Fables of Fortune

by Richard Watts

  One day Grandpa died. His two sons, Ed and Frank, took over the business, and they had very different ideas about how the business should be positioned for the future. But Grandpa continued to receive credit for the company’s success and origin. The generational leash was still attached.

  The sons decided to split the company into two areas of concentration, with one side marketing and selling products directly to the public and the other marketing and selling products through retailers and distributors.

  In our society’s growing preference for disintermediation, or “cutting out the middleman,” the older son, Joe’s father, Ed, proved to be more successful. His side of the business boarded a rocket and went vertical. Within ten years, the other side of the business failed, and Frank’s side of the family returned to ordinary means, as did his children and grandchildren.

  Ed, his wife, Margaret, and their four children flourished. The holiday table looked much the same as it had in Grandpa’s days, except for the obvious omission of the other side of the family. Frank and his children no longer attended, because it was too difficult for them to witness the reality of what they had lost. In addition, they were deeply hurt by what they perceived to be Ed’s heartless neglect of Grandpa’s example. They had expected familial loyalty to be more important than business success. But they were wrong.

  Ed’s adult children all worked in the company and lived handsome lifestyles. Ed groomed his eldest son, Joe, as the heir apparent to run the company. However, when Joe was just twenty-five years old, Ed unexpectedly died, leaving Margaret as the head of the family and Joe at the helm of the company. The business grew steadily for twenty-five more years. Joe benefited more than the other children, who were now in their fifties. He was secretive about the operations and financial condition of the company.

  Family gatherings were still large and festive, but Joe never mentioned his grandfather or modeled an attitude of gratitude. He believed he alone was responsible for the success of the company and overtly conveyed his belief that his siblings were lucky he kept them on the payroll. Tensions grew.

  As Joe’s mother, Margaret, entered her retirement years, he took the liberty of preparing her taxes, paying her expenses, and giving her enough money to prevent her from asking questions about the company. Later, when he approached her, insisting she sell him the company at a price substantially less than what the family thought the business was worth, Margaret recoiled and refused. Livid, Joe quit, vowing to destroy the family’s company.

  He started his own enterprise and began to steal away customers who had grown loyal to him over the past twenty-five years. Joe filed a lawsuit for fraud against his mother, insisting he had been wrongfully terminated and denied his right to own the company. The family quickly became polarized; Joe, his wife, and his children took one side, and Margaret and the rest of three generations stood on the other. The battle raged for years. Margaret was emotionally crushed.

  Holiday dinners continued minus one of the families. The woman at the head of the table was heartbroken. Joe’s family lost their uncles, aunts, cousins, and grandmother. He cinched the noose of pride around his neck and dedicated the rest of his life to bitterness.

  The company survived, the family reunited with the long-estranged members of Frank’s extended family to fight against Joe, and the family created ghosts … ghosts of the brisk talks and walks that followed a hearty family meal and ghosts of gratefulness for the family’s good fortune. What would Grandpa think?

  Family battles are not unique to the super-rich. But the super-rich have their own special brand. The stakes are higher, and they have the resources to sustain disputes over longer periods of time.

  Also, the battles that occur among average families usually involve direct confrontation. One family member confronts another and expresses his anger, disappointment, or hurt. Most often these are mere skirmishes and resolve quickly. They are healthy for maturing families and necessary for all to feel heard and valued.

  On the contrary, the super-rich often choose finances over family. Fighting over money begins on a level playing field. After all, everyone in the family of the super-rich feels entitled to part of the wealth. What the super-rich forget is victory requires an attack. The victor who gains the spoils leaves the vanquished … and the vanquished no longer want to be part of the family.

  PART THREE

  LIVING BEHIND CASTLE WALLS

  CHAPTER NINE

  PRETEND FRIENDS

  Once you have discovered who the real friends of the super-rich are, it would be an act of kindness to explain it to them. They would like to know too.

  Friendship—genuine friendship—is an irreplaceable gift. In a sense, friendship acts to level the valleys of the human experience, filling in the potholes of everyday life. A sincere friend accepts you as you are, in spite of your flaws. They offer companionship and comfort, acting as a sort of emotional scanner that can identify your undisclosed hurts and desires. Genuine friends are assets who help you overcome and forget the negative and rejoice in the positive. Life is not meant to be lived alone.

  A LONELY WORLD

  Barbara is the heir to a fortune acquired through a brilliant product invented by her father. He was barely able to provide for his family as a worker for Bethlehem Steel. But one day he imagined and built a device that would increase the flow of coolant to any machine that required constant temperature reduction. In simple terms, his invention was the first computerized version of an automobile radiator, and it offered a multitude of applications that eventually ranged from machine shops to nuclear power generators. At the end of her father’s life the company sold for hundreds of millions of dollars. Barbara inherited the fortune with her brother.

  When Barbara asked me to be her family’s legal counsel, we had a frank discussion. I told her straight up, “I am not being paid to be your friend. I am being paid to protect you, to be open and honest, and to be incredibly candid with my thoughts at all times.” I almost got fired before I was hired.

