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For the smart and lucky, New York's streets are paved with gold.

 
The New Gilded Age: Rise of the Slacker Millionaires

By Annie Gowen
Washington Post Staff Writer
Sunday, August 1, 1999; Page F1

   


One of an occasional series.

You need an exit strategy to be able to walk away a winner, and today, mine was realized. . . . Effective today at midnight, I have resigned from America Online Inc. in order to spend money, race motorcycles, and drink scotch. I am, at age 27.85, retired. It's the American Dream, but with less full frontal nudity and more political undertones. God Bless Steve Case!

Hal McCabe, in his goodbye e-mail

Over the past two years some very strange things have been happening at the America Online campus in Dulles. The parking lot, once crammed with battered Nissans and sport utility vehicles, started glittering with Porsches and BMWs. Employees who barely knew how to balance their checkbooks started asking the company for financial seminars. Rumors circulated of AOL staffers snapping up million-dollar houses outright, paying by check.

In its early days, as AOL struggled to survive, company officials used to hand out stock options like lollipops, 1,000 and 2,000 shares at a time. Those options were a nice little benefit for a while, but they became something else entirely last year as AOL's stock rocketed upward.

Employees hired in '94 and '95 started cashing out their options, and soon the online company was churning out young millionaires at an amazing clip. Several former and current employees say they believe the number of recent millionaires at AOL is around 3,000, although that's an unreliable estimate and AOL officials--who do not like to talk about their puppy barons--will not confirm it.

Hal McCabe is one of those millionaires. He is 28. He answered an ad in the newspaper and got a job at AOL in 1995, producing content at its different sports sites and earning around $28,000 a year. He did not know what stock options were.

In February, two weeks after he became vested, he retired from the company with a portfolio worth somewhere around $2 million. For his retirement party, he rented out the Barns of Wolf Trap. He intends never to work again.

McCabe is no cyber-visionary. Roughly around the time Steve Case founded the company that would become AOL, in 1985, McCabe was a high school student bagging groceries in Vestal, N.Y. McCabe will tell you this: He's a moron. He's a "tool." The first among his peers to take a photograph of his naked butt and turn it into an AOL system icon.

"I wallowed in mediocrity and underachieved like I always do, and I survived," McCabe says.

Something funny happened on the way to a brave new world: "The peons became millionaires!" McCabe says.

These days McCabe--6 feet 7 and a healthy 275 pounds--is "livin' large." Sometimes he sleeps till noon. Instead of starting to write a book about his experiences as an AOLien, as he has intended, he buys cars and electronics off the online auctioneer eBay Inc. He has three motorcycles and plans to buy a fourth. He just bought a four-bedroom country home in Upstate New York, where he is moving this month to live with his girlfriend while she attends nearby Cornell University business school. At first glance he has not a care in the world.

Those who know and love McCabe say over and over again that this whole thing--this happenstance, this unexpected windfall, these greenbacks tumbling from the sky--couldn't have happened to a nicer guy.

"If I had a choice between me and my brother, I would want him to have all this," says McCabe's little sister, Miki, a 26-year-old student.

"Hal has a heart of gold," says high school chum Dave Beattie. He adds pointedly: "I worry he'll spend all his money in the next five or 10 years, though."

That's just it. For McCabe, becoming an Internet millionaire has not exactly been the carefree bonanza he anticipated as he nervously counted down the days left until he vested. Nirvana has come with its own set of worries.

Lack of motivation, for one. Why take the garbage out when you can pay your roommates to do it?

Then there's always guilt, shame and fear.

Not for nothing has McCabe arranged the desktop on his computer screen so he can constantly monitor the price of AOL stock, where at least a third of his net worth remains. The little symbol is always there, mocking him. His mood swings with each tick up or down. Tick tick tick. He stares at it as if he thinks his money might evaporate in an instant.

Given McCabe's enthusiastic spending--three motorcycles, three!--most of his friends agree that his money may do just that. McCabe has gone through $250,000 in cash since Feb. 2. "He's an amazingly generous person," says Mike Nuckols, another high school chum. "Now that he's got all this dough, he's an idiot with his money. I believe if I called him up and said I needed $10,000, he'd give it to me. I wouldn't even need a good reason."

The Life of Riley?


For the moment, McCabe is alone. Unless you count his cat.

He has been alone a lot these days, as he awaits a midsummer move to Upstate New York, where he plans to start a New Life. He might tell you his friends are just an e-mail away, which probably explains why he obsessively checks his e-mail account, even when he gets up in the middle of the night to use the bathroom. But until his friends and girlfriend leave work, or he happens to have a lunch date, McCabe is by himself.

