In 2009, Edra Blixseth took the remaining members of her household staff for a walk down her driveway. There were about thirty of them—cleaning ladies, gardeners, security guards, cooks, and a driver. Some had worked for her for more than a decade. They walked in a quiet column in the chilly desert morning until they reached the front gate.
Edra thanked them all for their years of dedicated service. She gave them each a hug and a kiss. Then, one by one, she fired them.
After the last cleaning lady had walked out, Edra closed the gate. She looked back at her 240-acre estate with its own golf course and 30,000-square-foot mansion, and she burst out laughing.
“I was just staring at this 240 acres and thinking, ‘I’m it.’ There was no one to help me. It was funny at first. Then it was terrifying.”
Her most immediate problem was maintaining the property, one of the most elaborate and labor-dependent private estates in the country. Porcupine Creek, her desert palace near Palm Springs, had neither porcupines nor a natural creek, but it did have a golf course with more than a million flowers, plus artificial rivers, waterfalls, and imported grass. Her main house had ten bathrooms, five kitchens, a full-size movie theater, and a commercial-size spa. Then there were the seven themed guest villas (including the Tiki Villa, the Hollywood Villa, and the Rocky Mountain Villa), along with the amphitheater, the outdoor carousel, and the vast collection of computers, lighting systems, television screens, alarm systems, communication networks, and audio components that kept the hotel-like home operating.
Edra was also worried about her own security. They had always had a team of guards, led by one of former president Gerald Ford’s Secret Service chiefs, surrounding the property. The estate had a concrete wall and an alarm system. But the property border was too big and porous for the wall and alarm system to protect it completely. And the alarms were connected to the phones, which had been cut off because she couldn’t pay the bill.
“I’m totally exposed,” Edra told me, staring out across the golf course and the orange desert as the sun began to set. “There’s very little to stop someone if they really want to get in.”
Beyond the fear of intruders or the logistics of trying do the work of 110 staffers, Edra faced a more profound and lasting fear: that of suddenly having to do things for herself.
For more than twenty-five years, she had a retinue of cooks, maids, drivers, pilots, yacht stewards, gardeners, security guards, estate managers, butlers, waiters, masseuses, fashion consultants, PR people, and personal assistants to handle her every need. Each morning, her award-winning German chef sent up coffee, lemon water, and the newspaper to her bedside. Her cleaning staff kept every gold faucet freshly polished and every bar of soap new and freshly wrapped in French paper bearing the home’s porcupine logo. She would press a button on her cell phone or radio and have a driver at the ready. Her wine or vodka glasses were never empty. She hadn’t made her own bed, gone grocery shopping, or done her own dishes in years.
Edra was capable of doing these things. Or at least she used to be before she and her husband became rich. Yet over time, the forces of wealth had lifted her so far above the world of everyday human survival skills that she had to relearn them all. She was like a billionaire’s version of Rip Van Winkle, suddenly waking from a decades-long dependence on supplicants and discovering a strange new world of grocery stores, airport lines, and toilet scrubbers.
“It’s not like I wasn’t able to do any of these things,” Edra says, groping in the entry hall for a light switch, which used to be operated by a smart-home software system controlled by her staff. “But we always employed all these people to do things for us. And if we tried to do anything ourselves, they took it as an insult. It was threatening their job to do something myself.”
As Edra tells it, her return to the real world started out as a comedy of errors. After driving herself around in her ten-year-old Mercedes, she discovered she was running out of gas. She pulled into a filling station, then spent ten minutes trying to operate the self-service gas pump with its credit card reader. Eventually she gave up and paid cash.
When she needed cheap clothes for her grandkids, she found herself in the uncharted aisles of Target and Marshalls. “I never knew about this place called Marshalls,” she said. “It’s amazing. I can’t believe I had never heard of it.”
