The Rich Have Money — and Passion
Interviews show that only a minority inherited their wealth or made it in the stock market. Most said they simply had a dream and were willing to take risks in pursuing it.
The old saying is true: The rich are different.
But not only do their values and habits set them apart from the hoi polloi, they’re different from their wealthy predecessors of a generation ago. For those interested in joining their ranks, it helps to understand why.
To enter the nation’s top 1%, you need more than $5 million. And if you get there, you’ll have plenty of newly arrived company: The number of U.S. “pentamillionaires” has quadrupled in the past 10 years, to more than 930,000.
Indeed, 70% of the nation’s big family fortunes are less than 13 years old, according to The Harrison Group, a research and marketing firm. And the people who amassed those fortunes are primarily entrepreneurs — risk takers for whom wealth is a byproduct of pursuing their passion.
What got them to the highest level? It isn’t necessarily stock market savvy: On average, folks who recently hit the $5 million mark report that only 10% of their money came through passive investments. And only 10% of pentamillionaires inherited their wealth.
More than luck involved
One might think that good fortune would play a role, but even luck is largely a matter of one’s own making. Psychologist Richard Wiseman has found that people who describe themselves as lucky share common habits that account for their success: They’re friendly and fond of new experiences, traits that put them on a collision course with new opportunities. In addition, “lucky” folks simply have higher expectations of success — they’re too pigheadedly optimistic to heed the long odds and call it quits.
Not to say that getting rich is simply a matter of having a swell attitude. The path to riches usually involves the kind of risk that would make most people feel a little queasy.
Harrison Group head Jim Taylor recently persuaded more than 3,000 pentamillionaires to discuss their paths to success. Perhaps not surprisingly, none of them had a cushy union job down at the Department of Motor Vehicles. The vast majority — 80% — either started their own businesses or worked for small companies that saw explosive growth. Almost all of them made their fortunes in big lump sums after many years of effort.
Surprisingly, today’s very rich say that money itself wasn’t much of a motivator. Once you’ve got food in your belly and a big-screen TV, the mere prospect of more Benjamins isn’t enough to get you leaping out of bed at 5 a.m. Rather, rich folks often make their fortunes after they make up their minds to solve a problem or do something better than it’s been done before.
‘I just loved the work’
When Frank Darras graduated from law school, all he wanted in terms of material wealth was a middle-class life for his wife and kids. But while working as a doctor’s assistant to put himself through school, he developed a burning desire to help the folks he saw struggling with unpaid insurance claims.
“It was the David-and-Goliath aspect that attracted me more than anything,” says the Ontario, Calif., attorney. Once he had his degree, Darras was like a cruise missile aimed at the insurance industry. By 1990, Darras had his first million-dollar year, and today he oversees one of the nation’s largest disability- and long-term-care practices. “I never thought I’d make $5 million in two lifetimes,” he says. “I just loved the work.”
A company helps budding entrepreneurs determine their destinies by sending them on vacations where they can try out the businesses of their dreams.
Getting rich also requires a certain amount of stubbornness and clarity of purpose. Consultant Joel Kurtzman, who evaluated 350 startups for his book “Startups That Work,” found that successful outlets usually have a team of two or three founders who share a common vision; the success rate for this model was a remarkable 50%.
The odds for solo founders were more like the oft-quoted one in 10, in part because they often found themselves working at cross-purposes with hired guns who see things differently. That’s what 34-year-old Justin Jarvinen learned the hard way. The entrepreneur saw two promising business ventures go down the tubes after he took on partners who tweaked his ideas beyond recognition. But three years ago he started VerveLife, a service that helps companies promote online marketing efforts with free music downloads. Knowing that his success depended on his enthusiasm for bringing the idea to market, he carefully chose partners who supported his vision.
Jarvinen is now the majority shareholder in two dot-coms, and he claims an eight-figure net worth. But what really excites him is his freedom to explore and support new ideas; his current passion is mentoring younger entrepreneurs.
“I’m interested in doing whatever I want, whenever I want,” he says.
Chances are you feel similarly. When people dream of getting rich, it’s about more than nice clothes and fancy vacations. Being rich means freedom: to spend your time as you please, to pursue your real interests and to take chances without courting utter ruin. Paradoxically, the road to riches often means acting as if you already have that freedom.
This article was reported and written by Anne Kadet for SmartMoney, with additional reporting by Anojja Shah.