Second, Shy Millionaires pay for private school. According to the authors of The Millionaire Next Door, only 17 percent of millionaires ever attended a private school, but more than half send their children to one. This is the sea change in families that acquire wealth. Not only does it signal the increasing flight of many successful families from America’s public schools, but it also underscores an intense growth in demand for private K–12 education—triggering all kinds of unexpected strategies among private school parents, including holding children back a year to make them more competitive.

  Third, Shy Millionaires give to charity. Along with Altruistic Achievers, Satisfied Savers are the most generous of the millionaires, and they see part of their core role as helping to assist others who are less fortunate. So just as marketers need to dig beneath the opulence for potential customers, nonprofits need to dig beneath the big foundations for potential funders. And in that case, if you hit the Shy Millionaire jackpot, you might just find your nonprofit organization bequeathed a huge gift from the estate of that quiet, unassuming fellow with the twenty-year-old suits who used to say he admired your work.

  The bottom line is that while Richie Rich might not be living next door, Marty Millionaire is. And very quietly, he’s looking for financial services professionals, schools, and nonprofit organizations that share his regard for hard work, discipline, and the value of a dollar.

  As America approaches fully 10 million millionaires, it’s true that, at one level, a million bucks isn’t what it used to be. (Remember Dr. Evil in Austin Powers: International Man of Mystery, who schemes to hold the world ransom for “One MILLION dollars”—only to be nudged by Number Two that that won’t go very far. “Okay, then,” he declares, “we hold the world ransom for one hundred BILLION dollars!”) But by any measure, a million bucks is a sweet accomplishment—and those who are bashful about it are doing a lot more for their “class” than the billionaire braggadocios.

  Bourgeois and Bankrupt

  In France, they used to parade you naked through the street as they seized your estate. In Dickensian England, they locked you in debtors’ prison—which was better than putting you to death, which they were also allowed to do. In sixteenth-century Italy (as suggested in Shakespeare’s The Merchant of Venice)—they could literally take a pound of flesh. In colonial America, they branded your palm with a “T” for thief, so that in the future everyone would know not to do business with you.

  Ah, the bad old days of overextending your credit. Today in America, going bankrupt—while still a source of shame—is more like a personal finance management tool. In the past twenty-five years, personal bankruptcy filings in the U.S. have climbed nearly 350 percent, going from 1.2 per 1,000 people in 1980 to nearly 5.4 per 1,000 people in 2004. To put it in historical perspective, that’s eighty times greater than the rate in 1920, when 6 people per 100,000 went bankrupt.

  In raw numbers, the bankruptcy surge looks like this. In 1985, fewer than 350,000 people in America filed for personal bankruptcy protection. In 2005, filers topped 2 million.

  Source: American Bankruptcy Institute, 2005

  As Harvard Law Professor Elizabeth Warren has noted, that was more Americans than were diagnosed with cancer. More people went bankrupt in America in 2005 than graduated from college.

  And this is as the economy has been growing.

  Now we’re not talking here about those innocuous, “reorganizing” corporate bankruptcies, like even Donald Trump does from time to time. Personal bankruptcy is, quite simply, the breaking point at which your credit card bills, mortgage payments, and medical debts so outpace your income that you just can’t function anymore without the intervention of a court.

  In some parts of the country, bankruptcy is practically a way of life. In Tennessee, Indiana, and Ohio, more than 10 out of every 1,000 people file for bankruptcy. (In Massachusetts, fewer than three do.)

  But who are America’s bankrupts, really? It’s common to assume they’re deadbeats—extravagant spenders who buy sixty-inch TVs and sports cars, and then realize they can’t pay the mortgage. More than a few policymakers have claimed that the reason bankruptcies are rising in America is because there’s no longer enough shame in overspending.

  But according to Professor Warren, the high-on-the-hog bankruptcy-filer is a lot like the Welfare Queen of the 1980s—persuasive politics, but factually untrue.

  The typical bankruptcy-filer is a white, middle-class head of household with children and a full-time job. Nearly half of bankruptcy filers are married. They are slightly better educated than the general population. Almost all of them suffered a catastrophic personal event, like job loss, divorce, or a serious medical problem. (Of those who suffered a medical problem, fully three-quarters had health insurance when it started.) The fastest-growing group of bankruptees is seniors, who endure growing medical expenses not covered by insurance; but close on their heels are 20-somethings, whose student debts are at record highs.

  Bankruptcy has become a Middle America event.

  And why so many? The reason most often given for the recent surge in bankruptcy is the rise of easy credit. In 1970, only 51 percent of families had ever used credit cards; now, over 80 percent have. And you don’t even have to have good credit to get one—in the 1990s, the rate of subprime lending (to people with troubled credit) grew even faster than the credit industry overall. Lenders complain about deadbeats, but the truth is they make more off interest and late fees from struggling customers than they lose from the complete defaulters. And with easier credit comes easier overextension.

  Another commonly cited reason is America’s abysmal savings rate. In 2005, we saved at a negative rate—for the first time since the Great Depression. ’Nuf said.

