Fairy Tale Falls Short for Rich

Born of the outrageous riches pouring from the high-tech economy and the often young age at which fortunes have been amassed, a new malady has emerged: sudden wealth syndrome.

The term was coined by Bay Area clinical psychologist Stephen Goldbart and psychotherapist Joan DiFuria, who both noticed increasing psychological problems among the newly minted multimillionaires they saw.

Although their clients’ wealth brought them comfort beyond their wildest dreams, it also brought a sense of isolation, uncertainty and imbalance--as if they had been teleported into an alien world that was very pleasant at times but still completely strange.

“In a lot of ways, I was happier living a simpler life,” said one executive who wanted to remain anonymous. “I’m not saying I’m a miserable guy, but it is hard talking to people about making this transition. Other people just think, ‘Shut up! You have what everyone dreams of.’ What they don’t understand is that change is always difficult, and sometimes it’s painful.”

The pursuit of wealth is a mainstay of the United States--arguably the core of the American dream. But, until recently, vast wealth was achieved by only a small percentage of Americans.

The roaring bull market of the last few years and the seemingly endless parade of high-flying initial stock offerings have churned out new millionaires at an unprecedented pace.

What some of the newly rich have found is that amid the splendor of new Porsches and ocean-view homes is a very human sense that the frenzied pursuit of wealth is not quite the fairy tale that it is made out to be.

One Los Angeles entrepreneur woke up one morning, after years of struggling to build his business, and found himself tens of millions of dollars richer through the sale of his company.

It was the ultimate high-tech dream. Although he didn’t believe his good fortune at first, he eventually launched into a buying spree of new cars and a multimillion-dollar home.

Then something else began to creep into his life.

He found himself shadowed by a gnawing anxiety that his money could disappear as quickly as it had come, and he felt a growing gap with his old friends that made it hard to talk about even the most mundane things in life, like cars, home repair and taxes.

“Our property tax now is double our old house payment for a year,” said the executive, who spoke only if his name was not revealed. “How do you talk to other people about that?”

In many ways, these are problems regular working people would love to have. “I would trade places with them in a second,” said Jamie Watson, a 19-year-old census clerk, as she trudged up First Street in Los Angeles on her way to catch a bus home. “If they have that much money, they have enough to make themselves happy.”

Few, if any, of the wealthy would trade their new set of problems for those of the working world.

But Goldbart and DiFuria, who founded the Money, Meaning and Choices Institute in the San Francisco suburb of Kentfield, said that physical comfort alone cannot resolve many of the problems of identity and meaning that people spend a lifetime grappling with.

Sudden wealth syndrome is not really about money at all, they say, but about change--huge, life-altering change that is as powerful in reshaping life as work, divorce and illness.

David Wellisch, a professor of psychiatry at UCLA Medical School, said it is not that different from the countless other adjustment disorders that spring from radical changes in life--even when the changes are good.

“It’s a crisis of dislocation,” Wellisch said. “The dislocation is from former situations, surroundings, friends and your idea of yourself.”

Resentful of Envy

Goldbart said some of the signs of sudden wealth syndrome include feelings of being uncomfortably different from friends and resentful of envy from others. Some of the newly rich feel guilty about having so much money and yet are afraid that the money could disappear.

While some go on wild spending sprees, others are frozen, unable to make even simple decisions on how to use their money, he said.

“We live in a society that is very much governed by work,” said Goldbart, who added that many of their referrals have come from financial consultants working with newly rich high-tech people. “All of a sudden you wake up one day and you realize you don’t have to work anymore. That’s when people start becoming symptomatic. When you ask the wealthy, they will be the first to tell you that wealth doesn’t bring you happiness.”

Although it is easy to laugh off the trials of the rich, the luster of wealth has begun to spread, in smaller doses, to a broad swath of the middle class, which has been pulled upward by one of the greatest wealth booms in history.

New wealth has flowed not just to those who own high-tech companies or stock options in an Internet start-up but also to the millions of small investors who have shared in one of the greatest bull markets in history and the millions more who will soon share in the greatest transfer of wealth in history as an estimated $41 trillion to $136 trillion passes between generations in the coming five decades.

While the poor have made few, if any, gains in this boom period, many in the middle class have leaped upward at a surprising rate.

Since 1992, the net household assets of the country as a whole have grown by 47.5%--a figure comparable to the great economic booms that took place in the 1980s, 1960s and 1920s, according to a study by New York University economics professor Edward Wolff.

“It is really the first time in history that a large group of people have been freed of constraints in the material realm,” said Paul Schervish, the director of the Social Welfare Research Institute at Boston College and an expert in the sociology of wealth and philanthropy.

Millionaire Households Double Since 1983

The biggest growth in wealth has taken place at the very top of the food chain. The number of millionaire households has nearly doubled since 1983 to about 4.1 million, about 4% of all households, Wolff said.

The ranks of deca-millionaires--those with more than $10 million in net assets--has grown from just 48,100 households in 1983 to 274,000 in 1998--a fivefold increase in 15 years.

Nowhere has the boom in wealth been more apparent than in the high-tech centers of the nation, places like Seattle, San Francisco, San Jose, Los Angeles, Boston and New York.

For David Seuss, the chief executive of the search engine company Northern Light, based in Cambridge, Mass., it was as if a hurricane had picked him up from the worst type of ulcer-inducing drudgery and dropped him into a life of almost pointless ease.

Seuss was one of the earliest entrepreneurs of the personal computer age, starting a company called Spinnaker Software in 1982. He had been a management consultant making $120,000 a year but left his job after looking at the executives he advised and thinking, “I’m as smart as all these guys, but I’m not nearly as rich.”

Spinnaker, one of the first makers of low-cost office suites, boomed in the early years of home computers but began to suffer in the mid-1980s, when home computer sales dropped for several years.

