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By Adam Bryant
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BY ADAM BRYANT
WITH MARTHA BRANT IN CHICAGO, BRAD STONE AND NADINE JOSEPH IN SAN FRANCISCO, T. TRENT GEGAX IN BOSTON, ANNE UNDERWOOD, ANJALI ARORA AND ALISHA DAVIS IN NEW YORK AND BUREAU REPORTS
By most standards, Bill Frantz is doing great. At 31, he's an electrical engineer at General Motors, the biggest corporation in the country. In Detroit, a $60,000 salary goes pretty far. He has two cars, including a beloved Alfa Romeo, and he's going scuba diving in Cancun in July. But something's gnawing at him. His friend who got a 30 percent raise to go to California and work at a tech job with stock options. His buddy with the 32-foot boat. People all around seem to be cashing in, and Frantz's ideas about success are changing. "If I didn't know any better, I'd be perfectly happy with what I'm doing,'' he says. "But it gets to me when I see my peers, people I relate to, people my same age, doing better than I am. You start to feel discontent."
A lot of us know what he means. We are living through one of the greatest economic booms in U.S. history--yet many of us are feeling a little grumpy. Chances are you know somebody who's hit it big--by placing a timely bet on some soaring stock, grabbing a fistful of stock options from his company or perhaps joining an Internet firm that's about to go public. Suddenly, they're paying cash for cars and weekend homes, planning early retirement or disclosing matter-of-factly that they have their "two commas," the current shorthand for a million. Advertisements drill home the message that there's easy money to be made: there's the tow-truck driver in the Discover brokerage ads who day-traded his way to owning an island, and the smirking guy in a new ad for Forbes.com who's a "no-salary-earning, old-underpants-wearing, billionaire-on-paper C.E.O.'' In bookstores you'll see the best seller "The Millionaire Next Door" sharing shelf space with "The Millionairess Across the Street.''
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The bull market, powered by the cyberboom, is a pre-millennium party that's blowing the roof off the American Dream. It's just that some of us can't seem to find our invitations. And all this new wealth is creating a sense of unease and bewilderment among those of us who don't know how to get in touch with our inner moguls. The old road to success--perspiration and perseverance--doesn't seem as clear anymore. In this Age of Outlandish Expectations, even Horatio Alger might be tempted to trade stocks online. It's not so much a feeling of envy--heck, there have always been rich people around--it's a pinching sensation that the game is passing us by. In the new NEWSWEEK Poll, 67 percent of American families with incomes of $30,000 to $49,000 say they have missed out on the stock-market boom. And 71 percent of all Americans say they have no chance whatsoever of becoming rich in their current jobs. Yet 72 percent also say they feel more social pressure to buy bigger homes and fancier cars to keep up with their neighbors. And almost half of all people who earn $50,000 or more say they know someone who's become rich. "There's nothing more disturbing than other people's stock options," says Richard Cohan, a clinical psychologist in Berkeley, Calif. Cohan recently started house hunting, and found that many people were bidding 20 to 30 percent over the asking prices--making him feel unwelcome in his own neighborhood. "It's hard to stave off the secret forbidden wish for the market to crash," he says.
It's not just a perception that more people are getting richer--it's reality. The ranks of millionaires are, in fact, growing quickly. Between 1995 and 1998, about 1 million new millionaires were created, according to Edward N. Wolff, an economics professor at New York University (between 1989 and 1995, the number of households with such wealth stayed relatively constant at just over 3 million). The three-comma crowd is growing, too. Forbes magazine predicts its annual list of the 400 richest Americans, due out this fall, will include about 250 billionaires, or 60 more than last year.
Some of those paper profits will go up in smoke when the bull market finally flames out. And the market may be in for a slight tumble; Fed chairman Alan Greenspan is widely expected to raise interest rates. But future hiccups can't erase the headlines that have brought us stories about executives of some start-up--Priceline.com, TheStreet .com, theglobe.com--getting rich overnight. Of course, it's not overnight--most successful entrepreneurs have stories to tell of lean years, incredibly long hours and ideas that few believed in at first. But the Internet economy has turned these stories into videos to be watched with your thumb on the fast-forward button. Take Todd Krizelman and Stephan Paternot, who as Cornell juniors had a big idea in 1994. They raised $15,000 from friends and family and launched theglobe.com Web site, where users can e-mail, enter chat rooms and build their own home pages. The founders, both 25 years old, took the company public last fall. Value of their stakes: about $35 mil- lion each.
