Why do some of the super rich find themselves so troubled? What type of problems and terrible millionaire secrets do these people harbor?
The financial crisis is coming to a head. More and more people are gravely affected, but what I don’t understand is why it seems to be the case that the richer someone is, the more psychologically vulnerable they are to this downtrend. I would have expected the extremely affluent to be isolated from any financial meltdown. Why would someone probably still worth gazillions of dollars decide “it’s all over”?
As an avid student of psychology, I wonder what makes your typical billionaire tick (I love studying crime and pathology too, but that’s another story). When we think of money in absolute terms, the mind boggles as we try to wrap our minds around the level of wealth some people achieve. But the truth is, the rich encounter many pressures. Pressures that are serious enough that some of them decide that the only way out is to hasten their own demise. An old post I wrote some years ago about how rich neighborhoods can be deadly, speaks in that vein.
Deep, Dark Millionaire Secrets of The Super Rich and Famous
The billionaire body count has been rising over the last few weeks. The latest casualties of the financial crisis are some truly big names: a Madoff scam victim (hedge fund adviser and investor), a German billionaire who fell a few notches down on Forbes’ rich list, a real estate power broker, and one of our local money guys: a Silicon Valley investment manager.
It’s sad, and maybe even unthinkable, that the German billionaire decided that life wasn’t worth living with $9.2 billion, despite the fact that his percentage loss is not as bad as most people’s (in fact, his losses equal mine in terms of percentages):
He was number 94 on the Forbes list of the world’s richest people. He had fallen from number 44 on the Forbes 2007 rich list as his fortune declined from $12.8 billion to $9.2 billion in 2008.
It may not seem like it makes much sense why people would commit these acts, given how fortunate these victims are in so many other ways (seemingly an understatement for most of us). But maybe it’s not all about money. These tragic events happen because someone psychologically vulnerable meets with an unfortunate trigger. In this case, asset market deflation to a massive degree was that unwitting trigger.
Pondering the Big Problems of the Super Rich
Maybe it’s not just about being unable to accept personal loss; I’ve often read about how these fund managers feel the grave responsibility of being the cause of financial loss for others, as well. Hypothetically speaking, these people may have been headed for the same fate, regardless of what stressor provokes them to this end. We don’t know. All we know is that these people were vulnerable.
I reiterate the point that this may not be about money at all. Obviously, people with still so much money to spare (I’d assume) have decided that whatever losses they were experiencing weren’t worth the time and effort to recover from.
Ironically too, the same characteristics that give certain people the ability to achieve such astounding wealth are the same characteristics that can cause their devastation, when things don’t go their way. I try to explain the fickleness of wealth and money preservation across generations in this manner. Why is it difficult to retain fortunes across generations?
What I’d like to get out of these stories is this: the lesson that money can’t make us happy. That happiness stems from our own selves. And to increase our chances of staying sane and happy, let’s treat money as a tool, simply as a means to secure our family’s future. When money begins to represent something else in one’s life — something deeper and seemingly more important, like power, or status, or the culmination of one’s self-worth — then happiness will most likely prove elusive.
Maybe the rich aren’t so lucky after all.
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{ 22 comments… read them below or add one }
The debate about the relationship between money and happiness rages on in the psychology literature, and I certainly don’t have the answer – the jury is very much still out and we may not even have the right data yet to answer the question. But one thing we can be fairly sure of is the importance of social comparison, and I think that is one way to look at the meaning of these suicides.
When you’re on the Forbes list, for example, that becomes your reference group: you are generally socially compared to people who are “like you”, in that they have a ridiculous amount of money. Your 9.2 billion isn’t compared to 0, or to the average salary worldwide, but to the people around you…who also happen to have money in the billions.
And I recognize that might feel irrational, but I’d argue that we all do essentially the same thing. The average American is not comparing their salary to the average Cambodian, anymore than the average Silicon Valley engineer is comparing their salary to the average waiter. These simply aren’t the people that we view as within our social sphere.
