The New American Class System

Giga-billionaires are climbing the ladder and pulling it up behind them. Your six-figure salary won't even get you on the bottom rung. PLUS: A field guide to luxocrats and books to to feed your bitterness

You know this guy from college. He runs a hedge fund—let's call it Colossal Capital Strategies—and if you’re diligent or masochistic enough to do a little research, you’ll find out that he made about $100 million last year. He’s 36 years old and he has billions under management. The Wall Street Journal likes to refer to him as a “high-net-worth individual,“ but that wording seems so odd and clunky—the sort of boardroom-pretzel terminology that some lawyer from Enron might use to explain away a phantom transaction.
No. Let’s call him a luxocrat.
A luxocrat is not merely rich, but rich in a way that you couldn’t have imagined back in college. (Otherwise you would have been nicer to the guy.) He’s rich enough to guarantee that every calorie that passes his lips has been fussed over by a master chef, rich enough to share his truffled foie gras with the treasury secretary on a Gulfstream headed for Barbados, rich enough to impulse-buy doodads from the Robb Report with a black American Express Centurion card (whose existence you weren’t even aware of), rich enough to make your proud and dutiful little 401(k) look, in comparison, like the mound of coins that an Appalachian beet farmer might stash away in a pickle jar. A luxocrat is enormo-rich, robber-baron rich, 21st-century rich, swelled up with a wealth of such magnitude that it suggests the American class system would have to undergo a wholesale restructuring in order to accommodate it.
Which is arguably what’s happening at this very moment.
Usually when you read about the widening gap between the rich and the poor, you think of the insane chasm that yawns between, say, Bill Gates and a laborer trying to subsist on a few cents a day on the Bangladeshi floodplain. But there is a new status gap opening up in the American consciousness, one in which a young guy can earn or inherit what used to be a very respectable sum (well into the six figures, for instance) and still feel as if he’s stuck on a treadmill of perpetual proletarian worry and strain. Meanwhile he can’t help but notice that he’s got ultra-wealthy contemporaries (hedge-funders, real-estate moguls, Google geeks, surfers who retired at 30 after hitting the Silicon Valley jackpot) whose daily activities seem to have been shorn of all that worry and strain. The end result is the emergence of a different social pecking order—one in which the new money dwarfs the old, in which the currency-market globalists and Palo Alto venture capitalists conquer the top while even the Hollywood producers and Merrill Lynch desk jockeys get shunted to the bottom. A world in which the old rituals and pathways to success have been vaporized.
Let’s begin with the luxocrat’s home. “There is so much more big money in the hands of younger people,“ says Pam Liebman, the president and CEO of the Corcoran Group, a national real-estate powerhouse with almost $12 billion in annual sales. “And their way of thinking is much less traditional.“ In Manhattan, for instance, every budding tycoon used to lust for the pedigreed grandeur of an apartment in one of the pre-war buildings on Fifth Avenue or Park Avenue; he could acquire status by living in proximity to old money. Now “old,“ in any configuration, has lost its allure. The luxury tyro’s ideal habitat is a brand-new, Lysol-scrubbed steel-and-glass monument to personal service. (Consider the residential tower that Eric Packer, the cold-blooded 28-year-old billionaire in Don DeLillo’s 2003 novel Cosmopolis, likes to call home: “It had the kind of banality that reveals itself over time as being truly brutal. He liked it for this reason.“) Even if the building happens to be beautiful and designed by Richard Meier or Santiago Calatrava, what you see from the outside is less important than what the luxocrat has access to on the inside. The magic word is amenities: He wants a concierge, a pool, a gym, a spa, a playroom for the kids, valet parking, haute cuisine delivered to his door. He wants things taken care of. He wants, in effect, to live in a five-star hotel 24-7. You can’t really blame him. “People are busy, and they want to be pampered,“ Liebman says. “They want things that make their lives easier, more pleasant.“
See, there’s a reason you haven’t bumped into that college classmate for years, and it’s not just because you’re both so darn busy. It is because the luxocrat moves within a sphere that remains pretty much invisible to the rabble. Even if you’re tony enough to fly business class, stay at the Four Seasons, and gorge yourself at what’s supposedly the best steakhouse in town—Oh boy, creamed spinach!—you will never rub elbows with the luxocrat on a trip. This is because the luxocrat navigates his itinerary by private jet, floats above the airport traffic in a helicopter, whisks up to the presidential suite in a private elevator, unwinds for a weekend on a private island in the Indian Ocean, and dines at home on a menu tailored by Daniel Boulud or in a private club with fellow members of the elite. (Luxocrats hang with other luxocrats. They cluster.) The actions of his day are as swift, self-enclosed, and gravity-free as the rush of a capsule through a pneumatic tube. Chores are eliminated. Obstacles removed. Mobs avoided. Environments engineered for maximum efficiency and—as you’ve probably figured out by now—privacy.
