Plutocrats: The Rise of the New Global Super-Rich and the Fall of Everyone Else (12 page)

America’s business elite, by contrast, is something of a latecomer to this transnational community. In a study of British and American CEOs, for example, executive headhunter Elisabeth Marx found that almost a third of the former were foreign nationals, compared to just 10 percent of the latter. Similarly, more than three-quarters of the Brits had worked abroad for at least two years, whereas just a third of Americans had done so.

But despite the slow start, American business is catching up. Today’s American chief executives are twice as likely to have worked abroad as their predecessors of a decade ago, and the number of foreign and foreign-born CEOs of U.S. companies, while still relatively small, is rising. The shift is particularly evident on Wall Street. In 2006, each of the eight leading banks on the Street was run by a native-born CEO; today, their number is down to five, and two of the survivors—Citigroup and Morgan Stanley—are led by men who were born abroad.

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In fact, Jeff Immelt, the CEO of General Electric, recently told me his successor might well come from an emerging market, because that’s where GE’s future, and the future of American business more generally, lies.

In Immelt’s view, the financial crisis marked the end of the age of America’s economic dominance. “I came to GE in 1982,” Mr. Immelt told me. “For the first twenty-five years, until the bubble crashed in 2007, the American consumer was the definitive driver of the global economy.” But the future will be different, Mr. Immelt said. For the next twenty-five years, he said, the U.S. consumer “is not going to be the engine of global growth. It is going to be the billion people joining the middle class in Asia, it is going to be what the resource-rich countries do with their newfound wealth of high oil prices. That’s the game.

“There are going to be one billion consumers joining the middle class in Asia. I think for us to reduce unemployment, exports are going to be a key way to do it,” Immelt told me. “It’s this country’s only destiny just because most of the consumers are some place other than here.”

As a cautionary counterexample, Immelt cited inward-looking Japanese firms. “Look, when I was a young guy, when I first started with GE, Jack Welch sent us all to Japan because in those days Japan was gonna crush us,” he said. “And we learned a lot about Japan when we were there. But over the subsequent thirty years the Japanese companies all fell behind. And the reason why they fell behind is because they didn’t globalize. They didn’t have to go out and sing for their dinner in every corner of the world. That’s not the case with GE. It’s not the case with other American multinationals.”

At the 2010 Aspen Ideas Festival, Michael Splinter, CEO of the Silicon Valley green-tech firm Applied Materials, confessed that if he were starting from scratch, only 20 percent of his workforce would be domestic. “This year, almost 90 percent of our sales will be outside the U.S.,” he explained. “The pull to be close to the customers—most of them in Asia—is enormous.” Speaking at the same conference, Thomas Wilson, CEO of Allstate, told a similar story: “I can get [workers] anywhere in the world. It is a problem for America, but it is not necessarily a problem for American business. . . . American businesses will adapt.”

Paul Volcker, the legendary inflation-fighting former head of the Federal Reserve, told me that at a 2012 dinner with a group of chief financial officers in Manhattan he had been struck by the global outlook of what he described as “so-called American companies”: “Implicitly, they don’t think of themselves as American anymore,” he said. “They are international companies. If the American government doesn’t treat them right they will move their headquarters abroad. These companies are more likely to man their foreign branches with foreigners than they are Americans, and they send foreigners to run their American operations.”

Mohamed El-Erian, the CEO of Pimco, the world’s largest bond manager, is typical of the global nomads gradually rising to the top echelons of U.S. business in this international age. The son of an Egyptian father and French mother, El-Erian had a peripatetic childhood, shuttling between Paris, Cairo, New York, and London. He was educated at Cambridge and Oxford and now works for a U.S.-based company that is owned by the German financial conglomerate Allianz SE.

Though El-Erian lives in Newport Beach, California, where Pimco is headquartered, he says that he can’t name a single country as his own. “I have three passports,” El-Erian told me on a recent visit to New York. “I don’t belong to any one country. I belong to many and to the world.” As he talked, we walked through midtown, which El-Erian remembered fondly from his childhood, when he’d take the crosstown bus each day to the United Nations School. That evening, El-Erian was catching a flight to London. Later in the week, he was due in St. Petersburg.

