Wealth Strategies

BOOK REVIEW: The Wealth Elite

Tom Burroughes Group Editor 15 August 2018

BOOK REVIEW: The Wealth Elite

A new book examines the ultra-high net worth entrepreneurs of modern Germany, with potential lessons for wealth managers to draw on in serving them.

Wealth creators are typically extroverts, non-conformists, fiercely hardworking, and highly confident of being able to overcome challenges, according to a new book that analyses the motivations of what makes business builders tick.

The Wealth Elite, by Rainer Zitelmann, is an academic study into what drives men and women to become entrepreneurs, and explores their emotions and thoughts. It brings a rigorous sociological approach to a section of the world’s population.  It is a contrast to the majority of academic studies which have tended to focus more – perhaps understandably – on the less well off. (Dr Zitelmann is an investor and publicist with a background in media and academia: for a time he worked as an historian at the Freie Universität Berlin. At 421 pages, this is not a light read, but it will prove a valuable resource for business students in future.)

The book is also unusual, its author says, in that its analysis is centred on 45 ultra-high net worth German individuals. Germany has a significant number of ultra-wealthy persons but, perhaps given the nature of its culture, they tend to be less well-chronicled in the media and less willing or able to talk about themselves than their US counterparts. (One impressive statistic on page 45 is that there are more than 400 professors of entrepreneurship in the US.) To build up a picture of wealth creators, the author also looks at a number of other studies conducted around the world with wealthy persons - (it has a vast bibliography). As a consequence, this book can be read profitably by wealth managers in all regions of the world.

Divided into two broad parts, the book examines existing research, questions and methodology, while the second part covers specific interviews. The first part considers, for example, past studies (some of them going back to a 100 years or so) into why some businessmen and women succeed. Economics scholars might recognise economics luminaries from the 20th century such as Werner Sombart, Joseph Schumpeter and Israel Kirzner. All three men, in different ways, wrote about what motivates entrepreneurs (Schumpeter, for instance, is famed for the notion that capitalists bring about a form of “creative destruction”, while Kirzner, a figure of the “Austrian” school of free market economics, has developed ideas about “entrepreneurial alertness”.) 

The first half of the book also examines the ways in which business leaders question how their own fortunes came about, how much of their success was due to their character, and how much was down to chance. It is noticeable, Dr Zitelmann writes, that some entrepreneurs are anxious to stress that their success was due to getting lucky breaks, not just because they do not want to appear arrogant, but also to deflect envy and resentment. At a time when there is much political disquiet about widening wealth inequality, this observation stuck in this reviewer’s mind. The book seems to suggest that while all of us come up against good and ill fortune, what distinguishes many entrepreneurs, and is proof of their value, is how they deal with it. (There is a political edge to this debate, of course: if we believe that no-one really “deserves” wealth, then draconian wealth distribution seems to be a logical step.)

The book does not arrive at particularly startling conclusions, although a nuanced discussion about how people approach risk goes slightly against clichés of how entrepreneurs are dramatically more open to risk than anyone else. 

What is the value of this book for wealth managers? Well, it is useful for any firm wanting to build up its client base and understand their needs and how they think. The ultra-wealthy are not creatures from outer space, for sure, but they do have a number of traits that managers must be aware of: a focus on detail, a strong work ethic, extroversion, a determination to succeed, and high confidence in their own abilities. The more that RMs and other wealth professionals understand what makes their clients tick, the better it is for business.

This book is not bedside reading but as a contribution to the academic research on wealth and entrepreneurship, it is certainly valuable. It is issued by LID Publishing.

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