I’m doing a little research about the American Dream: hard work can lead to wealth.
Part of this research is figuring out how rich people ($1 billion US or more net worth) got that way.
So far, I’ve identified 4 main factors (in order of amount of wealth and number of billionaires):
Sheer Luck: this includes being born into the right family and inheriting a large business or personal fortune (the Walton family), selling out of an industry or business at inflated prices before it collapses (Mark Cuban,) creating a product that nearly accidentally becomes the industry leader (Mark Zuckerberg,) or investing a small amount in a new industry that paid ungodly returns (Harry Samueli.) This category is nearly always identified by a slow change of net worth without new increases, or dramatic changes in net worth because of stock investments, without new income streams.
Fraudulent, Unethical, or Criminal activity: this includes deception (Michael Milken,) forcing competitors out of business (Bill Gates/Paul Allen) political manipulation to increase profits (Michael Dell,) outright criminal or illegal activity (Mafia dons, drug kingpins, rum runners, etc.,) exploitation of prison labor or third world labor (Chinese businessmen, Michael Dell, founders of Nike,) “sinful” yet legal businesses (pornography, gambling, sex trade, alcohol, tobacco, etc.,) This category is nearly always defined by trouble in court, frequent lawsuits/investigations and/or jail time.
Parlaying a small amount of money (not family inheritance) into successively larger amounts of money through reinvestment in multiple unrelated products, e.g. Steve Jobs, Warren Buffet, Jerry Jones, etc.
Actual talent or invention: creating/inventing a product or series of related products (usually original) that have become or remain popular: e.g. Paul McCartney, J.K. Rowling, Steven Spielberg, founders of Google, etc.
Interestingly, so far I have not found that being highly educated leads to great wealth. In most cases of highly educated people with a net worth of over 1 billion, they are able to spend years getting good educations mainly because of family money and their parents tend to have high net worths or professional jobs as well. Also, I have been unable to find people who became wealthy by becoming CEO’s or highly paid executives, e.g. “working their way to the top.” Also, it is very rare for people to become rich late in life (e.g. work experience leading to wealth.) Most of the billionaires I looked at had most of their money by 40, and/or what they created that made them rich was mainly before they were 40 but continued to sell. When you get the 50 million net worth or lower, then you start seeing people who were able to get there through a regular day job (Roger Goodell) or income through their education work or academic publishing (Stephen Hawking.) What’s also interesting is that many of the billionaires quit college to pursue their business.
Also, those we would suspect would be very rich (e.g. popular writers or singers) tend to have small net worths. Usually, these people only make a small fraction of the overall sales of their work. Without lucrative movie deals, for example, J.K. Rowling ($1.2 billion) would be below Stephen King’s ($400 million.) Some, like George Lucas, generally only had one product (Star Wars toy line) that made them such a large % of their fortune that they are on the borderline of being a category 1 (sheer luck) billionaire.
So my question is: are there any other factors besides those I identified that cause people to get rich? Did anybody get rich from hard work alone?
A gigabuck is an awful lot of wealth. I would posit that, in order to build up a fortune of that size, you need generous helpings of all three of talent, hard work, and luck, plus possibly sleaze. Granted, there’s still inheritances, but then, you have to look at whichever ancestor made the fortune to be inherited in the first place, and there’s where you’ll find your three (or four) factors.
So in other words, nobody ever made that huge a fortune purely by hard work, but neither did anyone ever make that huge a fortune purely by talent or luck, either.
Read up on Harland Sanders, of “Colonel” Sanders Kentucky Fried Chicken fame, who developed his fortune from scratch.
He was in mid-life (his late 30’s or so?) when he started his road-side fried chicken stand. According to the story, we a more-or-less ne’er-do-well before that. Developed his “secret recipe” over next 10 years or so, began franchising it out some years after that, and became mega-rich. Don’t trust me on any of the exact details here, but you can read up on him at Wikipedia and any number of other on-line sources. I read somewhere that he got a royalty of one-half cent for each chicken served, and on that he got rich.
So you are only looking at how the top 1226 richest people on the planet got that way?
