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A Chain Of Riches Billionaire Marc Ewing, 30, and his wife, Lisa Lee, visit a playground near the Metropolitan Museum of Art in New York. (Helayne Seidman - for The Washington Post) By Richard Leiby Washington Post Staff Writer Wednesday, March 15, 2000; Page C01
NEW YORK Marc Ewing is off the payroll now, pretty much retired. Sure, they still like to have him around the office an older sage who can troubleshoot all manner of technical glitches. But no more of those sleepless, blurry days-into-nights struggling to build the business.
He's winding down, focusing on the next phase of life. He's been thinking a lot about helping others. Philanthropy he likes the ring of it. He considers it an "interesting" way to keep occupied.
After all, how many mansions or cars does a guy need? "I haven't bought an island yet," he muses with a quiet chuckle. But in all seriousness, he could. He recently received a bronze bull's head from his advisers at Merrill Lynch. The message: "Welcome to the billionaires' club."
At the ripe old age of 30, Ewing never has to work again. After the small software company he co-founded, Red Hat, went public last summer, the value of his shares climbed as much as 1,800 percent.
He has cashed out a portion worth $31.5 million and splashed out on new digs. He paid about $8 million for a 12-room apartment on the Upper East Side here. He spent nearly $7 million for the historic Pabst mansion on Chicago's North Shore. It has nine bedrooms and a five-car garage. Plenty of space for himself, his wife and young son.
So now what does he do?
"The problem of our age is the proper administration of wealth," declared the world's richest man. It was 1889; his name was Andrew Carnegie. Setting forth his famed "Gospel of Wealth," the steel baron said, "He who dies rich dies disgraced."
Today's new-technology plutocrats are the Carnegies, Rockefellers, Fords, Dukes and Mellons of our second Gilded Age. But they've become so rich so fast, so young that they represent an unprecedented development in America's history. The mega-millionaires of 100 years ago did not pile up their fortunes until they reached their fifties or sixties. Today's so-called Baby Billionaires can accumulate unimaginable luxuries for decades to come.
We'd like to think that massive wealth brings with it solemn responsibilities and psychological stresses and Ewing will tell you there is some of that. But he, for one, isn't whining.
"I don't have any guilt," he says.
Still, he has formed some nonprofit foundations and is working on a philanthropic master plan. "The most interesting things you can do with the money have nothing to do with actually spending money on yourself," he says.
If history holds true, many of the cyber-age moguls will give their money away, enjoying the write-offs and the good feelings, rather than have taxes consume their holdings. "The very rich simply do not leave their money to the federal government," says Tom Riley, research director for the Philanthropy Roundtable, a Washington-based association of charitable donors.
Midases like Bill Gates of Microsoft (age 44, net worth over $100 billion), Michael Saylor of MicroStrategy (35, worth $13 billion) and Steve Case of America Online (41, over $1 billion) are already charting new courses in philanthropy as they continue to run their companies. Gateway Inc. founder Ted Waitt (36, over $5 billion) recently gave up his CEO title, in part to devote significant time to philanthropic work. Netscape co-founder Marc Andreessen, 28, estimated to be worth hundreds of millions, has declared his intention to "give it all away."
Many billions, if not trillions, are expected to be funneled into philanthropy in coming years. "It's a huge, looming thing," says Riley. "I don't think most people have really grasped how consequential and transformative that money is going to be. My God, there's so much money out there that even if the market crashes, it's still a fantastic amount."
In the past, when entrepreneurs tended to locate their charitable instincts late in life, philanthropy was a function of estate planning, a way to buff one's reputation before the grave. Such magnates were happy to set up family foundations or to just write checks to symphonies, hospitals and universities. But today's young philanthropists are more eclectic and engaged.
The new donors want results. They like monitoring and measuring. They adopt charities as "partners." They talk in terms of making "strategic" investments, and using their charitable contributions to "leverage" further progress. "Venture" and "entrepreneurial" approaches are the vogue.
