The rich hurt too when portfolios crash
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Kai Ryssdal: This isn’t something a lot of people like to admit, but a good part of the way we see ourselves, how we identify ourselves, is shaped by how much we have. The cars we drive, the vacations we take, and the number of zeros in front of the decimal point on our bank statements. That goes for the rich, the poor, and the in-between, too.
It’s a pretty safe bet that most of us have less these days. We wanted to see whether big losses made a difference for those who still have a lot. Ashley Milne-Tyte reports that, even for the super rich, their identity takes a beating when their portfolios do.
ASHLEY MILNE-TYTE: No matter how much money you have, just thinking about losing some seems to make life harder to bear.
Kathleen Vohs is a marketing professor at the University of Minnesota. She and her colleagues have done experiments where they asked some students to make a list of what they spent the previous month. Others were asked to write about the weather. Afterwards the students plunged their hands into very hot water, or played a game where they were made to feel left out.
KATHLEEN VOHS: We were interested to see whether being reminded of money that you don’t have any more would change people’s experiences of pain. And it did, it made people feel that those painful experiences were even more painful.
Big financial setbacks, like we’ve seen in the past year, aren’t something the super-wealthy want to talk about, at least not publicly. But they do talk to Russ Prince. His market research firm studies people with at least $50 million. He says men, and it is mostly men, lose more than money when they lose money. Their sense of self can get lost too.
Prince knows one very successful businessman who’d been traveling by private jet for 30 years. Then he lost tens of millions and had to start flying commercial.
RUSS PRINCE: Now remember he has a handful of instructions, this guy has made a fortune, managing businesses and commanding other people and directing. He couldn’t find the plane, the plane left without him.
Prince says the experience was so unnerving the man flies as little as possible now. Then there’s the guy who lost $100 million recently — half his net worth. He still has another $100 million. But Prince says the man saw himself as invincible before. Not any longer.
PRINCE: Impotence was the first problem, erratic behavior soon followed, and drinking picked up afterwards.
Alden Cass is a psychologist with a practice in Manhattan. He sees a lot of Wall Street traders, music moguls and other competitive types who are struggling now.
ALDEN CASS: It’s about learning how to emotionally deal with times when your reality does not meet up with your expectations. And that’s where you need to learn how to look at things from different perspectives, healthier perspectives.
Cass trains clients to think positive — he calls his technique bullish thinking — so they can ride out the bad times without sinking into addiction or depression.
Then there are those who appear unaffected by their loss. Take Josh Harris. He’s an Internet entrepreneur who made around $80 million in the late ’90s. He bought a loft in Manhattan and two farms in upstate New York. But during the next several years he spent every penny of his fortune on two start-up companies and some experimental art projects. Now he’s broke and living in his friend’s pool house in L.A.
JOSH HARRIS: There’s the jacuzzi. And here’s the pool. Y’know, I do spend a bit of time sunning and getting my laps in.
Harris says what he misses most about being rich is smoking the finest Cuban cigars. He says he never wanted to live like a rock star. Still, losing everything was a shock.
HARRIS: There was about a month where I was literally numb. I mean, I don’t know, y’know my circuits were trying to recalibrate to the situation.
Harris says he has learned to live with his new reality, for the most part. He’s in his 40s now and wants to get married. But he says to do that, he needs money. How much?
HARRIS: My number’s around 20, after taxes.
MILNE-TYTE: Hang on, are you saying you need to have $20 million before you can, “find a wife?”
HARRIS: No, but it’s sort of uh, yeah, maybe. I’ll say it: I need $20 million before I can find a wife.
He’s setting up another company now, and says he’ll have that $20 million within three years.
I’m Ashley Milne-Tyte for Marketplace.
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