"It is sad to say, but from 9 to 5 [e-mail] is my connection to the real world," McCabe says, his big form folded into a chair next to his computer. He is in the basement bedroom of a group home in Falls Church.

His cat is purring on the futon. The TV is on. Audrey Hepburn's face is on the big screen in the corner: "Breakfast at Tiffany's" on HBO. "Sometimes a good movie comes and paralyzes the whole day," McCabe says. " 'The Color of Money' will come on followed by 'Raising Arizona.' That's a whole day right there."

On the walls of the bedroom are pricey, limited-edition caricatures alongside faded bumper stickers from the 1972 presidential campaign of his favorite politician, George McGovern, whose name is also tattooed on his right biceps. (McCabe, left wing to the extreme, considers the man who rallied anti-war sentiment among young boomers the year after he was born the "truest liberal Democrat.") There are two humidors filled with expensive Cuban cigars as well as a floor lamp shaped like a human leg. On the flat-screen monitor of the $10,000 custom-built computer, the AOL stock price changes every five seconds. Tick tick tick. Today it's hovering around 113 a share. "I should have sold out when it was at 175," McCabe frets.

The house has an odd hush, and not just because it's midday. Two of McCabe's other roommates have moved out and "The Noland Street Social Club" will soon be empty. McCabe's house used to be a group home like a million other group homes of the D.C. area's twenty-somethings. Lots of "boxer lounging, late sleeping and leaving the seat up," as McCabe puts it.

When McCabe became a millionaire, however, things started to change. Two of the others moved on and he was able to float the rent. Then he bought the house in Upstate New York and made plans to move out himself. Now a lot of his stuff is in boxes and so is a lot of his life.

"I've been putting my life on hold until this move," he says. "Waiting to get into my new house. Waiting to start writing. Waiting to get back into golf. Waiting to join a health club."

This morning he rose early to watch "Squawk Box" on CNBC, the business round table he loves. Contemplated making coffee but decided against it: "Then I'd have to go upstairs," he quips. Checked and answered some e-mail. Later, lunch and a trip out to a car repair shop that is working on his latest toy, a white 1964 Lincoln Continental convertible that he bought impulsively off the Web.

He used to imagine a life like this. All flow. Wake up, and have nothing planned: Get up, and do what you feel like doing. Work? Play? Back to sleep? Anything . . . Those were the words of a dreamer, posted on his very own Web site, a dreamer dreaming the hours away chained to three humming computers in the big sterile airplane hangar of an office at AOL, working 40 to 50 hours a week with the other online worker bees.

Now the big man is feeling a little bit at odds with the world. In recent weeks showers have somehow become a low priority.

"He calls it retirement. I call it a sabbatical," says his girlfriend, Alison Clark, who is 28. "I think he'll get bored." McCabe wants to start writing a book about his experiences but can't seem to bring himself to type those two crucial words--"Chapter One."

Hal Aide


The strange, true story of Hal McCabe, slacker millionaire, really begins in a tiny brick house in Vestal, a town in Upstate New York. The family rambler was so far out in the country when Hal and his sister were small that they could hit golf balls into wide open fields in any direction.

Hal was born March 31, 1971. He talked very, very early and exhibited a fabulous sense of humor at an early age, his mother says.

His parents divorced when Hal was 6.

"It was very hard on Darren," recalls his mother, Susan Myers, 55. She calls her son by his given name and not the nickname he was given, for no good reason, during a high school poker game. "He really wanted to see more of his father than he was able to. It was very painful." McCabe has a cordial but distant relationship with his father today.

The family struggled to make ends meet. Myers worked as a secretary by day and a bartender by night. She shopped for clothes at the Salvation Army and for family wares at garage sales. A treat was a night out at Tony's Pizza.

McCabe had a close group of friends but also found solace in computers. His mother sent him to computer camp when he was 11 and he got hooked, trading two dirt bikes to get a very early IBM PC.

He spent hours playing video games and later started his own bulletin board--the Stone Age precursor of the Web--for computer hackers. In those days, folks dialed into the McCabe family's own telephone line to access the bulletin board.

McCabe suffered through several minimum-wage part-time jobs, including clerking at Kmart, washing dishes at Lobster King and scrubbing toilets in a factory. When his car broke down, his friends--who say they adore him for his humor and generosity--held a mock-telethon dubbed "Hal Aid" and raised $110 for the car repairs.

