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What does the 1% talk about when it talks to itself? How different are the rich from you and me, really? Mike got on the phone with Jim, a member of the 1% uniquely qualified to talk about wealth and income inequality in America. He built his career in the last decade selling only to the top 1%. Then he walked away.
Jim: My name is Jim, and I’m a former publisher of a major, national, luxury magazine.
Mike: thank you for joining Bankers Anonymous this morning.
Jim: My pleasure.
Jim is not a banker, but he is a card-carrying member of the 1% in America. He not only earned his way into that group, but he ran a major magazine catering exclusively to high net worth individuals. I spoke to him about wealth disparities in America, his experience ‘making it’ in New York City, and his new life in a small town, attempting to recover from New York. He walked away from it all, of his own volition, and so has a very unusual story to tell.
Wealth and Income Disparity in America
Jim: So I was focusing on what clients, which consumers in America were the best consumers for luxury brands such as Rolls-Royce, Hermes, Gucci. who they should really be spending their advertising dollars against, and with whom they should be communicating the most with. and it was clear even back in the year 1999 when I first became publisher that we had this tremendous wealth and income disparity in America. That was actually not a new thing. It had been going on since 1980, and had been accelerating all the way through 2000, and even into 2008, and even after the recession to today. So I spent a lot of time convincing advertisers to focus their dollars on a few luxury magazines as opposed to spreading their advertising dollars out to many more mid-market magazines.
A decade ago Jim made his living telling all his luxury brand clients that the top 1% of Americans hold most of the wealth in this country, and that the way for them to make money was to focus advertising on just that small group. The 99% frankly just doesn’t matter all that much, since they don’t have enough money to matter. Especially in a recession.
Mike: I remember the web crash of 2000, and what now seems like a kind of mini recession, and you were saying to your advertisers and your friends, “Look, we’ve been fooled by this idea that these folks are the mass affluent, or the aspirational wealthy are important and it turns out along that only the truly wealthy cannot be truly hurt by the recession.
Jim: That was absolutely true in 2000 and has never been truer than today. In fact, this disparity, if you look back to 1980 to 2008, to sort of the height of wealth [creation] in America, in this country the total net worth of Americans increased by $53 trillion, this is from 1980 to 2008.
Mike: That’s the increase in net worth?
Jim: By $53 trillion, and that is the greatest and fastest wealth creation in human history. It’s unprecedented. But the dirty little secret behind this story, which didn’t get a lot of attention until right about now, although it’s been the bit going on steady since 1980, is that a staggering 94% of every dollar gained went to the top 20% already most affluent Americans, top 1% of wealthy Americans. And 42% went to the top 1%.
Mike: 42% of the $53 Trillion goes to the top 1%?
Jim: That left 6% of the remaining wealth went to the approximately 90 million remaining households… Let’s just see what happened in 2008 and 2009: That recent downturn wiped out about $17 trillion of wealth. But if you think about it, affluent consumers are still $46 trillion wealthier than they were in 1980. and $10 trillion wealthier than they were in 2000. And almost as wealthy as they were in 2004, pretty much the wealthiest year in human history. So I’m not that worried about the affluent consumer because they’ve had an unbelievable run-up and I don’t see that ending anytime soon.
Mike: so your customers are luxury producers: luxury carmakers, luxury travel people, luxury hotel people…Did they respond to the pitch, which I’m gathering is: “Pay No attention to the 99% percent. You need to only focus on the 1%” Were they responsive to that?
Jim: You know the great irony there was some there is some decent thinking behind this they actually weren’t. They felt in many ways that they had that top 1% to 10% in the bag, and they thought “My growth can come from this aspirational consumer,” this consumer that maybe didn’t have as much wealth or as high an income, but seemed to be spending a ton of money on luxury products, whether its expensive travel, home remodeling – we saw the rise of the McMansion – from that aspirational consumer.