  Barbara grew up in a middle-class neighborhood, but she had all kinds of friends. However, once she assumed the mantle of wealth, the quality of her friendships changed. She is an insightful woman: “I have old friends and new friends. My old friends fit into two categories: the ones who liked me before I inherited money and still do, and the ones who liked me before I inherited money and now like my money more than me. The new friends,” she continued, “also fit into two categories: those who want something from me, and those who have received something from me and want more.” She has a wonderfully “edgy” sense of humor.

  At least Barbara gets to retain twenty-five percent of her friends. Consider those who were born with wealth. They are left with the last two categories; they rarely have friendships without strings attached.

  ULTERIOR MOTIVES

  When Barbara throws a party it is always a spectacular event with concert pianists or small ensembles, lavish dinners, famous chefs, party gifts, dancing, and every kind of fun imaginable. She spares no expense to be sure everyone has a great time.

  At one of her beautiful parties, Barbara met an earnest prison warden who had dedicated his life to serving the inmates of one of America’s most notorious prisons. His credibility was heightened by his lifelong commitment to his faith. Barbara is a devout Christian, and she has a generous heart.

  After the party, the warden immediately became Barbara’s close friend. He was at her disposal for any need. She soon professed he was an “honest friend interested only in me.” I heard it often: “He tells me he loves me,” she declared with pride.

  At one point, one of Barbara’s friends was incarcerated for a nonviolent crime. At Barbara’s request, the warden went into action immediately. He was terrific. He knew the “ins” and “outs” of the system. He knew the procedure for the incarceration of an inmate and what the new inmate would experience during his first days and weeks in the prison. His friendship was valuable and comforting for the inmate’s fa
mily and for Barbara.

  Several months later, the warden called Barbara and asked for $100,000 to support a business venture. Barbara called me in tears, devastated by her overestimation of a blossoming friendship and the unexpected revelation of the warden’s ulterior motives. He may have begun the relationship with sincerity. However, after being around someone of such substantial financial means, he began to see Barbara as a resource rather than as a relationship. Before long, such friends are not shy about asking for whatever they want. The relational dynamic constantly changes.

  I hear stories like these all the time. Understandably, insincere relationships harden the hearts of the rich, make them cynical toward approaching strangers, and basically sentence them to life in a fortified castle whose drawbridge is seldom lowered in welcome.

  UNINTENDED SEPARATION

  Once you begin to acquire, others begin to admire. And when people admire, they covet. When they covet, they usually begin to manipulate and angle for what they want. The chasm widens from both directions. The haves seek to protect themselves from the rest. The super-rich often feel sure others are trying to get what they have. This protectiveness leads them to avoid people of seemingly lesser means. As they do so, they appear to be arrogant and condescending. Many of the rich intentionally cultivate the impression they do not want anything we can offer, either materially or emotionally. We don’t have anything to exchange for their attention, favor, or friendship.

  For the have nots, this aloof attitude undermines the desire to connect and be friends with the haves. Who wants to befriend someone who makes us feel bad? The gap grows wider, and the inability of the two groups to relate increases. The super-rich unintentionally—or sometimes intentionally—lose the opportunity to receive and give friendship.

  The wealthy would like nothing more than for us to like them for who they are. Unfortunately, they struggle to clearly define who they really are because they haven’t been challenged or genuinely encouraged because of their status and position. The rich share the fate of many celebrities, who often thirst for real friendship.

  My wife and I spent a week vacationing at a campground near the ocean. Our group included ten families of various socioeconomic means. We arrived as acquaintances and left as friends. The people were genuine, but I found it very interesting to consider why people of little means are so much more willing to reach out to others than those who have more. My wife labeled this phenomenon as a “clash of expectations.” Those of modest backgrounds have realistic expectations for one another; they are open and willing to reach out to strangers. They easily establish friendships that become the source of much fun and fulfillment. Rich people tend to be very leery of other people; every introduction or gesture of friendship is met with intense scrutiny.

  This distinction can occur even when the disparity in economic levels is modest. The Chadwicks, a super-wealthy family, joined the campers for the first time that year. The dad hired a service to set up the entire trailer in the park, complete with tables, awnings, and bedding. Their campsite was like a mobile home, complete with air conditioning and a misting sprayer on the patio. When he was ready to leave, the service came and picked it up. He only had to pile his kids in the accompanying car and leave.

  He and his family participated in many of the activities, but with an air of reservation that suggested they hadn’t yet bought into this “lesser” form of vacationing. Half of the families were in awe of him, and the other half resented him for bringing his entitled mind-set to their very modest and prized campout. It was readily apparent he and his family didn’t fully appreciate the simplicity of the long-standing traditional campout. When the children created skits to perform for the parents around the campfire at night, the Chadwick children didn’t participate because they were accustomed not to entertaining but to being entertained. Their actions unintentionally reminded everyone else they were financially elevated.