At ExcelAire, a private-jet company, senior vice president David Rimmer has seen a 50 percent surge in charter flights over the past year. A single jaunt from New York to Hawaii might shrivel your wallet to the tune of $150,000, but hey, it allows you to bypass the hassles. “You get to control your schedule,“ Rimmer says. “When you travel this way, your stress level doesn’t have to increase when you get to the airport. We cater to people who are used to having more control over their environment.“
Control—another magic word. Farhad Vladi, a Canadian entrepreneur, became a pioneer in international real estate by launching Vladi Private Islands, a company that helps rent and sell obscure and isolated atolls to people yearning for seclusion. “Bill Gates, we rented him Frégate Island in the Seychelles for 10 days—he came, nobody knew, he enjoyed it, then he left,“ Vladi says. “We did the same thing with Angelina Jolie. She rented an island off Kenya.“ But a member of the upper crust is unlikely to buy an island, because word would leak out, and that would only invite intruders. “It’s too dangerous for them. You are alone. You don’t have any help left, right, and center.“
Amenities, control, help—more than net worth itself, these are the factors most likely to arouse envy in anyone who peers into the cocooned and glitch-free biosphere of a luxocrat. The 19th-century railroad magnate had a Gosford Park–style retinue of servants who took care of all of his mundane tasks and needs. The luxocrat does too. But his legions of butlers and valets and scullery maids are, thanks to technology and changing tastes, invisible.
If you squandered part of your day bickering with Verizon over your phone bill or trying in vain to get a reservation at the French Laundry or begging United Airlines for a merciful upgrade to business class—if you did anything at all that reinforced how lamely you’re stuck on the ladder between status and schlubbiness—well, then, a conversation with Steven MacGeachy is going to feel like divine intervention. Because MacGeachy helps. MacGeachy makes things happen for you. MacGeachy, 35, and his brother Gordon, 44, run a service based in Los Angeles called Mint Lifestyle. They have roughly 140 clients from around the globe, each of whom pays them $20,000 a year. “Let’s not kid ourselves. Our clients are exceptionally affluent,“ Steven says in a ruddy Scots accent. “And successful people are incredibly busy. They are just manically busy. They don’t have the time to wait on hold for anyone.“
Which is why those clients can call the MacGeachy brothers and make a request—any request. “They’ve done some pretty cool things,“ says Michael Stuart, 37, a Mint client and commercial-real-estate broker in Las Vegas. “They got my new Rover, which was unobtainable at the time, and they got it without any add-on costs, and they had somebody deliver it to my door. Steven says he’ll do anything as long as it’s not illegal.“ Want a private tour of the Vatican? The MacGeachy brothers can set it up. Want an F430 Spyder? They can track down and inspect one for you. A few days back, Steven got a call asking whether he could, in a couple of hours, arrange for an obscure Iranian television program to be patched in, via satellite, to an office in New York City. “It was totally seamless,“ Steven says. In short, he says, “we’re managing your life.“