In another, earlier era--the go-go 1980s--many Americans tended to make villains of such arrivistes. But the suddenly wealthy are no longer bogeymen like Gordon Gekko, the slippery protagonist of Oliver Stone's "Wall Street." The rich, at long last, are very much like you or me: they're an idealized version of ourselves. If we once respected the Alger work ethic, many of us now admire the savvy of the instant rich, and are panting at the possibility of becoming one of them. "It's the first time in the postwar era that so many people seem to be getting so rich with so little relative effort on their part,'' said Robert B. Reich, the former Labor secretary who's now a professor at Brandeis University. "At least on the surface, it appears that the old work ethic has turned upside down.''
What's changed most profoundly is not the numbers of new rich, but the formula for becoming one of them. Americans' wealth and sense of security, once the product of a long haul up the job ladder, have become much more subject to chance. Timing and luck have never played a bigger role in getting rich. Many Americans are feeling richer these days not because their paychecks have expanded, but because their nest eggs are reaping double-digit returns. Record numbers are now playing the market: from 1989 to 1995, the share of households owning stocks jumped from 31.7 to 41.1 percent. And with the Dow seemingly unstoppable--it has soared 376 percent since 1990--even Wall Street rookies can feel like Masters of the Universe.
No phenomenon has spread the wealth more--or made it feel more random--than stock options. Options emerged in the late '80s as a way to link top executives' pay and stock performance. Silicon Valley firms gave them to most employees to offset the low pay of a start-up or compensate for long hours. Now options are distributed throughout the corporate food chain and far beyond tech enclaves. Options have become as versatile as a Swiss Army knife: they can attract employees, keep them in the fold and motivate them to work harder. About 6 million workers below the executive ranks now get stock options, according to the Employee Stock Ownership Plan Association of America. A recent survey of 350 large companies by William M. Mercer, a consulting firm, showed that more than a third of them had stock-option plans that covered a majority of their em-ployees--twice the number five years ago.
You've heard of Microsoft Millionaires who have gotten rich from their stock options. But Atlanta has legions of Home Depot and Coke option millionaires. Option wealth is spreading through New York's Silicon Alley, through other high-tech centers around the country and also in old-line companies like GM and Ford. "I never even dreamed this big," says Vern Joslyn, 47, a double-digit millionaire because of his Home Depot stock options. Joslyn was an assistant store manager in Bowater Home Center in Mobile, Ala., in 1984, when Home Depot bought the store. He didn't know what stock options were at first. But with Home Depot's stock rising quickly, his options helped him buy his first house and furnish it. He moved up the management ranks and is now group president for Home Depot's Northeast division. Joslyn says he's pretty frugal, but he indulged himself recently by buying his first Mercedes. "I walked into the dealer in shorts and sandals and a T shirt, and the guy was a little rude to me. He's looking at my clothes and telling me, 'We're closing in 15 minutes.' So I go, 'Then will you take cash?' I love that.''
The dementia of the stock market has turned former daydreams into distinct possibilities. A few years ago Steve Markowitz, now 28, founded Mypoints, a firm that offers the equivalent of frequent-flier miles for shoppers on the Internet. Last year he was offered $80 million for the business, which would have made his share worth $4 million. But with the value of so many Internet companies puncturing the ozone layer, his expectations have changed. "There was a time when I thought 1 or 2 million would be a great return on the investment in time and energy spent building the company,'' says Markowitz, who lives in Berkeley, Calif. "Now I would go as far as to scoff at that amount.'' Where's the bar set now? "In the tens of millions and 100 millions.'' He plans to take his company public next month, and the potential payoff is much greater--about $10 million. And that's if the stock stays flat.
Stories like Markowitz's have inspired a wave of defectors from large corporations. In addition to rich options packages, many want to plant a flag on some virtual turf in cyberspace (and reap the potentially much higher financial rewards that pioneers feel they deserve). Disney has lost many top executives to Internet companies recently. Joe Kennedy, the executive credited with much of the success of Saturn cars, recently quit GM after 18 years to join E-loan as its head of marketing. He says he had the best job in corporate America at Saturn, and that with a $500,000-a-year salary his financial goals would have been met. But Kennedy took a pay cut in return for a sizable equity stake in E-loan and a bigger potential payoff. "People used to say, 'Is it a good company? What's the pay, the benefits?' In this new economy, there is much more focus on whether the company is going to be really successful, an out-of-the-ballpark opportunity.''
For new college grads, it's all like being a kid at a carnival. And with expectations so stratospheric, the top-drawer careers of the past just don't cut it anymore. Jonathan Saunders, a senior in entrepreneurial studies at Babson College in suburban Boston, is preparing to launch Puffalumpf Toys, a custom-playthings firm with a heavy Internet presence. Before it's even off the ground, though, he's already thinking about his next business. "I'm more of a serial entrepreneur who nails it, sells it off or goes public and then moves on to a new idea. I have new ideas on a weekly basis.''
