When spinal surgeon and inventor Gary Michelson struck it rich in 2005 by winning a $1.3 billion patent settlement, he figured that his busy career was finished and he'd have more leisure time.
That's not the way it turned out, though.
Instead, the newfound wealth he gained from his settlement with medical device manufacturer Medtronic Inc. required him to start a second, full-time career. As a billionaire.
And a surprisingly busy career it can be. Billionaires have time pressures far beyond those of mere multi-millionaires. They may need a small staff just to handle the money. Another staff to spend the money, particularly if the billionaire has started a foundation. They may need a new level of security. Maybe they need a general manager to coordinate all the staffs. And there are endless taps on the shoulder from supplicants wanting you to give money or invest money or attend events. Add it all up, and it becomes a full-time job to be a billionaire.
"In cases like these, your wealth basically becomes the business," said David Emmes, who, as the Southern California regional president for Mellon Financial Corp., has advised several billionaire families over the years. "There are a lot of people competing for their time or attention, trying to get them behind a certain cause or the next hot deal or private equity fund."
Michelson found he was surprisingly busy when he became very wealthy. (The Business Journal estimates his wealth at $1.52 billion, which makes him the 27th wealthiest Angeleno.) He bolstered one foundation, set up another and created a research trust.
Michelson now spends his days poring over research and endowment proposals, and he meets in the mornings at his Brentwood home or over coffee at the local Starbucks with eager scientists. It's a task made more difficult by the willingness of some applicants to stretch the truth a common problem when those seeking funding approach a billionaire.
"Imagine a venture capital fund with $100 million. A prudent portfolio might be 20 investments. Now imagine that fund is $1 billion. It's very difficult for me to scale up to that kind of number," Michelson said.
"I've been burned a couple times. I got lied to because I wasn't scrutinizing enough. That's when I realized I needed to hire staff."
Michelson now is hiring employees for his foundations and research trust, something he never imagined having to do in those heady days after he won his settlement.
Michelson is not the only one to discover that his new career as a billionaire is as time-consuming, or more so, than his original career.
Some, like biotech entrepreneur Alfred Mann, keep right on cutting the deals or running the companies that made them so rich in the first place.
Most famously, billionaire Eli Broad, after founding two Fortune 500 companies, has spent his retirement years as a busy civic philanthropist, leading efforts ranging from the construction of the Walt Disney Concert Hall, to nationwide education reform, to the redevelopment of Grand Avenue.
On the other hand, Broad pointed out, the billionaires could retire if they wanted. (Broad is No. 3 on the Business Journal's list with $6.54 billion.)
"When you get to this stage, you make choices. I could have all the leisure time I want, but I enjoy making a difference," said Broad. "Those who retire just die off. Those who work, live. I find it intellectually stimulating to keep working."
Still, the more money the wealthy obtain, the busier they become. So busy in fact, that the number one commodity among the super-rich in L.A. isn't money it's time, as they juggle the competing demands of companies, charitable causes, foundations or often far-flung assets they must manage.
"Time does become a scarcer commodity for billionaires," said Mark Lipsom, managing director of the Southwest region in the Los Angeles office of New York-based Bessemer Trust, which provides financial counseling to high net worth individuals. "They have to have more personal assistance in handling the details of multiple households, multiple social calendars, travel arrangements, foundations, charitable commitments and the like."
Mann's various ventures including running the MannKind Corp. drug development company keep him so busy he said he is barely able to take a one-week vacation during the Christmas holiday, and only the very occasional four-day weekend.
Centimillionaires and billionaires will often plunk down considerable sums of money just to free up some valuable time. The ultimate purchase in this regard is what's come to be known as the billionaire's toy: the private jet. While some billionaires buy a jet just for the fun of it, most really want to save time and the hassle of commercial or charter flights.
The 81-year-old Mann five years ago purchased a $23 million Gulfstream jet. (Mann is No. 17 on the list with $2.1 billion.) He'd had the money to purchase a jet for years, but just the thought of buying one was anathema to someone who was raised during the Depression and thought nothing of flying coach even when he could afford first class. That changed, though, once Mann had set up his foundations and needed to travel more. The increased security hassles at airports after the Sept. 11 terrorist attacks also led him to purchase the plane.
"With all the ventures I have going now, I fly hundreds of thousands of miles a year, sometimes to two or even three cities in a day. I just don't have the time to be waiting around airports. Besides, I'm getting too old to go through all that security hassle every time I fly. Yet even when I bought the plane, I thought to myself, 'I really can't believe I'm doing this,'" he said.