A careful analysis of the link between happiness and money tends to show not that money matters in the absolute, but that it matters compared to the people around you. Happiness is being the richest person on your block, or in your circle of friends, or at your workplace. And people innately understand this. As evidence:
The lesson, to me, is that money should be viewed as non-comparatively as possible, or at least compared only to yourself. You want to try to make more next year than you did last year – not a lot more, just a little, enough to keep up with the “creep” of the hedonic treadmill. And then you put the personal finance tricks into play. When you get a bonus, bank it instead of spending it. Invest for the long term. The reason for all these tricks is that they make the upside less steep as well as the drop off, so that you can’t make radical lifestyle changes according to your finances that you inevitably can’t support and therefore feel like losses later on.
The slow steady gain…I like it.
Matt,
Such an awesome analysis. You hit the nail squarely on the head, IMO. No matter how much I scratch my head over why the rich appear — at least on average — as not “easy to please” or “less happy” than others, I see myself committing the same unfortunate behaviors.
I played this exercise with myself one time: I found myself becoming more and more uncomfortable about being less than 100% invested in the stock market as I saw more of my “buddies” rake it in in paper gains by taking higher stake positions in the stock market. When the market virtually collapsed, I actually felt some level of relief that it did, even though I lost money. How crazy was that?
Now as a wise friend of mine once said — recessions and economic downtrends are the great equalizer. There’s a lot to learn from the financial crisis and collapse. I’ll bet we’ve learned much more about ourselves now than we’ve ever had.
Interesting subject, especially at this time. I believe it has to do with seeing their self worth related to their money. I agree, money can be a tool and doesn’t tell what is inside a person or what his worth is. “The love of money is a root of all sorts of injurious things, and by reaching out for this love some have been led astray from the faith and have stabbed themselves all over with many pains.” (1 Timothy 6:10)
I’ve read some snarky comments about this suicide. People love to mock the rich. What they often fail to realize is that the rich pay for the rest of us. When the rich lose a large portion of their fortune, tax receipts fall disproporationately.
That’s one of the many hazards of relying on a tax code that collects from the rich, and gives to the poor. When times are tough, the rich suffer more than the poor, and then who can give to the poor?
It seems that, for the rich, money becomes a scorecard after a while, since they have so much.
I have a feeling it boils down to feelings of shame, and ‘what other people will think’, which causes these billionaires to react in the way they do.
Funny, these are some of the same issues us ‘poor folks’ have.
The strange thing is that “shame” isn’t typically the reason why people do themselves in. Usually it’s because of true financial disaster — maybe getting truly wiped out. If it’s true that the billionaire was sitting on billions when he decided to leave this world, then I find this harder to grasp. I can understand, on a peripheral level, that “shame” can cause depression perhaps leading to violence (similar to what happens in other cultures); I just think the loss of perspective is so great on this one. But I guess having so much money can make you irrational. Or you can also say, the higher you are, the greater your fall. Or that money corrupts and all that.
I think it’s perspective that people lose when they fall into a rut. When we lose sight of the good things we have, and start focusing on the glass half empty, the negativity can be such a burden.
Matt, very perceptive analysis. SVB, I agree 100% with your concluding paragraph. Only, I would rather have “money should not make us happy” as my personal motto/goal than “money can’t make us happy”. Happiness must come from inside and be based on deeper things like success in fulfilling duties/obligations to family, friends, and society at large, and from giving/making a difference to others’ lives. Of course, one should set aside time to indulge and savor personal passions as part of a balanced life.
I should note that I read somewhere that people who make $60,000 a year are the happiest in comparison to those who make much more (in terms of happiness units)…
Strange but true.
And when you lose so much money at once, it can do nasty things to your head because it’s a much higher fall in terms of absolute dollars than if you (facetiously) only lost $60k out of your $200k portfolio.
I really feel bad for these people, and I can’t understand why a billionaire felt the need to die, but maybe he just took it too far, or watched one too many Japanese movies with seppuku in them?
Great post.
