Rich, richer, richest…

Written by: Richard Willsher Posted: 25/05/2018

BL56_JeffBezosAs Jeff Bezos (pictured) is named the world’s richest person, does technology now rule the roost when it comes to global billionaires?

Li Ka-shing, who’s reportedly the richest man in Hong Kong, has decided to retire – at the age of 89. Could he be one of last of the old-style billionaires?

Maybe. But then again, maybe not. Listening to the noise surrounding the publication of the 2018 edition of Forbes World’s Billionaires, it would be easy to imagine that the world’s wealthiest people were all younger techies. 

The top 10 seems to point that way. Jeff Bezos, Bill Gates, Mark Zuckerberg, Larry Ellison… We could think about them as technology moguls. And if we stretch the list a little further, we see that Google’s Larry Page and Sergey Brin clock in at numbers 12 and 13 on the Forbes list, each worth in the region of $48bn. So that’s six out of the top 13. 

But look at the list a little closer and the picture takes on a distinctly different dimension. 

Warren Buffett (3), Bernard Arnault (4), Amancio Ortega (6), Carlos Slim (7) and the Koch brothers (equal 8) – these men are neither young nor techies. They, like Li Ka-shing – who’s ranked number 23 by Forbes, incidentally – have all built their business empires over many years.

What’s more, when you cast your eyes further down the list, only five billionaires out of the top 50 are under the age of 50. While 50 isn’t old, this stat gives lie to the notion that the ultra-wealthy are all college kids who took a fast track to their first IPO.

“The high-profile nature of the young tech entrepreneurs may convince us that there are more of these people around than there really are,” says Matt Tabb, Global Head of Corporate Communications at wealth services provider Equiom. “There’s still a core of very wealthy people whose wealth has been built up over many years – from industry or inheritance, for example. 

“The biggest change is that the wealth has been distributed more evenly around the globe. Thirty years ago, the vast bulk of ultra-high-net-worth individuals [usually defined as those with net worth exceeding $30 million] were located in the US and Europe. That’s certainly changed – especially with the opening up of Asia, and of China in particular.”

Wealth can be generated across a very broad range of sectors. Nick Train, co-founder of London-based fund manager Lindsell Train, points out that although a quarter of the top 100 billionaires listed in the 2016 Forbes list made their money broadly in technology – including, for example, pharmaceuticals – natural resources, real estate, financial services and retail all figure as sources of significant wealth as well.

Inheritance trends 

What’s more, inherited wealth not only endows many current UHNWIs, it’s a wealth source that’s set to burgeon. David Batey, Executive Director for Coutts Crown Dependencies in Jersey, says: “Studies estimate that £1 trillion will pass down from one generation to the next over the next 20 years or so. 

“Family-owned businesses are also hugely important to the global economy. Many families, but not all, will transfer their wealth and/or business successfully as they grapple with the complexities combined with a reluctance to discuss the subject.”

Back to the Forbes list and, as if to prove the point, we see that three members of the Walton (Walmart) family slot in at numbers 14, 15 and 16. They inherited their wealth from founders Sam and James, who died in the 1990s. Not far behind them is Françoise Bettencourt Meyers, heiress to the L’Oréal empire.

Old money, then, is still a key feature of the ultra-wealthy landscape. What’s more, businesses such as Amazon or Google couldn’t have existed until relatively recently. Look at Forbes’ 1987 list of wealthy Americans, and although 30 years have elapsed, some familiar names appear. 

Top of the bill is Walmart’s Sam Walton, who’s worth $8.7bn. Second is John Werner Kluge, a media billionaire whose business empire morphed into the Fox TV network. Third is Ross Perot, sometime presidential hopeful and, by some definitions, a techie. 

His business interests included data-handling firm EDS; a big investment in Steve Jobs before his second coming at Apple; and Perot Systems, which he sold to Dell. Behind him appears David Packard of HP, another techie. The youngest of these, incidentally, was Perot, then aged 57, while the other three were all 73 or older.

