A frequent commentator on views about wealth examines the sources of riches, throwing light on detail that will be useful in framing discussions about tax and enterprise more widely.
The clock winds down towards the US Presidential elections in November and it is highly likely that the great wealth of American businessmen and women will be a talking point. And even in other parts of the world, such as Asia and Europe, there are calls for wealth taxes and changes in policy to redistribute wealth.
A question that such thoughts raise is who are the richest people in certain countries and how, in particular, did they get their wealth? This matters, because defenders of wealth need to point towards the origins of it, particularly if it is generated by entrepreneurial hard work. The examples given in this article are mainly drawn from the US, but the lessons he draws apply globally, whether one is an advisor to UHNW individuals in Singapore, Dubai, London or Zurich.
A regular writer in these pages is Rainer Zitelmann, an academic, businessman and commentator on such matters. He writes here about some of the facts about who the top wealthy people are and how the composition of wealthy populations has changed.
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A clear majority of the richest people in the world became rich as self-made entrepreneurs – not as heirs. And although most millionaires and billionaires still come from the US, China is catching up fast.
Today’s super-rich predominantly built their wealth as entrepreneurs. Individuals who became rich through stock investments really are a very rare exception. And this doesn’t just apply to the super-rich, but to other rich people, too:
Here, according to Forbes, are the world’s ten richest individuals:
1. Jeff Bezos became rich as an entrepreneur with Amazon.
2. Bill Gates became rich as an entrepreneur with Microsoft.
3. Bernard Arnault became rich as an entrepreneur with luxury brands such as LVMH.
4. Mark Zuckerberg became rich as an entrepreneur with Facebook.
5. Warren Buffett became rich as an investor.
6. Larry Ellison became rich as an entrepreneur with Oracle.
7. Steve Ballmer became rich as an entrepreneur with Microsoft.
8. Larry Page became rich as an entrepreneur with Google.
9. Sergey Brin became rich as an entrepreneur with Google.
10. Amancio Ortega became rich as an entrepreneur with companies such as Zara.
Of the 10 richest people in the world, Warren Buffett is the only one who became rich investing in stocks. However, even he is not a typical stock market investor. For him, stocks are nothing more than a vehicle to make substantial investments in companies. Looking at the complete list, it is particularly striking just how many billionaires in China and the US have become rich through the internet.
A growing proportion of the super-rich are self-made
Many people claim that it used to be possible to become rich by one’s own efforts, but that today’s super-rich are mostly heirs. In fact, the opposite is true. The proportion of self-made billionaires among the super-rich has been rising continuously over the last 40 years and the number of heirs has been falling. The clearest documentation of this shift is in the US where, as well as publishing its annual list of the richest Americans, Forbes has also developed a scoring system to calculate the percentage of self-made billionaires and heirs in its ranking. Forbes regularly analyses its list and awards a score of 1 to 10 to each of the 400 richest Americans, based on how they became rich. Oprah Winfrey is a great example of someone who scores a 10: She rose from humble beginnings to become the world’s first black self-made billionaire and is currently worth $2.7 billion.
Self-made billionaires, defined by Forbes as those who score between 6 and 10, accounted for 48 per cent of the Forbes list of the 400 richest Americans in 1984. In 2018, when Forbes last analysed its list in this way, this had risen to 67 per cent.
Globally, the percentage is likely to be significantly higher. After all, China has the most billionaires in the world after the United States (455 compared with 614) and most Chinese billionaires are self-made, including Jack Ma, the founder of Alibaba ($39 billion) and Ma Huateng, the founder of Tencent ($38 billion).
According to data from the market research company Wealth X, 55.8 per cent of the 2,604 billionaires worldwide are self-made and 30.9 per cent are at least partly self-made. Only 13.3 per cent of billionaires inherited all of their assets. These data confirm a continuation of the long-term trend in the gradual increase in the proportion of self-made billionaires.