"It's really about getting involved with your money and trying to build something better," says Ewing. He knows, generally, that he wants to fund efforts to help keep children "excited about learning." So he's considering after-school programs and museums.
Children, after all, are like young companies. They must be nurtured. They are humanity's Initial Public Offerings, with the potential to soar in value.
"From a societal perspective of trying to leverage your philanthropic dollar, investments in children are the highest-paying one," Ewing explains. "It's like in any sort of business, if you invest in the seed round and it goes all the way to being public, your dollar is worth thousands and thousands of times more. If you invest in the mezzanine round just before the IPO, you'll make good money for sure but your best investment is getting at them early."
Such is the gospel of new wealth.
Conflict and Ambivalence
He's dressed this weekday morning in a well-worn sweater over a T-shirt, making no concession to the more fashionable Manhattanites sipping cafe; au lait from deep bowls in the French coffeehouse where he has agreed to meet. He is a self-described hacker, the creature of a culture where that's a term of respect, because the right kind of hacking can lead to innovations in computing.
Thoughtful yet playful, he carries himself like he could still be tweaking code in a dorm room somewhere. Ten years ago that's how Red Hat began, when Ewing was studying computer science and mathematics at Carnegie Mellon University.
"My wonderful geek husband," his wife, Lisa Yun Lee, calls him.
Lee, who is also 30, looks chic in a long skirt and tinted eyeglasses. They have no hesitation talking about their commitment to charity, their intellectual and social passions but are unwilling to reveal the specifics of how they spend money.
They don't want to get into their "lifestyle," a prohibition that tends to be typical of the ultra-wealthy. Most people feel some degree of discomfort over money, but for Ewing and Lee, it's suddenly become the unavoidable Topic A of their lives.
They're advised by a team of tax, trust and philanthropy specialists from Merrill Lynch. As clients worth $100 million-plus, they also qualify for what the brokerage calls "consulting on the emotional impact of wealth."
Money: "It makes you feel guilty, it makes you feel nervous," says H. Peter Karoff, who runs the Philanthropic Initiative, a Boston nonprofit organization that counsels the rich. "And instead of wealth being this great thing we all aspire to, it turns out to be negative."
Growing about as quickly as the dot-com economy is a cottage industry of consultants who not only assist with money management, but prod clients to inventory their morals and assess their feelings toward charity. Some clients have never thought about anything but business. "We ask all the time, 'What are your values?' What we get is deafening silence," says Karoff.
The suddenly, massively rich say they go through emotional stages. There's shock. There's denial an insistence that the IPO money isn't "real" because so much of it is not immediately liquid it's equity in the company, or tied up in options. Some live as if they're still broke. (Karoff tells the story of a high-tech executive worth $18 million who only recently paid off her school loans.) Others splurge on sports teams or real estate. There's much fretting about the money's impact on their children.
In the past few months, Ewing and Lee have been through all of this. She calls their spending "reckless" but he prefers the term "optimistic." Ewing has always been that way, certain that he'd always have ample cash: "I'm pretty good at spending money," he acknowledges.
But passing by a toy store, they debate whether their 18-month-old really needs another indulgence. They don't want the boy to grow up unmotivated, bratty and spoiled what Andrew Carnegie called an "idler." ("I would as soon leave to my son a curse as the almighty dollar," Carnegie wrote.)
They probe their core beliefs. "I'm not sure I've ever heard of a 'value' before. I wouldn't even know how to model it," he says.
But after seeing "The Cider House Rules," they had to resist the urge to go out and adopt 10 impoverished orphans.
"Conflict and ambivalence" over wealth course through their daily lives, she says. "Basically whenever you go and have a latte." Like now.
Lee laughs nervously. "There's a huge degree of guilt that motivates my philanthropic efforts," she says.
In December, Lee finally finished her doctorate. A German-studies scholar at Duke University, she wrote her thesis on Theodor Adorno, a 20th-century neo-Marxist German philosopher.
