Billionaire Wilderness

The Ultra-Wealthy and the Remaking of the American West

Justin Farrell

• Publisher: Princeton University Press
• Year: 2020
• ISBN:
  9780691185811
• Topic: Social Sciences
• Subtopic: Social Classes & Economic Disparity
• Index: Social Sciences

A revealing look at the intersection of wealth, philanthropy, and conservation Billionaire Wilderness takes you inside the exclusive world of the ultra-wealthy, showing how today's richest people are using the natural environment to solve the existential dilemmas they face. Justin Farrell spent five years in Teton County, Wyoming, the richest county in the United States, and a community where income inequality is the worst in the nation. He conducted hundreds of in-depth interviews, gaining unprecedented access to tech CEOs, Wall Street financiers, oil magnates, and other prominent figures in business and politics. He also talked with the rural poor who live among the ultra-wealthy and often work for them. The result is a penetrating account of the far-reaching consequences of the massive accrual of wealth, and an eye-opening and sometimes troubling portrait of a changing American West where romanticizing rural poverty and conserving nature can be lucrative—socially as well as financially.Weaving unforgettable storytelling with thought-provoking analysis, Billionaire Wilderness reveals how the ultra-wealthy are buying up the land and leveraging one of the most pristine ecosystems in the world to climb even higher on the socioeconomic ladder. The affluent of Teton County are people burdened by stigmas, guilt, and status anxiety—and they appropriate nature and rural people to create more virtuous and deserving versions of themselves. Incisive and compelling, Billionaire Wilderness reveals the hidden connections between wealth concentration and the environment, two of the most pressing and contentious issues of our time.

PART I

How We Got Here and What It Feels Like

1

New Nation of the Ultra-Wealthy

I met Jim Roselli over breakfast in the town of Wilson, Wyoming. Wilson is at the base of Teton Pass on the southwest end of Teton County, just fifteen minutes from its more famous neighbor, Jackson, Wyoming. Like many other people I interviewed, Jim insisted that we meet at his favorite breakfast joint, Nora’s Fish Creek Inn. This old log-cabin turned greasy-spoon breakfast cafe is where many locals come to chew the fat, both literally and figuratively. Its rustic interior has an old-money feel consistent with this sleepy, but deceptively exclusive, town.

I arrived a few minutes early, pulling off the two-lane highway down into a mostly empty gravel parking lot in front of the cafe. It was dark, but the first light of the sun was beginning to peek over the mountaintops. Moments later, Jim pulled up in a worn-down Toyota Four-Runner. Hopping out, he smiled and cracked a joke. “Being a Harvard guy, I’m not sure what I’m doing up this early meeting a Yalie, but the breakfast here sure is worth it.” By now, I had gotten used to these sorts of elite inside jokes, but appreciated his warmth and friendliness. Because even the summer mornings here can be quite chilly, Jim was wearing jeans with a Patagonia fleece sweatshirt. He was about six feet tall, white, and heavy-set.

We sit at a corner table next to the big stone fireplace. As we sip our coffee, we get to talking about his life, beginning with his childhood. Born in Pennsylvania, he had what he called a fairly routine childhood, the majority of which was spent on a farm in upstate New York. He excelled in school and then attended Harvard for college. From there, he went to Wall Street. I know from my own research that Jim is worth more than $90 million, but he talks about his career in unspectacular terms. “I was an investment banking guy in New York—did stints with Goldman Sachs, Lehman Brothers, and ran a private investment operation in London.” No small task, I think to myself. Certainly, Jim feels a sense of accomplishment from the businesses he’s built and the money he’s made, but he doesn’t dwell on it.

We both order omelets, and Jim continues to tell me about his career, and the decision he made to retire early. “I didn’t want to be one of these guys that retired at 65 and you couldn’t do anything, so I stepped down in my 50s.” Jim admits that some of it had to do with how fast the finance industry was moving, and I got the sense that he felt it was passing him by.