Grocery shopping, on the other hand, gave her sticker shock. “I used to ask the chef why he was spending so much on food, like $150 or $300 per delivery,” she said. “Our monthly food bills were easily in the thousands. But when I went to the store myself, I was surprised at how much things cost. I mean, one organic tomato for $2?”
She tried to make the most of her household chores. Her hours spent every morning pulling weeds on the golf course became “Zen weeding,” giving her a mental break from the endless lawsuits and depositions she faced during the rest of her day. She found that driving herself could be surprisingly liberating, as long as she wasn’t getting gas. Her time in the kitchen allowed her to try to resurrect some old favorite recipes. Giving me a tour of her walk-in refrigerator, Edra pointed to a baking dish filled with a wrinkly, slightly green-hued eggplant parmigiana. “I made that myself,” she said, beaming. “It was delicious. Really. I guess it looked better the day I made it.”
One morning Edra and I were sitting on the patio outside her mansion. She was holding a roll of paper towels and a bottle of Windex, which had become her favorite accessory now that the staff was gone. Like Jack Warner, she talked about how losing money had been something of a blessing, allowing her to reconnect with the real world, revealing her true friends, and giving her a new perspective on the everyday struggles of other Americans.
She said that if she ever wrote a book about her experiences, it would be called Fall to Grace, since her dramatic reversal of fortune had been a spiritual redemption of sorts rather than a purgatory. Material things no longer mattered as much, she said. What mattered was living a more real, healthy life, with true friends and family.
“I’m living my life now more as the person I am, not a person I am pretending to be,” she says. “My big goal going forward is to be genuine. I want a genuine life.”
In the middle of her elegy to the simple life, I asked her if losing wealth had actually made her happier than living with wealth. Edra laughed. “Are you kidding? No way. Anyone who says they’re happier without money is lying. I still want the comforts I used to have. And I hope to get some of them back. They make life a lot easier. And they give you freedom and choices. But what I’ve learned is that you can’t let things and stuff define you. That’s where I went wrong.” And with that, Edra looked at her watch and noticed that it was lunchtime. “Right now,” she says “I would be a lot happier if I had my chef back.”
The rise and fall of Tim and Edra Blixseth has many parallels to the high-beta stories of the Siegels and Jack Warner. Like the Siegels, they got caught up in the status race and spending binge of the 2000s with little regard for the long-term costs or consequences. Like Jack Warner, they were blue-collar climbers who pulled themselves up from poverty with a steady but unglamorous business, then got seduced by the asset bubbles and wealth glorification of the 2000s.
For Jack Warner, the Siegels, and the Blixseths, debt was the ultimate wealth destroyer.
Yet the Blixseth story is an extreme among extremes, showing just how suddenly and violently wealth can be made and lost in the age of high-beta wealth. Jack Warner, for all his misfortune, never climbed all that high on the wealth ladder relative to today’s wealth standards. He went from a few million dollars in net worth to a theoretical net worth of $14 million, then back down to zero. Even though he hit rock bottom, he fell from the place I called Lower Richistan (inhabited by those with a mere $10 million or so) rather than the more lofty heights of Upper Richistan.
As for the Siegels, they climbed much higher than Warner. But they won’t fall nearly as low. Yes, they will probably lose the largest home in America along with their fleet of jets and army of nannies. But they will still wind up multimillionaires because of the value of their private company and assets. The Siegels’ beta was higher than Warner’s, but still within the statistical band of many of today’s boom-and-bust wealthy. Edra’s beta, on the other hand, would be off the charts in any diagram. In a matter of two years, she went from being a billionaire to bust, from living large to liquidation, and from having one of the most expensive homes in the country to having no home at all. If anyone can claim to have gone from rags to riches and back to rags (at least on paper), it’s Edra Blixseth.
In the past, stories such as Edra’s were the freak results of fraud or theft. They were the Madoff investors who lost their life savings, who one day they thought they were millionaires or even billionaires and the next day learned they had nothing. They were the finance-challenged celebrities, pop stars, or athletes. Such radical downward mobility is not considered “real” in the sense that it rarely reflects broader economic trends or changes.