Adorno contended that a "mass-culture industry" promoted by capitalism created a passive society. People yearned for products and delighted in buying things simply because of how much they cost.
"The people I work on in school are all Marxists," she says. "My adviser is the premier Marxist thinker in today's generation."
Lee recently bought herself a new BMW. Driving it to campus made her feel disjointed. She says she deliberately parked it three lots away so nobody would know she owned such a potent symbol of upscale consumer desire.
Her husband chides her: "You walked. You didn't want anyone to see you! It's so funny."
"I definitely have a much more guilty conscience," she admits.
Says her husband, "She has all the guilt for me."
Bubble Gum Baron
Marc Ewing became a profit-focused entrepreneur by age 10. He would fill his empty saxophone case with packs of Bubble Yum and Bubblicious, purchased for a quarter apiece at the drugstore. At lunch he would peddle the packs for $1.
He became the gum baron of Hagen Elementary in Poughkeepsie, N.Y. "We made, like, two or three hundred dollars," he says. "It was a lot."
The principal eventually banned the sales. But not before Marc caught the eye of little Lisa, who was among his customers. "It was so cool to line up and get gum," she recalls. "A status thing."
The son of an IBM programmer, Marc went to computer camp in elementary school, and he recalls happy summers writing programs on Apollo and Commodore computers. He faced Lisa whose parents had emigrated from Taiwan to attend college in the United States in "Olympics of the Mind" competitions. They recall how brainy kids like themselves sometimes felt isolated and ostracized. They attended after-school gifted and talented classes together and became best friends.
She went on to Bryn Mawr, he to Carnegie Mellon. They didn't develop a romance until their final year of college, and have known each other so long that they honestly can't remember the year they married. "I think it was '93," she says.
Ewing may have become rich overnight, but he doesn't consider himself a sudden success. He spent years of hard work on Red Hat, which he named after a Cornell lacrosse team cap he found in his grandfather's closet.
Red Hat's $10 billion market valuation is one of the typical business ironies of the Internet age. The company has yet to make a profit. Its product is a version of Linux, the operating system developed by Finnish graduate student Linus Torvalds in 1991, and can be downloaded from its Web site for free. The source code of Linux (pronounced LINN-ucks) is free, too.
Techies call this the "open-source" business model an emulation of the Internet itself, which no one owns or controls, where information flourishes because it is free. No one gets royalties from Linux, yet many have profited from it. (Red Hat retails the operating system in packages priced from $29 to more than $3,000, some of which include training and customer support.)
Ewing happened onto Linux around 1993. After what he calls a "pretty boring" stint at IBM, he developed an easy-to-use, improved product that he burned onto CD-ROMs and started selling from the Durham, N.C., apartment he shared with Lisa. She helped with the packaging and mailing.
A computer-industry marketing veteran named Robert Young saw an opportunity. Young came aboard as CEO, and with Ewing as chief technical officer, they promoted Red Hat Linux as a faster, more stable alternative to Microsoft's Windows.
"The harder we give away our software, the better we do financially," Young liked to say. They built a name brand as Red Hat made alliances with Netscape, Compaq and IBM. They helped Linux gain a healthy share of business it now powers 31 percent of Web servers and see themselves as white knights who took on Bill Gates.
The company scored publicity during the Microsoft antitrust case in Washington when a Microsoft attorney used a box of Red Hat Linux as a prop, attempting to deflate Justice Department arguments about Gates's monopoly. Red Hat went public in August, and a federal judge hammered Microsoft in November. Shares first offered at $14 climbed to $302 by December.
"That's crazy," Ewing says.
Red Hat split 2 for 1 in January, giving him some 3.6 million shares. The bull's head arrived. They might have appreciated Merrill Lynch's gesture, but the ornament isn't something a hip young couple would proudly display.
"Pretty hideous," Ewing says of the bull. "It's in the corner somewhere."
