Evon’s best WOW was straight out of a Jodi Picoult novel: the mother of an autistic girl called because the shoes she had purchased for her daughter didn’t fit. But simply returning the shoes and replacing them with a more comfortable pair would be a problem because the autistic girl would be upset to be parted from the ill-fitting pair. A compassionate Evon let the customer keep the old shoes and sent her the right-size pair at no extra cost. Courtney, the mother, sent Evon a grateful e-mail, which she proudly shared with me: “She was very sympathetic of my situation and I was very grateful and appreciative of the service and attention she showed me. . . . With customer service agents like that, I will definitely continue to shop with Zappos. . . . Oh, and the replacements fit GREAT!! Thank you Michael and thank you Zappos!”
The Zappos family makes a point of flattening the corporate hierarchy. The company’s ruling troika are described as “our monkeys” on the corporate Web site (the third most powerful executive, Fred Mossler, has no title at all), everyone pitches in answering the phones during peak holiday periods, and there is no dress code. On the day I visited, top bosses, including Hsieh, had posed in a dunk tank, allowing themselves to be dumped in a pool in the parking lot to raise money for charity. There are no corner offices at Zappos. The executives sit in the same rows of cubicles as everyone else; Hsieh and his then CFO, Alfred Lin, had decorated their row of desks with streamers and stuffed animals chosen to evoke a jungle theme.
For wage slaves from elsewhere, Zappos exerts a powerful appeal. “I’m moving here. I’m done,” said Greg, the Virginia father, who works as a paralegal in Washington, D.C., and was in Las Vegas for a law conference. “I love that—the CFO just has a desk on the floor.”
“Yeah, it’s like that at your firm, isn’t it,” Joanne, his wife, said sarcastically.
Hsieh and his team have performed a miracle humanizing what can be one of the most alienating jobs in the service economy. If you are a Zappos customer—I, too, have had my WOW with the magical provision of a hard-to-find pair of running shoes—you are a beneficiary of the happy workers their approach inspires.
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But if you look closely enough inside Zappos, you can see another story, too. That is the tale of the 1 percent and the 99 percent and how sharply their lives and life prospects differ—even if they sit at the same row of cubicles and eat in the same cafeteria.
Inside the Zappos family, the 99 percent are inordinately proud of working at a place that is harder to get into than Harvard. But while Evon attended local community college without getting a degree, Zappos’s effective founders actually went to Harvard—Hsieh and Lin met as undergraduates at Quincy House, where the former was struck by the latter’s vast appetite for pizza. Slacking off was never an option—both are the children of Tiger Mother immigrants from Taiwan.
Lin recalls that his parents told him and his brother, who went on to trade derivatives for Credit Suisse, that they would be “temporarily poor” in their first years in the United States. The boys both attended Stuyvesant High School, one of New York City’s top, application-only public schools, where they were such enthusiastic members of the math club they now contribute to its support. Lin studied applied math at Harvard and went on to start a PhD at Stanford, until he was rescued from the academic grind by Hsieh, who cajoled him into joining him at his first company, LinkExchange. They sold it to Microsoft two years later for $265 million.
Hsieh likes to depict himself as something of a rebel against the Tiger upbringing. In his autobiography he proudly describes evading violin practice by playing a tape of himself to convince his alert mother he was hard at it. But Hsieh was enough of a scholar to study computer programming at Harvard and get a first job at Oracle, before deciding, less than a year out of college, that the real opportunity was in starting his own business and being part of the Internet revolution.
Not yet forty, Hsieh and Lin are already multimillionaires—Amazon bought Zappos in 2009 for $1.2 billion in stock—for whom life has become a series of appealing choices. When I was in Henderson, Lin had just accepted an offer from Michael Moritz, the legendary Silicon Valley venture capitalist, to return to the West Coast and join his firm. Hsieh was about to go on a cross-country bus tour to promote his book.
