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The appealing myth of the frugal billionaire

People love stories about supposedly penny-pinching billionaires like Warren Buffett and Mark Zuckerberg — even if they aren’t entirely true.

Facebook Founder Mark Zuckerberg Delivers Commencement Address At Harvard.
Facebook Founder Mark Zuckerberg Delivers Commencement Address At Harvard.
Paul Marotta/Getty Images

You may have heard that Warren Buffett, the CEO of Berkshire Hathaway whose net worth is somewhere around $87 billion, lives in a modest house he bought in 1958 for just $31,500. Or that Facebook CEO Mark Zuckerberg drives a stick-shift Volkswagen GTI. Maybe you’ve seen those articles floating around about how Bill Gates, who was once the wealthiest man in the world, wears a $10 watch. Or how Amazon head Jeff Bezos, who is currently the wealthiest man in the world, drove a Honda Accord for years after becoming a billionaire.

Most recently, the UK Sun reported that Michael O’Leary, the embattled CEO of budget airline Ryanair (which has been forced to cancel scores of flights amid strikes by pilots who say they’re underpaid and overworked), is as frugal in his everyday life as he is with his airline. Matt Cooper, the author of a forthcoming autobiography of O’Leary, told the paper that the airline CEO is “utterly ruthless and pathological about how much he hates spending money.”

We seem to love stories about frugal billionaires and penny-pinching CEOs. These anecdotes about the denizens of the Forbes 400 list driving sensible family vehicles and eschewing Rolexes are more than a reminder that the ultra-rich are just like everyone else: They’re also a way of justifying billionaires’ wealth by showing that they don’t spend it frivolously. There’s an aspirational element to it as well, since these anecdotes are often coupled with advice on how anyone can save millions if they drive a cheap car and never go out to dinner.

Commending rich people for their frugality is also a way of policing regular people for spending money on anything other than the absolute necessities. The subtext is clear: If Warren Buffett and Mark Zuckerberg are happy with modest homes and budget cars, everyone else should be, too.

For the wealthy, frugality is framed as an admirable sign of self-control; for everyone else, it’s a requirement. The question isn’t how much money one has to spend, but how that money is spent.

Good Rich People versus Bad Rich People

The underlying message in all these anecdotes is that good wealthy people don’t flaunt their wealth, and the best wealthy people have the same consumption habits as everyone else.

Rachel Sherman, an associate professor of sociology at the New School for Social Research who studies consumption habits among the wealthy, said that many rich people are concerned about what their spending says about them. For her book, Uneasy Street: The Anxieties of Affluence, Sherman interviewed 50 wealthy New York parents, many of whom emphasized how frugal they were and how “normal” their spending habits were.

“The wealthy people who I’ve studied are really concerned with the moral implications of privilege, and I think a lot of the popular culture representations of wealthy people are also really moralistic,” Sherman told me. “Being frugal is one of the ways in which we evaluate whether a wealthy person is morally good or morally bad.”

The fawning articles that are often published about the frugal rich, Sherman said, reproduce “an idea that very frugal consumption is good,” both among the wealthy and among middle- and low-income people. For the very rich, being frugal is a way of showing that they don’t take their good fortune — and their literal fortunes — for granted. For everyone else, frugality is a signifier of self-control.

She also noted that plenty of other wealthy people get held up as an example of how not to behave: One example is the “rich kids of Instagram,” teenagers and 20-somethings who flaunt their families’ inherited wealth on social media. Or Donald Trump, whose gilded ’80s aesthetic has become synonymous with the bad taste of the nouveau riche.

Kevin Kwan’s 2013 novel Crazy Rich Asians is practically a manual on the distinctions between Good Rich People and Bad Rich People. The protagonist, Rachel Chu, is dating a Good Rich Person: Nick Young, the heir to one of the biggest fortunes in Singapore, who downplays his wealth so much that Rachel doesn’t realize he’s the heir to one of the biggest fortunes in Singapore. His relatives, who are materialistic and can’t look past Rachel’s working-class background, are Bad Rich People; they’re the villains in both the book and the 2018 film adaptation.