Fabulously Broke in the City
Just a girl trying to find a balance between being a Shopaholic and a Saver…
I was just talking to my father about this phenomenon right now, and he mentioned that there could be more to the story than meets the eye. Could some of these older billionaires already be ill of health, and were only finding life meaningful by playing the money game their way? When things go bad, do they lose their reasons to live?
Also, sometimes the very wealthy are also heavily leveraged. Could some of them actually literally lose their shirt when they fall on the losing side of a highly risky move? Cases in point: Trump (who at some point went bankrupt, did he not?) and Robert Kiyosaki, if you believe his story.
Well, all of us have problems. Business people have hidden problems which the public doesn’t know.
In addition to what Matt said, behavioral finance tells us that people are generally loss averse, and are more likely to be hurt by losses than to be happy from gains.
Loss Aversion at Wikipedia
I have a feeling that a lot of these folks let having money define them, and when they lost their money they lost a part of themselves.
Many years ago, while still in college, my science teacher told us that the common feature researchers found in “happy billionaires” was their childhood. In fact, how happy you were in childhood will be reflected throughout your life with a steady equilibrium regardless of money.
Hence, i believe these unhappy billionaires used money as a driver and focused on it to fill a gap. Even though it brought them materialistic results, deep inside these individuals remained unhappy and it showed dramatically when a crisis threatened their financial status…
bottom line, your upbringing has a lot to do with how you will define happiness in your future. Money is just a means to an end (for us) : financial independence!
Leaving aside the moral / philosophical questions for a moment (interesting though they are), I think the reason the super-rich have been so badly affected by this downturn is that it’s based on a financial crisis, not a real economic crisis, and that virtually all asset classes have been hit in turn. Unless your billionaire was only in government bonds, their wealth will have fallen severely.
Normally they have conservative wealth-preserving that protect them from the biggest falls (and cap the upside) but those strategies didn’t work in 2008.
In the case of the investment managers, I think in addition to their own loss of status they are feeling very guilty over losing their clients money. Some of these clients had no idea their money was invested with Madoff. If I had single handedly ruined thousands of people, many of them friends and family, I don’t know if I could live with myself.
I don’t understand much about the psychological impairment one faces with billions. I do understand that principle, money can’t make you happy though. Once you solve what problem money fixes it only uncovers other problems, mostly relational I would guess, that and personal shortcomings. They say many rich people aren’t happy. I can only guess it is due to their “other” problems.
Money also takes our minds away from these “other” problems clouding our reality, and once that is compromised, facing the real person inside may seem like a thing not worth life?
I don’t know, but I would like some of their cash.
What every one has failed to mention is that the people who committed suicide not just lost money, but they also recommended Madoff to many of their family members and close friends. And many of them have put their entire savings with him given the consistent returns.
It’s one thing to lose your wealth. Many of these people have the intellectual capacity, talent and ethos of hard work to recover over time (hey – they are billionaires). But I should imagine it is hard to face your family (your mom, your brother and sister and close friends) who have lost everything and these people may not have the talent (or time) to recover.
I think it is that shame of facing family members and friends whom they have recommended their funds that drove them to suicide. I can imagine that the conversation went like this :
Family or close friends : Hey Billionaire – I’m unhappy with my financial advisor from xyz – who do you work with?
Billionaire : Oh- my money is with Madoff – In fact, he is so good I have everything with him. Beats the pants out of every Financial Advisors out there.
Family or close friends: really? how do I get in?
Billionaire : You can’t. But my guy is connected and can get you in.
Few years later..
Family or close friends: Hey Billionaire – thanks for getting us into this Madoff thing. We owe you so much. I’m thinking of putting everything with him!
Billionaire : I already have everything with him.
Fast forward 2008 – 2009 – can’t face family and friends who got wiped out!
What has not been mentioned is the fact that these folks (who have taken their lives) have also recommended Madoff to their close family members and friends. And I guess they all got caught up that they all invested everything in it.
So I do think all of them can live with going broke. They are billionaires. They have the intellectual capacity and drive to come (hey – that’s how they became billionaires).