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Indeed, there is a growing sense, at GE and beyond, that American businesses that don’t internationalize aggressively risk being left behind. For all its global reach, Pimco is still based in the United States. But the flows of goods and capital upon which the super-elite surf are bypassing America more often than they used to. Take, for example, Stephen Jennings, the fifty-two-year-old New Zealander who cofounded the investment bank Renaissance Capital. Renaissance’s roots are in Moscow, where Jennings maintains his primary residence (he also has farms in Oxfordshire and New Zealand, and his children go to school in England), and his business strategy involves positioning the firm to capture the investment flows between the emerging markets, particularly Russia, Africa, and Asia. For his purposes, New York is increasingly irrelevant. In a 2009 speech in Wellington, New Zealand, he offered his vision of this post-unipolar business reality: “The largest metals group in the world is Indian. The largest aluminum group in the world is Russian. . . . The fastest-growing and largest banks in China, Russia, and Nigeria are all domestic.”

As it happens, one of the fellow tenants in Jennings’s high-tech, high-rise Moscow office building recently put together a deal that exemplifies just this kind of intra-emerging-market trade. In the spring of 2010, Digital Sky Technologies (DST), Russia’s largest investment firm, entered into a partnership with the South African media corporation Naspers and the Chinese technology company Tencent. All three are fast-growing firms with global vision—in the fall of 2010, a DST spin-off named Mail.ru went public and instantly become Europe’s highest-valued Internet company, with a market capitalization of $5.71 billion—yet none is focused on the United States. A similar example of the intra-emerging-market economy was Indian telecom giant Bharti Enterprises’ acquisition of most of the African properties of Kuwait-based telecom Zain. A California technology executive—himself a global nomad who has lived and worked in Europe and Asia—explained to me that a company like Bharti has a competitive advantage in what he believes will be the exploding African market: “They know how to provide mobile phones so much more cheaply than we do. In a place like Africa, how can Western firms compete?”

A
RISTOCRACY OF
I
DEAS

Just as the railroad created new cities, private jets and private jet time-shares like NetJets have contributed to the globalization of the super-elite—owning homes and doing deals around the world becomes feasible when you can travel the planet as easily as the middle class steps into a car. New technologies have helped, too—instant and mobile communication makes it possible to live on the move and around the world. So have the political revolutions that have opened up so many of the world’s borders over the past twenty years.

The most important shift, however, was the one foreseen by Adam Smith in
The Wealth of Nations
. Writing in 1776 at the very beginning of the industrial revolution, he predicted that as fortunes shifted from acres to shares they would become more mobile: “The proprietor of land is necessarily a citizen of the particular country in which his estate lies. The proprietor of stock is properly a citizen of the world, and is not necessarily attached to any particular country.”

Smith could see that manufacturing companies, and the disaggregated owners of their stock, would eventually eclipse land as the engine of the economy. The technology revolution, which has created a new and powerful sphere of economic activity that has almost no physical manifestation at all, has taken that trend exponentially further. The result, as Smith anticipated, is an elite driven by its economic interests to think global: “He [the owner of stock] would be apt to abandon the country in which he was exposed to a vexatious inquisition in order to be assessed to a burdensome tax, and would remove his stock to some other country where he could either carry on his business or enjoy his fortune more at his ease.” But while capital—and capitalists—have gone global, governments and most of their middle-class citizens operate within national boundaries. Figuring out how the plutocrats are connected to the rest of us is one of the challenges of the rise of the global super-elite.

Harry Mount, the
Spectator
essayist, is grudgingly grateful to the global super-elite for “buying” the traditional summer social calendar of English high society and sprucing it up—“the rackety, amateurish, faded charms of English high summer have been replaced by a professionalised, slick operation, supercharged by oceans of international cash.”

But the irony of this overseas acquisition is that while the debutante balls and hunts and regattas of yesteryear may not be quite obsolete, they are certainly headed in that direction. The real community life of the twenty-first-century plutocracy occurs on the international conference circuit. “We don’t have castles and noble titles, so how else do you indicate you’re part of the elite?” Andrew Zolli of PopTech, an ideas forum and social innovation network, told
New York
magazine.