And should you remain unconvinced that the managed life is one of enviable ease, call your college classmate and rustle up an invitation to the Core Club. Located on East 55th Street in New York, the Core Club is a one-stop cloister of elite pampering and networking. Whereas an older club might come across as stuffy, says Anthony Scaramucci, a venture capitalist and one of Core’s founding members, the Core Club “is a forward-moving entertainment and cultural center.“ It has a spa, a bar, a gym, a video-conferencing nook, a pristine and elegant library curated by a former Paris Review publisher. It has a screening room with a curtain designed by art star David Salle and a restaurant with a chef, Dan Kluger, who has manned the stoves at Tabla and Union Square Cafe. “Our members don’t even have to order,“ says the Core Club’s founder, Jennie Saunders, “because Dan can cook anything for them, and Dan knows what they like.“ Everywhere you turn you see works by Hirst and Warhol and Koons and Basquiat—along with members and invited guests like Kenneth Cole and William Lauder and Jay-Z. In fact, all these sights and services are accessible to about 500 people who are deemed pioneering leaders in 13 industries, and who are hand-picked by a special panel, and who are happy to pay the $60,000 initiation fee—“people who are transforming our world,“ as Saunders puts it. Here, she says, they can meet, bond, and “optimize time“ in a club whose database is programmed to know each customer—his workout schedule, his peanut allergy, his fondness for a rare brand of tequila. “Our members deserve to live in a no-compromise zone,“ Saunders says.
An influential man, an adviser to four presidents, recently gazed upon the Core Club and made an intriguing declaration. “This,“ he said, “is all about our future.“
AND WHAT A GLORIOUS FUTURE IT WILL surely be, you think, this no-compromise zone of amenities and optimized time and bypassed hassles . . . until it happens to dawn on you that you will never have access to it. If the nineties boom felt sunny and democratic, backlit by a perception that a rising stock market would fatten all 401(k)s, this, the latest chapter in American growth, comes across as creepily aristocratic. Private planes, private chefs, private clubs, private islands—is this nothing more than a flukey societal fad, or are we witnessing the reassertion of long-dormant feudal hierarchies, a fresh, modern way to make sure that the lords don’t have to mix it up with the vassals and serfs? Privacy, after all, implies that someone’s getting shut out.
You don’t have to look far to pick up on this frazzled new mode of status anxiety. It’s in movies like Nicole Holofcener’s Friends With Money, in which Jennifer Aniston’s character slides pathetically into the service sector while her rich friends piss away thousands on charity balls, home renovations, and toys for their kids. “It just seemed to be coming up a lot,“ Holofcener says, “and I thought, I want to write about money and how fucked up we are about money. It’s insidious. It’s a little poison that spills into all different elements of relationships, and it complicates them.“ It’s in John Perkins’ Confessions of an Economic Hit Man, Dan Reingold’s Confessions of a Wall Street Analyst, and Paul Stiles’ Is the American Dream Killing You?—books that suggest that working stiffs are getting reamed by forces beyond their control. Stiles warns of “a dangerous separation in America between an upper, predatory class and their prey, the middle class“ and how “the entire top tier of society becomes a cabal exploiting the rest.“ The message is clear: The cozy class system you grew up with has been replaced by something else.
It used to be that dentists and lawyers and regular-Joe corporate schlubs qualified as “rich people,“ but in the age of the grossly overcompensated CEO and the hedge-fund wizard, all bets are off. A hedge-fund wizard does not get rich by socking away 13 percent of his salary in the Vanguard Nice & Safe Index Fund and waiting for the three-bedroom in Montclair to appreciate. He takes massive risks on stuff that looks abstract and inaccessible to the rest of us—movements of money as mysterious as the movements of clouds.
