Understanding the psychology, behavior and values of the rich

Whoever said money couldn’t buy happiness simply didn’t know where to go shopping. —Bo Derek

Novelist F. Scott Fitzgerald wrote in The Rich Boy (1926): “Let me tell you about the very rich. They are different from you and me.”

In the Philippines, we joke about the differences between rich and poor: pag rich, “petite.” Pag poor, “bansot.” Pag rich, “scoliosis.” Pag poor, “kuba.” Pag rich, “nervous breakdown” because of tension and stress. Pag poor, “sira ang ulo.” Pag rich, “eccentric.” Pag poor, “may toyo sa ulo,” “may topak” o “may sayad.” Pag rich, “slow learner.” Pag poor, “bobo.”

Seriously, before I discuss the mindset, behavior and values of the rich, let me first define the different kinds of rich people.

The Philippine & American Rich

The late Enrique Zobel publicly categorized the wealthy in the Philippines into three groups: the “profligate rich, the idle rich and the working rich.”

Charles Broadway wrote his own four classifications of the rich in the US as follows:

• The small rich: These are people who make more than $250K a year but under a million. Some are even millionaires because of savings, investment, ownership of a business, or what have you.

• The celebrity rich: These are millionaires who basically make their money from being famous. These would be Keith Olbermann, Madonna, Lady Gaga, musicians, athletes, Charlie Sheen, etc.

• The big rich: These are people who make millions and work largely in the financial services realm. These are your Wall Street types. These are your hedge fund managers. To a smaller extent, you have CEOs of large companies. The one common thing they have is they live in service to capital.

• The mega rich: These are the billionaires. These are the people who hold the real wealth. There aren’t many of them, but their large bases of capital give them enormous power and influence.

Five kinds of rich

Ayanna Guyhto wrote about five types of rich people:

• The invisibly rich – These people with bulging wallets are probably the most fun. This is because many times you’re not even aware that they exist. Many of these people work behind the scenes in the arts and sciences. Because of this, their lifestyles are a bit different than the average American citizen. These are the people who adorn themselves in nondescript, perhaps even disheveled clothing while they’re out and about.

• Bread and butter rich – These are the people who work hard and play hard. You look at them and can automatically tell that they have a substantial amount of money. They dress well, they smell good, they’re fit, and they’re everywhere. Many high-level executives in Corporate America fit into this category. These individuals are the financial movers and shakers. They make the most noise, are frequently in the news, and usually pass their wealth (and lifestyles) down to their children. But in many cases, that is where the similarities between generations end. The “bread and butter rich” are those who have earned their positions in society by pulling themselves through the ranks of higher education and solid decision-making.

• Old money – If you have ever heard the name Rockefeller, Vanderbilt, or even Hilton, then you will understand what the term “old money” refers to. In essence, old money signifies the fortunes that have been passed down from generation to generation. The wealth amassed in this way has been multiplied hundreds of times over due to solid, longstanding investment and business management. The people privy to the luxuries of the mature fortune are typically so accustomed to their opulent lifestyles that any less is considered substandard; for the wealth that dates back as far as centuries brings along with it an undeniable sense of power.

• Fast and furious – This sector of the well-to-do population lives fast (and sometimes dies fast.) Once synonymous with the term “nouveau riche,” which literally means “new money” in French, this phrase tends to describe those who have come into their riches fairly recently, usually within their own generation. Athletes, rock stars, and other entertainers typically make tons of money very quickly with their endorsements and through the rewards of their general career paths. But pay close attention to how often they switch roles, teams, residences, and even spouses. The money spent by the nouveau riche is often done so in flashy and exciting ways.

• Phenomenally rich – Presumably, there are only just a few of the truly phenomenally rich people in the world. These are the established billionaires of society. You may or may not be aware of who they are exactly. They often own multiple businesses or companies, and usually live well under the radar. But in truly elite circles, they are legendary. In fact, their reputations often precede them long before their money does. But their cash flow, derived from a series of wise investments, mergers, acquisitions, and other business ventures, finds its way into many different nooks and crannies of society.

Whether as financial planners, wealth managers, insurance brokers, branch managers, private bankers, trust officers, securities brokers, investment solicitors, and other professionals who offer financial advice and sell financial products, the following missionaries about the gospel of wealth offer words of advice to the rich and those who would be rich:

Focus on wellspring or sources of cash flow, not just assets. —My 19th-century paternal great-great-grandfather Dy Han Kia & John Gokongwei Jr.

Have an investing mindset. — “Save for gold, jewels, works of art, perhaps good agricultural land, and a very few other things; there ain’t no such animal as a permanent investment,” said Bernard Baruch. Actress Amalia Fuentes told me that before, she would use her talent fees from each movie to invest in a house in Dasmariñas Village, Makati. Now each home there is worth hundreds of millions of pesos!