The best known of these events is the World Economic Forum’s annual meeting in Davos, Switzerland, invitation to which marks an aspiring plutocrat’s arrival on the international scene—and where, in lieu of noble titles, an elaborate hierarchy of conference badges has such significance that one first-time participant remarked that the staring at his chest made him realize for the first time what it must be like to have cleavage. The Bilderberg Group, which meets annually at locations in Europe and North America, is more exclusive still—and more secretive—though it is more focused on geopolitics and less on global business and philanthropy. The Boao Forum, convened on Hainan Island each spring, offers evidence both of China’s growing economic importance and of its understanding of the culture of the global plutocracy. Bill Clinton is pushing hard to win his Clinton Global Initiative a regular place on the circuit. The annual TED conference (the acronym stands for Technology, Entertainment, Design) is an important stop for the digerati, as is the DLD (Digital-Life-Design) gathering Israeli technology entrepreneur Yossi Vardi cohosts with publisher Hubert Burda in Munich each January (so convenient if you are en route to Davos). Herb Allen’s Sun Valley gathering is the place for media moguls, and the Aspen Institute’s Ideas Festival is for the more policy-minded, with a distinctly U.S. slant. There is nothing implicit, at these gatherings, about the sense of belonging to a global elite. As Chris Anderson, the curator of the TED talks, told one gathering: “Combined, our contacts reach pretty much everyone who’s interesting in the country, if not the planet.”

Recognizing the value of such global conclaves, some corporations have begun hosting their own. Among these is Google’s Zeitgeist conference, where I have moderated discussions for several years. One of its recent gatherings was held in May 2010 at the Grove, a former provincial estate in the English countryside whose three-hundred-acre grounds have been transformed into a golf course and whose high-ceilinged rooms are now decorated with a mixture of antique and contemporary furniture. (Mock Louis XIV chairs—made, with a wink, from high-end plastic—are much in evidence.) Cirque du Soleil offered the five hundred guests a private performance in an enormous tent erected on the grounds; the year before that, to celebrate its acquisition of YouTube, Google flew in overnight Internet sensations from around the world.

Yet for all its luxury, the mood of the Zeitgeist conference is hardly sybaritic. Rather it has the intense, earnest atmosphere of a gathering of college summa cum laudes. This is not a group that plays hooky: the conference room is full from nine a.m. to six p.m. on conference days, and during coffee breaks the lawns are crowded with executives checking their BlackBerrys and iPads.

The 2010 lineup of Zeitgeist speakers included such notables as Archbishop Desmond Tutu, London mayor Boris Johnson, and Starbucks CEO Howard Schultz (not to mention, of course, Google’s own CEO, Eric Schmidt). But the most potent currency at this and comparable gatherings is neither fame nor money. Rather, it’s what author Michael Lewis has dubbed “the new new thing”—the insight or algorithm or technology with the potential to change the world. Hence the presence of three Nobel laureates, including Daniel Kahneman, a pioneer in behavioral economics. One of the business stars in attendance was then thirty-six-year-old entrepreneur Tony Hsieh, who had sold his Zappos online shoe retailer to Amazon for more than a billion dollars the previous summer. And the most popular session of all was the one in which Google showed off some of its new inventions, including the Nexus phone.

This geeky enthusiasm for innovation and ideas is evident at more intimate gatherings of the global elite as well. Take the elegant Manhattan dinner parties hosted by Marie-Josée Kravis, the economist wife of private equity billionaire Henry Kravis in their elegant Upper East Side apartment. Though the china is Sèvres and the paintings are Old Masters, the dinner table conversation would not be out of place in a graduate seminar. Mrs. Kravis takes pride in bringing together not only plutocrats such as her husband and Michael Bloomberg, but also thinkers and policy makers such as Richard Holbrooke, Robert Zoellick, and
Financial Times
columnist Martin Wolf, and leading them in discussion of issues ranging from global financial imbalances to the war in Afghanistan.