Sources of success

As you look down the 1987 list, Warren Buffett is in ninth place. Then, as now, the sources of wealth of many others are spread across a range of industries, including media, brewing and drinks, and real estate. 

Interestingly, one William Henry Gates III ranks as 29th richest – his source of wealth is described as ‘high technology’. If you look back even further, to 1937, billionaires were fewer, but at least one of them was wealthier than today’s bunch. 

That was the year in which John Davison Rockefeller passed away, leaving a pile of assets reported to be equal to 1.5 per cent of the GDP of the US. In today’s money, with US GDP estimated by the Central Intelligence Agency’s World Factbook to be $19.36 trillion, that would work out at around $300bn – nearly treble the wealth of Jeff Bezos. 

But there are some important comparisons we might draw with today’s new wealthy. Rockefeller, through his Standard Oil empire, bought refineries and pipelines to distribute oil, as the industry was starting to develop in the last two decades of the 19th century. 

In so doing, it ended up controlling access to 90 per cent of the American oil market. Two points are worth noting here: Standard Oil developed a massive monopoly; and it neither owned the oil nor had the rights to produce it, but it had access to it. 

Look at some of today’s billionaires and they also have huge monopolies – Microsoft, in providing the operating systems of the majority of the world’s computers; Google, in the search engine space; and Facebook, in access to friends and acquaintances. 

They also have, effectively, controlling market shares. Likewise, Amazon arguably provides access to the world’s largest department store. Where do so many of us go to buy a huge range of goods cheaply and conveniently? 

However, there’s one crucial difference between the internet billionaires and JD Rockefeller’s business empire. “They’re controlling access to a vast global market in today’s wired world,” explains Matt Tabb. “People want access to information now, and the faster you can supply it, the more valuable it becomes.”

The global reach of the web adds scale advantages that Rockefeller could only have dreamed of. How much wealthier would he have been if he’d controlled access to 90 per cent of the world’s oil?

Future wealth

The Forbes list shows there are still relatively few women among the world’s wealthiest. When they do appear, their wealth tends to be inherited – Alice Walton, for example, is the highest ranked woman on the list, at 16. Matt Tabb believes that this is likely to change as female entrepreneurs become more common. 

The international spread of the UHNWI community is already well under way. But this is likely to continue, not only because of the rise of the wealthy in emerging markets but also because the wealthy are internationally mobile. 

Knight Frank’s 2017 Wealth Report notes, for example, that Monaco has the highest proportion of UHNWIs per head of population. This, says the report, is because they seek havens to live in, with their associated tax advantages and lifestyle benefits. And ease of communication means that the wealthy can now live where they want and still run their businesses and investments conveniently.

Despite the continuing importance of inherited wealth, technology UHNWIs seem likely to feature more frequently in the wealth lists, as they’ve been doing for some time. But don’t be surprised if the Waltons, the Kochs and other wealthy dynasties feature for many years to come. Wealth, properly managed, breeds more wealth. This fundamental truth is likely to endure, though the word ‘properly’ comes heavily loaded with risk as well as reward.

The world’s 10 richest people

According to Forbes, the richest people on the planet in 2018 (all men) are:
1. Jeff Bezos, 54, Amazon, $112bn 
2. Bill Gates, 62, Microsoft, $90bn
3. Warren Buffett, 87, Berkshire Hathaway, $84bn
4. Bernard Arnault, 69, LVMH, $72bn
5. Mark Zuckerberg, 33, Facebook, $71bn
6. Amancio Ortega, 82, Zara, $70bn
7. Carlos Slim Helú, 78, Grupo Carso, $67.1bn
8= Charles Koch, 82, Koch Industries, $60bn
8= David Koch, 77, Koch Industries, $60bn
10. Larry Ellison, 73, Oracle, $58.5bn

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