With the long-weekend rapidly approaching, ConvergEx's Nick Colas takes a trip to the Hamptons, but through a time warp back to the Great Depression. Examining the social registers (colloquially called the “Blue Book”) from 1927 and 194...
With the long-weekend rapidly approaching, ConvergEx's Nick Colas takes a trip to the Hamptons, but through a time warp back to the Great Depression. Examining the social registers (colloquially called the “Blue Book”) from 1927 and 1940, he finds that “The great and the good” of the day had real trouble holding their status during the social upheavals of the late 1920s and 1930s. Only 32% of the families appearing in the Blue Book in 1927 were still there in 1940. The ratio was even worse, at 29%, for the ultra-elite who belonged to the Meadow Club in Southampton. It’s too early to tell what the last few volatile years will do to the upper crust of East Coast society, of course. Or what may still be in store. But when the hedgie in the Bentley cuts you off on Route 27 this weekend, take some solace in knowing he may not be there in a few years. Via ConvergEx's Nick Colas: F.Scott Fitzgerald is known for the phrase “The rich are different from you and me.” The full quote, from a 1925 short story, actually goes like this: “Let me tell you about the very rich. They are different from you and me. They possess and enjoy early, and it does something to them, makes them soft when we are hard, and cynical when we are trustful, in a way that, unless you were born rich, it is very difficult to understand. They think, deep in their hearts, that they are better than we are because we had to discover the compensations and refuges of life for ourselves. Even when they enter deep into our world or sink below us, they still think that they are better than we are. They are different.” Ernest Hemingway had a famous retort to “The rich are different” in his story “The Snows of Kilimanjaro”: “Yes, they have more money. But that was not humorous to Scott. He thought they were a special and glamorous race and when he found they weren’t it wrecked him as much as any other thing that wrecked him.” Yes, these two great American writers were friends. Sort of. I think about this exchange regularly, given the extremely high levels of personal wealth generation the world has seen over the last 30 years. Hedge fund billionaires in the US. Russian oligarchs in Moscow. Super wealthy Indian businessmen snapping up nine figure houses in London. And China… Even Chairman Mao’s granddaughter, Kong Dongmei, is reportedly worth over $500 million. And the list goes on… Specifically, I wonder how long wealth actually stays with an individual and their descendants. There’s an old saying which posits that three generations is pretty much the maximum: one to make it, one to start to spend it, and the third to finish it off. There are obvious exceptions to this rule, of course, such as the in United Kingdom, where land ownership has kept the country’s titled elite deep in the money for hundreds of years. But in economies where wealth is measured in financial assets rather than 100,000 acres of Scottish highlands or 50 blocks of London waterfront, how long does wealth concentrate before divorce, death, squabbling children and bad advice disperse it back into society? Since we are hard on the Memorial Day weekend, let’s travel out to the Hamptons for a few answers to the Fitzgerald/Hemingway debate. Don’t worry – you won’t get stuck in traffic or have to encounter the great unwashed on the train. We’re doing this in style since we are hunting some big game here. This is our approach: I have on my desk two Hamptons “Blue Books” for the years 1927 and 1940. These were the social registers of the day (and still in existence today), with inclusion on the list restricted to only the most well connected and affluent of the time. They list the “Cottagers” for towns such as East Hampton, Southampton, Bridgehampton and nearby villagers. The term is a bit of a conceit – some of these ‘Cottages’ still exist and run to 10,000 square feet and 5+ acres of land around them. In addition, the Blue Books list the officers and members of some of th