And according to the data, the luxocrats are breaking away from the schlubs faster and more emphatically than ever. Forbes reports that there are now 793 billionaires on the planet. Twenty years ago there were 140. (In the past year alone, 102 people crossed the billion mark.) Meanwhile, back in Schlubville, the last census found that the median net worth of an American household was $55,000—and sank down under $15,000 if you snipped out the (quite possibly inflated) value of the house itself. Between 1967 and 2003, the median income of an American household practically flatlined, not even poking out of the $30,000-to-$45,000 range in the course of 36 years. “The long-run trend has been this continuing concentration of income and wealth at the top,“ says Cornell professor Robert H. Frank, the author of Luxury Fever and coauthor of The Winner-Take-All Society. “For a while, people in the middle were gaining ground—in the late nineties, a little bit. But that’s all sort of gone back to the stagnant picture again. The only gains that people in the middle get are from working longer hours.“ D’oh.
Still, if you’re looking at those census numbers and you make six figures, you should be feeling pretty good, right? So why don’t you? Well, as Frank puts it, “Everybody wants an apartment with a view of Central Park. Those apartments don’t go to the people who earn $500,000 a year anymore.“ It’s a chain reaction: With every purchase that the lord makes, something slips farther out of reach for the vassal. Want to send your kid genius to private school? Consider it a sign of the times that Westridge, a prestigious school for girls in Pasadena, California, is now offering financial aid to families that bring in up to $150,000 a year. College tuition has shot up, too—by something in the neighborhood of 300 percent. Luxury inflation happens across the board, and it leads to bizarre phenomena: A recent report put together by Capgemini and Merrill Lynch discussed “The Mid-Tier Millionaire Paradox.“ (It turns out that people who are worth between $5 million and $30 million are seen as “tweeners“ in the world of high-net-worth individuals, because they don’t get enough help in figuring out how to invest and protect their money. No, the folks who get all the attention are the ultra-high-net-worth individuals, those who are subsequently obsessed with the Forbes Cost of Living Extremely Well Index and are constantly fretting about getting gouged by their yacht dealer.)
Shun caviar if you wish; you’re still gonna get crunched. “There’s a lot of ways that the spending at the top cascades down and imposes costs on people in the middle,“ Frank says. “You’re not thinking of building a 40,000-square-foot house. But the hedge-fund guys are. So the guy in the middle now has to buy a house that’s about a third larger than 20 years ago, and that’s problematic just because he doesn’t really earn much more than the guy in the middle earned 30 years ago. You could say, ‘Well, suck it up—just buy the house you can afford.’ That’s the prudent thing to do. You can scale back, but you’re not going to be comfortable with what happens.“
You’re not going to be comfortable because, among other things, your kids could wind up stagnating in inferior schools. Lifestyle factors like that are going to make you feel . . . destitute. “I’m already going broke on a million dollars a year!“—that line seemed like a joke back in 1987, when master of the universe Sherman McCoy said it in Tom Wolfe’s The Bonfire of the Vanities. Now it comes off as totally realistic. Mark Ketcham has two successful Bay Area businesses that cater to the luxury market: a winery and a vintage automobile dealership. “It may sound funny,“ he observes, “but with a first home, a wife, and a couple of curtain crawlers that will need to be sent to college, you’re just getting by in San Francisco on $300,000 a year.“
You can surrender, simply stop trying to keep up with the luxocrats, but then what? “If you don’t keep up, you’re supposed to feel bad about who you are,“ says Paul Stiles, 41, whose career path took him through both Wall Street and Silicon Valley before he threw in the towel and wrote Is the American Dream Killing You? “That’s the lever that the market’s using to get everybody to lead these ridiculous lives that are emptying them of all spirit. Why else would anyone do it? Even if they’re not really conscious of it, they’re afraid of feeling like shit about themselves. Even the guy who’s making half a million dollars feels like shit relative to the guys he’s in the office with.“ Because in the end, the problem is not that your college classmate has become outrageously rich. The problem is what that presidential adviser at the Core Club said about the future. The problem is that you, after all your hard work, never expected to be poor.
[click here for paranoia-inducing reading material >
[click here for a field guide to luxocrats >](javascript:popSlideShowV('/details/features/slideshow/v/05242006MONEY'))

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