Evon’s shift starts at six a.m.—being a few minutes late is a firing offense—and her workweek includes Saturdays and Sundays. She isn’t complaining: “It’s okay. When you are hired here they say if you take this position we need you when we need you.” Unemployment was nearly 15 percent in Nevada and her husband was working as a real estate agent in a market where house prices had fallen by a third over the past two years. One of the perks at Zappos is free lunch, and many of the parents who work there, at a call center starting salary of $11.50 an hour, told me they made a point of eating their main meal at work to spare their family grocery budget.
At Zappos, where everyone wears jeans and no one has an office, the chasm between the top and the bottom is as sharp as it gets. This paradox of an egalitarian culture coexisting with extreme economic and social inequality is a crucial and often overlooked part of the relationship between the super-elite and everyone else.
Most of today’s “working rich” plutocrats didn’t start out hugely privileged. And many of them operate in worlds—Silicon Valley and also the trading floors of Wall Street and its service firms such as Bloomberg, where one of the biggest corporate faux pas is to demand an office—in which the cultural dividing lines between the tribunes and the hoi polloi are intentionally blurred. But, of course, even if the billionaire is in a T-shirt and drives his own car, his universe is very different from that of a call center worker. Below is an exploration of what the plutocrats think of the rest of us.
THE BILLIONAIRE IN BLUE JEANS
Pittsburgh was one of the smelters of America’s Gilded Age. As the industrial revolution took hold there, Andrew Carnegie was struck by the contrast between “the palace of the millionaire and the cottage of the laborer.” Human beings had never before lived in such strikingly different material circumstances, he believed, and the result was “rigid castes” living in “mutual ignorance” and “mutual distrust” of one another.
The twenty-seven-story Mumbai mansion of the Ambani family, rumored to have cost a billion dollars, is just seven miles away from Dharavi, one of the world’s most famous slums, and the gap between these two ways of life is even wider than anything Carnegie could find in the Golden Triangle. So, for that matter, is the difference between Bill Gates’s futuristically wired 66,000-square-foot mansion overlooking Lake Washington, which is nicknamed Xanadu 2.0 and whose library bears an inscription from The Great Gatsby, and the homes of the poor of Washington State, where unemployment in 2012 was slightly above the national average.
Even so, the correct etiquette in today’s plutocracy, particularly among its most admired tribe, the technorati of the U.S. West Coast, is to downplay the personal impact of vast wealth. In April 2010, when MIT students asked him how it felt to be the richest person in the world, Bill Gates suggested it wasn’t a very big deal. “Well, the marginal return for extra dollars does drop off,” Gates said. “I haven’t found any burgers at any price that are better than McDonald’s.” He admitted there were some great perks, like flying on a private jet, but said that after a “few million or something, it’s all about how you’re going to give it back.”
If you traveled to Mountain View to visit Eric Schmidt when he was CEO of Google, you would have found him in a narrow office barely big enough to hold three people. The equations on the whiteboard may well have been scribbled by one of the engineers who works next door and is welcome to use the chief’s office whenever he’s not in. And while it is okay to have a private jet in the Valley, employing a chauffeur is frowned upon. “Whereas in other cultures, you can drive your Rolls-Royce around and just sort of look rich and have a really good time, in technology it’s not socially okay to have a driver who drives you to work every day,” Schmidt told
me. “I don’t know why, but you’ll notice nobody does it.”
This egalitarian style can clash with the Valley’s reality of extreme income polarization. “Many tech companies solved this problem by having the lowest-paid workers not actually be employees. They’re contracted out,” Schmidt explained. “We can treat them differently, because we don’t really hire them. The person who’s cleaning the bathroom is not exactly the same sort of person. Which I find sort of offensive, but it is the way it’s done.”
