Remember that scene in My Fair Lady where Eliza Doolittle goes to the Ascot races dressed like a blueblood but makes a bloomin’ arse of herself every time she opens her mouth? Hold that image.
I can’t afford valet parking at the Four Seasons Hotel Seattle, let alone the $500-plus ticket to attend the Seattle Opera Gala. Yet here I am in a $15 Goodwill gown (it’s black and sparkly), and the first person I meet is Maryanne Tagney Jones, one of those angel patrons of the arts, and I blurt out, “I’ve never seen an opera!” and she drops her foraged mushroom tartlet on the floor. What will happen next? Stay tuned.
I’m experiencing a night at the Opera Gala because I’ve been assigned to write a story on rich people in greater Seattle. Specifically, the magazine wants me to find out how affluent folks are feeling about the economy after the financial crisis and what that means for the region’s economic health.
Since the downturn, the wealthiest demographics have regained the most ground, thanks to DJI 14,600—but they fell further during the (not so) Great Recession, losing more than three times as much money as people of more modest means, according to a study by the University of California, Berkeley. The Internal Revenue Service says the number of Americans making $1 million or more a year fell by 40 percent between 2007 and 2009. After a shellacking like that, are the rich living it up and spending again?
To find out, I’ll have to talk to some prosperous people. It’s not my usual beat and I was kind of clueless about how to go about locating them until I hit on the idea of getting myself invited to the annual Opera Gala.
And that is how I find myself discussing with Maryanne Tagney Jones what to do about that dropped mushroom appetizer. We agree it’s barely detectable in a back corner of a carpet that is, well, mushroom colored. “I’m just going to leave it,” Tagney Jones says with a gracious laugh, turning away in a black sparkly dress that looks a little bit like mine. She’s so nice. I take a deep breath and do something my mom, Norma Jean Cunningham, always told me not to do. I ask her about money.
“David and I are nouveau riche,” Tagney Jones says, explaining that in Seattle the new rich are the very opposite of ostentatious. “We never thought we would be well off. I have a degree in psychology and David is a nuclear physicist. But David had to use computers for his data so he fell into Microsoft very early.”
Tagney Jones reports that while the couple’s personal wealth has regained a lot of ground since the recession, its charitable fund is down. A few folks join in the discussion, and it’s clear this group now hopes for the best but is prepped for the worst.
“The recession changed everything,” says Bob Moser, CEO of Laird Norton Wealth Management. “My clients are more aware of risk. They are still uneasy.”
Moser describes his clients as being “on the north end of affluent,” with at least $5 million to $10 million in investable assets. What they have done after the downturn is diversify their portfolios. “There is a lot less single-bet investing, putting everything into a single tech stock, for example,” Moser says. “Something else that’s fascinating is the savings rate. The amount of money my clients have in savings is way up.”
Wealth manager Dan Sudit sees the same pattern with his clients: They are basically sitting on their wallets, including the younger generation, and that’s a sea change from the boom years. “Thirteen years ago, you had young people spending a tremendous amount of money on cars, boats, planes,” says Sudit, who works for BMO Private Bank in Seattle. “Now, conspicuous consumption is not en vogue.”
But there is one big-ticket item both wealth managers are starting to see clients crack open those piggy banks for: real estate.
“I’ve seen many of my clients buy homes,” Moser says. “And we aren’t talking about a vacation home in Palm Springs. They are buying a new principal residence in Seattle and that trend is continuing.”
On the streets of Seattle, you can see some evidence of an upturn in luxury real estate. In February, Escala announced $11 million in sales in one month—quite a turnaround from 2010, when the 30-story condo building in downtown Seattle had that ghost-town vibe with only six of 270 units sold. A year-end report by Realogics Sotheby’s International Realty found that sales of homes in downtown Seattle valued above $1 million rose 10 percent in 2012 over 2011.
Just under that million-dollar price tag, Kevin Lisota is seeing a feeding frenzy the likes of which he hasn’t witnessed since 2007. Lisota is a broker for many clients who work in high tech. “There are plenty of people who can afford a $900,000 home—that craftsman in Queen Anne or North Capitol Hill,” Lisota says. “You are going to find a lot of competition. It’s like night and day compared to two years ago.”