McCabe went off to Ithaca College, majored in communications and says he did the bare minimum work but still managed to keep his GPA at 3.3. He scraped by on scholarships, grants and $30,000 in student loans. When he graduated in 1993, he followed his then-girlfriend down to Washington.

"He was a slacker in school," his sister says. "He was the kid who could sleep in class and stay up all night but pull B-pluses, no problem."

Getting a college degree proved harder for Miki McCabe; she dropped out on her first try. When she was accepted to New York's Keuka College earlier this year, McCabe told her he would pay for her education.

Then he took her to the Keuka bookstore and bought her everything he could think of--sweat shirts, key chains, a teddy bear, a wallet. "He said, 'I want to do this for you because I wished somebody had done this for me when I went to Ithaca,' " Miki McCabe says.

The Money Machine


Hal McCabe is driving along Interstate 66 on his way to lunch. He hates I-66, which is his old commuting route. When he worked at AOL, he rode his motorcycle to work and often dreamed of swerving off course and going to Ithaca for good, but his vesting date of Feb. 1, 1999, always held him back.

At least he is not driving his old junker pickup but rather his new Eddie Bauer-edition Ford Explorer, complete with CD player and a computerized global positioning system. "I like toys," he says. "I grew up pretty poor. I always had the crappy bicycle and never had a stereo. I'm reliving my childhood now."

It doesn't take a Freudian to see that McCabe feels an overwhelming need to play Big Daddy given the circumstances of his youth. It has made him extraordinarily happy to be able to take care of his family.

Since his windfall, McCabe has paid for 13 members of his extended family to take an all-expenses-paid limousine trip to Washington, putting the whole family up in suites at the Hay-Adams Hotel.

He encouraged his mother to quit her job as a human resources assistant and is now supporting her as she looks for a new job with better pay. A few months ago he plunked down $120,000 and bought her a house. A pretty little yellow Dutch Colonial in a nice neighborhood; the house has green shutters, a kitchen skylight and a three-car garage.

I love it," Myers says. "I would have loved to have a house like this when the kids were growing up." She says, "It's an awful lot to give someone," but she has long since given up trying to slow her son down: "You don't have any choice."

He also is making an effort at philanthropy--at his retirement party at Wolf Trap, he raised money for six charities devoted to the hungry and animal welfare--but feels he doesn't really know how to give effectively. He bought a book called "Inspired Philanthropy: Creating a Giving Plan."

"I have a guilt thing going on," he says. "I don't think I could live with myself if I didn't give money. It would be evil."

Personally, he has always been a spender, and it has cost him.

McCabe ran up $80,000 of credit card and other debts after college and ended up cashing out his first early set of stock options from AOL to pay off his student loans. The stock was valued far less in those days, and if McCabe had been patient, or not quite so badly in debt, he estimates he might be worth $5 million now rather than $2 million.

Once his balance was zero, he'd start charging again. His friend Dave Beattie once made him cut up his credit card, but McCabe "told me later he kept two halves of it so he could use it over the phone," Beattie says. McCabe bought a new BMW motorcycle in 1996 and totaled it. He bought a new Cannondale bicycle and broke its chain the first time out. He bought a 1999 Ducati motorcycle, wrecked it on one of his first rides--although that accident was not his fault--later trading it in for another Ducati, a professional racing bike.

He bought a $1,000 paintball gun. Scuba equipment. A white leather racing motorcycle jacket with his Web site stitched in navy on the back.

He bought the $300,000 four-bedroom house in New York for himself and Alison, built with cathedral ceilings and set amid six wooded acres overlooking a small pond. Over the garage is a small studio apartment that McCabe hopes to use as a writer's den. When he starts his book.

He has bought three watches in recent months, including a Rolex that rewinds itself from the movement of his wrist. His girlfriend decided he had too much money when he bought another gizmo that keeps the Rolex wound when he's not wearing it.

"At that point, I was like, 'Enough!' " she says, laughing.

She is petite and brunet and down-to-earth. She fell in love with McCabe because of his nice smile and funny rap. They have been dating for almost two years. "He's kind of a freak, but I love him," she says.

"She's numb to it now," McCabe says. "Last night I bought a pair of binoculars for $1,500. There was no expression on her face."

"There's nothing I can do about it," Clark says. "Nothing I say is going to have any effect."

Unfortunately for Clark, McCabe has a new obsession: gambling. He recently swore off online gambling after two nights when he lost--and then, thankfully, won back--$600. He's also gambled with friends in Atlantic City and Las Vegas, where McCabe insisted on paying for upgrading the group from a budget motel to a suite at the Mirage and giving everybody $100 to gamble with.