  Finally, many experts say bankruptcy is up because its stigma is down. As new laws make filing easier (which they did until 2005), and more and more people file, more people know someone for whom it all worked out just fine. This justification may be more speculation than fact, however. Economists have calculated that, in fact, the bankruptcy stigma is alive and well; and three-quarters of filers say they were depressed after going through a bankruptcy.

  According to Professor Warren, however, what is really going on here is the rising cost of being middle-class. Good public schools have become rare enough that in the neighborhoods they serve, there is an unprecedented bidding war for housing, and mortgages have shot through the roof. Add to that rising health care costs, and college tuition that is far outpacing inflation, and you have a very strapped middle class. And so while household income may be way up, discretionary income is down.

  Which means that when crisis hits, there’s no longer any cushion. In the typical middle-class family, Mom already works, so she can’t go get a job for emergency income. The family already stretched to buy the cheapest house in the lowest passable school district. In today’s middle class, finances are so taut that if a family is struck by job loss, divorce, or illness, they snap.

  What does this mean for America?

  Ironically, some of the bankruptcy rise is rooted in good news. When illness used to just kill us, we didn’t have ongoing, astronomical medical bills. When college was only for a select few, most people didn’t drown in student loans. When hardly anyone could get credit, hardly anyone defaulted.

  In fact, the option of a dignified bankruptcy is considered one of the healthy underpinnings of our economy. While the U.S. frets about personal debt, some in Europe and Japan are pressing for more bankruptcy options in order to generate more risk and entrepreneurship. Failure is a product of trying, of taking risk. If we never tried to go to the moon, we would never have had the Columbia space shuttle accident. Or, as the CEO of the now bankrupt Eastern Air Lines reportedly said, “Capitalism without bankruptcy is like Christianity without hell.”

  But even if, at some level, bankruptcy reflects general societal progress, the current rush of Americans in financial ruin is cause for serious attention. At the macro level, it reflects the trouble in our education system, if so few districts are passable that people overspend on housing just to get their kids a reasonable education; and in our health care system, if even the insured can be hurled into ruin with one major medical event.

  And at a more immediate level, the fact that there are 2 million people stretched to the breaking point means there is a growing market for credit-counseling, finance-coaching, and money-management training. Why is it that we wouldn’t let a 16-year-old on the road without a driver’s license, but two years later we’ll give her a credit card without so much as a basic financial literacy test? Almost no school in America teaches personal finance instruction, and yet 1 in 3 high school seniors has a credit card.

  So if you are one of those companies holding a lot of subprime loans, watch out. Your portfolio is likely to take an unexpected whack if these trends continue, and you will be owning a lot of real estate in the decade to come. We are likely to see fewer infomercials on how to get rich quick with real estate—and instead more on “how to get out from under the crush” of all those houses you bought. Since you can almost always keep your house in Florida when you go bankrupt, that state has been a powerful magnet for the famously bankrupt.

  If personal bankruptcies keep rising at current rates, there will be nearly 8 million people going bankrupt a year by 2025. While this is a country that was built on the backs of opportunity for all, America has instead in the last few years seen the squeeze of the middle class and the rise of the bankrupt class. And that is a critical challenge for us all for the future.

  Non-Profiteers

  No country in the world is more closely associated with free markets, capitalism, and the private sector than the United States. This is the Land of Opportunity. “Rags to Riches” is practically our national mantra. Show Me the Money!

  Those who can, earn a bundle; those who can’t, regulate them. Or, as Ronald Reagan put it (and what, in a partisan moment, I might say has been a self-fulfilling prophecy for the Republican Party): “The best minds are not in government. If any were, business would hire them away.”

  I personally disagree, of course. Although I’ve spent my whole career in the private sector, some of my best friends, closest colleagues, and favorite clients do government work with brilliant results. But lately, the public-private sector tension has become less and less relevant. Since the late 1970s, neither business nor government has grown at a very impressive rate, in terms of attracting employees. What has grown, however, is the “third” sector—also called the independent sector or the nonprofit sector. Compared to business’s and government’s lackluster employment growth rates of 1.8 and 1.6 percent, respectively, between 1977 and 2001, nonprofit employment grew at a robust 2.5 percent.

  Here’s what that means in actual jobs. In 1977, 6 million people worked in the nonprofit sector. By 2001, that number had more than doubled, to 12.5 million.

  With 12.5 million employees, the nonprofit sector is still the smallest of the three, but it’s by far the fastest-growing. And work within nonprofits is now so varied, and so relatively well supported, that you can make a serious career in America without ever stepping foot into government or the hallowed halls of business.

  As a result, there has been a quiet rise of the Nonprofit Class. People who spend whole careers never thinking about shareholders, profits, or year-end bonuses; people who aspire to compensation that grows incrementally, not exponentially; people for whom Show Me the Money is just a quirky scene in a 1990s football movie.

  Source: Independent Sector, Nonprofi t Almanac, 2001

  Why the Non-Profiteer surge?

  First, donors’ funds have made it possible. The world’s superrich are growing—there were almost 700 billionaires in 2005, compared to 423 in 1996—and the pressure on them to give generously is real. (So are the benefits of the tax deductions.) And so between 1993 and 2003, the number of foundations in America nearly doubled, with assets growing over 150 percent to $476 billion. In turn, the number of registered nonprofit organizations grew to almost 1.5 million.