After years of a time-share stake in a plane, Broad, too, purchased a jet for his family about four years ago. "It helps time-wise and it's also a luxury that we've given ourselves," he said.
Most of the time, though, Broad uses the plane on foundation-related business, not family pleasure trips, taking only one three-week vacation each year though it is a first class affair, such as yachting around the Mediterranean with his close friend and ex-L.A. Mayor Richard Riordan.
While mere millionaires can usually get away with just making frequent trips to their accountant, investment advisor and attorney, centimillionaires with net worth in the hundreds of millions of dollars and billionaires often need sizable full-time help.
Many create so-called "family offices," usually located in the home or at the family's main business. According to the Family Office Exchange LLC in Chicago, the number of home-based family offices in the U.S. has climbed to about 3,000 over the last few years, with several hundred in Southern California.
"For each household in these families, the average amount spent on managing all aspects of the family wealth runs about $500,000," said Sarah Hamilton, chief executive of the Office Exchange.
This $500,000 figure includes property management, external advisors, wealth transfer planning, investment planning, lifestyle management, philanthropic activities and trustee management "everything that tracks what you own, how you own it and what you are doing with it," Hamilton said.
The growth in family offices is one reason why the number of private household workers in Los Angeles and Orange counties has shot up 67 percent in the last five years to 150,000, according to the U.S. Bureau of Labor Statistics. And that figure doesn't include anyone paid in cash or otherwise off the books, such as some live-in nannies, maids and gardeners.
Of course, sometimes the needs go way beyond a small home-based staff and take on the trappings of a substantial business operation. The Broad Foundation focuses on education reform, medical and scientific research and managing Broad's extensive art collection. The staff of 60 takes up an entire floor in the Murdock Plaza in Westwood, including a family office with a staff of six.
Baubles or bling-free?
Perhaps surprisingly, billionaires don't always surround themselves with expensive baubles.
Michelson, for example, not only has no intention of buying a plane, he doesn't even have a very fancy car. He upgraded his primary vehicle, which was a Volkswagen Jetta, by buying a Chrysler PT Cruiser; he also splurged on a Chrysler Prowler roadster. Both vehicles combined cost less than $70,000. "I'm just not that into accumulating material possessions," he said.
Hamilton of the Family Office Exchange said some billionaires are more Spartan by nature, while others revel in luxuries.
"If you have a simple lifestyle at the outset, you're likely to maintain that even when you move into the nine figures," she said. "If you have a flashy nature to your behavior, then when you move into this range, you just get more and bigger of everything that you already had. For these families, you're generally talking about more homes, more travel, different options for travel and more motorized toys."
In Los Angeles, the display of wealth runs the gamut, from low-key individuals who eschew it almost entirely such as Michelson to music mogul David Geffen, who recently purchased a half-stake in Oracle Corp. chief Larry Ellison's $250 million, 454-foot yacht known as the Rising Sun.
Geffen already owns a pricey pad on Malibu's exclusive Carbon Beach and recently spent $29 million to buy a nearby parcel and is building the Malibu Beach Inn, which is set to open this summer. It will cost nearly $900 a night for a room.
Somewhere in the middle of this spectrum is Selim Zilkha, a centimillionaire who inherited some money from his father, a prominent international banker. He parlayed that into more by building up and selling a maternity and baby products retail chain, and then turning around a natural gas company and selling that to El Paso Corp. before that company's stock imploded in 2002.
Now worth hundreds of millions of dollars (but not enough to make the Wealthiest Angelenos list) Zilkha lives in a stately Bel-Air mansion that he bought in 1983 and maintains with a small staff. From his hilltop dwelling, he runs his latest venture, a biomass energy company, with his son.
In many ways, Zilkha is more representative of the ultra-wealthy lifestyle in Los Angeles than most in this hard-to-define demographic. At age 80, even though he doesn't need the money, he clearly relishes the ability to run business ventures. Before his latest biomass effort, he built up a wind energy business that he sold to the Goldman Sachs Group in 2005.
But he keeps a low profile most of the time, except when it comes to causes or pursuits that matter to him, such as finding a cure for Alzheimer's disease. He recently funded a building for Alzheimer's research on the University of Southern California campus; he's also given to the Los Angeles Opera. But aside from his mansion, he has few of the accoutrements typical of big wealth: fancy yachts or flashy cars running into the six figures. He finds his biggest challenge is not spreading himself too thin with philanthropic ventures or charitable donations.
"When people know you have wealth, they are constantly asking you for donations. I've become very good at saying 'no' when I have to," he said. "I guess the only thing now is that I do make sure I have time to travel. I'm 80 years old and there are still places I want to see."
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