The waitress interrupts us to top off our coffee, and asks if we are enjoying our omelets. For a split second, the waitress had me wondering absurdly to myself what a nine-dollar omelet tastes like to someone worth $90 million? Probably the same as mine, I suppose. Jim continued, reflecting that at fifty-seven, he “felt like there’s no room for a guy like me in the investment banking business.” With the finance industry being as mercurial as it was, and the fact that he, in his words, had become “quite financially secure” during the 1980s and 1990s, he sensed that it was time to move on with his life.

At first glance, Jim’s story may sound surprising and unique. Over the course of a few decades, he rose from the dirt of a middle-class farm to the pinnacle of Wall Street. But Jim’s story is not all that surprising, especially when viewed in light of recent economic gains among the very top in the United States, the ways these gains are generated, and the speed with which these gains can happen.

What we see here simply reflects—and is made possible by—broader trends in the nation’s economic and political system during last thirty years.¹ Set against this backdrop of dramatic socioeconomic transformation, the number of ultra-wealthy people in the United States has grown precipitously in the last decade (growing at a near 10 percent annual clip), with few signs of slowing.² The majority of new folks joining this rarefied group make their money from finance, banking, and investments, which as we will see, is also true of wealth accumulation locally in Teton County. Thus, this community, and the meteoric rise of folks like Jim, are not as unique as we might think. Each are simply products of these broader winds of change and emblematic of this new era of wealth concentration in which we all—including Jim—now live.

Creating the Richest Community in the Richest Nation

SKYROCKETING INCOMES

When I was a kid, my parents, two brothers, and I would drive through Teton County on our way to my grandfather’s home in nearby Idaho. We would never stay in Teton County—just stop for gas and keep moving an hour and a half northwest through the potato fields and small Mormon towns of eastern Idaho. Even though Teton County was just ninety miles away, it might as well have been, according to my extended family at the time, a different world—or worse, the East Coast.

Through the many pointed wise-cracks, I learned that this was the other side of the tracks, and increasingly so, with each year that passed. My family was right. Not only was Teton County changing dramatically relative to its neighboring communities, but it was distinguishing itself from every other county in the nation. And now most Wyomingites don’t even consider Teton County to be part of the “real” Wyoming. Certainly, for the locals, it didn’t take a sophisticated understanding of financial markets, real estate trends, or any other aspects of macroeconomics to see that this community was being entirely transformed by wealth.

According to the U.S. Department of Commerce,³ Teton County has the highest per capita income of all 3,144 counties in the United States, at $194,485. In a distant second is New York County (Manhattan) at $148,002, and the lowest in the nation is Wheeler County, Georgia, at $15,787. Median family income in Teton County is also sky high at $96,113, putting it in the top 2.6 percent of all U.S. counties. Figure 1.1 provides a nice visual picture over time, comparing Teton County to the rest of the United States, demonstrating that this place was not always so wealthy. You can see that it was fairly average up until the mid-1980s, when from there, local incomes began to skyrocket. There is a dip just after the recent great recession, but things pick back up considerably.

FIGURE 1.1. Per capita income, 1969–2016, showing growth over time compared to the rest of the United States. As noted in the text, median income (not pictured) is similarly high. Source: Bureau of Economic Analysis.

Even though Jim has owned a very nice home in the area for many years, he grumbles about the escalating costs of real estate, and tracks the markets as a hobby in his spare time. “The number of houses in this county that trade for less than a million dollars are not very many anymore.” Jim is right. Real estate here has become one of most expensive markets in the United States, with median home values hovering around $1 million. Jim laughs, and recounts back in 2011 when the most expensive residence in the United States was listed here for $175 million. This was just one day after another local property was on the market for $100 million. Skyrocketing incomes, untouchable real estate, along with booming population growth, has dramatically transformed this community from its historical roots as a pastoral region for rustic tourism and hardscrabble agriculture. Instead, it has become a storehouse of wealth.

THE ASCENDANCY OF FINANCIAL INVESTMENT INCOME

But almost as important as the amount of wealth pouring in, are the sources of wealth. Where was this money coming from, and how was it being made? Data show that the majority came from financial investments, rather than wages or salaries people take home from a typical 9-to-5 job. It was not always this way. During the early and mid-twentieth century, income from investments in Teton County mirrored that of the rest of the United States. But come the 1980s, investment income began to climb, making up 30 percent of all income in the area. It accelerated further, hitting the 40 percent mark in the 1990s, and still even further in the 2000s, when investment income made up more than half of all income in 2004.