Which is not to say that fancy-pants mansions are the next big thing. This is Seattle, after all. Even at the Opera Gala, with sparkling chandeliers and jugglers and guests enjoying seared scallop appetizers while they gaze out at the Great Wheel and Elliott Bay—even here at the apex of Seattle society, there is a certain friendly frumpiness and lack of vainglorious Donald Trump flash. There are rules about what’s cool to spend money on and what isn’t. If anything, those unwritten maxims are more stringent now than they were before the downturn.
“Would I go to Whole Foods and buy Kobe/Wagyu prime beef for $25 a pound? No, I would not,” says Bob Comfort, recently retired as the head tax guy at Amazon. “Would I open my wallet and get the best seats in the house for Seattle Opera? Yes, I do that deliberately.”
In other words, stuff is out, experiences are in. And there’s one experience that’s red hot in Seattle: getting the heck out of here.
|Head Hunting. Easter Island is one stop on an around-the-world excursion that Seattle-based TCS & Starquest Exeditions offers to well-heeled clients.|
“Sometimes, I live vicariously through my clients,” says wealth adviser Moser. “What they are spending their money on is fabulous vacations. Only in Seattle do people vacation like this.”
Here are the places Seattle’s well-heeled citizens are traveling to: Machu Picchu, Easter Island, the Great Barrier Reef, Angkor Wat, the Taj Mahal, the Serengeti Plain, the Pyramids. Not impressed? Well, bucket listers, how about this? Some are experiencing those treasures in one trip. On a private Boeing 757! Here’s another exclamation point: TCS & Starquest Expeditions, the world leader in private jet travel, is based right here in Seattle.
“Our clients are experience hoarders, not status seekers,” says TCS Marketing Director Cathy Swift.
So how much does it cost to be an experience hoarder? TCS around-the-world trips average about $60,000 per person. Dave Clark of Renton sees value in that because the private jet makes it possible to see so much. “We travel to experience the world,” says Clark. “Ways of living and places that may disappear in our lifetimes.” Clark and his wife have traveled with TCS three times and have spots reserved on two more epic journeys.
This year, TCS will take 1,300 passengers on 20 trips—a total turnaround from the company’s weakest year during the recession, when it had only 400 passengers and laid off half its staff. “This year, there’s a big luxury market pickup,” says TCS President Shelley Cline during a chat in March. “Two weeks ago, we had our biggest booking week ever.”
They don’t go by private jet, but travel is the one thing, besides the arts, that Bob and Loretta Comfort will splurge on. Recently, they came back from Cambodia, where they saw how microfinancing investments can change lives. Now that Bob has retired from Amazon, the couple is entering a new fiscal phase. “We have been fortunate,” Loretta says. “We have a son and he will be well taken care of. Beyond that, what?”
What many wealthy folks in Western Washington do with that extra money is give it away. That was true even when the economy soured. “In the lean times of 2007 and 2008, donors gave extra money,” says Mary Grace Roske, communications director at The Seattle Foundation. “The belief was that needs went up. Basic needs.”
The Seattle Foundation is the go-to organization for people of means when they need help creating and managing their own philanthropic funds. “The term these days is ‘giving while living,’” says Senior Vice President Jared Watson. He explains that, in the past, endowments only donated gains thrown off by their funds’ investments. But now more philanthropists will dip into their principal.
“Giving is different now in Seattle,” says Roske, noting that some Amazon or Microsoft employees are “wealthy at 40, and that creates a new kind of philanthropist: active, hands on and issue based.”
Since conspicuous consumption is out, leaving your mark on the world is perhaps the ultimate status symbol for Seattle’s moneyed class. Amazon CEO Jeff Bezos’ Kent-based Blue Origin aims to bring space travel within the reach of many people. Paul Allen hopes his Allen Institute for Brain Science spawns breakthroughs in neuroscience that will dwarf his contribution to society for cofounding Microsoft. San Juan Islands resident James Jannard, who made his money creating Oakley sunglasses, is transforming the film industry with the high-resolution RED video camera. Of course, these guys are billionaires. For the mere millionaire, angel investing is the way to create the next big thing.
