In the next five years, the number of individuals with at least 30 million dollars net worth will increase at a significant rate. This is one of the many things that the recent report of Wealth X that studies and analyses the life of high, and ultra high net worth individuals. One author, Benjamin Kinnard says that there are and there will be even more extremely wealthy people who basically ‘appear out of thin air’, while there will also be an unprecedented wealth-transfer: ten thousand billion will be inherited by heirs.
Péter Zentai: Apart from owning extreme wealth, what are the other common characteristics of the world’s most wealthy?
Benjamin Kinnard: There aren’t any. From five different continents and dozens of countries, we gathered and analysed the world’s richest people’s – 18.245 on average – profiles: their biographies, public and limited access data, local and international media reports, their statements, books and writings about their life, plans, family. Our conclusion: the world’s most wealthy individuals are an extraordinarily complex, colourful, and continuously changing group. Under no circumstance can they be characterized as a single unit of the top one percent of humanity.
How much net worth does one have to own to be classified as the top one percent?
Thirty million dollars – net worth. In 2015, we documented 212.615 high net worth individuals. The majority of them owns from thirty to one hundred million, however, a small but ‘meaningful’ part of them – 0.01 percent of Earth’s population has millions of dollars. Collectively, their total wealth of that one percent was worth 22 trillion dollars in 2015. Of course, we have no data on untraceable and secret ultra high net worth individuals, but there could not be more than one or two thousands of them globally. In the next five years, however, there will be significant changes: the number of ultra high net worth individuals will grow by about fifty percent, and the worth of their total wealth will increase by more than fifty percent. By 2020, there will be 320 thousands of them, and they will have – according to our calculations – 46 thousand billion dollars in total.
Why would their number grow so suddenly?
In the last two to three years it has been stagnant and hardly increased. Of course, in countries with modern industrial and processing potential, innovative power, and enormous export capacity, such as Germany, Netherlands, Scandinavia, and China, their number and their wealth increased, while – due to falling prices – in countries that rely on raw materials, like Russia, Latin-America, or Middle Eastern countries, they got relatively weaker. As the exchange rate of the dollar got higher, the wealth of ultra high net worth individuals got appreciated. Nowadays, there is a dynamic rise in both wealth and their owners across the world again. Primarily, this is connected to the global economic recovery, which has begun recently. We can expect an extraordinary activity of financial and capital markets in the following years, and after a long period of stagnancy in this field, there will be a rapid enrichment. Urbanization is increasing again, and we are also witnessing consumption booms in the developing markets, and technological innovations becoming more and more widespread in everyday life. As a result, innovators of trade, property market, and the technology sector – with many of them being a fresh face in the field – are becoming extremely rich. However, from now on, numerous heirs are also entering the top one percent. In the next years, there will be a total of about ten thousand trillion dollars inherited by children, grandchildren, and other relatives of the ultra high net worth individuals, whose majority is over eighty years old. This is going to be an unprecedented wealth transfer.
Who makes up the majority of the top one percent: those who are already rich and inherited their money, or the self-made millionaires and billionaires?
Two-thirds of them are ‘self-made rich’. The new ultra high net worth individuals of China, Russia, and emerging and developing markets, in general, did not have anyone to inherit their wealth from, while they make up the growing part of the world’s richest. The majority of today’s American billionaires are also ‘rootless’ and ‘appeared out of thin air’ from the technology sector. However, it is noteworthy that about 20 percent of ultra high net worth individuals – even though they are children of millionaires – owe their wealth to expanding and developing their talents, merits, their own enterprises, or the one they inherited. All in all, according to our study, ‘inheritors’ make up only 12.6 percent of the richest in the United States, and they represent only a small percentage in the United Kingdom, China, and Russia too; in certain European countries, such as Austria and Sweden, the parents and grandparents of almost fifty percent of ultra high net worth individuals had already been millionaires or billionaires. Inheritance as a source of wealth plays a primary role only in India among developing and emerging countries.
Does education have any significance on the road of becoming a ‘self-made’ millionaire? Are there any differences in customs and attitudes towards the world between rich individuals from different countries? What about between those who obtained their wealth in different ways?
The enrichment of the newly rich of Asia, South America and Eastern Europe – meaning Russia and Ukraine – is more connected to social networks or political nexus – which are founded during their college years – than in the United States or even in Germany. In the USA, a degree from Harvard – as our study showed – does not add anything to whether someone becomes an ultra high net worth individual or not. The performance of rich, resourceful, and hard-working German industrialists is not linked to degrees from excellent and elite universities. Hedge funds, online companies, and the achievements of millionaires and billionaires of the financial sector are indeed closely associated with degrees, and the majority of those individuals did go to exceptionally good universities – both in Europe and America. However, as for property market moguls, or mine owners who became billionaires, individual share market investors, and retailers the situation is quite different – they are typically bold and talented people, even though they might not be the most-educated. As for the question of nationality, we can say that there are absolutely more ‘self-made’ rich women in China and the United States, than in Europe or especially in Russia. In this regard, China even tops the USA. However, in any country, those women who are the children of wealthy families are more active in charity and donation. The ultra high net worth individuals in the United States – regardless of nationality or the method of enrichment – usually voluntarily contribute more to cases that increase the well-being of the society and its health, than their Asian, European, and South American ‘counterparts’.