  As a result, nonprofit work can be rich and varied—from hospitals to higher ed, from museums to mosques, from anti-poverty programs to pro-environment efforts. And “nonprofit” doesn’t have to mean nonsubsistence. While entry-level salaries in the nonprofit sector tend to be about 10 percent lower than in government and 20 percent lower than in business, a 2005 Pennsylvania study found that the average nonprofit wage in that state was only 5 percent lower than the average private sector wage ($641/week versus $679/week). And at the nonprofit chief executive level, one can do quite well: between 2004 and 2005, the median compensation of the nation’s largest nonprofits’ chief executives—fully $327,575—rose faster than the bosses’ pay at the nation’s 500 biggest companies. In 2007, the former head of the Smithsonian had close to a $1 million pay package until Congress got wind of it.

  Second, nonprofits may be growing in appeal because the private sector has taken a beating. And I don’t mean just the recent Enron and WorldCom debacles, or even Martha Stewart. Since 1981, the percentage of Americans who think corporations need to be reined in has grown from 18 to 34 percent. Between 2001 and 2006 alone, the percentage of Americans saying that corporations ought to have less influence in this country grew from 1 in 2 to nearly 2 in 3. And government isn’t any more beloved. Trust in government to handle America’s problems has fallen from the low 70 percents in the early 1970s to the low 50s now. So while nonprofits are not without their own public trust problems, they are by and large considered less dangerous, less greedy, and more helpful than either of the other sectors.

  A third reason for the surge in Non-Profiteers is that the nonprofit sector itself is maturing, and beginning to tackle social problems that used to belong to the government, with the kind of innovation and discipline that used to belong to business. In the old days, nonprofits meant basically soup kitchens and tutoring centers, and maybe brought to mind rapscallion United Way heads and infighting at the Red Cross. Now a growing number of nonprofits, representing a movement called “social entrepreneurship,” are buckling down with disciplined business plans, rigorous metrics, and ambitious plans for scale. Funders support them with an approach called “venture philanthropy,” which is hands-on investment, modeled on the private sector’s venture capital. As a result, Non-Profiteers around the world are making a big difference, fast—much in the same way that start-up businesses either catch on quickly or collapse. And they’re doing it on issues from changing how American colleges look at low-income talent, to franchising public toilets in Africa, to expanding microfinance in India. Given both the idealism and business sense of today’s young people—is it any wonder that more and more of them are drawn to this sector? The attitudinal data bear that out: according to a 2006 Harris poll, American adults 65 and older have only lukewarm feelings toward nonprofits—but the feelings of those aged 18–39 are wildly positive.

  Nonprofits are hot.

  So let’s take a closer look at the implications of this growing sector. One is that as the sector grows and attracts more and more talent, it will probably need to get its act together, gender-wise. While women make up nearly 70 percent of the nonprofit workforce—and are a majority of nonprofit executive directors—men still get the lion’s share of the money, holding more than half of the number one slots in organizations that have budgets over $5 million. And that disparity arises even when the positions are the same: According to a 2006 study of the nation’s largest nonprofits, men are paid over 50 percent more than women even in the same position. Clearly, many women like nonprofit work, perhaps because it is morally rewarding, family-friendly, and/or supplemented by a husband’s larger income. But especially in a sector that draws people who want to repair the world, those pay gaps don’t seem likely to be tolerated much longer.

  Another challenge of the maturing nonprofit sector is turnover. As nonprofits shift and evolve, their annual turnover, at 3.1 percent, is higher than in either the private sector (2.7 percent) or the public sector (1 percent). If nonprofits are to sustain the growth their leaders envision, and their causes require, they will need to invest in top-of-the-line HR systems that grow and retain employees—not to mention ensure that starting salaries are high enough for young employees to pay back their staggering student loans.

  Expect greater government scrutiny as well. As the nonprofit sector grows in dollars, people, and impact—particularly given the growth of political nonprofits—expect more resources to be devoted to checking out whether all registered 501(c)(3)s are truly “in the common good” and deserving of their tax-exempt status.

  The bottom line is that the sectors are beginning to blur. When enormous foundations take up reforming America’s high schools, or addressing Africa’s AIDS crisis—or when savvy nonprofits spot under-tapped value and follow aggressive business plans to bring it into line with market forces—the public/private/nonprofit distinction starts to seem important only as a legal matter. The actual work can feel pretty much the same.

  Whereas the nonprofit sector used to be regarded as a sort of backwater to the business world, and as a poor cousin to the formidable public sector, it is now increasingly becoming a destination of first resort. Not only is talent flocking there—giving the other sectors a run for their money in terms of employees—but with its emerging blend of businesslike discipline and governmentlike compassion, the nonprofit sector may yet arise to be the one the others look to. Best-selling author Jim Collins, in his Good to Great sequel monograph, Good to Great and the Social Sectors, claims that the next generation of leaders in America will be the ones who can blend social-problem-solving ability with serious business skills. That combination of skills seems to be just where many modern nonprofits are landing.