When he was CEO of Bain Capital and building his current net worth of about $200 million, Mitt Romney drove a Chevrolet Caprice station wagon with red vinyl seats and a beaten-up fender. Carlos Slim’s trademark look is slightly scruffy casual wear, and he loves to tell journalists he doesn’t own any homes outside his native Mexico. But even when he dresses down, a billionaire inhabits a world apart. A little more than a decade ago, I asked Mikhail Khodorkovsky, at that moment the richest man in Russia (and, as it happens, also someone who favored casual clothes and lived in a modest house), what he thought of the rest of us. “If a man is not an oligarch, something is not right with him,” Khodorkovsky told me. “Everyone had the same starting conditions, everyone could have done it.” (Khodorkovsky’s subsequent experiences—his company was appropriated by the state in 2004 and he is currently in prison for fraud and embezzlement—have tempered this Darwinian outlook: in jail cell correspondence he admitted that he had “treated business exclusively as a game” and “did not care much about social responsibility.”)
This worldview is straight out of the pages of Ayn Rand, but Khodorkovsky told me his uncompromising position was based not on literature but on life experience. During the 1998 Russian financial crisis some of his non-oligarch minions had made mistakes that had cost Khodorkovsky hundreds of millions. With hindsight, he blamed himself—they weren’t oligarchs, therefore something was wrong with them, therefore they shouldn’t have been trusted to make such big decisions.
Remember the line about Björn Borg, of whom Ilie Nastase said, “We’re playing tennis, he’s playing something else”? The extreme self-confidence you hear in Khodorkovsky’s comment is partly the product of believing you have an extreme aptitude for making money, one that is probably largely independent of time and circumstance.
The robber barons felt that way, too. “That this talent for organization and management is rare among men is proved by the fact that it invariably secures enormous rewards for its possessor, no matter where or under what laws or conditions,” Carnegie wrote. “The experienced in affairs always rate the man whose services can be obtained as partner as not only the first consideration, but such as render the question of his capital scarcely worth considering: for such men soon create capital; in the hands of those without the special talent required, capital soon takes wings.”
If you have that special talent, you have a special regard for others who possess it, too. Khodorkovsky trusted only fellow oligarchs. Steve Schwarzman thinks they are likely to make good presidents. “We ended up making twenty-four times our money” from a joint investment, Schwarzman told Bloomberg TV when asked why he had decided to host a fund-raiser for Mitt Romney’s presidential bid at his triplex home at the storied apartment building at 740 Park Avenue. “In finance, that’s the way to make friends.”
The flip side of that high opinion of fellow plutocrats can be a lack of sympathy, shading sometimes into disdain, for everyone else. For the super-elite, a sense of meritocratic achievement can inspire self-regard, and that self-regard—especially when compounded by their isolation among like-minded peers—can lead to obliviousness and indifference to the suffering of others.
Eric Schmidt, the chairman of Google, admitted to a journalist in December 2011 that no one in his world thought much about Occupy Wall Street and the discontent of the 99 percent. “We live in a bubble,” he said. “And I don’t mean a tech bubble or a valuation bubble. I mean a bubble as in our own little world. . . . Companies can’t hire people fast enough. Young people can work hard and make a fortune. Homes hold their value.” What is striking about those remarks is that the unemployment rate in Santa Clara County, where Google’s Mountain View campus is located, was 8.6 percent, slightly higher than the national average. And some of the most violent and controversial Occupy demonstrations were in Oakland, a forty-five-minute drive from Schmidt’s office.
Matt Rosoff, a business journalist based in San Francisco, argues that even in Silicon Valley, the epicenter of the West’s second gilded age, Schmidt’s perspective reflects the particular experience of the 1 percent. “I recently talked to an IT engineer at a midsize financial services company downtown and he complained that his budget is being slashed every year, as he’s expected to do more with less,” Rosoff wrote on his Business Insider blog. “He’s over forty and sees no chance of getting hired at one of these sexy start-ups run by 20-somethings and funded by VCs who are younger than him. So maybe Eric Schmidt and the people he talks to really don’t discuss the Occupy movement. But that’s not a Silicon Valley thing—that’s just the circles he travels in.”
The plutocratic bubble isn’t just about being insulated by the company of fellow super-elites, although that is part of it. It is also created by the way you are treated by everyone else.