  The Chadwicks’ overall intentions were probably good, but they isolated themselves by living on a different economic level than the rest. I’m not sure they even realized it.

  FRIENDS DURING A FALL?

  A benefit I attended attracted some of California’s richest supporters. The silent auction at the beginning was followed by a fabulous dinner, and the evening concluded with a live auction that historically brought in the lion’s share of fund-raising dollars for the event. On that particular night, a strange tension lingered in the air.

  Carolyn, a beautiful forty-something woman dressed in a couture Escada gown, served as the chairwoman and our hostess. Her husband, Frank, was a prominent hedge-fund manager. They were some of our area’s wealthiest residents.

  Although the Wall Street Journal had not yet printed the story, Carolyn’s “friends” had already betrayed her trust, spreading rumors that Frank’s fund had recently plummeted and sought protection in bankruptcy court. His other ventures were tied up in bank guarantees made possible by his portion of ownership in the hedge fund and their other assets. The banks had spent the week in federal court tying up Frank and Carolyn’s assets, including their enormous beachfront home.

  Near the close of the evening, Carolyn stood up and excitedly announced the items that had been donated for the auction. She reminded the guests a papillon puppy would be available and mentioned she hoped it would bring in a donation near $25,000.

  At that moment, I heard one woman at my table lean over to another and say, “Wouldn’t you be a little embarrassed to stand up there and ask for money if you were almost broke yourself? Don’t you think she is being a little presumptuous?” The whispered answer came quickly, “Maybe she should auction off her dress. She won’t need it for much longer.”

  In the span of a week, Frank and Carolyn fell from the highest rung on the social ladder to become the latest dirt to hit the tabloids.

  GENUINE FRIENDSHIP

  The first generation of the super-rich typically retain some genuine friends—the people who knew them before they became wealthy. But subsequent generations rarely find friends without ulterior motives. The real connections they make are usually with people who don’t have the means to compete with them or anything to gain from them. They often meet friends like these in unexpected places and develop close relationships outside of their normal, everyday lives.

  My father cultivated an unusual friendship with a very wealthy man whose name is recognizable worldwide. They met when they were young, and their friendship lasted because Dad didn’t care one bit about his friend’s money. I remember walking into my dad’s office and seeing this man sitting on the couch with his feet up and a soda in his hand. They spent hours shooting the breeze. Dad listened and spoke the truth as he saw it.

  One afternoon, this man confided that no one else in his life would tell him the truth. “How am I supposed to know if I’m out of line? Or if I do something well?” My father was brutally honest with him about his career, his kids, and his life. It was amazing to watch the grin spread over this celebrity’s face when he spent time with Dad. People just didn’t talk to him that way. The interaction was always a sincere pleasure for both. He had no other outlet for candid and truthful honesty. It would be a sad, lonely way to live.

  What about your friends? I’m willing to bet most of them don’t like you based on the car you drive or the dinners you might buy. They like you because you are funny, because you are kind, because you are talented, or just because you are you.

  Your true friends are invaluable assets. You can trust them. They will stand up for you. True friends will fight for your personal cause, and especially for you as a person. Most important, they serve as a litmus test of your character. When you are out of line, they will tell you. When you are successful—even moderately—they will cheer you on. Cherish your friends.

  CHAPTER TEN

  UNRELENTING COMPETITION

  For several years I had the privilege of serving on the board of directors of an international organization with about twenty of this country�
��s richest families. At least two of the board members were billionaires. We became acquaintances. I was invited to join the board because of my skills as an attorney. Otherwise, this poker table’s stakes were way too high for me.

  One weekend, one of the board members invited me to his home in Palm Springs. He collected cars as a hobby. When I arrived, he showed me his Duesenberg, two Ferraris, a Rolls Royce, and two Shelby Cobras.

  When lunchtime came, an award-winning French chef who had been lured away from a world-class restaurant cooked us this man’s favorite meal, gourmet hamburgers and homemade french fries. I can’t begin to describe what it was like to eat burgers off of Limoges china in a dining room filled with $3 million of furniture and artwork.

  The LPGA’s Dinah Shore golf tournament was being played that weekend on the course near his house. The management had closed the course for the week to make sure it remained perfect for the upcoming tournament, but they invited us to play the course alone that afternoon. What a treat!

  While we enjoyed our round, my new friend told me about an upcoming event, an annual party in the desert for the richest of the rich. He sounded bored at the thought of attending, but he mentioned he had to go because his wife was a co-chair.

  He explained everyone in the area always clamored for an invitation, but only a select few would be invited. The guest list was comprised of four “thirds.” Yes; in spite of Euclidian geometry, four thirds made a whole for this party. The first third was comprised of the super-rich couples who were invited every year. The second third typically included famous people like former United States presidents, congressmen, CEOs of Fortune 500 companies, best-selling authors, and movie producers … but no celebrities. The third group included the “new” money in town. These guinea pigs were under examination. Would they qualify to join the “in crowd?” Or were they just passing through?