on the One Percent, his point is born out. About a third of them started businesses. The next big chunk were doctors at 16 percent. Financiers were right behind them at 14 percent. Athletes and celebrities, who may have limited education, were 2 percent of the top group. What wasn’t clear from the data was where these people had started out in life—were they born with lots of financial and family advantages that put them ahead of their peers or had they worked their way up?
What I wanted to know, though, was, were top earners wealthy or just rich? I believe that being wealthy and rich are as different as loving someone for life and having sex on a date. There wasn’t anything simple that cleaved the have-mores from the haves and the have-nots. The thin green line cut through every income level—the teacher with her pension on the right side of the line and the high-earning but over-leveraged financier on the wrong side.
Excerpted from "The Thin Green Line: The Money Secrets of the Super-Wealthy" by Paul Sullivan. Published by Simon & Schuster. Copyright 2015 by Paul Sullivan. Reprinted with permission of the publisher. All rights reserved.