Those friends accept his generosity with a queasy feeling, fearing that McCabe will spend his way to insolvency. Says Nuckols, the old friend from high school, "He's trying to do it at the very least."

As his Explorer rolls along the highway, McCabe does some big-time musing about his good fortune.

"I feel awful about it in some ways," he says. "Why me? Why this much? My friends are struggling to get a mortgage. I could buy a house outright. I feel guilty, that's why I spend recklessly. I'm not comfortable with money. I'm more comfortable without it."

Thank God for Lana. Lana Puckorius, an Onancock, Va., certified financial planner who advises more than 50 former and current AOL employees, has one-third of McCabe's money under her gentle and steely control. She has put it in a diversified portfolio of bonds, mutual funds, variable annuities and blue-chip stocks. "I do see the dollars coming in and out, and if there is a big change, we will have a little chat," she says. "Hal makes me laugh. Then I say, 'Hal, you must listen.' "

The Quest to Vest


McCabe got his job at America Online in February 1995, the year the World Wide Web exploded. The company was still quite small, with just over 2 million members. It now has 17 million.

He had been on unemployment for three months when he was hired. He had also defaulted on several of his student loans. Credit card companies were calling continually. He was hired through a newspaper advertisement. "Pure luck," he says, dismissing the expertise amassed since he first started fiddling with computers in grade school.

McCabe went to work in AOL's first headquarters in Vienna, which had more of the feeling of a college dorm than a high-tech company. For most of his time at AOL, he helped create sports-related Web sites.

For a time, McCabe was happy. He finally had a job that captivated his interest, and he loved the casual, freewheeling atmosphere of the company's early days. CEO Case prowled the halls in Hawaiian shirts. There were beer bashes almost every weekend. Sometimes all the staffers would quit what they were working on and play video games.

But as AOL gained more subscribers and began its high-profile march to become the Internet juggernaut it is today, McCabe's dissatisfaction with the company grew. His first discontent surfaced when several of his friends were laid off during a downsizing campaign in 1996 and the majority of the company moved to its new international headquarters near Dulles International Airport.

Suddenly, AOL seemed invaded by blue-suited Harvard Business School grads.

"I couldn't believe it when my manager asked me to clean up my cubicle," McCabe says, still aghast after all this time. McCabe couldn't have helped matters by writing vulgar nastygrams about AOL and posting them on his Web site. Work is a "big crap sandwich," he wrote in May 1998. Vice presidents and other bigwigs at AOL are "[expletive] hermaphrodites," he wrote in July that same year.

Around that time, McCabe made a conscious decision to underachieve. He would float along below radar level until he hit the magical four-year mark and his stock options could be cashed in. AOLiens call it "the quest to vest." Ask anybody at AOL, "How many days?" and they'll respond with the time until vesting. "They can tell you to the day," McCabe says.

At first McCabe figured cashing in would give him enough to take a few years off. But some time last year, as AOL stock went up, up, up, he realized he was going to be a millionaire. He was sitting at the kitchen table at his mom's house in New York watching CNBC one morning when it finally sank in. He turned to her and said, "Mom, you're not going to believe this." She didn't--at least at first.

It was not hard quitting. He was unhappy and ready to leave.

"There is no effing way I miss working there. I don't miss anything about it at this point," McCabe says. Except, from time to time, the co-workers he was friendly with.

But when McCabe describes himself as a mediocre malcontent and an AOL peon, he may be deliberately understating his case, at least according to his old boss, Richard Repke, who was the managing director of publications and publishing at AOL Interactive Services.

"Big Hal is a large man in many many ways," Repke says. "He has a monster personality. He was the nicest person in the world, a great person to have as a staffer." Everybody wanted to work with Hal, Repke says: "I'd hire him back in a cocaine heartbeat."

He'll never have the chance. Repke himself retired as a millionaire earlier this summer, and called in his comments from his cell phone while driving along Interstate 70, on his way to lie on the beach in San Diego and contemplate his own hazy future.

A Brain Drain


Officials at America Online seem reluctant to discuss the company's departing millionaires. When a Post reporter asked last year for the number of millionaires at AOL, Case would only say "a bunch."

"I predict a complete brain drain at that place in the next year," Repke says. "I know for a fact it's a large worry. We had many, many meetings about how to retain talent that's vesting."

Nonsense, says AOL. America Online is one of the hottest companies in the country and will have no trouble attracting additional talent. Officials say that the annual turnover rate among their employees remains low--a percentage in "the low teens"--and that many of their millionaires have stayed on despite becoming independently wealthy.

