Like the Siegels, Jack Warner built his fortune from the ground up. More precisely, he built it from the clay-packed dirt and limestone of rural Indiana.
A self-described “son of a ditchdigger,” Warner started working with his father, who was an excavator, when he was ten. By the time he was fourteen, Jack was operating hydraulic excavators and driving gravel-filled dump trucks down the highway for his dad’s business.
“Times were a little different back then,” says Warner, a bear of a man with sparkling blue eyes, a mop of white hair, and a shaggy goatee. “People grew up faster, and nobody cared about your age or driver’s licenses or anything like that. For me it was fun, being around my dad and driving trucks and operating these huge machines. It was like a boy’s dream.”
The fun turned into work when he was fifteen and his father left home. With no income, Jack, his mom and four siblings moved to nearby Elkhart, Indiana, where they lived in a three-room shack with no plumbing or electricity. Jack started digging trenches and working on paving crews until he could save enough money to buy his own tools and truck.
Within a year, he had his own excavation company with five employees, even though he was still in high school. He started bidding on big contracts for the state and local utilities, grading roads and sinking electrical lines. When he filled out the bidding papers, he always wrote his age down as twenty-one, even though he was fifteen. No one ever questioned him since he was huge for his age—six feet three inches tall and over 180 pounds.
Jack never liked school much. By the time he was sixteen, he had earned enough money to buy his own car. His high school cut him a deal, allowing him to miss classes and earn a diploma as long as he passed the tests, which he always did.
He got married at seventeen and had three kids. His company, Warner and Sons (even though he was the only son in the company), soon grew to sixty employees, with sales of more than $5 million a year. His annual take-home pay ballooned to more than $500,000.
For the next thirty years, Warner’s life was one of hard-won success and growing comforts. He built a 6,000-square-foot home in Elkhart, with an indoor pool, Jacuzzis, a home theater, and giant flat-screen TVs. His garage expanded to house his burgeoning collection of toys, from a Corvette convertible and a Harley-Davidson to his Boss Hoss trike and trailers.
Warner has a laid-back demeanor. He’s got a dark tan and usually wears shorts and T-shirts with beer logos. He’s closer to the character of the Dude in The Big Lebowski than a steely midwestern construction magnate. His eyes and mouth are framed by deep smile lines, suggesting a life filled with laughs and playfulness.
Some days in Indiana, he and his friend Paul Shannon would jump into Paul’s plane and pick a random destination. “We’d just look at each other and say, ‘Which way is the wind blowing?’ ” said Shannon. “We’d wind up in Florida, or Mexico, or Costa Rica, or wherever, and we had nothing but the clothes on our back, so we’d just buy a toothbrush and stay a few days.”
When Jack goes to a restaurant, he never looks at the menu. He just tells the waiter or waitress, “Surprise me.” He happily eats whatever is served. Jack only needs about four hours of rest a night, and he always gets up at 4:00 a.m. and works from dawn till 9:00 or 10:00 p.m.
At first Jack took his success in stride. He became something of a mud-stained patriarch in Elkhart, sponsoring Little League teams and helping out sick or financially strapped employees or friends. The highlight of his year was the annual Warner pig roast, when he would host up to five hundred people—workers, locals, friends, whoever showed up—for a two-day blowout on his property. He roasted three pigs, grilled mounds of chicken and burgers, and tapped multiple kegs of beer as guests listened to live bands he hired.
Yet as his fortune grew, Jack lost his grounding. His world, once one of constant struggle, fear, and providing for his family, became one of endless luxury and possibility. His personal life disintegrated. He got divorced from his first wife and married again, then got divorced five years later. A daughter from his first marriage died at the age of twenty-five from a rare liver disease. The other kids remained distant figures in his life, appearing only briefly in between work and parties and personal projects.
“You know, I never really got to know my kids,” he says. “That’s one of my biggest regrets. I was just too busy. With work. With all my side projects. With having fun, I guess.”
