The little book behind the Little Annie’s battle

Dear Editor:

In his Jan. 26 column, “Another sad chapter in Aspen mayor’s book smarts,” Charlie Leonard makes two statements about my book that I would like to address.

He is entirely correct in saying that my book, “The High-Beta Rich,” chronicles the rise of a “new breed of rich gamblers or ‘high-beta rich people'” who are changing Aspen – as well as broader U.S. economy.

Yet he errs in saying my book “doesn’t rely on much science or data.” I cite more than a dozen academic and economic studies showing how the wealth and incomes of the top 1 percent have become the most volatile in our economy. I draw heavily on data from the IRS, Federal Reserve and Census Bureau as well as my own interviews with more than 100 people with net worths or former net worths of $10 million or more. This is more than “a few,” as Leonard states. In Aspen, I drew on census data, real estate data, sales tax data and interviews with more than two dozen full-time and seasonal residents, business owners, nonprofit executives and current and former town leaders.

Leonard also writes that I define the “high-beta rich” as people who spend more than 5 percent of their net worth a year, borrow more than 20 percent of their net worth or derive more than 20 percent of their net worth in an illiquid asset. None of these “definitions” is in my book. My book loosely defines the high-beta rich as multimillionaires or billionaires who are “byproducts of financial incentives that rewarded extreme risk-taking, borrowing, speculating and spending.” (The figures he cites were from a Wall Street Journal article I wrote asking everyday readers to measure their own financial beta.)

As for Aspen, my point in the book is that like many affluent communities, Aspen is now more closely tied to volatile financial markets, asset bubbles and leverage. That’s created a more manic real estate market (with price increases and declines outpacing the country), a more discretionary retail economy (built on luxury) and a more stratified, “velvet rope” society dominated by the transient wealthy.

I write in the book, “While (the wealthy) have brought visible improvements and huge amounts of money, they have also created economic and social messes that have proven difficult for others to clean up. A town that once prided itself on its display of millionaires and billionaires is now learning the downside of depending on the high-beta rich.”

On the dispute over Little Annie’s and the Benton buildings, I haven’t expressed a view. Leonard is entirely correct when he says I don’t live in Aspen, though I often wish I did. I haven’t communicated with the mayor about this issue, and I don’t pretend to know the solution.

One thing is clear to me, however. The threats to Aspen’s extraordinary beauty, culture and community go far beyond a single real-estate development. They are rooted in a much bigger change in the character of wealth in America.

Robert Frank

Senior writer, The Wall Street Journal

Author, “The High-Beta Rich”