Unrelenting, income from finance refused to slow. Surging further, in 2015, nearly 8 out of every 10 dollars of income made here was coming not from traditional wages or salary, but from financial interest and dividends. Put in real terms, in 1970, only $52 million in annual income came from investments, but by 2015, this number grew to $3.4 billion—an increase to the tune of 6,500 percent. These local numbers are astounding, yet they fit within data on national and global trends, where the finance, banking, and investment industry has created more billionaires than any other industry.⁴ In other words, we see skyrocketing income levels in this community because people moving in are leveraging wealth they have already made to create more.

Thus, the rush of wealth to this community has a particular source. It was not the result of broad-based economic growth or rising wages and salaries, but was gains from one particular sector of the economy. There are, however, an abundant number of low-paying jobs to provide services for folks like Jim. In other words, the large majority of income comes from a handful of people who have investments, but the large majority of jobs are low-paying services (for example, food, retail). Figure 1.2 demonstrates this quite clearly, showing the rise of income from nonlabor investments, compared to the relatively static growth of annual income from labor (wages and salaries).

FIGURE 1.2. Growth of investment earnings compared to labor from traditional wages or salaries, 1970 to 2015. Investment income (that is, financial interest and dividends) makes up less than labor income (that is, earned from traditional wages or salaries) until the mid-1990s, when investment-related income skyrockets, and by 2015 makes up about 80 percent of every dollar earned in Teton County ($3.4 billion dollars of income). Source: U.S. Department of Commerce, 2016, Bureau of Economic Analysis, Regional Economic Accounts, Washington, DC, and Headwaters Economics.

Astoundingly, while this community became the richest in the nation because of investment income, the wages or salary from an ordinary job remained shockingly stagnant: in 1970 the average earnings per job was $39,943, and by 2015 this number had climbed only to $41,052—an increase of just $1,109 in 45 years, making it difficult to survive amid inflation and now untouchable home prices.⁵

What all this means is that while the rapid population growth in this community over the last forty years is certainly unique, it is not what makes this area distinctive. What makes it unique, and why it sits atop so many county rankings regarding wealth, investments, and economic inequality, is that the people who are moving here are unusually wealthy and earn a good deal of their money from investments.

PRIMARY CAUSES: TAX SHELTER AND TECHNOLOGY

Were these skyrocketing incomes in this community just the result of sheer chance, or are there particular reasons why wealth accumulated in the spectacular way it did? The evidence points toward two main causes. The first is driven by specific political decisions by the state of Wyoming, and the second concerns larger forces of technological change. Of course, these two underlying causes are bolstered by the fact that this place has unique natural amenities. Scholars have written a great deal about Americans’ romanticized love affair with the “West,” with more recent attention on natural amenities and the rural gentrification of the “New West.”⁶ I focus attention here on what I think is actually at the root of the income and population growth, because there is much more at work than just the fact that this is a nice place to live and recreate. Certainly, natural amenities play a part, but there are many nice natural places to live in the United States, and not all became the richest in the nation.

To the first main cause, it is well-known that the state of Wyoming does not collect personal income tax. Nor does it levy a corporate income tax. It also has one of the lowest sales tax rates in the country. In addition to its cultural and political aversion to taxes, Wyoming has not needed to collect such taxes because, more than any other state, it has long enjoyed record windfalls from oil, gas, and coal production. But these windfalls are fewer and far between in recent years, and point toward an uncertain future, and even potential crisis, for the state. Nevertheless, income tax is not being levied, even with skyrocketing population and income growth among the very wealthy here, almost all of whom are nonnative Wyomingites—some genuinely contributing to the community, but many others who have simply parked their personal money, or created a corporate shell,⁷ beneath this lucrative tax shelter.

For better or worse, specific governmental policies have contributed to the local changes that we have seen. It is not the cause of random market forces, but deliberative choices for one tax policy over another. And even if these choices result in staggering wealth inequality, or cost the state dearly in much needed tax revenue, policies remain unchanged because of Wyoming’s longstanding anti-federalist cultural streak that has created an all-out aversion to...