"As the company has grown dramatically, that's generated a tremendous amount of wealth for a lot of employees," says Mark Stavish, AOL's senior vice president for human resources. "People feel great about that. They have enormous flexibility to choose to work, choose not to work. They may do volunteer work, church work or go back to school."

It's still early yet to tell what most of the AOL millionaires will do. Bumble around for a little while, like McCabe, and then find a niche? Create new Internet companies? Set up foundations to cure cancer? Help to save the world? Take the money and run?

"Nobody's really talking about buying an island or anything like that," quips David Baker, 33. He recently left AOL and ponied up $250,000 of his cash to invest in and to become president of Exit1 Inc., a friend's information technology services company in Reston.

"I think there will be a lot of different paths people will take," Baker said. "Most are extremely marketable, intelligent people about the industry and they're young. In due time, after you've taken enough time off and played enough golf, you're going to want to get plugged back in."

Jack Daggitt, 43, is a former senior executive at AOL. He had joined the company in 1986 and exited 10 years later after one day got to look too much like the others.

Daggitt had been there during the company's darkest, leanest years. He remembers what it was like when the company had only 35 employees, and the desperate feel of slaving over software at 3 a.m. "You couldn't sleep," he says. "You knew if you didn't do it, there was no one else to get it done."

At the time he left he was a general manager of services, overseeing AOL's travel, health and reference channels. It was a good job, but he was sick of it. He wanted to devote time to his personal life. He wants to get married and have kids.

Now he works out of an office in his town house in Northwest Washington, mutts Chango and Jake sniffing at his feet. He spends a lot of his time looking for start-up companies to invest in. The other day one of his companies went public.

He doesn't consider himself "retired":

"Now my two jobs are managing my personal life with the goal of getting married, and managing my money with the goal of making sure I'm comfortable and have enough to do some good things with it." He recently made his first big charitable investment in Kids Computer Workshop, a D.C. program aimed at introducing at-risk children to computers and the Internet.

He has no desire to go back to work full time.

"I'm content to accept this as a blessing," he says.

Happiness Is . . .


McCabe's cat is named Little Kitty. She is sweet and spoiled and calico. He rescued her six years ago after seeing her thrown from a truck. He picked her off the median strip along Constitution Avenue.

He explains how Little Kitty likes to sit in the front window of his house on a special perch and survey the neighborhood. "She gets her kitty spit all over the window," he says and giggles happily.

Next he gets solemn.

"This is the lesson I'm trying to learn," he says. "Maybe I know it already. Money doesn't make you happy. My cat makes me happy. My friends make me happy. My family makes me happy."

McCabe says all this before his trip to see the "Stinkin' Lincoln." Of all of the excesses McCabe's slacker millions have produced, the Stinkin' Lincoln is the most over-the-top. It is a 1964 Lincoln Continental convertible that McCabe says is one of only 3,000 ever made. It is white. It is old. It is long. It is fancy. It has the kind of doors that both open from the center.

"I have these visions of driving it to Vegas or up to Atlantic City," says McCabe dreamily.

The car is currently immobile in the back lot of a car repair shop, where it has been since McCabe purchased it online and shipped it there. It does not work. It has not worked in a long time. Apparently parts for such a car are hard to come by, a detail McCabe apparently overlooked in his haste to plunk down $9,500 for it. Seeing it there, rusting, McCabe gets glum.

"Oh, the Stinkin' Lincoln," he sighs. "That car gives me more grief and stress."

He gets glummer still when he goes inside the body shop to talk to the mechanic, a laconic man in a blue coverall with his name stitched on the pocket.

"We're up against the wall trying to get parts," Mechanic Bill tells him. "We're running into a dead end." He tells McCabe he rebuilds entire suspension systems sometimes when he remakes old muscle cars. Could he do that for the Lincoln? McCabe asks.

Mechanic Bill's eyes light up. If this were a Road Runner cartoon, Bill's eyes would be alight with dollar signs.

"You're talking about a lot of money," Bill says slowly, stroking his chin.

Running on Empty?

Earlier, on his way to the car place, McCabe had noticed his Explorer needed gas. It was by then late afternoon. Rain was thrumming on the windshield.

The computerized gas gauge read alarmingly, "Seven miles to go . . ." Then six. Then five.

McCabe said he ought to get off at the next exit and gas up. But the next exit came and he sailed on by.

"I think we'll be okay," McCabe said. "I've driven 15 miles when it says zero. It's gambling. That's all it is."

The rain kept falling on the windshield. McCabe kept driving. He was seeing how far he could make it till empty.

   

© 1999 The Washington Post Company

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