Plutocrats: The Rise of the New Global Super-Rich and the Fall of Everyone Else (10 page)

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What’s new isn’t so much the pure power of getting an early start. That’s both easy to intuit and well reported. One example is a 1968 study of Nobel Prize winners by social scientist Robert Merton. He found that one striking shared characteristic of the future Nobelists was being talented enough and focused enough at a young age that they were able to find their way into the labs of the most eminent scientists in their fields—“of 55 American laureates, 34 worked in some capacity as young men under a total of 46 Nobel Prize winners.”

The bigger shift has been that, in a time of rapid economic change, there are fewer second chances for those who don’t take off from the starting blocks at a sprint, or who run in the wrong direction for their first few laps. That was true during the industrial revolution. As Alfred Marshall, the pioneering nineteenth-century English economist, wrote, “The conditions of industry change so fast that long experience is in some trades almost a disadvantage, and in many it is of far less value than a quickness in taking hold of new ideas and adapting one’s habits to new conditions. A man is likely to earn less after he is fifty years old than before he is thirty.”

Marshall, who transformed economics by going out and doing field research, made that observation in 1890. A century and a quarter later and on another continent, you could hear remarkably similar comments from leaders of the Internet revolution. “A lot of professional writers apply here,” Keith Griffith, the director of editorial recruiting at Groupon, the Chicago-based Internet sales site, told a reporter in 2011, five months before the start-up’s $700 million IPO. “I’ve had applicants from
Rolling Stone
, the
Wall Street Journal
. But it’s really hard to get them to do what we’re looking for. It’s easier to teach people than unteach them.”

This volatility makes us unhappy. Carol Graham, a researcher at the Brookings Institute, has identified what she calls the paradox of the happy peasant and the miserable millionaire—ambitious members of the middle class in fast-growing economies are actually less happy than poor people in more stable societies. One reason for the distress of the group Graham calls the “frustrated achievers,” she believes, is the uncertainty of their economic position. They worry that at any moment they could lose their jobs and savings and drop back down to the bottom.

By contrast, early super-success is a useful hedge against the vagaries of an unpredictable economy. Many of today’s plutocrats stumbled a decade or two into their careers, but by then they had already accomplished so much that they were poised to seize even larger opportunities.

The premium on early success means that the alpha geeks of the super-elite have been driven from a young age. The dorm room incubation of our most important technology companies is common knowledge. That’s where hedge funds are starting, too. Bill Ackman, the most influential activist investor in America today, whose targets have included J.C. Penney and Target, founded his first hedge fund with a classmate right after graduating with an MBA from Harvard. Ken Griffin, the billionaire founder of Citadel, the Chicago-based hedge fund, started trading bonds out of his college dorm room.

The pattern holds for many of the emerging markets plutocrats, too. Carlos Slim, who bought his first share when he was twelve, started to make serious money straight out of college, when he was one of Los Casabolseros, or Stock Market Boys, a group of aggressive young men who traded shares on the Mexican stock market and played dominoes together after the market closed. Many of the Russian oligarchs first ventured into commerce while they were students taking advantage of Mikhail Gorbachev’s tentative perestroika reforms to open businesses as diverse as window washing and computer programming.

The result is a super-elite whose members have been working to join it for most of their conscious lives—if not since nursery school, certainly since high school, when the competition for those elite college places begins in earnest. College, which boomers may fuzzily recall as a halcyon season of parties and self-discovery, has become, for the future 1 percent, a grueling time to found your start-up or to build a transcript that will earn a first job at an elite firm like Goldman Sachs or McKinsey. One sign of the shift is the illicit drug of choice among the gilded youth—Adderall. Its great virtue, one Princeton engineer told me, is that you can study for twenty-four hours without losing your concentration or needing to sleep.

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For those who make it, the relentless pace continues. One badge of membership in the super-elite is jet lag. Novelist Scott Turow calls this the “flying class” and describes its members as “the orphans of capital” for whom it is a “badge of status to be away from home four nights a week.” The CEO of one of the most prestigious multinationals recently climbed Mount Kilimanjaro with his daughter to celebrate her graduation from college. He told a friend the two-week expedition was the longest they had ever been together.

“They make a lot of money and they work incredibly hard and the husbands never see their children,” Holly Peterson said of the financiers of the Upper East Side. Their lives are driven not by culture or seasons or family tradition, but by the requirements of the latest deal or the mood of the markets. When Mark Zuckerberg rebuffed Yuri Milner’s first approach, the Russian investor, who was already a multimillionaire, turned up at the Internet boy wonder’s office in Palo Alto the next day, a round-trip journey of twelve thousand miles. In November 2010, the number two and heir apparent of one of the top private equity firms told me he was about to make a similar journey. I was a having a drink with him near Madison Park on a Wednesday night. He told me he needed to leave by eight p.m., because he had to fly to Seoul that evening. He planned to make the fourteen-thousand-mile round-trip for a ninety-minute meeting. His putative partners had invited him to Korea just forty-eight hours before, on the Monday of that week. It was, he told me, “a test of our commitment.” When the European sovereign debt crisis came to dominate the markets in 2011, New York traders started to set their alarm clocks for two thirty a.m., in time for the opening bell in Frankfurt. Some investors in California didn’t bother going to bed at all.

Wall Street e-mail in-boxes give you a flavor of the working lives of financiers, at least as they perceive them. In the spring of 2010, when the Obama administration first proposed a millionaires’ tax, an anonymous screed pinged its way around trading desks and into the electronic mail of a few journalists. It begins with the declaration “We are Wall Street,” and goes on to describe the intense workdays of traders: “We get up at 5 a.m. and work till 10 p.m. or later. We’re used to not getting up to pee when we have a position. We don’t take an hour or more for a lunch break. We don’t demand a union. We don’t retire at 50 with a pension. We eat what we kill.”