Yet Edra’s fall is the product of larger economic change. In her case, the primary forces behind high-beta wealth—debt, spending, asset bubbles—all converged to create one of the defining examples of modern wealth destruction and volatility. She and Tim rode on the very top of the asset bubble, with maximum leverage and a defiant lifestyle. As we will see, when the debt came due and the asset bubble popped, the Blixseths didn’t have enough savings or real assets to pay their creditors. The problems were made worse by a more traditional wealth destroyer: divorce.
What is most striking about the Blixseths, however, is the impact that high-beta wealth had on their lives. Their identities, values, and happiness were shaped as much by their precarious rise as by their sudden collapse. In the end, Tim and Edra came out of the experience with vastly different outcomes.
If you ask Tim and Edra Blixseth what lessons they learned after losing so much money so quickly, you will get two very different answers.
Tim’s answer is simple: “Don’t get a divorce in the middle of a recession.”
He will tell you that his entire financial mess and the blizzard of lawsuits and bad press of the past four years was largely the result of his nasty battle with his wife. He will tell you how she mismanaged money and engaged in a conspiracy to take over the Yellowstone Club. He will explain, in the entertaining and briefly convincing way that only Tim can manage, that the main villains in their epic downfall were the bankers who lent him too much money—$375 million, to be exact.
He will explain that he still has his jet, his 150,000 acres of timberland, his Mexican resort, the private island in the Turks and Caicos, and his yacht. He will muse about his next big fortune from a reality TV show or a natural gas reserve. He’s married again, to a slim, young blonde from Seattle, and he remains close to his two children from his first marriage.
For Tim, the past four years appear as just another momentary setback in a life defined by redemption and rebounds. “I’m happier than I’ve ever been,” he says, looking tanned and fit on a wintry day in New York.
Edra’s answer to the question about lessons is less sanguine. “Lessons? I could write a book about the lessons from all this. I’d have to go back a few years, maybe more than a few years, to start to answer.”
She would probably start in Oregon in the 1970s, when Tim and Edra first met. He was an upstart land buyer who had grown up poor in rural Oregon. He couldn’t afford college and he needed to support his family, so he went into the business of buying and selling timberland. He’d scoop up scattered parcels for low prices, then assemble them into larger plots he could sell to the big timber companies for a profit.
Edra grew up in a more middle-class family in California’s San Joaquin Valley. She was always ambitious; she says one of her happiest moments was winning a competition to bring other kids to Sunday school. “I won a Snickers bar,” she said. “I didn’t do it for just the Snickers bar. I did it for the challenge. I have always found fulfillment in meeting a challenge.”
But her life took a sudden turn when she got pregnant in high school and married at the age of seventeen. “It was kind of clichéd—one day after cheerleading practice, with number 10 on the football team,” she says.
She worked the graveyard shift at a diner to pay the bills. Later, she managed a restaurant and helped launch a chain of restaurant-inns. She met Tim at one of her restaurants when they were both trying to get out of bad marriages.
They were both ambitious, entrepreneurial, and attracted to the finer things in life. Edra drove a Mercedes. Tim’s dream was to one day have enough money to pay cash for a new Rolls-Royce. Edra wanted a home big enough for their four kids and, one day, their grandkids.
They married and settled down, and in 1982 they bought a 10,000-square-foot historic home in Portland. They got their first plane. Yet behind the façade of wealth, the Blixseths were always living close to the edge. They were putting most of their money back into their business, even as their lifestyle became more and more expensive.
“It always looked like we had more than we really had,” Edra says. “There was always pressure to maintain our lifestyle. We were always living beyond our means.”
One Christmas Eve they had no money for presents for their kids, even though they lived in a mansion. They rushed to cash a check from a logging company, drove three hours to a Toys R Us to buy presents, and raced home to put them under the tree.