I was looking at this and thinking: “How the heck can these people spend this money on luxuries when they basically had no increase in real wealth when you adjust for inflation for about 30 years?”
what was happening was the advertisers were right, in that the aspirational consumer was spending money on luxury. It turned out to be fake money…
Mike: Borrowed money, credit card money.
Jim: it turned out to be completely borrowed money, in basically two forms, as you well know: home-equity loans which were irresponsibly loaned out to them, and irresponsibly taken on by these consumers, who just assumed that real estate prices would forever go up, and then also massive amounts of credit card debt. The average American had anywhere from between 6 and 8 credit cards. The weakness of this aspirational consumer, the fact that they never really participated in this $53 trillion worth of wealth creation was masked by the fact that they were spending as if they were wealthy. As if they were part of the top 10%. And the party only ended recently when the banks and the credit card companies finally said “You know what? This is too risky.”
Mike: “You’re cut off.”
Jim: And to me that’s why all of a sudden the 99 percent is all of a sudden saying “Hey this isn’t fair!” Well, it’s because they either got laid off in greater proportion – of course the less money you make the more likely you got laid off in this most recent round. And also they’re not out able to live the lifestyle that they were able to live, and now they’re complaining because they can’t get the credit to live the fake lifestyle that they had enjoyed, and this is only going to become more pronounced as lending becomes more conservative.
New York City Lifestyle
I asked Jim about he and his wife living in Manhattan being driven to succeed at all costs, to prove themselves worthy of being part of the 1% crowd. As you can hear, it was not without some costs.
Mike: So I want to shift gears a little bit. You have left the world of New York City luxury, and left at the peak. What prompted the move?
There is no one reason. There was no one “Aha!” moment that my wife and I attribute to pulling the plug on that lifestyle. That so-called lifestyle in New York City. Kim was a big-time lawyer in New York – highly paid. I was at the top of my profession – very well paid. In the, kind of glamorous, famous, magazine fashion.
Mike: The black-tie events ,the private schools…
Jim: All of that, and then some, to almost to a cliché degree.
Mike: Charity events, an army of staff…keeping your kids, bringing them to school, taking them home.
Jim: At one point my Mom said to me: “Jim you don’t really have a life, or lifestyle, you sort of outsourced your entire life.”
I mean, we had people walking our dog. Two or three nannies circulating in and out. Housekeepers, Therapists, Nutritionists, Trainers.
Mike: Incidentally, The New York Times Magazine just – there’s some book out about outsourcing your life. I think you were, once again, years ahead of your times. There’s some new book about you know, Rent-a-Friend, and outsource your life.
Jim: We once made a list of all the people we were employing. At any given time it was between 20 and 30 different experts. Just so that we could, you know, see our kids without having to do work while we were seeing our kids for those few moments. You know the tutors, the Life Coaches…I mean I think at one point Kim had two life coaches and I had one. And that was in addition to our separate therapist as well as the therapist that we went to together. Of course my daughter developed some anxiety, probably from all the people coming in and out of the house. She had to have her own therapist as well.
Mike: you know for people who never lived in New York, I love the picture you just painted of what it takes… it doesn’t take a village, it really takes entire household staff to raise a family.
Jim: Oh yeah I mean at one point one of the nannies was pretty much there just to walk our dog. I live in the country now, and the idea of spending $24,000 a year to walk your dog seems absolutely absurd to me, but was completely normal at the time. We thought we were very virtuous, and down to earth, because we didn’t have a driver full-time who picked us up every morning, and drove our children to school, and then drove us to work. We thought we were down with people.
Mike: It’s pretty downscale to not have the private driver taking your kids.
Jim: I would say the three things we didn’t succumb to, that many of our peers with similar jobs, with similar apartments, living in similar neighborhoods, and having the same life would be: The Chef, the Driver, and the Private Airplane. Those were the three.
But you know my daughter, for example, talked about some friends of hers, in her first grade class, who had never flown commercially. [They] went on vacation all the time, had never flown commercially. You have eight-year-olds using the words “Wheels Up!”
I mean, the absurdity of that now…But nothing surprised me. Nothing surprised me then.
