Coping with affluenza

Believe it or not, many people find that their joy-to-stuff ration is much, much too low after they inherit their parents' estate.

"Who Wants to Be a Millionaire?” is one of television’s top-rating shows. But what if you won? Could you cope? How would you handle the responsibility, the investment decisions, the envy of friends and relatives, the realisation that work is no longer a necessity? Would you start daydreaming about downshifting and returning to a life of modest poverty?

This is not just a question for overnight millionaires in Silicon Valley or lottery winners. With what economists call “the largest wealth transfer in history” looming as baby-boomers begin to shop for grave plots, many people will be inheriting more money than they could ever have imagined. And the experience of many financial planners is that many people won’t be able to cope — they will succumb to “affluenza”, a buzz word amongst American financial planners.

Estimates have varied widely over the past decade as to how much wealth rapidly ageing boomers will pass on to the next generation. These range from US$25 trillion up to a staggering $136 trillion over the next 50 years. The most often cited wealth transfer number is $41 trillion, based on research by  Paul Schervish and John J Havens of the Boston College Center on Wealth and Philanthropy. (1) More recently, the life insurance company Allianz Life estimated that the figure is a mere $25 trillion, with $7.2 trillion going to boomer heirs.(2)

How will people cope? Dr Schervish points out that most people are prudent and will use it wisely. He foresees a new generation of philanthropists. Looking at IT billionaires like Bill Gates and Paul Allen, he says: “Never before have so many people, with so much wealth, energy, and entrepreneurial instinct concluded that applying finances to meet the needs of others is a path of self-fulfillment.” (3) His work, like that of many other consultants interested in managing the transfer, has a slightly New Age feel to it -- teaching the comfortable rich how to forge a spirituality out of the pleasure of giving to others.

But there may be a down side to the enormous legacy that some people will receive. Milwaukee psychotherapist and author Jessie H. O’Neill has made a career out of counselling people who have too much money. She claims that affluenza is a serious illness in the world’s richest and most powerful nation.

“We’re not good at sitting with the pain and putting off the reward,” says Ms O’Neill on her website, The Affluenza Project. “And we basically have a culture of that now. I’m not saying that having the stuff is necessarily bad. It’s the loss of balance. People tend to become so focused on the money. Everything else gets pushed aside.”

Affluenza is a real disease, insists Ms O’Neill, with many symptoms, such as loss of personal and professional productivity, an inability to delay gratification or tolerate frustration, a false sense of entitlement, low self-esteem, depression, workaholism, and compulsive and addictive behaviour.

Clients seek her out after a personal crisis. “They’re sort of confused and surprised,” she says. “Most of them have started out making the money because they want to do well for their families. Some of them are a little bit shocked, a little bit angry. ‘This is the American dream, I lived it, I did it and now my wife’s divorcing me, my kids aren’t speaking to me. It didn’t work. I did what I thought I was supposed to do, and it didn’t work.’”

Ms O’Neill, who has also written The Golden Ghetto: the psychology of affluence, has seen it at first hand. The granddaughter of Charles Erwin Wilson, a president of General Motors and Secretary of Defense under Eisenhower, she grew up in a “disfunctionally affluent home”. Now she runs seminars on how to be rich and still be happy.

Most people find it difficult to sympathise with miserable millionaires. Sudden reverses in the fortunes of tycoons normally inspire sentiments which are best captured by the charming German word Schadenfreude or joy in another’s pain. But O’Neill, and other therapists who are mining the rich lode of monied unhappiness, do have a point. It is an old point and it sounds trite on the lips of a finger-wagging parent, but people ignore it at their peril: money can’t buy happiness.

The problem is that Western society – especially the United States – has become so accustomed to wealth and comfort that conspicuous consumption no longer seems greedy. Ms O’Neill cites an anecdote about the legendary American plutocrat John D. Rockefeller. He was once asked, “What is enough?” Rockefeller’s reply was: “Just a little bit more.”

“When I began this work ten years ago, understanding the downside of wealth seemed a meaningless and frivolous joke to many people. No one is laughing now. Now that there are more wealthy, the topic and its profound importance have reached critical mass. There’s no stopping it now,” says Ms O’Neill.

O’Neill says that she has three types of clients.

The suddenly wealthy – the dot.com millionaires and winners of lotteries – the victims of “sudden wealth syndrome”. Because this species is so numerous and affords so many highly-publicised examples of self-destructive wealth, many are well prepared and try to use their good fortune carefully. Some cope through philanthropy. Some wrestle with what she calls a variant of “survivor’s guilt” – “Why me? How do I deserve all this?”

In another group are the hard-driving types who made their money through their own hard work. Often they are talented control freaks and perfectionists who have neglected their families to build up their business.

Finally there are the people who inherit the wealth of their workaholic parents. These men and women, says Ms O’Neill, are the most damaged by riches.

“Often raised by surrogate caretakers and absentee parents who confuse material gratification with love, these children grow up with a myriad of dysfunctional personality traits that frequently doom them to personal and professional failure. Some of the more devastating traits are: an inability to delay gratification and tolerate frustration, a loss of future motivation, a false sense of entitlement, low self-esteem, lack of self-worth, loss of identity, loss of self-confidence, and much more.”

The symptoms have a familiar ring – you can see them in any high school in a posh neighbourhood. But O’Neill points out that the shortcomings of these young people could snowball and end up having an immense impact on the economy in the coming wealth transfer.

Most people who unexpectedly become rich act like drunken sailors. “All of a sudden you can spend, but there is no way to satiate all desires, so you spend, spend, spend – and never are fulfilled,” says one financial planner.

And Ms O’Neill comments: “Without immense changes in the ways that we raise our children and prepare them for their legacy, we will continue to see an alarming increase in affluenza. Because they continue to confuse financial security with emotional security, and are driven by a wounded psyche with little self-confidence, it is also difficult for them to determine what is ‘enough’.”

She cites the old saw , “Shirtsleeves to shirtsleeves in three generations” and warns that unless the younger generation learns how to cope with its wealth, down the plughole it will go.

“Traditionally it was thought the reason most fortunes were lost in three generations was poor financial planning. We now know due to extensive research in the field, that only 10 per cent is lost for this reason. A full 90 per cent of this wealth is dissipated due to poor emotional and financial preparation of the heirs. This figure underlines the importance of preparing our children, whatever their ages may be, for this tremendous responsibility.”

Michael Cook is editor of MercatorNet

Notes
(1) Why The $41 Trillion Wealth Transfer Estimate Is Still Valid: A Review Of Challenges And Questions.  By John J. Havens And Paul G. Schervish. Jan 6, 2003.

(2) American Legacies Study Overview. Allianz Life. July 27, 2005.

(3) Paul Schevisch. “The New Philanthropists”. Boston Globe. March 2, 2002.