It is the shame of facing your family and friends who are ruined (because they are not billionaires) that probably took them over the edge and not just losing everything for themselves.
While I don’t doubt that some of these instances stem from the relationship between their money and their self-esteem, in the case of the German billionaire I don’t think that’s accurate. As a businessman who employed thousands of people, there is a level of responsibility that you carry for the employees of your company. He wasn’t able to obtain loans to assist his business as a result of the his losses.
Often the ‘riches’ of those on the Forbes list are not liquid. They estimate the value of their homes and holdings, etc. Many businessman make their fortune through the shares of their particular company (ala Bill Gates).
It is highly likely that some of these ‘richest billionaires’ are “asset poor”. As a businessman who is asset poor, who cannot obtain a loan from a banking institution, and who is responsible for many people – I could see how he would feel crushed by the weight of his responsibilities and believe there was no escape.
I guess that most of these people aren’t really doing what they are doing because of purely financial issues – it seems more likely to me that it’s something else that is driving them: perhaps a sense of failure that comes from losing large amounts of money; or perhaps they feel ashamed of not keeping up with the billionaire joneses next door. What do I know – I am not even a millionaire…
It doesn’t matter how much / little you have, sudden financial downturns can catch you out; I broke my own rule by spending $4 Mill. on a house just before the market went sour (not to mention, I haven’t yet sold my $2 Mill house!) … now, it won’t send me broke, but I have broken my own 20% rule [ http://7million7years.com/2009/01/12/how-much-house-can-you-afford/ ] and will have to “pay the consequences” by watching my spending over the next few years, perhaps a little more than I otherwise would have had to.
I don’t expect anyone here to be sympathetic, but, it really is all relative …
Yeah, but I’d like to see for myself that the rich aren’t so lucky. Then when I learned that I was liking being rich I’d have the option of donating it or giving it all away. I think a lot of it is how you see money. I see money as a reward for investing hours of my life each week. And that I am to use that money to provide essentials for my family first and then for things that we enjoy. Money can do wonderful things. But I think that when money begins controlling the person instead of the opposite, problems pop up. I know lots of workaholics, and am probably one myself. I’ve got to get it in my head that work can wait sometimes and my family shouldn’t have to. If I don’t start being better about that, money might start controlling me.
Personally, I couldn’t care less. While the majority of people in this country, alone, are struggling and worried to death about losing their homes, or being unable to find a decent job – or any job, for that matter – we have to listen to the “problems” of those who can write their own ticket in this world. How horrible to be so wealthy that you can buy the services of others and sit back while somebody else cleans the house, cooks the meals, cares for the babies and children, tends to the garden and lawn, etc. The rich have no inkling what it feels like to lie awake at night and worry about whether their house will be foreclosed on. Let them find out what it feels like to have to go without life saving medication simply because there isn’t enough money to buy it. That German billionaire who “couldn’t face another day” living such a “miserable” life left behind a “grieving” family…but, trust me. They’ll get over it. You can rest assured they aren’t going without anything.
It seems the more these billionaires make the more they want. And I have a very hard time respecting them. These people have egos bigger than the ocean. They hire people then fire them for no good reason. They couldn’t care less about the rate of unemployment in this country. It doesn’t effect THEIR bottom line.
While many people in America are either living in substandard housing, or have no home at all, these ridiculously rich and selfish people are holed up in sprawling, opulent mansions bigger than the typical shopping mall, surrounded by a huge team of servants waiting on them hand and foot, wearing clothing that costs more than the average American makes in a year, flitting around at political fund raisers pretending to like people they can’t stand, and jet-setting (first class, no less) all over the globe. They have no contact with the “filthy, smelly” poor, so why should it bother them?
If these billionaires REALLY want something to complain about, let them step down off their high horses and sample what life is like down HERE. Let them experience going without necessities such as food, medicine, housing, and even transportation. Let them find out how uncomfortable life really CAN be. They need to stop whining about something they already have way too much of. Money.