Munib Masharib

POLS-Y 490
10/21/19
Frank, Robert. 2011. ​The High Beta Rich: How the Manic Wealthy Will Take Us to the Next

Boom, Bubble, and Bust.​ New York: Crown Publishing Group.

Robert Frank works as a journalist, and has spent the majority of his career covering

topics related to wealth and the American wealthy. He got his start in the area working as the

wealth reporter for ​The Wall Street Journal​, and later moved on to his current position as a

reporter and editor for CNBC. (Entrepreneur, n.d.). In his book, ​The High Beta Rich: How the

Manic Wealthy Will Take Us to the Next Boom, Bubble, and Bust​, Frank chronicles selected

stories of members of the ultra-wealthy class in the United States and those who live and work in

their world. These detailed profiles and anecdotes make up the vast majority of the book, but

Frank does use secondary research and statistics to help make his arguments and drive home the

book’s message. Overall, I found the book to be a well written, extremely well researched, and

very interesting read.

Frank focuses his book on what he terms the “high-beta rich.” In the financial world the

term “high-beta” normally refers to a stock that is much more volatile than the overall market.

Thus, the “high-beta rich” are those who are, “prone to violent swings and rapid cycles of value

creation and destruction.” (Frank 2011, 31). Frank’s thesis seems to be that the ultra-wealthy

class in the United States has changed dramatically over the past forty or so years to include

many more high-beta individuals, normal people do not understand their behavior or its

importance, and due to rising economic inequality, the manic behavior of the high-beta rich has

important ramifications for the national economy as a whole. The extreme examples detailed in

The High Beta Rich​ are also used to provide the book’s intended audience, normal middle class
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Americans, with valuable lessons to help them manage their own finances. Frank concludes the

book with one primary argument: the growing income, wealth, and consumption divides across

classes and driven by the high-beta rich in the United States have created an increasingly volatile

economy that heavily depends on the earning, borrowing, and spending habits of the

ultra-wealthy.

The book is generally well written from start to finish, with the exception of a handful of

fairly noticeable grammatical and spelling errors peppered throughout. Readers will find it an

easy, interesting read, not only due to the subject matter, but also due to Frank’s popular and

entertaining style of writing. He occasionally skips between stories or tells them in a

non-chronological order, but this does not detract from their value or comprehensibility like it

might in other books or films.

The High-Beta Rich​ starts out with the story of a repo-man for the wealthy, Ken Cage,

who earns a living repossessing the toys of the wealthy: yachts, planes, helicopters, and high end

cars that have not been paid off. (Frank 2011, 43-44). Frank’s goal for this chapter is to

immediately introduce readers to the idea of the high-beta rich. He goes on to chronicle this

group’s meteoric rise from the year 1982 on. He notes that for roughly four decades following

World War II, the rich in America enjoyed a sustained, steady growth in wealth, growing slower

in booms and losing less in busts than the American people at large, citing statistics along the

way to add validity. (Frank 2011, 67-68). But, he points out, in 1982 the election of Ronald

Reagan created a country in which deregulation and pro-wealth policies, technological

innovation, and financial speculation converged to create a wealth boom that minted nearly

overnight multi-millionaires and billionaires. (Frank 2011, 70-72).

From billionaires falling to mere multi-millionaires to multi-millionaires losing it all, his profiles

tell an ominous tale about the dangers of living beyond one’s means. While this section itself is

short on main arguments, one point stands out: as the stock market has created more and more

rich people through liquidation type events like IPOs, it has grown in importance for the health

and growth of the overall economy. (Frank 2011, 183). This is essential for the next, most

important part of the book.

In the third part, Frank explains how the highs and lows of the high-beta rich can affect

normal people and the greater economy as well. He first focuses on the town of Aspen, where

over the years the population has come to include many of these high-beta types, and where the

financial crisis of 2008-2010 wreaked havoc on the fortunes of the town as a whole due to the

enormous losses suffered by its high-beta residents. The lesson is simple: as the economy came

to depend on the high-beta rich and their spending, it too became increasingly volatile and

unstable. (Frank 2011, 203). Frank moves on to tell the stories of two butlers who lost their jobs

during the most recent recession. While these people believed their employment for the

ultra-wealthy meant job security, they found out the hard way that it meant the opposite. He cites

a study by Jonathan Parker and Annette Vissing-Jorgensen in stating that, “... the spending

volatility of those in the top-earning 10 percent of households is ten times higher than the

spending volatility of those in the bottom 80 percent of households.” (Frank 2011, 227). Frank

uses the example of these former butlers and the greater market for butlers’ services, which fell

apart during the recession, to help illustrate the human costs of the high-beta rich and their

habits.
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The book then turns to the great state of California to provide its next warning about the

effects of the high-beta rich. Following the dot-com bubble and burst of the late 1990s and early

2000s, economists in California realized that its income tax revenues were highly dependent on

the windfalls earned by a certain brand of the high-beta rich, tech entrepreneurs. In good years

state tax revenue surged and in bad ones it plummeted. (Frank 2011, 258-260). The lesson

learned by California, and later states such as New York and New Jersey, was to appreciate the

good years but remain conservative when planning the budgets for future ones. As the national

economy continues to become increasingly beholden to the ultra-wealthy, the lessons learned by

these states will become more and more important for the nation as a whole. (Frank 2011,

277-279).

