Growing Poor by Degrees

A few pages from the book of real life.

Almost every day, I eat lunch at The Palm, a steak-house in West Hollywood favored by the newly rich. Around me sit slobby-looking typesin thin leather jackets, T-shirts, chains and beards. They look a lot like the people who used to pump gas in Washington when I was a child. Who are they? One of them came here a year ago., broke and unemployed. he borrowed the money to start a factory in a back room that mixed mineeral oil with perfume and called it Garden of Venus Love Oil. he sold out after about six months for $3,000,000 in stock of a major pharmaceutical company.

Another guy could not make a living as a lawyer, incredible as that may sound. So he began to lease whole floors of office building and then sublease individual offices to solo practitioners of law. He spends most of each lovely day listening to music and counting his money--around $2,000,000 at last count. Yet another was a messenger for a record company, delivering promo discs around town. He thought it might be a groove to press records on white vinyl. Two years later, his company is selling about 2,000,000 albums a week. He owns it all.

Page two from the book of real life. Not long ago, I visited some of my old pals from Yale Law School in a decrepit house in Cambridge full of charm and the smell of cat shit. Several of the class of 1970 were there, comparing notes on what we had all accomplished. One of us was a full professor at Harvard Law School. Another was head of a Ford Foundation project on birth control in the sub-Saharan desert. Yet another was in charge of new projects for an environmentalist group, saving whales and snail darters.

Prestigious, indeed, but what we really wanted to know was how much money we were making. The sad answer--not much. Even the moneygrubbers, beneath our dignity, who had gone into Wall Street practice, were taking home no more than $50,000. A comfortable wage, but barely, in the era of the $6000 Volkswagen. All of us had thought we were going to be rich, but somehow we had missed the boat. Why?

The final page from the book of real life, the one I carry around in my head. "What, in your opinion, is the most valuable skill you will learn in school?" That was a question I asked almost 400 of my students when I taught at American University in Washington, D.C., a few years ago. The overwhelming favorite answer was "How to make lots of money."

It is all enough to make a person think. How come those guys at The Palm are so rich and all of us smart guys from Yale are so poor? How come all of us guys in college want to make big money and hardly any of us do?

Maybe I was just looking at it wrong. The Palm is not a perfectly representative sample, after all. So I did what any smart guy would do: I looked it up in the library. I found that college graduates made more money than non--college graduates, on the average, though the gap is narrowing. But I also found that for getting rich, not just a Master Charge card but a ranch in the Shenandoah Valley and a private plane and $10,000,000 in the bank, a college degree was almost irrelevant. Millionaires were coming from someplace that had nothing to do with school. Speculation, investments, starting companies, taking risks, becoming rock-'n'-roll stars, writing about Watergate--that is where the real money comes from, and it does not have a damned thing to do with getting straight A's in New Haven. It has to do with buying in Snowmass at the right time, figuring out that a lot of people like to watch lovable bigots and, yes, that people like to play white-vinyl records when they are high.

So a daring thought came to my mind late at night: School has nothing to do with making you rich and, far more deadly, school actually hinders a smart fellow or girl from getting rich.

After all, what do you learn in school? Roy Ash, multimillionaire founder of Litton Industries, seconds something he once read--that "in school you learn to spend money gracefully after you already have it" but not how to make it, at least not quickly.

In school, you learn how to read, how to add and subtract (maybe), how to learn the history of art and music. May-be, if you are really lucky, you will also learn how to analyze and criticize thoughtfully. That is the highest goal of education--to teach students how to analyze and criticize elegantly and penetratingly.

If you are a really top-notch student, you will learn how to explain The Failure of Great Britain's Postwar Foreign Policy. You may develop a new approach to understanding the irony of Trollope's Barchester Towers.

For that, in school, you are praised and rewarded with good grades and member-ship in the elite group of the academically inclined.

You also learn in school that you are superior to everyone else, that your powers of analysis and criticism set you apart from and above the sorry mass of people who do things, instead of criticizing things. Where in school, after all, is there any merit in doing --as opposed to explaining why the doers did it all wrong, why Lloyd George was a fool and modern architecture is trash?