In the 1980s, Jack became a licensed pilot and started buying planes. He worked his way up from single-engine Pipers to twin-engine Cessna 414s. He became so addicted to flying that he and some friends pooled their money and formed an airport community, called JB’s Landing, where plane owners could own homes just off an airport runway for easy access.
“You could land on the runway and taxi the plane right into your garage,” he says.
His favorite destinations were Florida and the Bahamas, especially during the bitter Indiana winters. The more time he spent in Florida, the more he liked it, and he decided to look for a place to retire there. His plan was to find a property on the water that could also generate income for his retirement. “I wanted something secure and stable,” he said.
He scoured the Florida coast for years, working farther and farther south until he found his paradise—a run-down trailer park at the end of Little Torch Key, near the bottom of the Florida Keys.
The park was called Lucky’s Landing. It had fourteen weedy acres of mobile homes, trailers, garbage, and the occasional feral dog. Jack saw potential. There were very few undeveloped properties of that size left in the lower Florida Keys, since development is so restricted. The property also had a dredged shore—unusual for the island—which was perfect for docking large boats.
Jack didn’t have much experience in real estate. He was “basically just a ditchdigger with a pilot’s license,” he says. But Lucky’s Landing seemed like a no-lose proposition. He could turn it into a condo development and sell off the plots for millions. If that didn’t work, he could keep it as a trailer park and make $50,000 a month in income. Either way, it would fund a comfortable retirement.
Jack bought the property in 1993 for $1.025 million and began fixing it up with the growing cash flow from Warner and Sons. He built new boat docks, put in new roads, and added lush lawns, trees, and thousands of flowers. He built himself a 6,000-square-foot house with a resort-size pool, Jacuzzis, chef’s kitchen, and seven bedrooms. By 2003, he had put more than $3.5 million into the property.
Plans for the development moved along slowly. There were partners to manage, banks to convince, and local politicians to please. But Jack was patient. He was also having the time of his life.
As a wealthy, self-employed divorcé, he reveled in the endless summer of the Florida Keys. Almost every night he went to Teasers, a strip club that featured young women from around the world. It wasn’t uncommon for him to drop $200 a night at the club, mostly buying drinks for the strippers.
“It wasn’t about the sex,” Jack says. “They were just friends. We joked around, had fun. Some guys go to strip clubs and hit on the girls. We were all just pals.”
Some of those “pals” also moved in with Jack, at least for a while. He had always been generous about letting friends or relatives stay at his houses. But Lucky’s Landing became a twenty-four-hour party pad and free five-star boardinghouse. The door was never locked, and people would come and stay for days and weeks, eating his food, borrowing his cars, and sometimes leaving with his computers. The guests were almost always female and always young and attractive.
“Jack’s always been a little too trusting,” says his friend Paul Shannon. “Especially with pretty girls.”
Warner had two rules for his house: no boyfriends and no drugs. Clothing was optional.
“I never told anyone they couldn’t wear clothes,” he said. “I just told them that it was their choice. So a lot of the girls who were staying at my house never wore any clothes. It’s just the way life is in the Keys.”
Indiana’s attractions became less and less appealing. Warner started turning over the operations of Warner and Sons to his management. Sales and profits started to slide. At the same time, he was plowing more and more into Lucky’s. He also took on a side business: manufacturing airplanes.
Jack knew as little about manufacturing airplanes as he did about real estate. But he loved buying planes, and he liked to tinker with the engines and tweak their wing and flap designs. In the mid-2000s, he decided to buy what he calls a “hot-rod plane”—capable of high speeds and long range—from a company called Phoenix Air. Before he could buy the plane, the company ran into financial troubles. Jack loved the plane so much he bought the company.
He set up shop in Port St. Lucie, a blue-collar town north of Palm Beach that had a convenient and cheap airport. Warner invested $250,000 in the company and borrowed another $250,000 from a friend. They spent the next year developing a new prototype and building a manufacturing line.