“I think wealthy people who care about feeling like they are morally worthy of their privilege and who want to be seen as normal are always using people like that as their foil,” Sherman said. “That’s something that they can say, ‘Well, we’re not that.’ By saying that, they’re often signaling, ‘Well, we’re wealthy, but we’re not the kind of wealthy that wants all the attention, that has this over-the-top taste.’ They sort of distance themselves from that.”

That also means downplaying their own spending habits. The families Sherman interviewed spent hundreds of thousands of dollars on private school tuition, home renovations, and lavish family vacations each year, but most of them continued to classify their spending as normal.

One woman told her husband that he wasn’t allowed to “talk about what we pay for things to your family outside of the city … they’ll think that we are the craziest people in the world. And we’re not. We’re, like, totally normal people.”

Another said she took the label off the $6 bread she bought at the grocery store because she didn’t want her nanny to see it — and, more importantly, because she was uncomfortable with the vast inequality between her own family and the nanny’s.

Frugality is relative

What the simple dichotomy between good rich people and bad rich people obscures is that even if wealthy people aren’t spending as much money as they could be, they’re still spending far more money than the average person. Mark Zuckerberg may be known for his minimalist hoodie-and-T-shirt wardrobe, but those hoodies are made of cashmere and cost $2,000. His peers in Silicon Valley may have adopted a similar aesthetic, but many of them are paying a stylist big bucks to help them do so.

The Sun story paints Michael O’Leary as a money-minded penny-pincher, but if you read past the headline you’ll see that he literally owns 100 racehorses. Apparently, O’Leary is frugal because he fired his horse trainer, even if he still has the horses, and just bought a fourth house.

These stories about financially prudent billionaires are also used to shame others for their own spending habits, which are cast as frivolous in comparison. In a 2017 interview with Time, investor Mark Cuban said that anyone who wants to get rich should aggressively save and not spend money on anything other than the essentials. “I did things like having five roommates and living off macaroni and cheese and I was very, very frugal,” Cuban said. “I had the worst possible car — those kinds of things.”

Meanwhile, millennials are told they wouldn’t be in such dire financial straits if they just spent less money on coffee, rent, weddings, bachelorette parties, alcohol, Uber and Lyft rides, travel, and avocado toast.

Lauding the wealthy for their thriftiness is also a way of blaming people for their own poverty. “There’s a whole image of the welfare queen driving a Cadillac,” Sherman said, referring to Ronald Reagan’s infamous description of public assistance recipients who spent the money on luxury goods instead of basic needs. “That’s why food stamp spending is restricted in particular ways; there’s this idea that poor people can’t be trusted.”

In other words, the financial advice millionaires dispense onto the masses ignores basically every structural problem that keeps people poor in the first place, from poorly funded public schools to stagnating wages to being saddled with tens of thousands of dollars of student loan debt. Frugality is presented as a simple position to a complicated problem — a promise that anyone who saves enough money and has the right mindset can be rich, or, at the very least, not poor.

Is there a right way to be wealthy?

Increasingly, conversations about wealth have shifted from how the wealthy spend their money to whether they should have that much money to spend, and how they accumulated that wealth in the first place. Sen. Bernie Sanders (I-VT) recently called out Jeff Bezos for amassing more and more wealth while Amazon warehouse employees make so little that they qualify for public assistance.

Where some people see a frugal billionaire who should be emulated, Sanders and others see an unconscionable hoarding of a fortune built on the backs of underpaid employees.

“The implicit message on those kinds of stories is: ‘These people are good, therefore it’s okay for them to be so wealthy,’” said Sherman. “And what I argue in the book is that talking about any of this in that way avoids questions about distribution. Should they have $50 million to begin with, regardless of what they spend it on? That, to me, is a question that never comes up, partly because these representations of rich people as frugal or as spendthrifts is focused on their spending habits, not on what they have.”