In the 1980s, Tim’s business crashed after a fall in timber prices. He and Edra declared both personal and corporate bankruptcy, leaving creditors with $17 million in bad debt.
They were quickly back on their feet, forming a new timber company shortly after the bankruptcy. The Blixseths later sold it for more than $20 million. They moved to Lake Tahoe and bought their first yacht, a 97-foot Feadship, along with a Citation jet.
After selling the company, Tim went into semi-retirement. He started a music company, building on his minor success as a songwriter in the 1970s with a tune called “I Hope to Find Your Rainbow.” But his real windfall came a few years later, courtesy of the federal government.
In 1991, the Blixseths swapped the government some of their timberland for a 13,500-acre parcel near Yellowstone National Park. The Yellowstone land turned out to be one of the most stunning and valuable pieces of property in the country. The Blixseths turned the property into the Yellowstone Club, an exclusive compound deep in the Montana Rockies where the rich could ski, golf, drink, and play without having to mingle with the non-rich. Members paid $250,000 to join and millions more to buy property and build homes on the site.
It was the ultimate in pampered mountaineering, and part of the sudden gentrification of the Rockies that turned towns such as Jackson Hole, Wyoming, and Sun Valley, Idaho, into high-elevation versions of the Hamptons. At the Yellowstone Club, members could have ski boots pre-warmed before their arrival, their log mansions were always filled with groceries and wine, and their dogs were given hand-sliced meat by the Yellowstone staff.
With Tim’s sales charm and Edra’s expert operating skills, the club membership exploded with newly rich Wall Streeters, entrepreneurs, sports stars, real estate developers, cable magnates, and dot-com billionaires. Bill Gates became a member, along with hotelier Barry Sternlicht and former vice president Dan Quayle. The membership swelled to more than three hundred.
Land started selling for more than $1 million an acre. Some members started buying parcels and flipping them for instant fortunes. By 2005, the Yellowstone Club was appraised at more than $1.2 billion. Tim and Edra, who owned virtually all of the club, were now billionaires, at least on paper. To make it official, in 2005 Tim debuted on the Forbes 400 list of richest Americans, his wealth estimated at $1.2 billion.
The Blixseths had always lived large. But by 2006, fueled by their $1 billion in paper wealth and ever-rising real estate values, their lifestyle became epic. They bought three jets—one for him, one for her, and one for friends and family. Porcupine Creek became their home base and grand trophy. The Blixseths also had homes in Seattle, Cabo San Lucas, and Montana. They threw $1.5 million weddings for their kids, with the flowers for one daughter’s wedding costing $250,000.
Tim not only achieved his dream of buying a brand new Rolls-Royce for cash but bought two—one Phantom painted in flashy two-tone colors so that he would get good valet parking spots at restaurants, and another in simple blue for “just driving around,” he said.
To the public, the Blixseths were living the ultimate American dream. Privately, however, their lives were starting to spin out of control.
Edra had always loved parties and drinking and getting together with friends. But in 2005 and 2006, Tim says, her drinking got worse. She admits that she had a drinking problem and says she drank to drown her problems with Tim, who was rarely around and had become more distant. He was also becoming increasingly crazed with money and the need for attention, buying ever larger cars, boats, planes, and properties, she said.
While they both liked the good life, their priorities and rationale for their riches began to diverge. Porcupine Creek became the center of many battles. Edra saw the home as the center of their family, a place where her kids, grandkids, and growing ranks of close friends could all live and enjoy life together. She felt deep pride in its design, since she had picked out almost every lamp, tile, and ceiling fresco. She took special pride in their antique wooden bed, which came from the archbishop of Milan’s quarters and had a carved Jesus above Tim’s side and a carved Mary above Edra’s.
“I don’t think of it as this big house with guest villas and a golf course,” Edra says. “I think of it as home.”
