One of the (many) advantages to living amongst people who fall into what I described on Thursday as a “gray area” between “rich” and “wealthy” is that it gives me a window into how those folks think about life.
That’s useful to the extent it affords me a virtually limitless supply of anecdotes from a social stratum that’s often forgotten when it comes to discussions about redistributive policies, higher taxes and the Democratic agenda more generally.
The media likes to depict America has a society divided neatly along class lines. In reality, things are much more complicated.
Lots of people are poor, yes. That much is clear. A handful of people are wealthy. That much is also clear. And a couple of dozen people control around a half-trillion dollars between them. We know who they are. They’re building spaceships. Literally.
Beyond that, it gets murky.
Many people are “middle class,” but increasingly, that’s a misnomer because they struggle to make ends meet. Are you really in the “middle” if you lose sleep over basic bills?
A smaller, yet still relatively large, subset count themselves as “upper-middle class.” They finance cookie-cutter McMansions and lease mass-produced mid-sized luxury sedans in a hapless bid to project wealth and pretend they’re capital (they’re not). They do well for themselves, but aren’t immune from a financial calamity.
Another group is comprised of what I’ll call “technical millionaires.” They’ve accumulated millions over time, but they don’t boast of multi-million dollar income streams. There are all kinds of ways you can end up with, say, $4 million. Most of them don’t involve making millions every, single year. If they did, you wouldn’t have $4 million (or $8 million), you’d have $40 million (or $80 million). Recently-signed rappers notwithstanding, people with “just” $4 million in the bank don’t run out and buy a Ferrari for themselves and a Bentayga for the wife. And they surely don’t bid at any fine art auctions. That would be ludicrous. There are kids who need to go to college, there are property taxes, there are bills, and so on. Sure, all of that is easily affordable, but it wouldn’t be affordable for very long if our “technical millionaire” was buying the same cars as a Saudi prince.
Too often, this group (the technical millionaires) are mistaken for “wealthy.” I’ve argued that’s not an accurate characterization. Of all the people I’ve come in contact with over the half-dozen years since I left Manhattan for my current island sanctuary, I’ve come across very few people who are truly wealthy. There’s one Bentayga here. A white one. There are three Ferraris that I know of. Two new, and one navy blue 360 Modena (which I actually prefer to the almost bizarre-looking late models, but that’s just my aesthetic). The rest of the folks I’ve met who own homes here betray almost no outward signs of extravagance and have surprisingly “little” in the way of liquid assets. Of course, “little” is an extremely relative term, especially when your home is worth a couple of million and you still own part of a business operating in some other locale, but you get the point. I did a portfolio analysis for a lady two weeks ago, and she had just over $400,000, for example.
Why bring this up? What’s the point of more island anecdotes? What I want to emphasize is that whenever some policy proposal that would hit the wealthy lands on the front page (as it did Thursday and Friday), billionaires pretend to speak for my neighbors. They do it habitually, and it creates a false narrative, which dupes people into believing that Democratic agenda items which affect almost no one, affect nearly everyone.
I don’t want to demonize Tim Draper, but because Bloomberg ran an entire story based on his tweets, I’ll quote him too. “43.4% capital gains tax might kill the golden goose that is America/Silicon Valley,” he said. “People need an incentive to build long term startups. In California, that would be a 56.4% tax burden. >50% spells death to job creation.”
Draper is, of course, a billionaire VC. Besides being over 60 years old, he has exactly nothing in common with my neighbors. But he’s implicitly trying to speak for them and for every other “technical millionaire” in America. Note that he also equates (literally) the entire country with Silicon Valley (he wrote: “America/Silicon Valley”). How’s that for being trapped in your own bubble (figuratively and literally)?
With apologies to Tim, the vast majority of “everyday” rich people (i.e., our “technical millionaires”) don’t care whether a capital gains tax increase which doesn’t apply to them upsets a billionaire VC. And nobody with any sense about them believes that the incentive to build startups that go public with hundred-billion-dollar valuations is going to be materially diminished by a higher capital gains tax for 0.3% of American filers. That’s a ridiculous proposition.
Are VCs just going to close up shop? Will financing no longer be available to the next Instagram? Is innovation just going to die next week when Joe Biden makes it official? “Sorry Mark Zuckerberg 2.0, we’d love to invest in the next Facebook, but we’re going to have to take a hard pass because after all, capital gains taxes went up.”
The same linked article (above) quotes Michael Sonnenfeldt who, for those unfamiliar, founded Tiger 21, which Bloomberg reminds you is “a network of wealthy entrepreneurs, investors and executives with an average of $100 million in assets.” So, not my neighbors and definitely not your neighbors.
Sonnenfeldt suggested that plans like Biden’s might “create disincentives so that people hang on to assets longer than they might have.” That’s problematic, he said, because “that capital might have been better deployed in the next business that will create jobs.”
Notice how it’s always about “jobs.” None of these people are worried about their personal fortunes or about the personal fortunes of their friends. It’s purely a concern about the economy and job creation for everyday Americans.
Folks, I don’t know how else to say this: If you believe that, then you’re gullible. It’s just that simple.
On its website, Tiger 21 describes itself as “an exclusive network of wealth creators” for whom “issues of relevance, legacy, family, philanthropy, and what to do next weigh heavily on their minds.”
In the same set of tweets mentioned above, Draper said that “the antidote for oppressive government and runaway taxes is Bitcoin.”
That was at 2:30 PM on Thursday. Around seven hours later, Bitcoin fell into a bear market.