In between his nights at Teasers and his days flying planes and hanging out with naked strippers at his pool, Warner thought he had found the perfect retirement.
“I was done,” he said. “Simple as that. I thought I was set. I thought I’d never have to worry about money again.”
Sure, there was talk of a real estate bubble, especially in Florida. Jack heard plenty about the speculators and the no-money-down mortgages and the overbuilding. But Lucky’s Landing seemed a sure bet. Development in and around Key West area has been frozen for decades with restrictive zoning, so no one could build a new structure without tearing down an old one (assuming they got permission). Lucky’s Landing had the space to build forty-six new homes.
He could even transfer the building rights to a buyer at another location. The rights alone could be sold for $250,000 each—even if he didn’t build a single house. Lucky’s Landing was appraised by multiple lenders and brokers at more than $14 million.
“Did I think anything could go wrong? Of course I did. Maybe the real estate market would fall. Maybe we’d have a recession. But even if that happened, I figured I’d be fine. There was such a big cushion. The property was valued at $14 million. And I had only a small amount of debt compared to its value. That’s what I thought anyway.”
Jack Warner was a “middle-class millionaire,” someone who worked his way up from poverty by starting his own business. He was a ditchdigger, and a great one at that.
Yet like so many of the modestly wealthy (those with between $1 million and $10 million in wealth) over the past thirty years, Jack was swept up by the post-1982 wave of financial speculation and investment bubbles. He became convinced of his own market savvy in areas of the economy where he had no experience. He joined the nation’s headlong rush toward ever-greater wealth, ever-bigger homes and boats, and trophy mates. And he traded in his steady-earning business, the excavation firm, for a chance at bigger, easier riches. Like the Sterns and others, he went from being a wealth builder to an asset trader. So many other people were making instant millions by flipping real estate and companies, why couldn’t he?
In the world of high-beta wealth, however, it is often these lesser millionaires who get hurt the most. People like the Siegels, who went from billionaires to millionaires, will see their lives change on the margins, even if they perceive the changes as more severe. They are still lifetime residents of Richistan.
Jack Warner had less of a cushion. The middle-class millionaires barely made it to the top rungs of the wealth ladder and were hanging on by their fingertips. They had little to stop their fall to the bottom. A study of Americans with $1.5 million or more in investable assets found that more than half will continue working into retirement. Another study found that nearly half of today’s millionaires are worried about outliving their assets and said they would have to change their lifestyle in retirement.
Jack’s story offers lessons to the mass of Americans who hope to become wealthy without getting caught in the traps of high-beta wealth. The keys to avoiding ruin today are to stick to your business specialty, borrow for your business and not your lifestyle, and always value your assets based on long-term price trends rather than short-term bubble valuations. Most of all, never, ever sell assets at the bottom of a cycle if you can avoid it.
Debt was always a friend to Jack Warner. At Warner and Sons, he was always borrowing as much as he could from banks to buy new equipment or hire new workers to try to win more contracts. He also used borrowed money for homes, cars, and planes. Leverage was his fuel, and it seemed endlessly renewable. He never paid the money back on time, always keeping it until the minute the bank threatened to place him in default. The lax lending practices and low interest rates of the past thirty years made debt a necessity for anyone wanting to get rich.
“If I can borrow at 2 percent and put that money in my business and make 10 percent, it’s stupid not to borrow,” he says. “Maybe I was always a little close to the edge. But I always made it work.”
Jack’s friend Paul put it more bluntly. “Jack was always stretched too thin,” he says. “He borrowed to the max. That’s just the way he is.”
When Jack bought Lucky’s, he borrowed $800,000 of the $1.025 million price. He then borrowed another $1 million to improve the property, tear down the trailer park, and build his house. He had an additional $1 million in liens from business partners and contractors, bringing his total debts to nearly $3 million. The loans were larger than any Jack had ever taken before. But they were still minor compared to the market value of the property and his potential borrowings: Marine Bank of the Florida Keys valued the property at over $14 million and offered to bankroll $25 million of the costs for the new development.
