Richistan is Wall Street Journal reporter Robert Frank's look at the "New Rich". It was an impulse buy at the airport to give me something to read on a long haul flight back from Europe last week.
Richistan examines the explosion in the number of "rich" people and the issues which they face. The number of millionaires has multiplied over the last decade, as has the number of households with net worths greater than the US$5MM, US$10MM and higher thresholds. The Merrill Lynch Cap Gemini World Wealth Report produced similar findings. The reasons for this explosion in the sheer number of notionally wealthy people are several and include, ample liquidity, low cost of capital, a salary premium for those with skills most in demand, globalisation and the broader adoption of new technology. Even with the current economic uncertainty, the expectation is that the ranks of the notionally wealthy will continue to expand in sheer numbers as will the various benchmarks.
Where Richistan is interesting is the way it addresses the issues which the wealthy face. Two specific points of note were:
(i) US1MM may put you well within the top decile of household wealth, but it does not make you wealthy. Inflation above and beyond the CPI index means that the middle class millionaire is just that: middle class. US$10MM is considered the new benchmark for being considered "wealthy";
(ii) the sheer number of millionaires and multi-millionaires has created issues ranging from the important (instilling values in children, pressure on places in private schools, rising cut offs for access to some high end investment products) to the trivial (waiting lists for luxury yachts and lack of space for private jets at airports) to the pathetic (charity balls and other status symbols).
One issue which Richistan only mentioned in passing which would have merited further examination was the difficulty in maintaining a given level of relative wealth over a long period of time. This is more of an issue for those in "lower Richistan" than the seriously wealthy, but with the combined risks of lifestyle expansion and high inflation is a material issue for most of the lesser millionaires.
Although we will never be on the waiting list for a private jet or a 200 foot motor yacht, some of the points raised are relevant even to "middle class" millionaires. In particular, the dangers of attempting to emulate those who are significantly more wealthy than yourself, school placements and the rising cost and rising scarcity of some of the very few luxuries which I am tempted by (e.g. business class air tickets for long haul flights).
Richistan was a well written and enjoyable read. Recommended.