If you’ve been a subscriber for a while, you know we do these things.

Completely unnecessary, detailed analysis of something that frankly does not matter in the least.

But sometimes we need a break from the grind of building those cash flow machines.

I, along with most of the tv watching planet it seems, am falling deep into The White Lotus. I drove back to LA from Colorado recently and spent probably a third of the drive listening to podcasts discussing the show, a third discussing the show with my wife, and a third blindly reaching behind my seat grasping for snacks.

One of the debates was just how much money Greg/Gary inherited. How wealthy was Tanya? But Tanya isn’t the focus of this season so I turned my attention to the impending financial ruin of Tim Ratliff.What did he do? Just how wealthy is this family?. And what could reasonably wipe out generational wealth?

So just for funsies, let’s see what we can figure out.

The show hasn’t given us specifics, but they did drop a few related details: hints of his family history, his observed relationship with money, and the situation he is now faced with. 

So to answer this burning question I  will be triangulating between three specific points, represented by three quotes from the show. With each assumption I’ll define a range and then at the conclusion we’ll see where those ranges overlap and use any additional points to nudge it one way or another on the scale.

Is this necessary? No. Will it enhance your viewing? Maybe…? Am I too far in to stop now? 100% yes.

Let’s math.

“Thank God they’re dead…” - Origins of Wealth

If I’m guessing as to the primary source of Tim’s wealth, I’m betting it was inherited. The fact his grandfather was a governor of a fairly substantial and politically relevant state probably assumes this money goes back a ways or at least there was a lot of opportunity for Tim’s father. That’s further supported when he explains his father was a “VERY successful businessman”. I took the emphasis on “VERY” as a signal that his father was more successful than Tim and to an order of magnitude that impresses him which is important later.

So how big is this inheritance potentially? First, let’s see if we can guess where it came from.

If the wealth goes back beyond Tim’s grandfather, tobacco is a good bet. If the money was primarily from Tim’s father, I would assume he made it from founding either a Biotech or Tech company (a lot of R&D comes out of the heavy concentration of universities) or furniture company (did you know NC is the furniture capital of the world?).

Both are capital intensive and have potential regulatory obstacles which would have benefited greatly from the connections of the governor.

I’m going furniture based on the timing of when that industry was blooming and that it would generally take longer to build wealth on that path. The Ratliff’s vibe seems to be more traditional, more conservative, emphasizing “strong values” (lol), and not new to them. This feels like money and reputations earned over decades or longer, not a pharmaceutical IPO.

A successful furniture company could be anything from the guy on local cable shouting “BUT WAIT THERE’S MORE” and throwing in the throw pillow “foor FREEEEEE” (which doesn’t strike me as the son of a Governor’s style) all the way to an import / export business barely known beyond the legal paperwork filed somewhere. I think that’s our elder Ratliff.

Still, that could be a range so what else do we know?

Given Tim’s comment that he’s a “pillar of his community” suggests that his own company is of significant weight. His “community” likely includes the political elite and as such the financial elite and this isn’t a big fish, little pond situation. North Carolina is a major financial hub for a lot of banks including the home of Bank of America. There is a lot of financial wealth here so to be a “pillar” means it’s substantial. Let’s say minimum pillar status is $50 million.

If his father’s success far eclipsed Tim’s, I’m going to put the money passed on from Tim’s dad in the $100 million to $1.5 billion range. 

However, I think we have to run this through one more filter in that it’s unlikely Tim was an only child coming from a family in that generation, that geography, and with that type of legacy. I would bet that 3-5 kids is conservative and given Tim’s high regard for his ancestry, and that he has 3, I’m going to assume he grew up with 3 also.

That puts our inherited wealth landing in Timmy’s pockets between $30 million and $500 million. 

One wild card? Does Victoria also have some family money? We don’t get any information about this but it’s hard to imagine her NOT having some. However, I think seeing her adoration of her husband and his accomplishments I would assume it isn’t material relative to Tim’s money. Her parents are also potentially still alive.

Even without a second inheritance we certainly have enough money and connections to launch a variety of careers for Tim so let’s look at the likely second source of Tim’s wealth:

His company.