A couple years into New York City, not even a couple years, maybe two years into New York City, having gone from not even owning a car, not even barely being able to afford an apartment, pretty much every night we were working so late that the companies allowed us to have a driver, a limousine pick us up after work.
Kim worked a little later so I’d go over to her office, she’d call a car, we’d go down and get the car, and it’d be 10:30, 11 O’clock. Of course it’s New York City so you can go anywhere for dinner, at any hour. And so we’d decide what restaurant we wanted. And so we’d both, I guess that night they didn’t have a regular Town Car, so they sent this massive stretch limousine like you’d see on a prom date, but of course, we barely even noticed it because we’re so focused on our jobs.
We got into the car, we’re about 50 feet away from the driver. And he starts driving to the restaurant that we gave him directions to. And he took one turn that was slightly less efficient than taking the other turn. And both of us, without consulting with each other, starting screaming at him like it was the end of the world.
And we thought to ourselves, ‘WHAT ARE YOU DOING!! THAT’S THE WRONG WAY!! WHAT ARE YOU DOING!” like he was about to kill us or something. And we looked at each other and said “Oh boy, things have changed a little bit.”
So, we took it from there. That’s just one of those moments that you remember that you’ve become part of New York City.
Jim: And not in a good way.
Kim and I have this conversation that, about six or seven or eight years into clearly being successful from all objective measures, but still being incredibly insecure that “Jeez, I can’t believe I’m flying first-class and they’re picking me up in the limousine, and they’re paying me all this money, and treating me [well]”
We had this joke that one day the fraud squad was going to come and take us away in handcuffs from our offices. Because, how could this possibly be us doing so well? They’re going to figure out that we really don’t know anything. I’d say a lot of my dreams are.
Mike: Classic imposter syndrome.
Jim: Classic insecurity dreams that I haven’t written the speech that I have to give to 1500 people, which a couple of times is closer to truth than I would like to admit.
And then the other thing would be, I’ll still read the trades from my industry, and I know Kim reads the trades from her industry, and you read about someone having this great success that you knew really well and you think to yourself:
“Geez, I didn’t even think that guy was very good. I can’t believe they’re doing so well, and everybody thinks so highly of them. So, you know, the petty ego jealousy stuff, competitive spirit, rears its ugly head for sure.
Mike: New York City and Wall Street runs on insecurities, right, I mean this is a very key driver for everyone. “I need to prove myself” “That guy or that woman is not better than me, I’m just as good as them.” It’s an incredibly powerful motivator.
Jim: Oh yeah. A typical thing would be, one day worrying that you have a bad meeting with your boss and you read into all these things that he may be saying and you think “I really think I’m going to be fired tomorrow.” And then of course you’re way off base. And then next day he announces to you, brings you into his office and says, “Jim you are doing a great job, here’s a 25% raise.”
And you’re really excited and then you think to yourself “I wonder what Jane got for her raise?” And then you’re quickly angry. You’ve gone from being just happy to even be employed, to hearing that maybe one of your peers got a higher percentage raise, and then you’re enraged.
And so there’s this dichotomy between absolute terror at being not fit for duty, and then on the other side your ego kicking in and saying “how could that person be more important than me?”
Mike: Having lived through bonus day on Wall Street, it is the unhappiest day of the year. Because on the one hand, all of your sacrifices have been reduced to a number, which is inevitably never as satisfying as you want it to be, and then there’s the “I just got paid an extraordinary amount of money, but I know I’m underpaid relative to that bozo sitting next to me, who’s not as good as me, and just pretty much the worst human instinct kicks in on Bonus Day, and everybody’s feeling it at all at the same time on a trading floor.
Jim: You try to talk yourself off the ledge, but this competitive spirit is so ingrained when you’re there, that it drives everything.
Mike: Temporary insanity takes over on bonus day. You just reminded me of that, with the 25% raise, and yet you’re upset because the other person might have gotten a 35% raise or whatever.
Small Town life. Walking your own dog. Transition away from NYC.