Finally, you learn in school how to be successful in organizations. What is school, after all, but your first corporate job? Steadily, methodically, you advance through the grades, doing what you are told carefully and risklessly, one grade higher every year, one step closer to disillusionment and shock.

The sad fact is that no one will pay a dime for criticism of Barchester Towers, for an explanation of why Lloyd George's policy failed or to learn why the French New Wave came to an end. No one cares enough about criticism and analysis to pay big money for it.

In real life, people care about those who do, not those who criticize. In school, you learned that you were immeasurably better in a kind of indefinable way from that crude fellow who puts up tacky condos in Palm Springs out of tar paper and sheet rock. But that lowbrow fellow is the one with the Rolls Corniche. Yes, in school, you learned to sneer at the people who produce rock records while you talk about Cuisinarts. But the producer is the man who owns the vineyards in Bordeaux while you fly three abreast on a charter to see 1,000,000 tourists seeing the Mona Lisa. Of course, we all laughed at the turkey who dropped out of school to drive a trash truck. But he started his own trash-hauling business and now we are dying to get a grant from his foundation.

While we were learning how to look down our noses at people and things, he was learning how to make money, and we do not know one damned thing about it.

Society rewards people by making them rich for all kinds of reasons. If a man builds something that people need, if he sells something that people think they need, if a woman looks like many people's dream girl, if a boy sings in a uniquely appealing way, if a tall man can drop a ball through a steel hoop--society is ready, waiting, even eager to make them all rich.

But no society, not even one as rich as ours, is rich enough to make people rich for criticizing and writing querulous essays.

To make money in this world takes some knowledge of what things are worth and some ability to provide them. William Zeckendorf knew that people needed buildings. Rod Stewart knew that people needed his songs. Reggie Jackson knew that people needed his home runs. Max Palevsky knew that people needed his computers. Norman Lear knew that people needed to laugh.

Zeckendorf, Stewart, Jackson, Palevsky and Lear did not write a paper about it nor apply for a grant. They did something to give people what they wanted and the nation made them rich.

Getting rich takes a certain turn of mind, a certain flair, way beyond knowing what the market rewards in an intellectual sense. That flair, that special personality is as far from classrooms as L.A. smog is from fresh air.

Other people get rich because they have learned that, except in astoundingly rare circumstances, it is not enough to simply sell your own labor to get rich. This is absolutely key. School, even the best law school or medical school, even business school, teaches people how to sell their labor. However highly skilled the labor, it will almost never be enough to make the worker any more than a well-paid wage slave.

For example, if a man works hard at Harvard Law School and harder still when he gets out, and then becomes a partner at a Wall Street firm, he may make $150,000 a year. Maybe more. He (continued on page 234) Growing Poor (continued on page 198) has to pay tax, send his wile to tennis lessons, have his daughter's teeth straightened and have a Cuisinart. If he is very, very frugal, he may save $20,000 a year. (Remember, I said "very, very frugal.")

If he can keep that up for about 30 years, what with compound interest, he will have saved $1,000,000 dollars. It simply never happens. Never. Not ever. No one is that frugal.

On the other hand, if a man who drives a trash truck starts a trash-hauling business and hires a few winos to throw the bags and cans, he may soon be netting $2000 a week. That is less than the lawyer is making, but the trash proprietor can sell his business for ten times earnings and soon have his $1,000,000, while he is still young enough to enjoy it.

Similarly, the builder who puts up ticky-tacky apartments that no one we know would ever want to live in can usually sell them the day after completion for twice what it cost to build them. The builder probably had to put up only ten percent in the first place, so he is rich overnight.

The secret is that if you have a business or a building or a book or a record or a piece of land, you can sell it for a multiple of its earnings and take the money and live it up. You cannot sell yourself as a wage slave at a multiple of earnings and then have the money to live it up. You get the money, week by week, but the employer gets your life. The trash king has the money in a lump and his life, and that makes all the difference.

Unfortunately, the rule that the rich get rich not by selling their labor but by selling something else is almost unbreakable--except for entertainers and athletes.