The final part of ​The High Beta Rich​ documents the story of Frank and Susan

Kavanaugh, members of the “low-beta rich,” who steadily built their fortune and were so risk

and debt averse that they managed to escape the Great Recession with only ten percent of their

wealth lost. (Frank 2011, 289). This part of the book stands apart from the others, and serves the

purpose of describing an alternative path to wealth and providing lessons on prudent money

management. The epilogue follows suit, specifically providing readers with lessons such as

follow the stock market, take money off the table, and stop acting rich. (Frank 2011, 309-311).

The High-Beta Rich​ serves its purpose extremely well. Frank, with his long history

reporting on wealthy Americans, is better qualified to write this kind of book than most. He

thoroughly examines his subjects in a logical and creative manner, and includes seemingly

everything worth noting in their life stories from childhood to the present. It would be difficult to

argue that he treats the rich people profiled in his book unfairly or is ideologically biased in
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making his argument. He simply presents facts about their lives in order to make his points, and

his conclusions flow logically from the evidence he presents. In the end, he does acknowledge

his subjects and their contribution to writing the book, and even admits that the stories that made

it into the final product are the most interesting of all he uncovered, while remaining

representative of the much larger sample size of individuals and families he interviewed. (Frank

2011, 324-325).

While the book does touch on economic inequality, as a whole, it would not be of

particular value to the study of the politics of inequality, and therefore the class. Frank mentions

how the convergence of deregulation and pro-wealth government policies, technological

innovation, and financialization in the early 1980s created an environment conducive to rapid

wealth creation and growing inequality, but focuses most of his book on profiles of the high-beta

rich and those who live and work in their world. His arguments and conclusions are made with

an acceptance of rising inequality as the norm, and rather than proscribing potential solutions to

this problem, he outlines some of its effects as they relate to the high-beta rich and the overall

economy. In the epilogue, he also adds some advice regarding prudent financial management

tailored to individuals.

Still, ​The High-Beta Rich​ does build upon some of the themes of the class, and parts of it

could be beneficial reading. The book is relevant to answering the question of whether inequality

matters. For example, the book expands on the short ​Slate​ article by Robert H. Frank titled

“Does Inequality Matter?” The article mentions how the rich have been earning and spending

more proportionately to the rest of the country, but does not cite many specific statistics. It

argues that these habits of one percenters are imposing huge costs on everyone, but only focuses
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on how the seeming need to keep up with the Joneses has led to increasing debt and financial

struggle for Americans of all classes. (Slate, Frank 2011). The book builds upon these general

ideas and details the toxic financial habits of specific rich, or formerly rich people, while going

into greater scope and depth about why these habits are a problem for the masses, specifically

noting the economic volatility caused by the high-beta rich.

Robert Frank tells a compelling and well written story about the ultra wealthy class in the

United States and their importance to the overall economy in ​The High-Beta Rich​. He uses

profiles of a handful of people, either high-beta rich individuals who lost much or all of their

wealth in the Great Recession, or people like repo-man Ken Cage who work in their world.

Frank goes even further to chronicle the effects these people have had on local and state

economies using case studies and statistics from secondary research in order to argue that these

smaller cases are becoming relevant to understanding the larger national economy. Without these

statistics on inequality, the message of the book would fall flat; if there was not a huge level of

inequality, then understanding the high-beta rich would not be important for understanding the

economy. Therefore, the parts of the book describing the connection between rising inequality

and the importance of understanding the high-beta rich could prove valuable reading for the

class, but because the vast majority of the book consists of individual profiles, I do not believe

the entirety should be required reading.

Entrepreneur. n.d. “Robert Frank.” Accessed October 21, 2019.

https://www.entrepreneur.com/author/robert-frank.

Frank, Robert. 2011. ​The High Beta Rich: How the Manic Wealthy Will Take Us to the Next

Boom, Bubble, and Bust.​ New York: Crown Publishing Group.

Frank, Robert H. 2011. “Does Inequality Matter? How ‘expenditure cascades’ are squeezing the

American middle class.” Slate. Published December 5, 2011.

https://slate.com/business/2011/12/ows-and-inequality-how-expenditure-cascades-are-sq

eezing-the-american-middle-class.html