The New Elite: Inside the Minds of the Truly Wealthy

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9781423364351: The New Elite: Inside the Minds of the Truly Wealthy

We are all fascinated by them - that enigmatic class of people often referred to as the rich. With all the emphasis on the rich and famous in America, we would think we know everything about them. In reality, very few of us truly understand those who make up the very wealthiest Americans - those with liquid assets of $5 million or more. What is this new class of people and how did they get that way? In The New Elite, the authors reveal what motivates our country’s most powerful and influential class, what they want, where they shop, and how they really spend their money. With candor and unique insight, they reveal that the people who drive our economy are not Ivy league-educated, luxury-seeking socialites. While they include luminaries like Bill Gates, David Geffen, Ralph Lauren, and Donald Trump, they also include the small business owner next door. Based on unprecedented research with hundreds of interviews with members of this unique group, The New Elite uncovers the five classes of America’s newly wealthy - including those who struggle with its implications, those who refuse to let it change them, and those who give it away, and how each of them is changing our culture and economy. This is an entertaining and enlightening look at America’s ruling class, the profound ways they have redefined what it means to be rich, and how we court them.

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About the Author:

Jim Taylor is Vice Chairman of Harrison Group and one of the country’s leading experts on marketing, branding, and wealthy consumers. Doug Harrison founded Harrison Group in 1996 and develops branding strategies for some of the world’s most successful companies. Stephen Kraus has a Ph.D. in social psychology from Harvard University and leads Harrison Group’s training and wealth consultancies.

Excerpt. Reprinted by permission. All rights reserved.:

CHAPTER ONE

Today's Wealth Explosion

The Supernova and the Gravitational Pull of Money

PROVE IT

In 2004, those two words started our odyssey of crisscrossing the country to meet with some of the wealthiest individuals in America and to hear the stories of their success. Along the way, we have peered into the heart of one of the biggest explosions of wealth in history.

Those two words—prove it—have been uttered to us many times, but in this particular case, they came from Lyle Anderson. For over twenty-five years, Lyle's company has built some of the most spectacular and expensive luxury-housing developments in the world, often centered around award-winning Jack Nicklaus–designed golf courses. In 2004, Lyle was contemplating a new development with properties targeted as second or third homes for families of substantial means, and we were consulting for him on a variety of brand issues. During one of our meetings, Lyle turned to us and asked: "What will be the amenity of the future that will differentiate a property—one that hasn't been already done?" By this, Lyle meant an amenity that went beyond beaches and golf courses and club houses and innovations of architectural design. We thought about Lyle's question: The world was already awash in gated beach/golf communities. We looked at the age of the people for whom the property was targeted, the remote location, and the growing needs for health, and responded: "Put a hospital and healthcare facility on the property for the use of the residents. The hospital can provide immediate life-saving treatment if anyone has a heart attack (during the so-called "golden hour"), offer residential treatment for chronic disease, and even provide cosmetic surgeries. It can make its money on executive family physicals. It could even support emerging therapeutic DNA and homeopathic services. The hospital would not only be an attractive amenity in and of itself, particularly in a world of aging baby boomers, but also it would lessen any anxiety that some might feel about buying a home in a beautiful but slightly remote location."

After Lyle indicated that he thought the idea had some merit, we began our due diligence and examined the potential of putting such a hospital within a property. We concluded that it would cost $50 million in construction costs and another $25 million for staff housing, infrastructure equipment, and supplies. On top of that, another $10 million would be needed for an evacuation helicopter and a landing base. Given the $85 million price tag, Lyle was curious as to whether these costs could be absorbed in the price of the property lots—and whether residents would want to pay proportionately to keep the facility in the black. He considered our top-of-the-mind advice that this could be the amenity of the future, turned to us, and simply said, "Prove it."

Thus began our inquiry into the nature of wealth in America, and the beginning of a series of groundbreaking research studies. We sought not only to answer Lyle's specific question about the willingness of wealthy people to pay for amenities A, B, and C the next time they purchase a multimillion dollar home; we also sought to understand who the wealthy are—at fundamental social and psychological levels: their mind-set and lifestyles; their attitudes and values; their aspirations for themselves, their children, and the world in general.

We sought to understand how they came by their money, and how, if at all, it has changed them; whether money can buy happiness, or if it just brings a new set of challenges; whether they live loudly or quietly; whether the typical wealthy person is more like Donald Trump, Oprah Winfrey, Paris Hilton, or none of the above; indeed, whether or not there is such a thing as a "typical" wealthy person. As market researchers, we were, of course, particularly interested in how they save, invest, and spend their money. In where they shop, what brands they like, and what luxury means to them. And whether conspicuous consumption—a term coined by economist Thorstein Veblen over 100 years ago—is a fair characterization of how they buy and live today, or if it is an unfair generalization based on media stories about an unrepresentative few.

We were, like many people, inherently curious about people who have achieved tremendous financial success, and we found their stories to be not only fascinating but also inspirational—and personally informative, as well. For example, we found that the vast majority of wealthy people today created their own wealth in their lifetimes; and we have at times used the principles that guided their success to shape our own life choices and business growth strategies. At the broadest level, this book is for anyone who shares this interest in stories of success and the desire for financial growth. This is (we hope) just about everyone, as stories of success and achievement have always captured the human imagination, from the heroic epics of the Iliad and the Odyssey, to Horatio Alger's rags-to-riches novels of the nineteenth century, to Napoleon Hill's Think and Grow Rich, to today's multibillion-dollar industries of biographies, financial how-to manuals, and self-help books.

We are also marketing professionals, and this book should hold special interest for anyone who does business (or aspires to do business) with people of considerable financial means. As the following chapters will reveal, the wealthy today are poorly understood, not only by the media and the average American but also by the professional marketer of luxury and high-end products. We'll give a number of examples highlighting how accurately understanding today's wealth dynamics is crucial for success in fields as diverse as marketing, sales, product development, branding, and advertising.

Finally, this book is for anyone interested in understanding the past, present, and future of wealth in our society and the world at large. The past quarter-century has seen a truly dramatic, and in many ways silent, shift in money throughout the world, impacting everything from everyday lifestyles and economics to business and politics. These changes have been so profound that astronomical phenomena seem to provide the only apt metaphors.

The Wealth Explosion: The Supernova and the Gravitational Pull of Money

Supernova: the explosion of a star so violent that it often outshines entire galaxies

Gravitational pull: the fundamental force by which all objects with mass attract one another

History has rarely seen an era in which so much money has been made by so few people in such a short amount of time. We'll explore later whether the poor have gotten poorer, but for now we can show that the rich have gotten much, much richer. We think of it as a supernova of wealth.

The Multimillionaire Next Door

Thomas Stanley published his groundbreaking The Millionaire Next Door in 1996, and his profile of the typical millionaire as a hard-working, frugal small-business owner still resonates. The issue today is that the population of millionaires is growing so rapidly that soon everyone may literally have a millionaire living next door to him or her. From 1983 to 2004, the population of the United States grew by about 33 percent. During that same time, after controlling for inflation, the population of millionaires grew 168 percent, those with $5 million in net worth grew 353 percent, and hecamillionaires ($10+ million) grew over 400 percent (see Figure 1-1). The explosion of wealth has been so dramatic that, although a net worth of $1 million is certainly something to which many people still aspire, it hardly qualifies as true "wealth" anymore, particularly if it includes nonliquid assets, such as one's primary residence. Some have even suggested that net worth is an outdated and irrelevant definition of the term millionaire, and if it is still to be used as descriptive of wealth it should be defined as someone having an annual income of at least $1 million.

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