Tim saw it differently. To him, Porcupine Creek was a marketing vehicle used to wine and dine the rich and powerful and get them to buy properties at the fledgling Yellowstone Club.
“The idea was if they could see what Edra and I could create at Porcupine Creek, they’d sign up for Yellowstone,” Tim said. “It was a business tool, a great business tool. I always saw Porcupine Creek as an investment.”
Tim also hated having so many staffers hanging around.
“I never liked a bunch of people in my house,” he said. “It was like a hotel. I resented that even back then.”
Edra and Tim also fought about spending. Even as he preached the simple life, saying to all who would listen that “if you’re defined by your things, you’re not defined,” he continued to pile up toys. So did Edra, but she felt more conflicted. She turned to Buddhism and Eastern religions, looking to fill a growing void in her life.
Edra recalls a turning point in 2006, when she and Tim were sitting on the patio of Porcupine Creek after dinner. She asked him if he wanted to take a sunset stroll with her through the gardens. Tim refused. It was a seemingly small request, but for Edra it meant the end of their marriage.
“He just didn’t want to be with me or to do anything that I wanted to do,” she says. Edra ran to the bathroom and started crying. It was at that moment that she realized two things: that she wanted a divorce, and that she was too afraid of getting a divorce because she might lose the house.
“I said to myself in the bathroom, ‘If I could keep Porcupine Creek, I wouldn’t stay married.’ I was willing to stay married and miserable in order to keep Porcupine Creek. After that, I couldn’t look at myself in the mirror. I wanted to keep the status quo. I sacrificed who I was for something that was material. So yes, you could say I got caught up in all the stuff.”
The Blixseths’ financial situation had undergone a radical shift in 2005, when they took out a mammoth loan. Credit Suisse, the Swiss-based investment bank, approached them about taking cash out of Yellowstone in the form of a business loan. Over several wine-filled dinners, the Credit Suisse team said they had just structured a loan for the owner of another resort and could promise the Blixseths $150 million. The Yellowstone Club would be the collateral for the loan.
Initially Tim and Edra were cool to the idea. The club was generating plenty of cash and the Blixseths didn’t really need the money, even with their outsize personal spending. They also knew the perils of debt from their last bankruptcy. Tim and Edra had promised each other they would never get into debt trouble again.
“Debt is the root of all evil,” Tim always said, and still says today.
Yet the loan came with an irresistible hook: it was non-recourse. That meant Tim and Edra would never be held personally liable for the loan, even if they never paid back a cent. If the club crashed, which seemed unlikely, Tim and Edra would walk away with their planes, cars, homes, and yachts untouched.
“It’s not really my debt if it’s non-recourse,” Tim said. “That was the cornerstone of the deal. It was the depersonalization of debt.”
The land sales from Yellowstone Club would easily cover the interest and principal. And Tim told Edra that even if they wound up short of cash, they wouldn’t be responsible.
“Tim’s answer was always, ‘We don’t have to pay it back,’ ” Edra says. “We were taking some money off the table.”
It seemed like the deal of the century—until Credit Suisse came back and offered them even more money. The bank said investor demand for such loans was so strong that they were offering to give the Blixseths $230 million. Like many commercial loans, the Blixseth deal was “syndicated,” or sliced up and sold off to other investors.
Days before the loan deal was supposed to be signed, Credit Suisse came back to Tim. They had a problem. The bank had so many investors wanting to buy pieces of the Blixseth loan that they needed to increase the size. They asked Tim if he would take $375 million.
“We said no, but they kept pressing,” Tim says. “So I said ‘Okay, but that’s it, no more.’ ”
It was a typical loan of the Wall Street–fueled real estate bubble—huge fees for the underwriter, a pile of cash for the lender, and a ticking time bomb for the investors and property owners (in this case club members). Credit Suisse made more than $7 million in fees from the deal. A judge later ruled that Credit Suisse’s due diligence on the deal was all but nonexistent and that its $1.2 billion valuation for the Yellowstone Club was based on a highly questionable appraisal.
