More rich people in America -- a good thing?

Posted Nov 27th 2006 10:02AM by Peter Cohan
Filed under: Other Issues, Market Matters, Columns, Rich in America

This morning's New York Times [subscription required] describes how the very rich are leaving the merely rich behind.

This is a potent article that's sure to make the rounds of e-mail inboxes this week. The article suggests that to be merely rich you need to earn in the low to mid six figures; whereas to enter the very rich you need to make at least $2 million a year and have a net worth of at least $10 million. The ranks of the very rich are growing. For example, one in every 825 households earned at least $2 million in 2005, nearly double the percentage in 1989. And one in every 325 households had a net worth of at least $10 million in 2004 -- more than four times as many as in 1989.

But it also appears that there's a higher level of wealth which is growing rapidly. For example, hedge fund managers -- the top 100 of whom earned an average of $363 million last year -- and partners in private equity firms are setting records at art auctions, making $100 million contributions to their alma maters, and building 20,000 square foot estates in tony suburbs like Greenwich, CT. Is this good for America?

I think it's the essence of America -- the notion that people can use their education as a stepping stone to do whatever they want regardless of where they came from. What's interesting about this article is that it shows how a graduate of Harvard Medical School -- obviously at the top of what was once seen as the most lucrative profession -- saw and adapted to changes in the marketplace that had turned the practice of medicine into a path to mere riches instead of the greatest ones.

By migrating from medicine, to consulting, to investment banking, to hedge funds many doctors are reaching for higher rungs on the economic ladder. If they're happier in finance than in medicine, why shouldn't they have the freedom to do what they want?

I just wonder whether America's economy can lead the world in the long run if its smartest, most ambitious people are drawn away from less lucrative but more strategic fields such as doing scientific research to allocating capital for pension funds and endowments.

Peter Cohan is President of Peter S. Cohan & Associates, a management consulting and venture capital firm, and a Professor of Management at Babson College.

Print this

Reader Comments (Page 2 of 2)

12-07-2006 @ 5:14PM

just joe said...

we are sitting here at the library to try to keep warm,we are making belive the best we can that we are just here for knowledge and not trying to escape the cold ,since we have been stricken homeless under this o so wonderful goverment /president ,that just keep raises prices so far as too make my company shut down and lay off 100s of people that were just struggling in the first place,
as far as taxes well i geuss i wont be paying any since i have no income
charge cards-i dont have to pay them anymore ,i have no address
car payments -wont need that cant afford gas
as far as eating ,not sure yet ,will see what scrapoins are left out in the garbage tonite
people sit back and think this cant happen to you ,well it is and it creeps up quicker than you can imagine
as far as all being create equal \and treated equally mayb in the south american rain forest tribes but noT in this good old USA
if you werent born with a silver spoon in your mouth or resorted to some formn of crime ,you dont have a chance
well im warmed up now from my blood startin to boil ,its a bit hard to explain to my kids what happened to santa !
god bless america!

12-07-2006 @ 5:56PM

Sarah said...

The argument that the rich need to pay less taxes simply confounds me. As its been stated before, the wealthy have a number of loopholes and tax breaks.

The argument that anyone could have access to the type of education that could prove to be a stepping stone to the wealthy class is ludicrous. It doesn't matter how many books you drag yourself through at your public library; it call comes down to what authority wants to give you credit for. If you are lower-class, its unlikely that parents can go that extra mile to see Junior is kept out of the sub-standard ghetto school... it's even more unlikely that they will be able to assist their kids in getting that college education.

And, having been one of those kids, I can safely say that just scrounging up the money to pay the APPLICATION FEE to be considered a possible student can be difficult -- nevermind missing out on all those wonderful scholarships because I'm not a 95 pound cheerleader able to warm the hearts of the hundreds in my community and thus promote the development of charity.

I live in a world of debt because the costs of living and insurance are rediculous -- and I'm one of the lucky people in that I havn't -HAD- to buy a car or pay for gas or groceries... although the reality of that is looming closer and closer.

Perhaps I'm just bitter on the topic, but you can not honestly tell me that the gap we're seeing is not caused by what essentially boils down to raw capitalism and an enormous feedback loop.

12-07-2006 @ 6:24PM

Shanan Calico said...

MATTHEW 19:23 AND 19:24
"ASSUREDLY,I SAY TO YOU THAT IT IS HARD FOR A RICH MAN TO ENTER THE KINGDOM OF GOD."
"AND AGAIN I SAY TO YOU,IT IS EASIER FOR A CAMEL TO GO THROUGH THE EYE OF A NEEDLE THAN FOR A RICH MAN TO ENTER THE KINGDOM OF GOD."

12-07-2006 @ 11:45PM

Mike said...

The next time you need a Doctor, call your broker!

It seems our only value in the USA is the dollar....

12-08-2006 @ 4:16AM

Gustavo Juarez-Valencia said...

Not all men are born equil....but for those that never quit from schol's or never give-up; The Future is there. But remenber: the Goverment, Banks and Corporations always will try to keep us down to make them rich by the day.
I agree, LET'S DO SOME THING ABOVE IT before we became a Third World Country
I'm from Mexico and I been there..........

Previous 20 Comments