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Even when they are not traveling, the super-elite inhabit a volatile world. Jobs at the top are very insecure, and becoming more so. The average tenure of a Fortune 500 CEO has fallen from 9.5 years to 3.5 years over the past decade. That’s true lower down the food chain, too. Thomas Philippon, the economist who documented the connection between deregulation and soaring salaries on Wall Street, also found that the jobs of financiers were very insecure. Nor does being your own boss protect you from the uncertainty of the markets. At a 2011 seminar at the Central European University in Budapest devoted to the psychology of investing, George Soros told the gathered academics that “the markets are a machine for destroying the ego.” Popular culture has taught us to imagine the chiefs of Wall Street as strutting masters of the universe. That’s partly true. But they are also chronically exhausted men terrified that their latest trade will turn out to be a multimillion-dollar mistake that costs them their job. Soros, secular to his fingertips, describes investing mistakes as “sins” when he talks about them with his team.

“If you push towards an Apple world, a Google world, that’s all about brutal efficiencies. The guys on the top are constantly updating their models. It’s a brutal world, actually. You have to be really on the ball and fast,” Eike Batista, the oil and mining magnate who is the richest man in Brazil and one of the ten richest men in the world, told me. “A year and a half ago, we didn’t know about tablets, right? Tablet is basically killing the PC world. So, you know, congratulations to Apple, which had the vision that it would create a dramatic change. Everybody has to change now. Look at the brutal change that is being used through that thing. And so, if the others don’t move, they’re going to be dead tomorrow.”

Batista used the Apple analogy as a way to communicate with me, a North American, in an idiom he thought I would understand. But he was really talking about a Darwinian struggle at the very top in Brazil, one of the fastest-growing economies in the world: “Of the 10 percent wealthiest, you know, 70 percent of this 10 percent wealthiest made their money in the last ten years. Voilà. So, a massive social movement.” Batista is one of those arrivistes, and the old guard doesn’t like him or his ilk one bit, he told me. “You have to accept criticism—that’s part of a democratic system like we have in Brazil,” he said, half triumphantly, half ruefully.

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None of which is meant to make you pity the super-elite. The famous Whitehall study of the British civil service documented something humans have suspected for centuries: power is good for your health. The UK research, which was launched in 1967, found that the higher up in the bureaucracy you were, the longer you lived. That’s equally true of today’s super-elite. They may be anxious and overworked. But it is still a lot better to be a trader or a CEO earning several million dollars a year—and guaranteed a golden parachute—than a minimum-wage cleaner working those same sixty hours a week but without the comforts of a private jet, a housekeeper, or medical insurance. Still, to understand the mind-set of the super-elite, your starting point should be the reality—and their own self-perception—that they, too, lead anxious, overworked, and uncertain lives.

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The money certainly helps justify those long hours. But the super-elite also bask in a culture that, at least until the 2008 financial crisis, was happy to regard them as the heroes of our age. Their virtue need not manifest itself in any of the traditional Judeo-Christian values—Steve Jobs, who currently dominates the iconostasis, was an egotistical jerk who often treated employees, family (including his daughter), and ordinary mortals who dared to e-mail him with cruelty or disdain. But we do need them to succeed in business because of their sheer superiority to everyone else—part of the appeal of the Jobs story is his second coming at Apple, when he showed up the mediocrities who had ousted him.

Most important of all, the plutocrats, and their chorus in the popular culture, are keen to believe they are not engaged on an entirely selfish mission. Carnegie asserted that knights of capitalism like himself “and the law of competition between these” were “not only beneficial, but essential to the future progress of the race.” No one would talk like that today, but our champions of capital do like to describe their work in strikingly moral terms. Google’s company motto is “Don’t be evil,” and at a recent company conference, Larry Page, Google’s cofounder and now its CEO, said earnestly that one of Google’s greatest accomplishments was to save lives—thanks to the search engine, for instance, people can type in their symptoms, learn immediately they are having a heart attack, and get life-saving help sooner than they would have otherwise. The self-driving car, one of Page’s pet projects, would eventually, he argued, save more lives than any political, social, or humanitarian effort.

“It’s not possible in tech to frame your ambitions aside from those who are making the world a better place,” Eric Schmidt, former CEO of Google, told me. “I think it has a lot to do with the way Silicon Valley was formed and the university culture. The egalitarian culture. The liberal culture there. People are often surprised by that. . . . And I always try to explain to people that people actually came to Google not to get wealthy, but to change the world. And I genuinely believe that.”

Another way to believe our plutocrats are heroes battling for the collective good is to think of capitalism as a liberation theology—free markets equal free people, as the editorial page of the
Wall Street Journal
asserts. One of the most convincing settings for this vision is Moscow, where in October 2010 you could hear it ringingly delivered by Pitch Johnson, one of the founders of the venture capital business in Silicon Valley, in a public lecture to business school students about capitalism and innovation.

Johnson, who was a fishing buddy of Hewlett-Packard cofounder Bill Hewlett, is a genial octogenarian with a thick white head of hair, glasses, and a Santa Claus waistline. He has made something of a project of Russia, having traveled there twenty times since 1990 (he got a particular kick out of flying his private jet into what was then still Soviet airspace). As Johnson tells it, capitalism is about more than making money for yourself—it is about liberating your country. “Those of you who practice economic freedom will also cause your country to have more political freedom,” Johnson promised with great enthusiasm. “I would call you the revolutionaries of this era of your country.”