Edra says she was always opposed to borrowing so much money. “If we had gotten $150 million, we could have handled it. Even $220 million. But $375 million? No way. I knew it was way too much money.”
Yet the Blixseths (Edra included) had no trouble finding ways to spend their sudden windfall. The loan documents expressly allowed the Blixseths to use up to $209 million for their own personal benefit. To avoid paying taxes on the money, the Blixseths recorded the $209 million as a personal loan from the Yellowstone Club. They signed an IOU to the club promising to pay it back. While the move saved them millions in taxes, it would later come back to haunt them.
They paid off their mortgage on Porcupine Creek, paid off their Gulfstream jets, and put a few million into personal bank accounts and other businesses.
They launched a new venture called Yellowstone Club World, a global version of the Yellowstone Club where rich members could vacation at one of ten palatial private resorts around the world. The Blixseths went on one of the most extravagant real estate shopping sprees in history, picking up a medieval castle in France, a private island and mansion in the Turks and Caicos, a golf resort in Mexico, and a chunk of land in Scotland to build a golf course. To get to all the new locations, they bought a second yacht.
Edra accepts some blame for the loan. “How could I not feel some responsibility for it? I benefited from the lifestyle, no question. And I would say that I was part of the problem because I went against my better instincts. One of my kids told me at the time, ‘Mom, you went to the dark side.’ I stopped fighting this need for more and more money and material things.”
She would often remind Tim during the loan deal that “this is exactly the kind of thing we said we’d never do” after their last bankruptcy.
Even if the loan did go bad and they had to pay it back, the Blixseths had so many valuable assets, they assumed they could never get caught short. Yellowstone was appraised at $1.2 billion and Porcupine Creek had been valued at more than $200 million, plus they had thousands of acres of land and developments that were easily worth hundreds of millions. How could $375 million wipe out more than $1.5 billion in assets? It just didn’t seem possible, even if the economy went into recession.
Yet as Tim kept spending and expanding, Edra grew more anxious. She felt like their lives had become a lie, since few people knew about the loan. If the real estate market tanked, she thought, they would be unable to make the loan payments and Credit Suisse could take the club.
“I felt like we had to keep up this façade of not having any debt or financial pressures,” she said.
Tim says he became fed up with her drinking. One morning, after a night of partying, Tim announced he was leaving. Edra said, “You owe me one more hour of your time.” She sat him down in her office and made him watch a one-hour video by Tony Robbins, the motivational speaker. In the video, Robbins talked about the importance of being true to ourselves. For Tim, “It was the longest hour of my life.”
After it was over, Tim hugged her and drove off with nothing but his toothbrush. He later wrote a song about their marriage, with these lyrics:
We had everything the world could see but love.
Sip by sip she slipped away
From my heart and then my days.
Initially, Tim and Edra tried to keep the divorce civil and private. But like many divorces involving rich people, it quickly devolved into a spectacle of public attacks and money battles. Tim accused Edra of being a steroid-addicted alcoholic who had a long history of overspending. He said she had flown her house cleaner on the Gulfstream to their various properties and spent $90,000 on a divorce party that featured Tim’s likeness on voodoo dolls and rolls of toilet paper.
“She has been recklessly spending money as if it grows on trees,” he said in one press release, urging a Montana court to liquidate her assets.
In the spring of 2008, the Blixseths put the Yellowstone Club up for sale and inked a deal for $400 million. It fell through as the real estate market crashed. Property sales at the Yellowstone Club ground to a halt.
With their business collapsing, the Blixseths settled their divorce by dividing up all their holdings. Edra got the club, Porcupine Creek, and the French castle. Tim got the Mexican resort, the Turks and Caicos property, and tens of millions of dollars in cash.
Along with the club and the house, Tim also gave Edra the most important item on their balance sheet: the Credit Suisse debt. She agreed to take over the promissory note that she and Tim had signed saying they owed the club $209 million.