In hindsight, $3 million in debt looks excessive. At the time, it seemed conservative. “Even if the value of the property fell by more than half, I would still be fine,” Jack said. “And nothing like that had ever happened in the Keys, so it didn’t seem possible.”
In 2007, when the real estate market in Florida started its rapid slide, the bank called his $1.8 million loan. “Of course I didn’t have the money,” he said. “The bank was crazy to think I did. But they were even more crazy to call the loan. They knew the place was worth $14 million.”
Jack’s airplane business was also having trouble getting off the ground. He had built a prototype and had a full manufacturing line constructed inside a hangar in northern Florida. Yet on the day of the company’s maiden flight, the test pilot called in sick. Jack decided to do the test flight himself. He had a smooth takeoff, but when he got into the air he forgot which way he had set the thruster. Instead of easing up on the throttle, he gave it full power, which blew out the engine. Suddenly he was a thousand feet above the ocean with no power.
Jack guided the plane back to the airport and hit the runway hard, breaking the landing gear and shattering large chunks of the fuselage. He injured his back, which had already been broken in a previous plane crash.
With the bank demanding payment of his entire loan, Jack headed back to the Keys and started selling off everything he owned. He sold off his Boss Hoss trike, which he bought for $40,000, for $12,000. He sold his Cessna for $125,000. He sold the Corvette, the Harley-Davidson, and other toys for less than half what he paid. He shut down the plane business and offered it for sale, though no one wanted to buy a smashed-up prototype and a hangar full of parts—especially at a time when unsold planes were piling up around the country.
“I just went for broke,” Jack says. “I kept thinking, ‘This can’t be happening to me.’ One day I’m worth $20 million and the bank is promising me $25 million more, and the next day I’m selling my TVs and furniture to raise cash. It was just so quick.”
Hope came in the form of an auction. While he hated to lose Lucky’s, he figured the bank would get a good price for it at auction. Early estimates were that the property and his house would sell for $4 million to $5 million. That would still leave him with at least $1 million after paying back the loan.
Jack called old friends, business contacts, and investors to drum up interest in the sale. The auction company launched its own marketing blitz. A few days before the auction, in August 2008, Warner got the good news that more than fourteen people were planning to bid.
On the morning of the auction, he was confident he would bounce back. He went to his favorite breakfast joint, the Big Pine Café, and had his favorite breakfast, a towering stack of pancakes with peanut butter.
By late morning he started to worry. Not a single person had registered to bid. He found out the auctioneer was insisting on selling the house and development property as one piece, even though the two properties appealed to different types of buyers.
The auction was supposed to start at 1:00 p.m., but there were no bidders. At one-thirty they had to start. Two local residents—a doctor and retiree—showed up at the last minute and registered to bid. The price started at $1 million and slowly crept up: $1.5 million, $1.8 million, $2 million. At $2.4 million the bidding came to a stop. The two bidders turned to each other and agreed to team up, with one getting the house and the other the development.
The hammer came down at $2.5 million. After commissions and other payments, the sale price left Jack with more than $1 million in debt. Jack Warner was officially broke.
“I fell into my chair and just sat there,” he said. “It hit me pretty hard. What would I do? Where would I go? How would I survive?”
On a rainy afternoon in the winter of 2010, Jack is sitting at the counter of the Airport Tiki restaurant at the Port St. Lucie International Airport in Florida. A blond waitress named Jeannie comes over to take his order.
“Surprise me,” he says.
Despite its name, Airport Tiki doesn’t have much tiki nor much of an airport. It’s a yellow-walled diner located at the Port St. Lucie airport, a landing strip and refueling stop for recreational fliers going to or coming back from the Bahamas.
During the good times, Jack used to stop in at the Tiki for a burger as he was flying through on the way to Bermuda or the Keys. Later he came here when he was building his Phoenix airplanes, located in a hangar nearby. Now he arrives most mornings in his pickup truck for the cheap breakfast.