One financier, speaking about his friend who is one of the top five hedge fund managers in the world, said, “He’s a good man—or as good as you can be when you are surrounded by sycophants.” A few days after Dominique Strauss-Kahn’s arrest on accusations of assaulting a hotel maid in New York, I happened to share a car with a U.S. technology executive. The American technologist thought he understood the IMF chief’s psychology. The thing was, he told me, when you ascend to a certain level of the super-elite, you come to inhabit a world in which all of your needs are catered to. That, he said, can lead to a dangerous sense of entitlement. As an illustration, he told me that on a recent holiday he had stayed in a Four Seasons hotel. The service was exceptional—at one point, as he was sitting by the pool and dropped the spoon he was using to eat his melon, a waiter instantly appeared with a choice of three differently sized replacement spoons. The Silicon Valley executive said that readjusting to ordinary life had been hard: he had become impatient and rude when confronted by the slightest delay or discomfort. “When you are used to being catered to twenty-four/seven, you start to feel the world should be built around you and your needs. You lose all sense of perspective,” he told me. “I think that is probably what happened to Strauss-Kahn.” His point was that the impact of privilege was unconscious. A few minutes earlier, he had provided another, unintended example. We had struggled for a few minutes to find the car and driver that had been arranged to take him (I was cadging a ride) from the airport to our conference. He had fumed about the wait, berating himself for breaking with his usual practice of having his Mountain View–based assistant be on call no matter what the hour (it was morning at Heathrow Airport) to ensure smooth transfers.
A recent family of academic studies suggests that my acquaintance may have been on to something when he pointed to the coarsening effect of privilege. Paul Piff, a psychologist at UC Berkeley, and four other researchers devised seven different experiments to test the impact of affluence on how we treat others. “Is society’s nobility in fact its most its most noble actors?” the researchers ask. Their answer is a resounding no: “Relative to lower-class individuals, individuals from upper-class backgrounds behaved more unethically.” Their explanation for the behavior of these ignoble nobles was an echo of the Silicon Valley executive’s Heathrow observation: “We reason that increased resources and independence from others cause people to prioritize self-interest over others’ welfare and perceive greed as positive and beneficial, which in turn gives rise to increased unethical behavior.” One of the experiments studied San Francisco intersections. The team found that the drivers of new, expensive cars were twice as likely to cut off other vehicles or pedestrians as the drivers of old, cheap cars. In
another test, experimental subjects with higher real-world incomes were more likely to deceive a hypothetical job applicant in order to persuade him or her to accept a lower salary—an accomplishment that earned the manager in the experiment a bonus. Even imagining you were rich changed the way experimental subjects behaved. In another study, participants were prompted to think of themselves as either very rich or very poor, and were then invited to take candy from a jar that afterward would be given to children in a nearby lab. The subjects who had imagined they were very rich took more candy.
THE AMERICAN MIDDLE CLASS NEEDS TO TAKE A PAY CUT
Or consider the view of some Western members of the plutocracy concerning the strains imposed on the American middle class by globalization. In a dinner speech in New York on a gloomy evening in the autumn of 2011, one Greenwich-based hedge fund manager observed that “the low-skilled American worker is the most overpaid worker in the world.” He seemed genuinely worried about the high unemployment and falling wages that were the likely consequences of that circumstance (if you doubt this claim of hedge fund compassion, perhaps the fact that he grew up in Scandinavia will help persuade you), but he said business couldn’t fail to take it into account.
The U.S.-based CEO of one of the world’s largest fund managers told me that his firm’s investment committee often discussed the question of who wins and who loses in today’s economy. In a recent internal debate, he said, one of his senior colleagues had argued that the hollowing out of the American middle class didn’t really matter. “His point was that if the transformation of the world economy lifts four people in China and India out of poverty and into the middle class, and meanwhile one American drops out of the middle class, that’s not such a bad trade,” the CEO recalled.
Plutocrats: The Rise of the New Global Super-Rich and the Fall of Everyone Else Page 28