Last year Jim moved back to the small town where he grew up, with his wife and two young children. I asked him about giving up the glamourous New York life, and teased him about having to walk his own dog now.
Mike: Dog Walkers, of course! Who can afford the time to walk your own dog? It’s crazy.
Jim: Why even walk the dog?
Mike: How’s that making me money?
Jim: I walk the dog so much it’s become…I walk the dog three sometimes four times a day. He’s pretty cool, but it’s actually good exercise, you know.
Mike: Yeah, you walk the dog like it’s your job.
Jim: I do, and I do a good job of it. I’m very competitive about taking a different route every time, I don’t go the easy route.
Jim: I don’t go the expected route.
Mike: you moved to a small town close to where you grew up. What are the biggest things? What are the biggest changes outside of the Fast Lane? And do you miss it?
Jim: I have not missed it yet. I think part of that is that it just feels so good to be relaxed and to not have that pace and that stress. So physically and mentally I feel so much better now, that as I get over the post-traumatic stress of a typical, clichéd, high-powered life in New York City, maybe some of that missing energy will come back but right now I just feel like I’m detoxing from that whole experience and it’s been great.
You know once again…a lot of clichés – that are true though – I mean this is why they have these stories, about staying time with your kids, driving them back from school, listening to their conversations and really understanding what’s going on with them, having dinner at night with the four of us. I mean that something we never did. When we came home in New York, the kids were fed, dressed, bathed. And that was it.
And I go to the kids practices, I coach them. Same thing with Kim. She takes Caroline to dance class, and singing class. We go to every recital, and every little art fair. And we’re volunteering for the first time, and being asked to be on boards.
I would say the biggest difference though, is that when you have a conversation with someone, you’re really have a conversation with them. You’re not thinking “Oh my God, I’ve got to get on my Blackberry and get back to that person.” Or, “Ooh, I haven’t fired that person yet, when am I going to do that?”
Two minutes into a conversation – or forget two minutes – thirty seconds into a conversation in New York City with someone who might even be interesting and might be a potential friend, but it’s so competitive and so high paced that your mind quickly wanders back to all the tasks you have to do to get ahead, and to make more money. To become a higher part of that top 1%.
Jim: I also realized the things I enjoy doing don’t cost that much. Reading, going to the movies. I like to run, I like to play tennis. I like to go to yoga. I like to walk the dog. I like to hang out with smart people. None of that costs a lot of money.
And so here we were in New York City, doing all of these incredibly expensive things. The fancy dinners, the fancy shows. It was just over the top, and I really didn’t enjoy it that much.
You’re having this funny food. You don’t even know what it is on your plate, and all you want to do is go back home and have a tuna fish sandwich. Too much of anything is not good, and too much of the 1% lifestyle is certainly not good either.
Mike: You’re a very ambitious, hard charging person who I know grew up in a small town, went to New York City, won, became part of the 1% and then some. Moved back to the small town. Would you urge your kids to go out and strive to be part of the 1% for themselves? Do you think about that?
Jim: That’s a great question. Fortunately my children are very young so I don’t have to make that decision, or recommendation or encouragement. In reality, it depends on the kid. I think for us, would I take back that experience? I wouldn’t take it back. I’d make some other decisions. I wouldn’t have treated it as so much as a life or death experience every day, whether you made the big sale or closed the big deal.
But I think there’s a certain satisfaction in knowing, having come from a small town, that you’re able to go to New York City, to compete, to win, to do really well, to get rewarded for it, get recognized by your peers, by the industry, even by the press, and also know yourself that “I competed, and succeeded,” and proved to yourself that you can do that.
Mike: this is where we cue the Frank Sinatra music or the Jay-Z/ Alicia Keys “New York“
Jim: So I think it depends on the kid. If the kid is competitive, and also needs to prove that to himself, that could be the thing for them. But I think what I will be able to do for them when they graduate from college is have a frank discussion about the dangers and the trappings and downsides and sacrifices that you make on a personal level to choose that path of conditions in a city like New York.
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