Billions Can Be Easy Come, Easy Go

Appearing in In The Black Digital site, August 2017

 

F. Scott Fitzgerald, that great chronicler of the foibles of society, was once asked whether the rich were different to the rest of us. “Yes,” he replied. “They have more money.”

These days, much more money – much much more.  According to the Bloomberg Billionaires Index (www.bloomberg.com.billionaires), which keeps a running check on the super-affluent, the richest man in the world, Bill Gates, had US$90.7 billion (on 30 June 2017). Second was Jeff Bezos, founder and largest shareholder of Amazon, with US$87.2 billion. Even the person who ranks 500 on the Bloomberg list, Xu Bo, a Chinese online games developer, comes in at US$3.88 billion.

Bill Gates
Bill Gates: over $90 billion

 

The US dominates the billionaires list (although not to the degree it once did), and many of the American super-rich have much of their wealth invested in the US stock markets. This means that market movements can have major impacts. In the course of one day, 16 May 2017, Gates lost US$1 billion as Microsoft shares fell 2.8 percent. Bezos lost even more, about US$3.7 billion, temporarily dropping to the No. 3 slot. He was passed, for a while, by Spanish retailing tycoon Amancio Ortega, who lost only US$355 million. Facebook founder Mark Zuckerberg was also hit hard, dropping US$2 billion to US$62.3 billion when the company tumbled by 3.3 percent.

As a group, the 500 richest people lost around US$35 billion. The cause of the stock market tumult was political events, with President Donald Trump’s ties to Russia and his firing of former FBI Director James Comey under scrutiny. But the billionaires who lost staggering amounts seemed unconcerned. There were no public statements lamenting their losses or attacking Trump.

“When you look at this group you find that some are very involved with their investments, and some are less so,” says Alex Erskine, Principal of Erskinomics Consulting, a company aimed at promoting economic and financial development around the world. “As you get more money you can spread your investments more broadly and take a longer view on returns. So daily movements don’t matter so much.”

But if downward movements on the stock market can reduce the pile it is equally the case that upward movements can see it grow dramatically. The net worth of Jack Ma, chairman of Chinese online retailer Alibaba, surged US$2.8 billion on 9 June 2017 when the company forecast sales growth that topped the market estimates. The news pushed the Alibaba share price up 13 per cent to a record high.

 

jack-ma
Jack Ma: Richest in Asia

Ma is now the richest person in Asia, with a net worth of US$41.8, a gain of over US$8.5 billion in a year.

 

In Australia, the fading of the resources boom saw an end to wealth figures massively inflated by commodity prices, although mining riches still play a major role. Gina Rinehart, chairman of Hancock Prospecting, comes in at No. 82 on the Bloomberg list, with US$14.4 billion. The wealth of Andrew Forrest, founder and largest shareholder of Fortescue Metals Group, has reduced markedly but he still has US$4.55 billion (435 on the Bloomberg list). The lesser-known Ivan Glasenberg, CEO of Glencore, the world’s largest commodity trader, sits at 307 with US$5.45 billion. The other Australians are Anthony Pratt (No. 284, US$5.68 billion), Frank Lowy (No. 326, US$5.25 billion) and James Packer (No. 435, US$4.37 billion).

An interesting point is that many billionaires continue to work, often putting in exceptionally long hours and taking on ever-increasing responsibilities, even after they have made enough money to be able to spend their days sitting on a tropical beach – or even buy their own tropical island.

“They often it as see an opportunity to make the world a better place,” says Erskine. “Many continue to work well after the usual retirement age, from a sense of duty or for the personal satisfaction. And some move into philanthropic activities. When you look at George Soros or Bill Gates, for example, they show a strong sense of using their resources, and their energy, for larger social purposes. Efficiency and effectiveness become priorities.”

The profile of the world’s billionaire population is undergoing massive change, according to a 2016 report by UBS Group and PwC. The report, Are Billionaires Feeling the Pressure?, noted that growth in the number of billionaires in the US and the other countries of the developed world is slowing, while it is growing in Asia, where someone enters the billion-dollar club every three days (www.ubs.com/billionaires). China is leading the way but new billionaires are appearing in India and other countries as well.

However, many self-made billionaires are now reaching the end of their working careers and are planning to step back. Over the next two decades, approximately 460 billionaires will transfer an astonishing US$2.1 trillion to their heirs. For most of Asia’s young economies, this will be the first-ever handover of billionaire wealth, and the outcome of the process is not yet known.

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