So what's wrong with great expectations? After all, these are prosperous times. The stock market has generated trillions of dollars' worth of gains in the last decade. Unemployment is low. Home ownership is up. The income gap remains a thorny problem, but wealth is being increasingly spread out as businesses give workers more of a stake. And as everybody starts to ponder his own dot.com business plan, that picks up the pace of innovation.
But get-rich-overnight stories can also raise a lot of false hopes--on everything from the money people think they should earn to when they plan to retire. In a recent survey of 281 college juniors and seniors, 61 percent said they think they will retire between the ages of 40 and 50--not bad if you can swing it. But all this new wealth swirling around has left a lot of people who are many years out of college in a mild state of panic. Just try quoting those old saws to your kids about the value of patience when they hear success stories like Don Roberts's. The 29-year-old, who has a master's degree in nuclear engineering and lives in Emeryville, Calif., decided to apply his analytical skills to day-trading Internet stocks. Now he has made enough money to take a five-year sailing trip. "I had a goal to sail around the world,'' he says. "I asked myself the fastest way to achieve that goal, and I thought I could either start a company and have other people manage it or I could make it in the stock market.''
Of course, day trading is a dangerous game played by too many people who don't have the skills. But given the advertising blitz by online brokerage firms, you could be forgiven for thinking that a lot of investors are making money at it. Even Barbra ("You Don't Send Me Stock Tips") Streisand is day-trading--she turned a $1 million investment from her friend Donna Karan into $1.8 million after only five months, according to an article in Fortune.
Despite all the success stories, there's another downside to all these heightened expectations: a sense that old-fashioned work can be demoralizing. At least when robber barons made their fortunes in the late 19th century, there was general agreement they worked long and hard to get them. Now quick fortunes are built on notions of being the "first-mover'' in cyberspace and capturing lots of eyeballs. "If you can make a killing in the short run, so the reasoning goes, why worry about the long run?" says Prof. Jim Koch of Santa Clara University's Center for Science, Technology and Society. He finds it frightening that few people are really committed to the companies being created--not the venture capitalists, the mortgage bankers, the start-up entrepreneurs. "You don't build a great society or a durable economy in this kind of environment."
The strange thing is that nobody's really countering the money hype. In previous boom times in the 1800s and earlier this century, there was always influential criticism of such behavior coming from pulpits, schools and colleges. Now it seems as if the list of deadly sins has been shortened to six. Personal-growth guru Suze Orman has given money a spiritual gloss in her best seller "The Courage to be Rich." A new book is out on personal finance for twenty- and thirtysomethings called "Greed Is Good,'' by Jonathan Hoenig. In the book's preface, he recalls that as a young boy, he was fascinated by stock tables. "The notion of being able to make money without actually doing much of anything jazzed me to no end,'' he writes. Cohan, the Berkeley psychologist, also detects a broader shift in attitudes about money. "People used to apologetically make money. Now you apologetically don't make money.''
In this unprecedented market, it can be hard to find appropriate words of wisdom, particularly for all those people who feel as if they're missing out. The have-nots can take some comfort in history. The crazy prices of stocks and the frenzy over cyberspace can't last, and all this hype over the Internet as the Next Big Thing will eventually fade or come to a crashing halt. When it becomes a Former Big Thing, a good steady paycheck won't feel like you're working for nothing anymore, fewer people will seem to be hitting the jackpot and one comma may not look so measly. Lacking a moralist of greed for the '90s, let us dip back into the '80s. To quote the long-forgotten words of Daryl Hannah's character in the movie "Wall Street": "You may find out one day that when you've had money and lost it, it's much worse than never having had it at all.'' Well, maybe. But those of us who haven't gotten our share yet wouldn't mind a taste.
No Starch, PleaseHe may look lower on the evolutionary scale, but the Entrepreneurial Man of the gold-rush economy is far more advanced than his ancestor, the Organization Man. Even if he doesn't tie his shoelaces. Here are the vital stats on both species:
GETTING STARTED: Earns degree in accounting, polishes resume, gets haircut
STATUS TOY: Sports car
DRESS FOR SUCCESS: White shirt, black shoes
LEISURE TIME: Golf
RETIREMENT: Gold watch and certificate at 65
GETTING STARTED: Writes business plan on pizza box
STATUS TOY: Sports franchise
DRESS FOR SUCCESS: Shirt, shoes (optional)
LEISURE TIME: Whitewater rafting (with laptop)
RETIREMENT: Yacht at 35 (unless he's lucky)
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