The latest edition of the Forbes 400 — a list of the richest people in America — hit newsstands this past month. You may have read headlines about the list because it always generates copy for the local newspapers as they focus on who in their state made the coveted list.
Accurate wealth statistics are hard to come by because there are two camps of wealthy. The first group goes to great lengths to make sure everyone is aware of their net worth. Several Forbes articles, in fact, have detailed the lengths some people will go to in lobbying to make sure their name appears on the list.
The second group is made up of members who probably have the wealth to be on the list but are not. It’s probably not so much that they avoid the list as it is hard for the press to corroborate the value of their assets because they are either not known or not publicly traded. Whatever the case, they put forth little or no effort to make it known.
Knowing that some probably shouldn’t appear while others who qualify are omitted, the Forbes 400 list, on the whole, is probably an accurate snap shot of wealth in America.
The remainder of this article will use this respected list as a basis for some observations about wealth accumulation.
One of the most striking facts is the age profile of the members.
In this year’s edition only 46 people under the age of 50 were included. That is less than 12 percent of the group. Of those 46, seventeen were second generation wealthy — either they were inheritors or they took over family companies. William Wrigley of Wrigley gum and Gary Magness of TCI cable are two examples on the list.
The small percentage of young people alone provides not only a window, but a picture window, of what it takes to build wealth — TIME. Einstein commented that the magic of compounding should be the eighth wonder of the world. The more time you have to let your money compound the more you’ll have.
Of the self-made people under 50, 37 percent made their fortunes in high technology — think Jeff Bezos (Amazon.com); Pierre Omidyar (Ebay); and David Filo and Jerry Yang (Yahoo). The high tech entrepreneurs absolutely belong, but how many others invested all their money and countless hours in technology and have not one red cent to show for it? High risk means potential high reward, but it ups the chance of failure tremendously.
Another striking thing is the numerous ways in which people built their fortunes — potato farming, mobile homes, dollar stores, timber. The quickest way to become wealthy is also mentioned — marriage. As the wise old man said, “You can marry more money in five minutes than you can make in a lifetime.”
Many people fall into the mentality that there is certain way to make money. The Forbes list corroborates the truth in the following encounter. A young man was riding up the ski lift and talking to a seasoned businessman about this hot investment idea. The young fellow asked the gentleman, “This is a great opportunity. Why isn’t everyone doing this?” The older man just looked at the youngster and said, “There are a lot of ways to make a lot money. You just have to choose one and go with it.”
Certainly, there our industries with better economics than others but there are abundant ways to make money.
As the biographies of each entrant details, they chose a wide variety of areas, but the area they did choose they managed well over a number of years.
It is often said that real estate has created more wealth than any other industry.
That very well may be true, but the list seems to indicate that real estate is a long-term endeavor.
Tried and true it is; quick it is not. Real estate was, in fact, the greatest source of wealth for the 400 members, but notice, not one of the members under 50 had real estate as their primary source of income.
If we trust the Forbes 400 to be representative of wealth dispersion in America, then maybe, we can draw some insightful lessons and set some realistic goals in our financial endeavors based on observations from this list.
Damon Carson is a Longmont business owner and small business investor who can be contacted at email@example.com.