Big Blue Room
Lee wishes her husband would get out more. When he was younger, he used to love to exercise. But some days he just seems to hang around the house, looking . . . doughy.
"He has, like, the total computer-boy-sitting-there-inside-for-the-last-10-years-look," Lee says, exiting the cafe. It's brisk and sunny out here in what hard-core programmers sometimes call the Big Blue Room.
"I'm having this slow reentry to real life," Ewing says, ambling across Madison Avenue.
He spies a playground next to the Metropolitan Museum of Art and decides that's the perfect place to pose for pictures. "I've never grown up," he says.
They mug for the camera and fool around on the jungle gym, monkey bars and tire swing. It's fun here in the Big Blue Room.
Schoolchildren dart around, laughing, squealing, singing. Look at how naturally happy they are: Such carefree little IPOs.
Puzzling Out the Future
Although Ewing remains on Red Hat's board of directors, his days as an employee are over. He still weighs in by e-mail and makes appearances at headquarters in Durham. But in January he gave up his job as chief technical officer in part to devote more time to a new nonprofit organization, the Red Hat Center for Open Source. It was established with $8 million in cash and stock from him, Young and another major shareholder.
The center has a lofty, somewhat fuzzy goal: to show how "collaborative intellectual pursuits" using the open-source model can be applied to other political, legal, educational and scientific projects. "For the greater good of the general public," according to a press release.
His wife, meanwhile, hopes to fund what she calls "an interdisciplinary institute for public intellectuals" in Chicago, where they plan to reside most of the year. She also may endow scholarships for women who had to curtail their education because of marriage or childbirth.
But mainly they're two extremely smart people attempting to puzzle out the future. Becoming a philanthropist isn't an overnight achievement. They've entered "a completely different sphere that is totally foreign to us," Ewing admits.
He is committed to improving education, but feels the problems are systemic and can't be alleviated by plopping a computer on every desktop. When charity consists mainly of donating computers, it can come off as an extension of the company's marketing department.
Some of the Internet billionaires are rushing into philanthropy like men wielding hammers who see only nails: They prospered thanks to computers, so now they want to spend their fortunes to bridge the "digital divide" between poor and well-off communities. But the horrific home life of the Michigan 6-year-old who shot his classmate wouldn't have changed if only he'd had access to the Internet.
Surfing the Web doesn't necessarily make you smarter or more creative. "It just aggravates the situation. It further distances students from teachers and an interactive process with other people," says the man who spent his boyhood crunching hexadecimal code.
"It's better to send them out on the playground."
Gospel of Wealth
In Carnegie's day, a mogul was happy building libraries, parks, music halls, institutions of higher learning. The old gospel of wealth was straightforward, echoing the Bible.
"Sell what you have, and give to the poor, and you will have treasure in heaven," Jesus Christ advised.
Ewing and Lee aren't religious types. They have no handy blueprint. They just have all this money, and it's complicated their lives.
But look on the bright side. "In a year, the market could be tanked and all our problems will go away," Ewing says. He's smiling but only half-joking.
Actually things could go disastrously bad and he'd still be rich forever. Say they socked away a tidy $10 million and let it earn just 5 percent interest. That's still $500,000 a year.
"It's a strange place to be," Ewing says.
What's strange? As a lad he showed grit and pluck. He labored late into the night at the school a philanthropist named Carnegie founded 100 years ago to sustain the technological revolutions in electricity, railroads, telegraph and steel.
He fell in love with a girl who would study neo-Marxism at a school endowed by philanthropist James B. Duke. Then he became a 30-year-old billionaire because of a giveaway software. Now he's endeavoring to give his money away.
Maybe it's just the American way.
) 2000 The Washington Post Company
-- suzy (firstname.lastname@example.org), March 15, 2000
Bet I'm in the right place to hang out with the millionaires huh! And they all hang out on this board! Right! I know it sure isn't me.
-- suzy (email@example.com), March 15, 2000.