How the world’s richest people make their money

Wealth-X has published its billionaire census for 2019 – revealing how the world’s richest people work and live.

The report showed that the global billionaire population and its wealth declined in 2018.

Amid a slowdown in global growth, persistent trade tensions and a late-year slump in equity markets, billionaire wealth declined by 7% to $8.6 trillion, Wealth-X said.

The total billionaire population also declined by 5.4% to 2,604 – only the second time it has suffered an annual fall since the financial crash a decade ago.

“North America was the only region to record an increase in its billionaire population,” Wealth-X said.

“Following dynamic growth a year earlier, the decline in the global billionaire population in 2018 was led by Asia-Pacific, which registered a fall of 13%.

“The number of billionaires in the EMEA region dropped by 5%, but there was a modest expansion of the billionaire class in the Americas (+1%), driven by a 3% increase in North America.

“There were double-digit rates of decline in Africa’s billionaire population and combined net worth in 2018, driven mainly by oil-price volatility and currency weakness.”

How the rich make their money

The report showed that the world’s billionaires have created their wealth via a wide array of industries, from pharmaceuticals to food products and asset management.

No single area dominates, but two industry sectors – banking and finance, and industrial conglomerates – have together accounted for a third of the global billionaire population’s primary industry focus in 2018.

Real estate, food and beverages, and manufacturing round out the remaining five primary industries.

“As a result of a methodological change in how we calculate primary industries, technology no longer appears in the top five ranking, although its 5.1% share of billionaires’ industry focus in 2018 was broadly similar to a year earlier,” Wealth-X said.

“Technology billionaires’ average net worth, at almost $6 billion each, is far greater than in all other industries, though this figure is heavily skewed by a select group of extremely wealthy individuals at the very top end, including the world’s richest person, Jeff Bezos, founder of Amazon, who, in March 2019, had an estimated net worth of $131 billion.”

Wealth-X said that five of the 10 richest billionaires have created the majority of their wealth via the tech sector – evidence of the huge gains that can be made in a sector that can cross borders fairly easily, has comparatively low barriers to entry, and can increase in scale much more rapidly than traditional industries.

Self-made vs inherited

Wealth-X said that 2018 saw a continuation of the long-term trend in the gradual increase in the proportion of self-made billionaires, accounting for well over half of the global population.

Almost a third of billionaires’ fortunes come from a combination of inheritance, which they then built on.

This proportion grew very slightly in 2018, an indication that as a means of entering this exclusive wealth tier, an initial boost of capital can make a significant difference.

Meanwhile, the proportion of billionaires who inherited their fortunes remained stable and fairly small in number.

“For the vast majority, it takes time to accrue wealth. With an average age of 65.7, the billionaire population is no exception,”Wealth-X said.

“Businesses usually need many years to grow to the point where their main shareholder become billionaires – and in the case of inheritance, this usually happens when individuals are in their 50s or 60s.

“Over half of all billionaires are between 50 and 70 years of age, and only a 10th of them are below 50.”

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How the world’s richest people make their money