Thomas J. Stanley, the co-author of the personal finance classic The Millionaire Next Door, died in a car accident last week at the age of 71. The obits were both sorrowful and laudatory.
The book “stands today as a sort of promise that everyday people have a shot at accumulating true wealth through habits and not just outsize risk,” wrote Ron Lieber at the New York Times. Wall Street Journal columnist Jonathan Clements called it “a roadmap for everyday Americans who want to accumulate significant wealth.”
Left unmentioned in all the celebratory reminisces: the actual millionaire next door had died some time ago.
First published in 1996, The Millionaire Next Door was an ode to the self-made, blue-collar millionaire, the man (it was almost always a man) who started a small, non-glamorous business like peddling plumbing supplies, and used it to hoist himself into the ranks of the wealthy, with an assist from abstemious habits and frugality. These sub rosa seven-figure men drove older and inexpensive used cars, drank lowbrow beer like Budweiser, and never, ever gave money to their adult children.
Stanley’s book, co-written with William Danko, was an immediate sensation, and it remained on the bestseller lists for three years. But The Millionaire Next Door was already describing a vanishing world when it was published. As I pointed out in a piece I wrote for Reuters a few years back, the blue-collar one-percenter is an increasingly rare thing.
According to a 2013 survey by U.S Trust, around a third of Baby Boomers worth more than $3 million claim to have grown up in a lower middle class home, versus 18 percent of Generation Xers, and 12 percent of Millennials. Why the change? In our increasingly class stratified society, it takes money to make money—frugal habits be damned. Even Mitt Romney suggested youngsters on the make turn to mom and dad for the funds to start a business. People who have taken that advice include Jimmy John Liautaud, the founder of Jimmy John’s, and Steve Ells, the man behind Chipotle.
Today’s millionaires don’t even present the way Stanley and Danko’s self-made men did twenty years ago. According to Russ Alan Prince and Lewis Schiff, the authors of The Middle Class Millionaire, men and women with a seven-figure net worth favor such things as concierge medical practices and business coaches. The closest they come to millionaire status is their insistence, when asked, that they are middle class.
Truth be told, there were signs of trouble with Stanley’s thesis early on. The Baffler’s own Tom Frank took the book to task in his book One Market Under God, published in 2000, calling it “filled with questionable science and repulsive ethnic stereotyping.” Nassim Taleb piled on a few years later in his book Fooled by Randomness, making the astute point Stanley and Danko failed to account for survivor bias (most small businesses fail!) when making claims that small business owners shared character qualities that led to their financial success. “This tells me the unique trait that the millionaires had in common was mostly luck,” Taleb wrote.
Even Stanley seems to have had trouble living up to his own hype. In an irony many could not resist commenting on in recent days, the author of The Millionaire Next Door died driving a Chevrolet Corvette, a car with a list price of more than $50,000.
So what explains the continued popularity of The Millionaire Next Door in our current age, an age that celebrates personal excess and extravagance, even as more and more fall financially behind? Think of it this way: the book offers a virtuous cover for the financial sacrifices all too many are forced to make, telling its often-struggling readers that their cutbacks and continued downsizing will lead not to more sacrifices, but to prosperity. Like any self-help manual, The Millionaire Next Door claims to offer up a scheme for success, but is really in the business of selling optimism and hope. And those are forever popular commodities in the United States.