The Statistical Abstract of the United States tells us that of the top one-half percent of wealth holders in America, all but a tiny few have their assets in (1) real estate, (2) corporate stocks, (3) bonds.

The people who get rich have learned--perhaps intuited is a better word--that to get rich, you have to take chances, get off the beaten path, stop living the linear life. Making big money takes a willingness to get down into the guts of the economic system and roll the dice. In school, you learn to sit in stuffy classrooms and explain why the system stinks or how it evolved. But the real money comes from getting your hands dirty with the risks, the unpleasantness, the excitement of actually being inside the monster, the economic monster, itself. That takes a certain kind of person, and if he or she started out like that, he or she will not wind up like that after intense exposure to higher education.

A personality that can jump back and forth, can see beyond the next mid-term, can take the gamble of getting dropped in shit in exchange for the chance of making real money, that's what you need to make money. School will take that out of you just as surely as a summer day in Washington takes the crease out of your trousers.

Furthermore, where in school do you learn anything about capitalizing earnings? Where, among all the talk of Balzac and Rousseau, is a word about cashing out? Nowhere, unfortunately, and so we watch the rich getting out of their Bentleys and think that they must have no taste at all. Secretly, we get high blood pressure from envy, even as we know that we know about the crucial differences between Pound and Eliot.

That does not mean school is an abomination. There is still a great deal of psychic gratification to be gotten from understanding literature and art. Poli sci has its uses. So does art history. It just does not take you one inch toward the place where all those students at AU wanted to be--standing at the bottom of the money tree and shaking it.

How did it happen? Why, in a money-crazed society, are our brightest and greediest youth learning nothing about getting money, when that is what they really want?

It happened, as most things do, by accident. The liberal-arts course of study, which about half of all our college-age boys and girls are now pursuing, began in England. In the 13th Century, the clerics of England wanted schools to prepare themselves to advise kings and princes, as well as to teach themselves Latin and the lives of the saints. So Oxford and Cambridge were created. For several centuries, they taught reverend men, until various social upheavals shook England and the schools changed. The priestly class had suffered an immense drop in power; the nobility and the wealthy merchant classes filled the void. There was no longer any need for classes that would teach about Saint Monica, but there was great felt need for classes that would teach the sons of the wealthy how to be cultivated and witty gentlemen.

Thus, the liberal-arts curriculum was born. It was intended to teach men of leisure how to discourse graciously on a variety of subjects without having to know any of them thoroughly. Oxford and Cambridge were intended to make dilettantes out of wealthy boors. There was absolutely no interest in teaching the boys how to make money, because, obviously, they would never have to soil their hands trying to make any: They already had it.

Oxford and Cambridge were such a hit that when the English colonized America, they founded various imitators. At first, these schools, too, were generally for clergy, but gradually they also became a way station between childhood and parlor desuetude for the scions of the rich.

Harvard, Yale and Princeton taught the children of the rich how to make foreign policy, quote poetry, admire the art they were rich enough to collect, give speeches at club dinners and enjoy the wealth their parents had thoughtfully stored up.

In the prairies and bayous of America, other colleges were organized. At first, they taught about agriculture or teaching, but the lure of that upper-crust liberal-arts curriculum was irresistible, so the Harvards of the Midwest and the Harvards of the South and the Harvards of the West started to offer liberal-arts courses in the middle of empty and desolate prairies and swamps.

Not only were the scions of the great industrial and merchant families of the Midwest able to study Beowulf and Homer but also the daughters and sons of the local International Harvester dealer were able to get an education, fully as superficial as that obtained by the children of the Lodges and the Cabots.

Until the Forties, though, most of the students going to liberal-arts colleges had businesses to go to after graduation. No matter that they did not learn how to make money in school. They were able simply to keep churning it out of the family business.

That all changed after World War Two. Along with the expectation that every person would become middle class, have a Kaiser car and a Magnavox TV, the demand that every student be entitled to a liberal-arts education was heard in the land. The masses had seen the rich in their offices and their clubs with their college degrees. The masses of ordinary citizens wanted in. They wanted their sons and daughters to be college kids and have those cushy jobs with lots of money.

