The Middle-Class Millionaire: The Rise of the New Rich and How They Are Changing America
by Russ Alan Prince, Lewis Schiff
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Book Summary Information
Author: Lewis Schiff, Russ Alan PrinceEdition: Hardcover
Audio: English (Original Language); English (Unknown); English (Published)
Published: 2008-02-26
ISBN: 0385519273
Number of pages: 240
Publisher: Doubleday Business
Book Reviews of The Middle-Class Millionaire: The Rise of the New Rich and How They Are Changing America
Book Review: Some serious methodological issues
Summary: 3 Stars
This book starts out by stating that there are 8.6 million "millionaires" in the US--about one in 35 people. However, the recently completed "World Wealth Report 2008" by Capgemini and Merrill Lynch puts the total GLOBAL number of millionaires at just 10 million, and the number of US millionaires at around 3 million--about one in 100 people.
How to account for the discrepancy? The authors of The Middle-Class Millionaire foolishly include housing "wealth" (home equity) in determining who is or isn't a millionaire in the US. That increases the number of millionaires by nearly threefold. That must have made it a lot easier for the authors to assemble a large database of "millionares", but at the expense of meaningful information.
Since the book was published in early 2008, we can assume the surveys took place in 2006-2007, when home values were meaningfully higher. As a result it is not surprising that they found so many "millionaires" on the east and west coasts--these regions of the country contain many house-rich people who've probably seen significant home equity declines since then.
There's a reason the Capgemini study excluded home equity: you can't "eat" your house. Wealth is something you can live on; a house is something you can live in. Certainly there are individual cases where an individual may monetize considerable house wealth to become "wealthy"--imagine an elderly person selling their house for millions of dollars and downsizing. But for society as a whole, it's erroneous to think this is possible--after all, if everybody tries to monetize their home equity, the home equity goes away, as the countless foreclosures around the country are now showing.
So, already, nearly two-thirds of the authors' target group don't belong there in the first place. Another problem is comparing people with one million dollars to people with ten times as much money and pretending they are in the same group. Sorry, but an order of magnitude is a big difference. Many financial advisors will suggest a sustainable portfolio drawdown range of 3-5%. On one million dollars, that is 30-50K a year; on ten million, it's 300-500K a year.
Is it really possible those two groups are really living in the same economic world? Sure, there are many people with small portfolios who live beyond their means, just as there are many rich people who live well within their means--Warren Buffett famously still lives in the same house he bought for 31.5K at the age of 27. But in general, when you have two wealth cohorts separated by an order of magnitude (from 1mil to 10mil), there are going to be big, big differences in perceived reality and behavior. If you include the 5.6 million "house millionaires" like the author did, the disparity between the bottom and top of this so-called middle class becomes even more severe.
I'm not saying people with 10mil live like the people in "Richistan" who have their own private golf courses, yachts, and planes, but come on, you are talking about a very, very small segment of the population. Let's not pretend they are living in the same world, with the same range of choices, as the rest of us.
So, I can't help but be pretty dismissive of the authors' broadbrushed "conclusions". Having said that, this book has some amusing tidbits that made it a worthwhile read to me. Whether it would be interesting to you is a matter of personal taste. I would suggest a thumb-through at the local bookstore.
Summary of The Middle-Class Millionaire: The Rise of the New Rich and How They Are Changing America
A compelling look at a new class of the affluent - the middle-class millionaires - whose attitudes and values are influencing and reshaping American lifeIn this groundbreaking book, Russ Alan Prince and Lewis Schiff examine the far-reaching impact of the middle class millionaires-people who enjoy a net worth ranging from one million to ten million dollars and have earned rather than inherited their wealth. Comprising 8.4 million households and growing in number, the attitudes and behaviors of these working rich are exerting a powerful influence over our society. So who are these people? They believe in the benefits of hard work. They believe in investing in themselves, and in self improvement. They are more likely to focus on drawing financial gain from their work, and less inclined to be discouraged by failure. And they don't spend money on the extravagances indulged in by the very rich; instead, they wield their affluence according to middle-class values and ideals. From home security systems to health care, technology to travel, their spending choices are affecting us all - from the products we buy, to the communities in which we live, to the aspirations and values of the broader middle class and American population as a whole.
In the bestselling tradition of Bobos in Paradise and The Millionaire Next Door, THE MIDDLE-CLASS MILLIONAIRE is a captivating narrative - part sociology, and part aspirational journey into the lives, attitudes, and values of the middle-class millionaires. Based on extensive surveys and research into more than 3,600 middle-class millionaire households around the country, this book will reshape our understanding of what it takes to be successful - and how all of us can achieve similar success.
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