Edra said it seemed like a fair deal at the time. She planned to sell their French castle to keep Yellowstone running until she could turn around the business or find a buyer. Yet the deal to sell the castle to a Russian oligarch collapsed and she ran out of cash. Yellowstone filed for bankruptcy in 2008 and sold for about $100 million—less than 10 percent of its appraised value in 2005. Because she was personally on the hook for $209 million, she filed for Chapter 7 personal bankruptcy.
Tim appears to have escaped any real damage from their financial wreck. Even though he’s being chased by creditors demanding his properties to pay back the loan, Tim shows little regrets for his spending spree, his lifestyle, his debt, or the long line of angry club members and former business partners who are suing him or no longer talking to him. If he went a little too far during the good times, well, so had plenty of other rich people.
“It was fun back in the go-go years, to have all the stuff you don’t need and always wanted,” he said. “Anyone who says they didn’t have fun isn’t telling the truth. The whole world was living like that.”
Edra had more of a reckoning, both financially and psychologically. Back when she was rich, her daughter would joke about Edra’s fantasyland of privilege and isolation. It was a world unto itself, she said, one that Edra fully controlled and yet one that also failed to give Edra some of the real connections—to people, to family, to experiences—that she so craved. During one conversation, Edra made a joke about a politician who needed to “get back to the real world.”
“Real world?” her daughter asked. “Mom, you don’t live in the real world. You live on a 240-acre estate surrounded by guards and a staff of a hundred people. You only see the people you want to see and friends you want to invite over. You leave the FBO [fixed base operator, or private jet terminal] in Palm Springs, then you go to the FBO in Yellowstone Club, which you own. Then you see more of the same people that you only want to see. That’s your life. Mom, you know I love you. But you don’t live in the real world.”
Edra’s grasp of the real world has improved. But along with the newfound respect for gas stations and grocery lines, she’s also living with loss—especially of friends and family. When she was wealthy, Edra felt she had a tight circle of real friends who didn’t care about the money or playing on her private golf course but liked her for who she was. There was another group of friends who liked her for her charitable donations, parties, and free trips on her private plane. Yet Edra figured they were a small minority—maybe 10 percent of her friends—and that she knew exactly who they were. “I could spot them immediately,” she said. “You develop a very good radar for these kinds of people.”
Her radar, however, proved woefully inaccurate when it came to wealth loss. She expected to lose only about 10 percent of her friends after her bankruptcy. Instead, she’s lost more than half. “I still don’t really know why,” she says. “These are people who were never about the money. Or at least I don’t think they were”
She’s also had a rude awakening when it comes to her family. Of the Blixseths’ four children, two are Tim’s from a previous marriage and two are hers from a previous marriage. She considered them all her children. Yet after the divorce, Tim’s children have largely taken his side and stopped talking to Edra. Edra’s daughter Julie, whom she was closest to, moved to Sweden with her family. At the very time when she needs them most, her family is largely absent.
Edra says her life has become so filled with personal attacks, lawsuits, and public scrutiny that her daughter and grandchildren felt it would be healthier to stay clear. She also says that in Sweden, “it’s easier to live with less.”
“The family separating was the biggest shock,” she says. “I got used to having them around. And I think that it would in some ways be easier to face these pressures if I had them here. But it’s just not possible.”
You might think that after her fall, Edra would have the lessons of the past four years ingrained in her memory. And yet, when I ask her about her biggest fear for the future, she has a surprising response.
“My biggest fear is that I forget what happened and that I forget the lessons,” she said. “Maybe that sounds weird in light of the extreme change in my life. But I think that this crisis might have been too quick and too easy for some of the wealthy. Nothing really changed. Now, I don’t think you’ll be seeing the Credit Suisse–type loans for a while. And I don’t think real estate prices will go up like they did. But we have short memories in this country. For the wealthy, nothing really changed. That means it could all happen again. My fear is that I forget all of this. My fear is that we all forget.”