I think it depends on what you mean by “becomming highly educated” and “working their way up”. That’s exactly what Mike Bloomberg did. He went to Johns Hopkins and then Harvard for his MBA. He worked his way up to partner at Salomon Brothers. Got fired. Then used his $10 million severence to start what became Bloomberg L P.
What I think you will find is that, unless you are born into the family, no one just gives someone billions of dollars. You generally have to create a company and see it grow into something huge. And that takes a combination of being in the right place at the right time AND having the smarts, drive, and hard work to recognize and take advantage of those opportunities when they present themselves.
A billionare generally doesn’t go to school, study hard, get a good job with a good company and then work his way up to CEO. That’s what the typically upper middle class middle manager mook working at your typical Fortune 500 company does. He will go that route until he gains the skills, experience, contacts or cash that he needs to start his own thing. And even then, plenty of startups fail.
Considering the average net worth of an American is 320k, a million bucks will still make you wealthy. A billion is fabulously wealthy, well beyond what most would consider rich. Micheal Jordan has more than any other athlete yet his net worth is only a mere 500 million.
The president of the medium sized company I used to work for (annual revenue of $300 million) is bright, good at marketing, knows how to get people to work for him, but most of all is relentless. If we were in a different industry, I wouldn’t surprised if he had turned out to be a billionaire.
boytyperanma - The median net worth of an American family (not individual) is around $75,000.
As I mentioned, there are only 1226 billionares in the entire world. People throw out the term “billionare” with little concept of how few of them there really are.
Can a trillionare be far behind? Yes. A trillion dollars is several orders of magnitude more than what the wealthiest people are currently worth (between $40-70 billion). The largest companies in the world have around $300 - 400 billion in total assets. A trillionare would have net assets exceeding the GDP of every country except the top 15.
I would argue that if he were billionare material, you wouldn’t have to be in a different industry. He would have revolutionized it. Before Gates, computers were mostly for businesses and universities. Before Zuckerberg, social networking was just a fad for teenagers and indie bands. There was no such thing as the ubiquitous Bloomberg terminal before he created it. Sam Walton basically invented the retailer warehouse store.
Relentless, bright workaholics with a knack for inspiring people are a dime a dozen. And most will generally do well for themselves. But you really have to do something no one else has done before if you want to be a billionare.
Like others, I think you’re setting your sights too high. I don’t think of the American Dream as “working your way up to become one of the 1226 richest people in the world.”
I don’t think luck deserves (heh) to be its own category. Arguably, nobody gets rich without some luck somewhere along the way, but they also have to do something. Unless they inherit the wealth, which maybe should be a category of its own, but which raises the natural question of how the people they inherited the wealth from got it.
Just the year before either were found out, they would have be lauded as masters of their universe. Just because a few get caught, doesn’t mean they all get caught. I personally think there was a psychological basis behind Walton’s success. He was a ruthless against suppliers and employees alike. You can’t help but notice the cult-like atmosphere that exists in their operation even to this day.
Connections. The wealthy tend to go to the same schools, live in the same gated communities, grow up knowing each other and as adults help each other out.
This. And I would generally say they don’t gamble too much on ventures, and if they do they don’t use borrowed money to do it.
I think personality, marketing, and networking makes a big difference too. Having a good product or service doesn’t help if no one believes in you, or knows about you.
I would say the exact opposite is true. They take big (calculated) gambles and ideally, you want to do it with someone elses money.
To **Der Trihs’s **point, you can only go so far by “going to the right schools” and “living in the right towns”. To me, that seems like more of a risk-adverse ticket to winning the race to the middle. Study hard, go to the right schools, get good grades. Get a job with a large, successful company. And your reward will be grinding career ultimately leading to a mid-level management position.
I think this is a big part of the equation as well. I would think a lot of wealthy families began as regular folk, but somewhere on the family tree someone came up with something that hit big. Seems like a lot of those opportunities occurred in the past when our country as a whole was capitalizing on vast global industrial opportunities. There were a lot of things that had not been done before and needed doing, and lots of room for improving processes and methods. Today ISTM just about everything has been thought of, and once in a while someone comes up with an original idea and a plan and is rewarded (Zuckerberg). However, for every one of those there are millions of people and ideas that never get rich and never see the light of day.
By the numbers, it seems like someone has a better chance of getting killed by lightning than becoming a billionaire.