“Generally, the climate for startups/angel investing in Seattle is positive,” says John Cook, founder of GeekWire, a website dedicated to news about technology. “People who either got burned in the dot-com bust or in this past recession, who sat on the sidelines, are now opening up their pocketbooks.”
This is not philanthropy. It’s investing. Angel investors put up $50,000 to $1 million per deal to be the next big fish that creates the next Big Fish. But, according to research from the Harvard Business School, three of four startups fail. Why not buy yourself a Tesla instead?
“These people have a passion for startups and angel investing keeps them in the game,” says Cook. “This is entertainment for them. Instead of watching the Seahawks play, they watch the next-generation company grow up.”
Amit Mital knows about that phenomenon. He’s a corporate vice president in charge of startup-style innovation at Microsoft and he’s the final person I talked to at the Opera Gala. Mital believes we are all rich in Seattle.
“Just look at what I did today. Three hours ago, I was up at Crystal Mountain. That’s where I got this scar on the side of my face,” he says, pointing to an angry red skid near his eye. “Now I’m at the opera in a tux. Where else does that happen?”
And then it’s time for Eliza Doolittle to leave the gala. Hiking up my flowing skirt, I hobble on heels up Pike Street to Third Avenue to catch the No. 13 bus, feeling cast out of Eden. But wait! Maryanne Tagney Jones has invited me to a dress rehearsal for La Bohème, my very first opera. Maybe it’s true: We are all rich in Seattle. Even the bohemians.
From Weyerhaeuser to Amazon: Sources of Seattle’s Great Wealth
Like much of the country’s material wealth, Washington state’s began with natural resources and evolved toward industry, real estate and, finally, technology.
The first generation of Seattle’s wealth was tied to the lumber industry. In 1900, Frederick Weyerhaeuser and 15 partners bought 900,000 acres of land from the Northern Pacific Railroad for $6 an acre and built a lumber empire. It was the largest private land transaction in American history to
Lumber wealth, in turn, led to other fortunes. The company William Pigott launched in 1905 to produce railway and logging equipment eventually became Paccar, now a multinational truck company. His descendant, John Pigott, still owns 1.9 million shares in the company worth about
William Boeing made his wealth trading forest land around Gray’s Harbor before moving to Seattle and founding an airplane company. Although the Boeing family does not maintain a significant share of the company, aerospace has created substantial wealth in the region by paying good wages to tens of thousands of employees.
Another major source of wealth in early Seattle was real estate development. Bagley Wright and Jack Benaroya started real estate companies in 1956. Both made millions and became prominent philanthropists.
As real estate investors continued to make large fortunes in the Seattle area, it was Microsoft’s initial public offering of stock, in 1986, at a value of $350 million, which spread the wealth even more. The company’s value soared, producing three of the nation’s wealthiest men. Bill Gates, Paul Allen and Steve Ballmer are all among the top 20 billionaires in the country, according to Forbes.
Today, wealth is being created in a far broader range of industries. Harvard-educated Gabe Newell founded Valve, a game company reputed to be worth $2 billion. James Jannard, worth $2.8 billion, made his money in sunglasses, while Craig McCaw, worth $1.6 billion, made his fortune in telecommunications.
Amazon.com is another great source of wealth. Most of it has gone to founder Jeff Bezos, whose share is now worth more than $22 billion. But at least another half dozen in the company have done very well, thank you, including Diego Piacentini, SVP of international retail, who owns shares worth more than $30 million; Jeffrey Wilke, SVP of consumer business, with shares worth more than $21 million, and CFO Thomas Szkutak, who owns shares worth $15 million.
Beyond the obvious wealth, thousands of owners of private companies across the state are repositories of great wealth. That fact became clear in 2011, when Saltchuk Resources, a little-known Seattle company, acquired, Interstate Distributor Co., an even more unknown trucking company with annual revenues of $450 million, for a cool $100 million. Privately held Saltchuk now has annual sales of $2 billion but operates from a tiny office on Lake Union with no sign to announce its presence. — Leslie Helm