Tim doesn’t come out and say what he does but he states he’s a) in finance, and b) has lots of wealthy clients. That would imply some sort of fund or private wealth management. Again using the super analytical metrics of “vibes”, I’m assuming Tim went fund over wealth management. More prestige. More privilege. It’s also a VERY common path for people with wealth already to start a family office fund with their own money and then bringing on additional clients. We’ll go with that.

As far as the size and type of the fund, I’m going to lean more conservative and traditional so think mid-market private equity instead of startup venture capital. He doesn’t mention any partners, and this is DEFINITELY the time to be calling partners, so it can’t be TOO big. I’m ruling out 50+ billion. But he is getting calls from the Wall Street Journal so it could be either larger, small but well-known and prestigious, or The Journal isn’t involved because of him but is instead interested in someone else…

I think it’s a combination of the latter two options so we’ll estimate it is a small - medium sized private equity or hedge fund in the $100-500 million range excluding his personal funds. Small enough to be run by a single, major partner, but big enough to have some local reputation.

This type of fund would generally run on some version of a 2-and-20 model. Two percent of total assets under management (AUM) billed as management fees to cover salaries and overhead of the firm. Twenty percent carry on any money returned to investors. I’m keeping it simple (this isn’t about the details of hedge fund economics) so the fees are probably $2-10 million. For the carry, I’ll assume returns of 12% (let’s say Tim-bo is not elite but good enough and certainly tolerant of some “colorful” risk) so that’s around $12-60 million a year to investors. The fund then takes home 20% or $2.5-12 million a year. That brings total revenue to the fund at about $5-25 million a year on average from investor related income.

His funds in the firm contribute to the weight and reputation but I don’t count the fees or carry since he’s paying himself. So just assume he makes 12% a year on another $30-500 million.

It seems like a small team, although Saxon probably pulls in an unreasonably high salary, so after paying the staff and bonuses, putting money back into the fund, maybe even some minor “partner” level employees taking distributions, I think T-bone could take home anywhere between $5m and $20m a year with the fund size increasing considerably each year.

Given the family legacy, how much he values the respect and admiration of his father, grandfather, peers, club members, and his family, and is likely the true origin of Saxon’s “big dog” mentality I’m going to assume he put most of his inheritance into his fund, diversification be damned. That confidence and need to prove himself probably created a perceived invincibility that clouded sound financial judgement.

Which puts the Ratliff family as only having one major source of wealth - the value of his business which now holds his inheritance. I’m going to put the value of his business and holdings inside the business between $50-600 million. I don’t think it could go lower than that given the constraints here but it definitely could be higher so to be conservative, let’s say it’s between $50 million and $1 billion.

“Only ten million dollars” - The Deal

We’ve got a very wide range of personal wealth and annual income but I think we can sharpen it a bit based on how he approaches this deal.

There are three assumptions in this brief statement. One is that $10 million is not a lot of money to him. The second is that he still does it. The third is that he KNOWS it’s $10 million.

Enter my “Favor Theory” where $10 million isn’t material to him but he does it as a favor to someone. 

To me, this implies:

1. An invincible attitude that comes from at minimum a net worth of 9-figures

2. Someone who earns at least $10+ million a year

3. Someone who still clocks $10 million swings in their assets

That pulls up our estimates to at least $100 million and probably earning at least $10 million a year but also I think pulls it down a bit as well. It’s a favor but he still knows exactly how much he made on the deal. That’s not $1+ billion, it’s probably now a ceiling of $800 million.

“Am I going to lose my house?” - Impact and Fallout

To zero in on the last part we consider the impact this might have on him. There are a couple of key fears he expresses:

• He might be “poor” after this.

• He is advised to cut a deal and cooperate and likely going to jail.

• He’s afraid he might lose his house.

I don’t see much new information in his fear he’d be poor. Someone with a few billion that suddenly finds themselves with “only” $100 million might feel poor suddenly and he could be exaggerating.

Similarly, jail time doesn’t tell us much other than he’s involved enough to be prosecuted and it’s a government prosecution case and not civil.

HOWEVER, the attorney (voiced by Scott Galloway, what a legend) indicates this is a juicy case for them that they’re going to pursue for political points BUT he also suggests if they cooperate they could get off lighter. Add that to the WSJ covering it means the fraud is BIG, there’s a big name, but TIM is not the big name.