Watching his business shrink was an agonizing experience. “There are times you think you’ve just wasted a decade,” he said.

What ultimately saved his company was not the software it had produced but the sales and distribution network it had built over the years. It was a ready-made infrastructure for other software companies that were expanding. In 1994, Seuss sold the company to Softkey International for $200 million, making enough money for himself that he never had to work again. He was 43 years old.

“I absolutely swore then that I would never be a CEO again, never work at a start-up and never work for a company that needed to raise money,” he said.

For the next two years, Seuss busied himself with all the hobbies and chores he had put off while building Spinnaker. He wrote a program for betting on horse races, raced cars, played computer games, repaired his house and slept.

Even Luxury Gets Tiresome

But as time wore on, even easy luxury began to wear thin. He and his wife had launched into home repair with all the pent-up energy they had lavished on their business, but eventually everything was repaired. At one point, his wife started to paint yet another room in the house, and he stopped her, saying, “Wait, we did that 18 months ago.”

What finally drove Seuss back into the fray was his realization that somehow he had lost sight of what he really liked and did best: running a business.

“I felt like the guy sitting in a Paris cafe and the revolution sweeps by on its way to the Bastille,” he said. “It wasn’t that retirement wasn’t fun, it was just that you get used to leading people and feeling that you’re changing the world. Somewhere along the line you realize you’re not doing that anymore and you miss it.”

Despite his oath on retirement, Seuss eventually took a new job leading Northern Light.

“It’s much better the second time,” Seuss said about running a business again. “There’s a satisfaction in doing something without mistakes.”

As many of the newly rich have discovered, the freedom that comes with money is double-edged.

One Bay Area executive, who made several million through the sale of his last Internet publishing enterprise, said that a sense of power and confidence springs from knowing that you do not have to work again.

“It gives you the freedom to fail or the freedom to opt out if you want,” he said. “It gave me the ability to be a much stronger executive.”

But, he said, just as wealth rearranged his place in the working world, it did the same thing to his social relationships.

“It’s never been a goal of mine to be rich, but now I have it and there’s a social reality that you have to deal with,” he said. “It creates a division that runs through everything, down to what type of gifts you give and the gifts you get.”

He is still trying to deal with the changes that money brought to his relationships with family and friends. Even something as simple as deciding whether to give some money to his parents has been an awkward dilemma, since it turns around the usual relationship between children and their parents.

“Is it right for me to help or should I help?” he asked. “It’s sort of embarrassing for them and myself.”

For all the power of wealth to change life, what some have found the most difficult to deal with are all the things that don’t change.

One retired couple from Nevada who have been seeing Goldbart and DiFuria for counseling over the last three years said they still have the same arguments over spending and saving that they did before their stock portfolio boomed into the tens of millions of dollars.

They still argue about buying cars and worry about their adult children becoming spoiled--only more so now that there are millions of dollars available.

Their son said that, although the gifts of money from his parents have been wonderful, it has also been hard dealing with his parents’ efforts to control how the money is spent.

He wanted to re-landscape his yard, but his mother wanted to review the plans. “They never stop being parents. They never stop wanting to take control or knowing better.”

The money has also brought a range of problems they never thought of before, from issues of how to protect the gifts in case one of their children divorced to making sure the money is wisely invested.

Goldbart and DiFuria said that surviving the transition to wealth depends a lot on people rediscovering themselves in their new worlds and finding what is still important and valuable to them.

Fundamental Question Remains

After buying all the toys and taking all the vacations, they said the rich still have to answer the question: “OK, who do I really want to be?”

“Part of the problem is that in this country there is no longer a model of what you’re supposed to do with your life besides make money,” Goldbart said.

Their advice to some of their clients is simply to give it away--not all of it, but a piece of it to causes and issues that are important to them.

Few people can match the approximately $20 billion that Bill and Melinda Gates of Microsoft have given away, but the number of smaller gifts from high-tech millionaires has sparked a modern boomlet in philanthropy.

While the tax incentive is clearly one reason people donate money, there is also a sense of purpose and focus to charity that has been attractive to the entrepreneurs and Internet geeks who created the greatest revolution of our era--the information revolution.

David Bohnett was one of those early Internet visionaries who became almost $300 million richer after selling his Internet site, GeoCities, to Yahoo last year for $4.5 billion.

“As a gay man, I saw the power of giving people a voice by coming out,” he said. “I was going to give away home pages and let people stand up.”

After selling his company, Bohnett went through the usual phase of buying toys--a pristine 1966 Pontiac GTO, a house in Brentwood and little gadgets like a rare Nazi Enigma coding machine from World War II.

But after a few months, Bohnett said, he finally realized that “you don’t have to own something to appreciate it.”

He gave away his beloved GTO in a charity auction and then threw in $32 million to start the David Bohnett Foundation, a charitable organization focused on a variety of causes, including voter registration, gun control, and gay and lesbian issues.

“It’s all of a single piece,” he said, “giving away home pages and giving away money.”

In many ways, the foundation has given him an even greater sense of focus, responsibility and perspective than he had while trying to start GeoCities. But he added that philanthropy carries its own burden.

“Wealth? It’s a responsibility,” he said. “It’s a burden you carry to make sure you make the most of life and of wealth.”

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Who Is a Millionaire?

The United States has been swept by one of the greatest wealth booms in history. New wealth has flowed not just to those who own high-tech companies or stock options in an Internet start-up, but also to the millions of small investors who have shared in the bull market and the millions more who will soon share in the estimated $41 trillion to $136 trillion in inheritance that will pass between generations in the coming five decades.

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Deca-Millionaires 1998: 274,600 households

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Millionaires 1998: 4.1 million households

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Source: Edward Wolff, New York University