State universities that had been teachers' colleges began to build great pyramids to humanities, social sciences, music appreciation, botany and field hockey. In St. Paul, where farmers had gone to learn about seeds and harvests, their sons and daughters learned about Engels and Schumpeter. In Davis, California, where teachers once learned geography, the children of the new masses sat and watched French movies.

The number of students in liberal-arts colleges doubled and redoubled and redoubled again; by the late Sixties, there were 12,000,000 college-age students in liberal-arts colleges, where there had been barely over 1,000,000 before World War Two. Everyone had a college degree. There were, suddenly, more degrees than jobs appropriate for people with degrees. A barber with a college degree cut hair and a waitress with a degree in sociology served Coors at the Aragon Ballroom.

That is where we came in. The students went to college, studied the same things the scions of the gilded age had studied before them, and then graduated, ready to start living like the plutocracy. Surprise! They were lucky to get jobs as insurance adjusters. Surprise! Even when they went to law school, even when they went to medical school, even when they went to business school, even when they made great contacts, it was hard cheese. They were still a million miles away from having all that money that college graduates were supposed to have.

The students and their eager parents had made a fundamental mistake. They had assumed that because you see a rich man with a Rolls-Royce, having a Rolls-Royce must have made him rich. Wrong. He got the Rolls because he was rich.

The students and their parents who had their noses pressed up against the window watching all those rich kids in college, wanting in for themselves, had utterly confused cause and effect. The college kids who were rich when they got out had been rich when they went in. That was why they were, in college instead of out earning a living like you and me. College did not make them rich. It does not make anyone rich. It is for people who are already rich, dummy.

All of those rich guys at the Princeton Club, eating lamb stew and talking about their bonds, did not make it because they went to Princeton. They made it because they were born. The same goes in spades for Podunk U. You have about as much chance studying liberal arts there and coming out rich as of smoking a lot of angel dust and keeping your sanity.

Those of us who were born without money and who want to have it need college like New York City needs welfare mothers. We are supposed to go out and work, so that we can get enough money so that our children can go to college and come out without having to work. Higher education is either for those who want knowledge for its own sake (a fine and shining thing) or for people who will not have to work. It is a nice bauble for the rest of us, but it should not be confused with making real big money. The same goes for graduate schools. They are fine for passing the time, but they have nothing to do with the really substantial bucks.

That is the truth, and these are the consequences: Kids get out of school and are bewildered at what happens to them. All their lives, their mommies and daddies and teachers told them that they would inherit the earth, and suddenly they see that the kid who drove the trash truck is inheriting the earth. They work at their clean jobs, becoming committed wage slaves in clean offices, with secretaries and dictating machines, and the guy who owns the maid service that cleans up the offices after they have gone home to their public television and Claudius gets rich. The college graduates keep poking along, remembering the palmy days of college and wondering what happened. Why can't we take a year off and go to Spain? Why can't we get a Jensen? Why can't we have a chalet in Aspen?

So the grads get bitter. They feel cheated. They thought they would come out and be the crème de la crème, and they're down there somewhere with the bed of rice. Of course they're mad. Society has duped them, cheated them, pulled the rug out from under them. They get alienated. They hate the society. They sneer even more at the people who have what they want.

It hurts. It is painful to be disappointed. It rankles when you thought you were going to live like a Brahmin and you have to pay your Visa bill every other month. It burns when you thought that you might work at a low-paying, high-status job--Foreign Service, perhaps--and you find that because you don't have that wonderful inherited wealth, you do not even have the high status.

Disillusionment, resignation, depression--all the things we see in our friends a few years after they have gotten out of school, they all come when we do not get the things we want. So we turn to Cuisinarts and pretension to mask our disappointments, and we wonder how we ever went so far off the track.

But don't blame yourself. It's what you learned in school. You can come to The Palm any time and learn the truth, but be prepared for a wallop when you see the price of the lobster. The rich, after all, can afford it.

"We watch the rich getting out of their Bentleys and think that they must have no taste."