There’s also the idea that if he was mega wealthy - as in we DRAMATICALLY underestimated from the very beginning 100 years of compounding interest originating from old tobacco wealth - given his family history in politics, he could probably fight this, pull strings behind the scenes and make it go away, or any amount of damages will be insignificant. He’s beyond the law at that level or at least might perceive he is, which he clearly does not. That supports our ceiling that he’s not a billionaire but not much else.

Which brings us to the part that really puts a point on it for me: the house. That implies that he will lose EVERYTHING in this since that’s typically the last thing they would seize. 

Now, I’m not a lawyer, but as far as I know a court can’t just bankrupt you for breaking the law. They don’t just take all your money regardless of where it came from. They can award damages and seek restitution that bankrupt you but bankruptcy is a byproduct not a sentence. 

So how big could the damages be to wipe out his wealth?

There are two types of damages broadly speaking. Actual damages are the funds actually stolen, lost, etc. as well as legal fees, interest, and probably a few extra bucks the accountants could find from lost opportunities or something like that. Punitive damages are meant to punish and create additional penalties beyond just giving the money back. In government led prosecutions JAIL is the punishment so punitive is rare.

That means restitution alone has to have the potential to wipe Tim out. It’s a big fraud but Tim’s part is small since he only made $10 million. So how does restitution wipe out a net worth at least 10-20 times that?

Unless…

1. This is something like a Ponzi scheme where the losses have been compounded at each round of the scheme.

2. It’s particularly egregious, maybe Tim used client funds inappropriately and spread the risk to his other assets and implicated his fund, and thus inherited assets, more fully in the scheme.

3. The main culprit, who could be 90% at fault here for example, can’t cover their portion of restitution and the burden falls to more minor members of the scheme - like Tim.

The charges mentioned are fraud and embezzlement which are pretty broad but could very well apply to a Ponzi scheme. Embezzlement COULD refer to Tim misappropriating his client funds which would check box number two. And let’s be honest, that first dude on the phone was freaking out and did not sound like someone who’s going to be able to cover the bill.

So where does all of that leave us? 

*Checks calculator

Given there is potentially a bigger fish here, and Tim’s role was limited, I do think there are limits to Tim’s amount owed. It won’t be billions most likely owed by Tim.

Even if Tim’s cut was around 3% of the whole, that puts this deal at most around $400 million. Certainly enough to get some attention from prosecutors and press but probably not Maddoff or FTX big. If his cut is more, the total deal is smaller so I think that we have to assume he could be wiped out with a bill south of $400 million.

At the end of the day, generational, “pillar of the community”, “$10 million is no big deal” wealth that could be wiped out from a scheme gone bad lands puts our Patriarch of the Ratliff family between…

$100 million and $300 million. 

I think that passes the vibe checks as well.

Last thing, couple of red herrings I think that people will point out:

1. Watches. Tim and Victoria wear matching Rolex Day-Date 40’s somewhere in the $75,000 range. While I DO think that suggests wealth over something like $10 million it really doesn’t mean anything. People buy watches WAY out of their league all the time and some of the wealthiest people on the planet will vacation in an Apple watch. Interesting? Sure. Relevant? No. But just for fun: Saxon can be seen in a Rolex Milgauss and a Hublot Big Bang - which, of course he does. He absolutely packs 2 $20k+ watches for vacation.

2. Reactions from their day on the boat. I don’t think they’re day on Greg/Gary’s boat says much because Victoria’s general distaste for the company is probably more related to her perception they’re all frauds and cheats. Additionally, they don’t have much reaction to the boat which could mean they just don’t want to get on the boat or they’re not impressed by it.

3. Tim’s pride in booking The White Lotus. In the first episode, Tim seems very pleased with himself for booking TWL and stands, chest puffed, admiring his work. As easily as that could be attributed to a ‘less rich’ being excited to stay somewhere fancy, it also could be someone so rich they’re more ‘post-wealth’ and his pride comes from the gesture of his “work/life” balance and rich family life.

What do you think? Did we make a case? Anything we missed?

Best,

Chase “LBH” Spenst

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