What billionaires live in Palo Alto
They buy houses and pay in cash. You buy a new car and choose the practical model, not the prestige object. They take three months off and go to the rainforest in South America. Then they come back and team up with like-minded people to start a new business or create a charitable foundation. "What sets the Facebook generation apart from previous instant millionaires is their reluctance," says Miles McCormick. "I have never seen successful entrepreneurs who are so down to earth and loathe to show their wealth," said the real estate agent in Palo Alto, who counts numerous Facebook employees among his customers.
Asset managers in Silicon Valley confirm the image of a new generation of millionaires who want to show their wealth less than cautiously. "The Facebook people are completely different from the millionaires of the Internet boom ten years ago," explains Michael Spector, director of Vista Wealth in Palo Alto. "Most of the millionaires back then had no idea what they wanted to do with their money. Many lost everything.
Facebook employees understood this lesson and also experienced the 2008 financial crisis first hand. They want to invest their wealth in a long-term and sensible way. "
The upcoming IPO of Facebook and the public openings of Zynga and Linkedin last year have made the greater San Francisco area one of the few growth islands in the US economy. The real estate prices here have in some cases risen above the level before the collapse of 2007.
In the millionaire enclaves Atherton, Menlo Park, Palo Alto and Los Gatos, prices averaged 30 to 50 percent higher in the last quarter than a year ago, while they fell again in most other regions. However, the "MacMansions" built in the pseudo-lock style are not bought. Practical, solidly built houses are wanted. "Facebook people value substance more than pomp," said McCormick.
Sheryl Sandberg is moving
A rare exception is Sheryl Sandberg, CEO of Facebook and a neo billionaire. She caused quite a stir in Menlo Park when she bought an older house for $ 2.9 million, had it demolished and built a futuristic steel-and-glass building with six bedrooms and as many bathrooms. Residents felt taken by surprise and said the house was too modernistic and did not fit into the idyllic tree-shaded street.
The excitement has since subsided. As long as Sandberg does not get permanent visits from Obama people from Washington and the streets are blocked by agents, according to one neighbor, everything is fine. At least informative: Sheryl Sandberg moved from the enclave of the super-rich in Atherton and an even larger house to the medium-sized Menlo Park. And your new house is more practical because it offers more space for prominent guests from politics and business. By the way: Your boss, Mark Zuckerberg, lives in a completely nondescript house that he has only sparsely furnished and only rented. In this austerity he is reminiscent of Steve Jobs, who made little of his billion dollar fortune.
Instead, the Facebook effect is attracting more and more banks and asset managers. J.P. Morgan Chase, Bank of America, Morgan Stanley, Goldman Sachs, UBS and Credit Suisse - the usual suspects are all busy expanding their offices in Silicon Valley. "Every bank sends their A-Team to Northern California," said Joseph Camarda, head of wealth management at Goldman Sachs in San Francisco. The advances made by the banks, who want to manage the money of perhaps more than a thousand new millionaires, are reminiscent of the Internet boom of the late 1990s. At that time, the Wall Street houses flooded Silicon Valley with teams of consultants and withdrew after the collapse.
Facebook mafia among themselves
This time the banks would have to adjust their tactics, says Michael Spector. "Customers today are much more independent and less gullible." Many prefer low-cost providers like the Vanguard fund company and just want to know from the advisors how they can avoid gross investment mistakes.
Asset management is therefore less aimed at pure investment, according to McCormick, than at long-term business and career planning. We are already talking about the Facebook mafia; a conspiratorial group of former software developers who want to invest their assets in each other's start-ups. The model is the PayPal mafia around billionaire Peter Thiel and Elon Musk, who founded Tesla Motors. "But there are a hundred failures for every successful company," says McCormick. "My primary goal is therefore to advise caution.
A million dollars is gone quickly; and even five million is not enough for a lifetime. "His strategy is not to sell all Facebook shares immediately when the company goes public, but to sell the shares in individual portions for two to three years. Facebook employees should sell just as many shares as they need for their immediate needs - a home, a trip, a car. "With the rest they can wait; after all, Facebook still has the future ahead of it. "
California tax dreams
For California, Facebook's IPO comes just in time. The heavily deficit state is hoping for an additional tax billion. The authorities draw their optimism from the IPO of Google in August 2004. At that time, 16 company founders and top employees sold some of their shares and paid $ 450 million in income tax for it. These revenues coincided with a stock market boom, and in 2006 completely unexpectedly washed $ 7 billion into California's cash register.
In the following year, the high deficits returned, which have grown steadily since then and are estimated at 9.2 billion dollars for 2013. "Any additional income would be very welcome," said Jason Sisney of the parliament's bipartisan Analyst's Office. However, the estimates of the Facebook effect differed widely. "Going public can bring us 500 million, maybe even a billion." However, California has not planned any additional income for 2013 because it is unclear how many Facebook employees will sell their shares and when.
Facebook founder Mark Zuckerberg is forced to sell part of his up to $ 28 billion estimated package. His plan is to sell off five billion shares to pay off the tax bill due on going public. It is estimated that Zuckerberg will have to deliver around 1.8 billion dollars, of which the state of California will divert around 500 million.
The comparatively high income tax of 10.3 percent in California pissed off some of the Facebook employees, says Michael Spector, director of the investment consulting firm Vista Wealth Management. Several employees he advises have decided to move to states like Nevada, Texas or Florida to avoid taxes. "These people never took root in California and now they see a good opportunity to break away."
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