Part 2

All the Money in the World: How the Forbes 400 Make - and Spend - Their Fortunes
By Peter W. Bernstein, Annalyn Swan

(Page 2 of 2)

The first, What It Takes, examines the character of fortune-makers, looking at such factors as risk taking, luck, and education in helping them get ahead. The second, Making It, explores how their money was made, with particular emphasis given to the booming fields of technology, finance, and entertainment and media (while also reporting on the more traditional, so-called blue-collar fortunes). The third, Spending It, looks at what the wealthy do with their money, focusing on conspicuous consumption, heirs, family feuds, and philanthropic and political activities.

All the Money in the World also contains a rich collection of charts and graphs that detail intriguing facts about wealth (many analyzed here for the first time) gleaned from the twenty-five years of the list. A few of the highlights:

• In the first Forbes 400, oil was the source of 22.8 percent of the fortunes, manufacturing 15.3 percent, finance 9 percent, and technology 3 percent. By 2006 oil had fallen to 8.5 percent and manufacturing to 8.5 percent. Technology, however, had risen to 11.75 percent and finance to an extraordinary 24.5 percent.

• With the emergence of new technology-based and financial fortunes, the geography of American wealth has changed. In 1982 New York had 77 members on the list, California 48. Today California has 89 members. (At its peak, before the Internet bubble burst in 2000, California had 107 people on the list.) New York now has 56 members, a decline of 27 percent over the life of the index. But New York City has more 400 members (45) than any other American city. Texas had 65 members on the list in 1982 and 36 in 2006. The flow of fresh money to California is mostly concentrated in Silicon Valley, near San Francisco. In the last twenty-five years, Silicon Valley has joined Wall Street, Hollywood, and the Texas oil patch as a storied and almost mythical source of American riches.

• In the last twenty-five years, 97 immigrants have made the list. Only 13 working women have made the cut, and this small number includes several who began life with substantial advantages, such as Katharine Graham and Abigail Johnson, each of whom inherited a large fortune. (The fortunes of Oprah Winfrey; Martha Stewart; Pleasant Rowland, founder of the American Girl doll empire; and Meg Whitman, the chief executive officer of eBay, are entirely self-made.)

• The average net worth in 2006 of Forbes 400 members without a college degree was $5.96 billion; those with a degree averaged $3.14 billion. Four of the five richest Americans - Bill Gates, casino owner Sheldon Adelson, Oracle's Larry Ellison, and Microsoft cofounder Paul Allen (whose combined net worth was $110 billion in 2006) - are college dropouts. The fifth, Warren Buffett, has an undergraduate degree from the University of Nebraska - and subsequently got a master's degree in economics from Columbia University. A broader study of the Forbes 400 over the last twenty-five years indicates that in any given year about 10 percent of the members dropped out of high school, possess only a high school diploma, or never completed college.

While Ronald Reagan wasn't solely responsible for the historic economic boom reflected in the Forbes 400, there can be little doubt that he created the environment in which the list took root and flourished. Elected to the presidency in 1980, two years before the list was invented, Reagan was in certain respects a characteristic voice of the corporate fifties: After his movie career faded, he became well-known as a spokesman for General Electric (GE) and as the genial program host for its hit television show, General Electric Theater. The United States was developing at this time into a mass society with a vigorous consumer culture. The country had united as never before during World War II, marshaling its industry to defeat a common enemy. In the postwar period its energetic corporations defined what was meant by economic success. The company man (and shareholder) came into his own; it would have seemed selfish, with the Cold War intensifying and memories of the Depression and World War II still fresh, to overemphasize individual riches. The chief executive officers (CEOs) of IBM, General Motors (GM), and AT&T were kings of the American hill.

Nobody better symbolized corporate America than Robert McNamara, a man driven less by his belief in individual glory than by his faith in rational planning and the social utility of institutions. Ford Motor Company had, of course, been founded by the industrialist Henry Ford. That McNamara rather than a Ford heir rose to the top of this legendary family company symbolized the ascendancy of a corporate ideal that appeared to many people of the time at once sensible and visionary. It seemed natural that the young, newly elected president John F. Kennedy would, in 1960, ask a man of the new forward thinking to modernize the military as he might a corporation. What happened to McNamara as secretary of defense during the 1960s - as American culture was shocked in turn by the assassination of a president, a failed war, and the rise of the counterculture - helped bring this idealization of the corporation to an end. The company man became, in the eyes of many, a soulless automaton. In the aftermath of the Vietnam War, moreover, a frightening inflation ripped through the economy, destroying public faith in the weight and stability of the dollar.

Copyright © 2007 by Peter W. Bernstein.

About the Author

Peter W. Bernstein and Annalyn Swan are veteran journalists and editors who between them have worked at U.S. News & World Report, Time, Newsweek, and Fortune magazines over the last twenty-five years. Bernstein is the coeditor of The New York Times Practical Guide to Practically Everything and editor of The Ernst & Young Tax Guide. Swan is coauthor, with Mark Stevens, of de Kooning: An American Master, which was chosen as one of the ten best books of 2005 by The New York Times Book Review, and which won a Pulitzer Prize and a National Book Critics Circle Award. Bernstein and Swan are cofounders of ASAP Media, which helped produce Secrets of the Code: The Unauthorized Guide to the Mysteries Behind the Da Vinci Code. They live in New York City.