As he sits at the counter, in paint-stained cargo shorts, a blue T-shirt, and worn-out sneakers, his cell phone rings. “Hello?” he says. “Okay, what debt are you trying to collect?” He quickly hangs up.
Jack gets these calls all day, from banks, credit card companies, auto lenders, lawyers. He gives them all the same answer: “Stand in line, buddy. There’s nothing to collect.”
Ever since the sale of Lucky’s, Jack has been jobless. That’s partly by choice, since any salary would just go straight to the creditors. He considered filing for bankruptcy but decided it would be far too complicated and costly.
He does odd jobs for money, usually making $40 to $50 a day fixing toilets or repairing roofs. He sleeps in his pickup truck—a 2002 GMC with more than 200,000 miles—or sometimes on the couches of friends.
His eventual plan is to live off Social Security payments, which are off-limits to creditors and which he’ll start receiving in 2011. “I never dreamed I’d be living off Social Security,” he says. As for trying to get rich again, he says, “It’s not going to happen for me.”
While driving to one of his jobs, I ask Warner what he’s worth. He pulls out his wallet and counts the bills. “Fifty-three dollars,” he said. “You caught me on a good day. Yesterday I was worth $9.”
Around Port St. Lucie, Jack doesn’t talk much about his millionaire past and—this being Florida—no one asks or really cares. He’s just “Handyman Jack.” And that’s fine with him.
“A few days ago, I was fixing a toilet for a guy who owned a condo on the beach,” he says. “He probably paid $1 million for this condo, and he was real arrogant. He starts telling me, ‘Do this, do that,’ and getting nasty. I just looked at him and smiled and said, ‘Would you like to fix it?’ And he shut up. It didn’t matter to me. Because I can just walk away.”
Jack insists he’s happier now that money no longer rules his life.
“Before, when I had money, I was always worried about paying people, or moving money around, or making a sale, or raising enough money from investors. I was responsible for so many people and so many things. I was always going from one meeting or phone call to another, and life was passing by. Sure, I enjoyed myself. But I look back now and realize I never really spent time with my family. I never really knew my kids. I regret that. I feel bad about that.
“It’s a cliché, but wealth doesn’t do much for you. What makes me happy are my friends—the friends I have left, the real friends.”
Paul Shannon, Jack’s former flying buddy, said he admires Jack’s ability to carry on despite the losses and the complete collapse of his personal life. When the money ran out, so did the girls, the toys, and many of Jack’s so-called friends. “To lose that kind of money so quickly and to be able to keep your chin up blows my mind,” Paul says. “I don’t know anybody else who could do it. There was a period of time when I was worried about him. He was really depressed, and I thought he might do something to himself. I still sometimes worry.”
Paul has tried to convert Jack to Christianity, with no success. “Jack’s just not spiritual in that way. But somehow he finds his inspiration somewhere.”
Jack says it’s his connections with his few remaining friends and family that keep him going, along with meaningful work. For a few hours each day, he does volunteer construction work at a drug and alcohol rehabilitation center for men just outside Port St. Lucie. He says he’s never had any addictions. But Jack likes helping out his friend who founded the center, and feels like he’s helping people in need. He’s also helping to build a second rehab center for addicted women.
“Jack only sees the upside,” says Paul. “That’s part of why he was so successful. If he’s taking on debt or trusting other people or starting a business, he doesn’t see the risks. He just sees the good. He trusts that it will all work out, and he jumps right in. I just hope that optimism stays with him.”
As he drives his pickup truck to his next job—fixing a dog fence for $20—Jack turns up the radio and rolls down the window to let in the rain. “I’ve got one job right now, to fix this fence,” he says. “After that, the world is wide open. I have nowhere to go, nowhere to be, no one that I have to kiss up to in a meeting. It’s just me and my truck and my $53. That’s all I really need.”