Some of the wealthy will be permanently changed by the decade’s wealth shocks. There are people like Warner, who because of age and debts, will never climb back. Yet there are also people like John McAfee, who now looks at the whole notion of wealth, spending, and quality of life in a different way.
McAfee founded McAfee Associates, a computer security company best known for its anti-virus software. He sold his stake in the company for somewhere between $50 million to $100 million and started and sold another company for $17 million.
By the mid-2000s, he was worth more than $100 million. With his goatee, tattoos, and waves of blond hair, McAfee bears a resemblance to Richard Branson and shares his rebellious streak, openly mocking the corporate establishment while at the same time profiting from it.
After selling his businesses, McAfee devoted more time to his hobbies: racing motorcycles, flying lightweight planes over the New Mexico desert, and doing yoga. He bought homes in New Mexico, Hawaii, and Colorado.
“Success for me is, Can you wake up in the morning and feel like a twelve-year-old?” he told Fast Company in 2007.
By 2008, however, the money ran out on his second adolescence. His rampant spending and his costly investment decisions (including bonds sold by Lehman Brothers) drained his $100 million fortune down to just a few million. John McAfee had lost more than 95 percent of his paper net worth.
In 2008, the New York Times ran an article about McAfee and his efforts to auction off his properties. One of the most surprising parts about the article, however, was the response. After readers posted dozens of online comments attacking McAfee as an indulgent, self-promoting, whiny rich guy who deserved no sympathy, McAfee responded with an admission: “I am not surprised by the angry attitude toward myself expressed in many of the comments,” he wrote. “In fact, I have to agree with most of them.”
He added, “I fully agree that I had little need for most of my toys. I spent money on houses that I seldom visited. I conspicuously consumed. A majority of America’s wealthy live and act the same, not that that excuses any of my excess.”
McAfee had given away almost all of his major possessions, many to charity or local communities. “Stuff, in and of itself, has little value,” he wrote. “It’s what we do with it that matters.”
McAfee’s losses changed the way he thinks about wealth. When he started out, he believed that if he just made enough money to be secure and buy the things he wanted, he’d be happier. He was happier, for a while. But the thrill soon passed. Over time, buying another house or plane just didn’t excite him anymore. What excited him was starting companies. McAfee is one of those natural entrepreneurs who live to reimagine markets, invent new products, and obsessively pursue ideas that sound insane to everyone else but make perfect sense to him.
Wealth was a by-product of that process. Yet McAfee mistook it for the goal. For him, adding wealth and things only distracted him from his deeper drive to change the world through business. It’s a lesson repeated by many of the high-beta rich, and one that was costly for McAfee to learn.
“We have over time equated entrepreneurialism with the drive to accumulate wealth,” McAfee said. “It’s a perversion of values.”
By 2011, McAfee had gone back to what he did best. He had moved to Belize and was pursuing new vaccines from jungle plants, and he had started a host of other businesses, including the nation’s largest ferry company. Getting away from American consumerism and status competitions was healthy, he said. It allowed him to focus more on what mattered.
Sitting in his bedroom, looking out over a lush jungle and waterfall, McAfee told me, “I have all I need right here. I don’t need anything else. I don’t need much, really.”
As for the rest of America, however, he said the culture of wealth was still one of “more, more, more.” Like Edra, McAfee said the lessons of the crisis are likely to be quickly forgotten. High-beta wealth will become even larger and less stable.
“Nothing’s changed,” he said. “There’s no reason to think all this won’t happen again.”
In our collective amnesia, the cycles of high-beta wealth will no doubt repeat themselves in the coming years. And it won’t just be the wealthy who are affected. Increasingly, the highs and lows of high-beta wealth are extracting a price from the rest of the country. As we will see in the coming chapters, high-beta wealth is distorting our communities, our consumer economy, and even our government.