Small fortune comes from frugality and hard work; big fortune comes from the heavens. —My late mother Mary Young Siu-Tin, quoting an old Chinese proverb

Smart people know how to utilize a loan or other people’s money for growth. —Prof. Maurice Lim, banker and my former Ateneo accounting teacher

Easy money is often easily lost. — John Gokongwei Jr. Look at Napoles and her extravagant daughter. Look at the winners of sweepstakes and bank robbers. Moral lesson? Don’t go for shortcuts or get-rich-quick schemes.

Take care of your shinyong or credit standing — Pay loans on time and safeguard your integrity.

Think of a debt or loan as an obligation, not as a windfall or income. —Mary Young Siu Tin, Lucio Tan. Don’t be addicted to too much or unnecessary debts. Mad magazine once said: “The only reason a great many American families don’t own an elephant is that they have never been offered an elephant for a dollar down and easy weekly payments.”

Do not be afraid of discomfort for yourself or your family members. This advice is especially important for those self-made entrepreneurs raising children.

Take care of the small change, not just the big amounts. “A penny saved is a penny earned,” said Benjamin Franklin.

Do not gamble, except for calculated risks in business, because nobody wins in gambling except the casinos or gambling lords. Do not follow the example of my great-grandfather’s first cousin Dy Chau Si, who gambled and lost 18 commercial shops in one evening in 19th-century Manila.

Become rich by helping enrich others — “Never forget: the secret of creating riches for oneself is to create them for others,” said Sir John Templeton. Chinabank’s slogan goes: “Your success is our business.” This quote is not only applicable to financial advisors and banks, but to many businessmen, too.

Don’t forget the ability to demand payment or collect. —Lucio Tan, quoting Tao Zhugong (722-476 BC), a statesman who became a tycoon 2,500 years ago in ancient China. His wife, Xi Shi, was also one of the most beautiful women in the world at that time.

Be fair to people in business dealings. —Andrew Gotianun and wife Mercedes Tan Gotianun of Filinvest Group and East West Bank

Low profit margins and big sales volumes —You can see this Chinese business strategy used in the SM stores of the Henry Sy family, Cebu Pacific Air and the former Sun Cellular of John Gokongwei Jr.

Invest in people to reap riches — “If you want one year of prosperity, grow grain. If you want 10 years of prosperity, grow trees. If you want 100 years of prosperity, grow people.” — old Chinese proverb

Be an iconoclast; think differently from the crowd —  “Buy when everyone else is selling and hold until everyone else is buying. That’s not just a catchy slogan; it’s the very essence of successful investing, said J. Paul Getty, who was named by the 1966 Guinness Book of Records as the world’s richest private citizen, worth an estimated $1.2 billion (approximately $8.6 billion in 2012). “Be fearful when others are greedy and greedy when others are fearful,” says Warren Buffet, the world’s richest investor.

Customer is king, customer service is important — “Customers are jade; merchandise is grass.” — Chinese proverb

Riches and big companies start from small — “The loftiest towers rise from the ground,” according to an old Chinese proverb quoted by Iloilo tycoon Pedro Marquez Lim, maternal grandfather of John L. Gokongwei Jr.

Delayed self-gratification is key to riches and success — Save and think for the long-term; self-sacrifice for future generations. The problem with America today? Actor Will Smith said, “Too many people spend money they haven’t earned, to buy things they don’t want, to impress people they don’t like.”

Non-stop education is a source of wealth. Education is prime in Chinese culture as the source of wealth, fame and success. You can’t argue with Confucius, Lucio Tan, John Gokongwei Jr. or Mary Young Siu-Tin. Brian Tracy said, “Today the greatest single source of wealth is between your ears.”

The goal is not money itself, but excellence, productivity, success. Money is only a scorecard.  “Happiness is not in the mere possession of money; it lies in the joy of achievement, in the thrill of creative effort,” said Franklin D. Roosevelt. “Find a job you love and you’ll never work a day in your life,” advised Confucius.

Success is our birthright and destiny; we just have to struggle to claim it. Every crisis, failure or obstacle is only a temporary setback, because we’ll soon flourish! Don’t forget: The poorest man on earth is not the person without a cent, but without a dream.

Giving is real wealth — “Not he who has much is rich, but he who gives much,” said Erich Fromm. “Surplus wealth is a sacred trust which its possessor is bound to administer in his lifetime for the good of the community,” according to Andrew Carnegie. “We make a living by what we get, but we make a life by what we give,” observed Winston Churchill.

I am not religious, but even in the Bible, it says in Acts 20: 35: “The Lord Jesus himself said, ‘It is more blessed to give than to receive.’”